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Human Genome Sciences DEF 14A 2006
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):
þ No fee required.
o Check box if any part of the fee
is offset as provided by Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held April 26, 2006
To the Stockholders of Human Genome Sciences, Inc.:
NOTICE IS HEREBY GIVEN that the 2006 Annual Meeting of
Stockholders (the “Annual Meeting”) of Human Genome
Sciences, Inc., a Delaware corporation (the
“Company”), will be held in Room F at the
Gaithersburg Marriott, 9751 Washingtonian Boulevard,
Gaithersburg, Maryland 20878 on Wednesday, April 26, 2006
at 9:30 a.m., local time, for the following purposes:
1. To elect three directors for a three-year term ending in
2009.
The Board of Directors of the Company has fixed the close of
business on February 28, 2006 as the record date for
determining stockholders of the Company entitled to notice of
and to vote at the Annual Meeting. A list of the stockholders as
of the record date will be available for inspection by
stockholders at the Company’s corporate headquarters during
business hours for a period of ten days prior to the Annual
Meeting.
Your attention is directed to the attached Proxy Statement and
the Annual Report of the Company for the fiscal year ended
December 31, 2005.
By Order of the Board of Directors,
James H. Davis, Secretary
Rockville, Maryland
March 22, 2006
EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY, OR VOTE OVER
THE INTERNET OR BY TELEPHONE. IF YOU ATTEND THE MEETING YOU MAY
REVOKE YOUR PROXY AND VOTE IN PERSON.
HUMAN
GENOME SCIENCES, INC.
14200 Shady Grove Road Rockville, Maryland 20850
PROXY
STATEMENT
INFORMATION
CONCERNING SOLICITATION AND VOTING
This Proxy Statement is being furnished to stockholders of Human
Genome Sciences, Inc., a Delaware corporation (the
“Company”), in connection with the solicitation by the
Board of Directors of proxies for use at the Annual Meeting of
Stockholders (the “Annual Meeting”) to be held in
Room F at the Gaithersburg Marriott, 9751 Washingtonian
Boulevard, Gaithersburg, Maryland 20878 on Wednesday,
April 26, 2006 at 9:30 a.m., local time, and at any
adjournment or postponement thereof.
The solicitation is being made primarily by the use of the
mails, but directors, officers and employees of the Company may
also engage in the solicitation of proxies by telephone. The
Company has retained the services of Georgeson Shareholder
Communications, Inc. to assist in soliciting proxies. Georgeson
Shareholder Communications, Inc. will solicit proxies by
personal interview, telephone, facsimile and mail. It is
anticipated that the fee for those services will not exceed
$7,000 plus reimbursement for
out-of-pocket
expenses. The cost of soliciting proxies will be borne by the
Company. Other than the compensation of Georgeson Shareholder
Communications, Inc., no compensation will be paid by the
Company in connection with the solicitation of proxies, except
that the Company may reimburse brokers, custodians, nominees and
other record holders for their reasonable
out-of-pocket
expenses in forwarding proxy materials to beneficial owners.
This Proxy Statement and the accompanying form of proxy are
being sent to stockholders on or about March 22, 2006.
A proxy may be revoked at any time prior to its exercise by the
filing of a written notice of revocation with the Secretary of
the Company, by delivering to the Company a duly executed proxy
bearing a later date or by attending the Annual Meeting and
voting in person. However, if you are a stockholder whose shares
are not registered in your own name, you will need documentation
from your record holder stating your ownership as of
February 28, 2006 in order to vote personally at the Annual
Meeting.
The close of business on February 28, 2006 has been fixed
by the Board of Directors of the Company as the record date (the
“Record Date”) for determining the stockholders of the
Company entitled to notice of and to vote at the Annual Meeting.
On the Record Date, there were 131,402,991 shares of the
Company’s common stock, $0.01 par value per share (the
“Common Stock”), outstanding. The presence at the
Annual Meeting, in person or by a proxy relating to any matter
to be acted upon at the meeting, of a majority of the
outstanding shares, or 65,701,496 shares, is necessary to
constitute a quorum for the Annual Meeting. Each outstanding
share is entitled to one vote on all matters. For purposes of
the quorum and the discussion below regarding the vote necessary
to take stockholder action, stockholders of record who are
present at the meeting in person or by proxy and who abstain,
including brokers holding customers’ shares of record who
cause abstentions to be recorded at the Annual Meeting, are
considered stockholders who are present and entitled to vote and
they count toward the quorum. In the event that there are not
sufficient votes for a quorum or to approve any proposal at the
Annual Meeting, the Annual Meeting may be adjourned in order to
permit the further solicitation of proxies.
Brokers holding shares of record for customers generally are not
entitled to vote on certain matters unless they receive voting
instructions from their customers. “Broker non-votes”
mean the votes that could have been cast on the matter in
question if the brokers had received instructions from their
customers, and as to which the brokers have notified the Company
on a proxy form in accordance with industry practice or have
otherwise advised the Company that they lack voting authority.
Directors are elected by a plurality and the three nominees who
receive the most votes will be elected. Abstentions and broker
non-votes will have no effect on the outcome of the election. On
all other matters, the affirmative vote of the majority of the
shares present in person or by proxy at the meeting and entitled
to vote on the matter is required to approve such matter. On
such matters, broker non-votes are not considered shares
entitled to vote on the matter and therefore will not be taken
into account in determining the outcome of the vote on the
matter. Abstentions are considered shares entitled to vote on
the matter and therefore will have the effect of a vote against
the matter.
All outstanding shares of the Company’s Common Stock
represented by valid and unrevoked proxies received in time for
the Annual Meeting will be voted. A stockholder may, with
respect to the election of directors, (1) vote for the
election of the named director nominees, (2) withhold
authority to vote for all such director nominees or
(3) vote for the election of all such director nominees
other than any nominee with respect to whom the stockholder
withholds authority to vote by writing the number designating
such nominee’s name on the proxy in the space provided. A
stockholder may, with respect to each other matter specified in
the notice of the meeting, (1) vote “FOR” the
matter, (2) vote “AGAINST” the matter or
(3) “ABSTAIN” from voting on the matter. Shares
will be voted as instructed in the accompanying proxy on each
matter submitted to stockholders. If no instructions are given
on a validly signed and returned proxy, the shares will be voted
FOR the election of the named director nominees and FOR the
ratification of Ernst & Young LLP as the Company’s
independent registered public accounting firm.
The Board of Directors knows of no additional matters that will
be presented for consideration at the Annual Meeting. Return of
a valid proxy, however, confers on the designated proxy holders
the discretionary authority to vote the shares in accordance
with their best judgment on such other business, if any, that
may properly come before the Annual Meeting or any adjournment
or postponement thereof. Proxies solicited hereby will be
tabulated by inspectors of election designated by the Board of
Directors.
PROPOSALS
TO BE VOTED ON AT THE ANNUAL MEETING
Messrs. Watkins, Lawlor and W. Young have a term of office
expiring at the Annual Meeting, and at such time as their
successors shall be elected and qualified. Each of these
directors has been nominated for a three-year term expiring at
the annual meeting of stockholders in 2009 and until their
successors shall be elected and qualified.
The persons named in the enclosed proxy intend to vote properly
executed and returned proxies FOR the election of all nominees
proposed by the Board of Directors unless authority to vote is
withheld. In the event that any nominee is unable or unwilling
to serve, the persons named in the proxy will vote for such
substitute nominee or nominees as they, in their discretion,
shall determine. The Board of Directors has no reason to believe
that any nominee named herein will be unable or unwilling to
serve.
Set forth below is information concerning the nominees for
election and those directors whose term continues beyond the
date of the Annual Meeting.
The Board
of Directors recommends a vote FOR
election of the Directors whose term will expire in 2009. 4
The Board of Directors held seven meetings during 2005. No
director attended fewer than 75% of the total number of meetings
of the Board of Directors and of the Committees of which he or
she was a member during 2005. The Company expects each member of
its Board of Directors to attend the Annual Meeting and all
future meetings of stockholders. In 2005, eight members of the
Company’s Board of Directors attended the 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 applicable rules of The Nasdaq
National Market. The Board of Directors has an Audit Committee,
a Compensation Committee and a Nominating and Corporate
Governance Committee. The Board of Directors has adopted a
written charter for each of these committees, copies of which
are available on the Company’s website at www.hgsi.com. A
copy of the charter of the Audit Committee is attached to this
proxy statement as Annex A.
The Audit Committee, currently consisting of Messrs. Lawlor
and Ha-Ngoc and Dr. Link, provides the opportunity for
direct contact between the Company’s independent registered
public accounting firm and the Board of Directors. The Board of
Directors has determined that each of the members of the
committee is independent in accordance with applicable rules of
The Nasdaq National Market and each meets the SEC criteria of 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 the Company’s internal accounting controls and
oversees the Company’s financial reporting process. The
Audit Committee held eight meetings during 2005. A copy of the
Audit Committee Report is included in this Proxy Statement on
page 14.
The Compensation Committee, currently consisting of
Drs. Link and Karabelas and Mr. Lawlor, determines all
compensation paid or awarded to the Company’s executive
officers and senior officers (those with the rank of vice
president or above) and administers the Company’s 2000
Stock Incentive Plan, as
7
amended, and Employee Stock Purchase Plan. The Board of
Directors has determined that each of the members of the
committee is independent in accordance with applicable rules of
The Nasdaq National Market. The Compensation Committee held
three meetings during 2005. A copy of the Compensation Committee
Report on Executive Compensation is included in this Proxy
Statement beginning on page 24.
The Nominating and Corporate Governance Committee, currently
consisting of Messrs. Danzig and W. Young and
Drs. Drews and R. Young, is responsible for reviewing the
Company’s corporate governance principles, proposing a
slate of directors for election by the stockholders at each
annual meeting, and proposing candidates to fill any vacancies
on the Board of Directors. The Board of Directors has determined
that each of the members of the committee is independent in
accordance with applicable rules of The Nasdaq National Market.
The committee will consider nominees for Board membership
recommended by stockholders. Any stockholder wishing to propose
a nominee may submit a recommendation in writing to the
Company’s Secretary, indicating the nominee’s
qualifications and other relevant biographical information. The
Nominating and Corporate Governance Committee held three
meetings during 2005.
The Board of Directors, on the recommendation of the Nominating
and Corporate Governance Committee, adopted a set of corporate
governance guidelines, a copy of which is available on the
Company’s website at www.hgsi.com. The Company continues to
monitor its corporate governance guidelines to comply with rules
adopted by the Securities and Exchange Commission and The Nasdaq
National Market and industry practice.
The Board of Directors has adopted a written code of ethics and
business conduct, a copy of which is available on the
Company’s website at www.hgsi.com. The Company requires all
officers, directors 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 the Company’s best
interest. Employees are required to report any conduct that they
believe in good faith to be an actual or apparent violation of
the code. The Sarbanes-Oxley Act of 2002 requires 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. The Company currently has such
procedures in place.
The Nominating and Corporate Governance Committee uses a variety
of criteria to evaluate the qualifications and skills necessary
for members of the Board of Directors. Under these criteria,
members of the Board of Directors should have the highest
professional and personal ethics and values, consistent with
longstanding values and standards of the Company. 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 should have
sufficient time to carry out their duties and to provide insight
and practical wisdom based on experience. In identifying
candidates for membership on the Board of Directors, the
Nominating and Corporate 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 statements,
experience at senior levels in areas relevant to the Company
and, consistent with the objective of having a diverse and
experienced Board, 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 the Company. Each member of the Board of Directors
must represent the interests of the stockholders of the Company.
The Nominating and Corporate Governance Committee also reviews
and determines whether
existing members of the Board of Directors should stand for
reelection, taking into consideration matters relating to the
age and number of terms served by individual directors and
changes in the needs of the Board.
The Nominating and Corporate Governance Committee uses a variety
of methods for identifying and evaluating nominees for director.
The Nominating and Corporate Governance Committee regularly
assesses the appropriate size of the 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 Corporate
Governance Committee considers various potential candidates for
director. Candidates may come to the attention of the Nominating
and Corporate Governance Committee through current members of
the Board of Directors, professional search firms, stockholders
or other persons. These candidates are evaluated at regular or
special meetings of the Nominating and Corporate Governance
Committee and may be considered at any point during the year.
The Nominating and Corporate Governance Committee nominated, and
the Board of Directors appointed, Dr. R. Young to the Board
of Directors effective October 2005 and Mr. Ha-Ngoc to the
Board of Directors effective December 2005. The Nominating and
Corporate Governance Committee considers stockholder
recommendations for candidates for the Board of Directors that
are properly submitted in accordance with the Company’s
by-laws. In evaluating such recommendations, the Nominating and
Corporate Governance Committee uses the qualifications standards
discussed above and seeks to achieve a balance of knowledge,
experience and capability on the Board of Directors.
Any stockholder who wishes to communicate directly with the
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.
Set forth below is certain information regarding the positions
and business experience of each executive officer of the Company
who is not also a director of the Company.
10
11
12
The Audit Committee has selected the firm of Ernst &
Young LLP to serve as its independent registered public
accounting firm for the fiscal year ending December 31,
2006, subject to the ratification of such appointment by the
stockholders. A representative of Ernst & Young LLP is
expected to be present at the Annual Meeting and is expected to
be available to respond to appropriate questions from
stockholders. Ernst & Young LLP currently serves as the
Company’s independent registered public accounting firm.
Unless marked to the contrary, the shares represented by the
enclosed proxy, if properly executed and returned, will be voted
FOR the ratification of the appointment of Ernst &
Young LLP as the independent registered public accounting firm
of the Company for the fiscal year ending December 31, 2006.
The Board
of Directors recommends a vote FOR ratification of
Ernst & Young LLP.
The fees billed by Ernst & Young LLP for professional
services rendered in connection with the audit of the
Company’s annual consolidated financial statements for 2005
and 2004, the review of the consolidated financial statements
included in the Company’s quarterly reports on
Form 10-Q,
as well as the review and consent for the Company’s other
filings for 2005 and 2004 were $523,087 and $555,138,
respectively. The fees for 2005 and 2004 include $181,780 and
$195,000, respectively, for services associated with compliance
with the Sarbanes-Oxley Act of 2002.
The fees billed by Ernst & Young LLP for professional
services rendered for assurance and related services that are
reasonably related to the audit of the Company’s annual
consolidated financial statements for 2005 and 2004 were $26,000
and $55,017, respectively.
The fees billed by Ernst & Young LLP for professional
services rendered for tax compliance, tax advice and tax
planning for 2005 and 2004 were $42,509 and $36,402,
respectively.
In 2005 and 2004, Ernst & Young LLP did not bill the
Company for any services other than those described above.
The Audit Committee has established a policy governing the
Company’s 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 SEC
rules and regulations, provided that management obtains the
Audit Committee’s approval before such services are
rendered.
The Audit Committee of the Board of Directors consists of three
independent directors, as required by Nasdaq listing standards.
The Audit Committee operates under a written charter adopted by
the Board of Directors, and is responsible for overseeing the
Company’s financial reporting process on behalf of the
Board of Directors. The members of the Audit Committee are
Mr. Lawlor, Mr. Ha-Ngoc and Dr. Link. Each year,
the Audit Committee selects, subject to stockholder
ratification, the Company’s independent registered public
accounting firm.
Management is responsible for the Company’s financial
statements and the financial reporting process, including
internal controls. The independent registered public accounting
firm is responsible for performing an independent audit of the
Company’s consolidated financial statements in accordance
with auditing standards generally accepted in the United States
and for issuing a report thereon. The Audit Committee’s
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, the
Company’s independent registered public accounting firm.
Management represented to the Audit Committee that the
Company’s consolidated financial statements were prepared
in accordance with accounting principles generally accepted in
the United States, 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). These matters
included a discussion of Ernst & Young’s judgments
about the quality (not just the acceptability) of the
Company’s accounting principles as applied to the
Company’s financial reporting.
Ernst & Young LLP also provided the Audit Committee
with the written disclosures and letter required by Independence
Standards Board Standard No. 1 (Independence Discussions
with Audit Committees), and the Audit Committee discussed with
Ernst & Young LLP that firm’s 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 firm’s independence.
Based upon the Audit Committee’s discussion with management
and the independent registered public accounting firm and the
Audit Committee’s 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 the
Company’s audited consolidated financial statements be
included in the Company’s Annual Report on
Form 10-K
for the year ended December 31, 2005, for filing with the
Securities and Exchange Commission. The Audit Committee and the
Board of Directors have also recommended the selection of
Ernst & Young LLP as the Company’s independent
registered public accounting firm for 2006, subject to
stockholder ratification.
Audit Committee
Augustine Lawlor, Chair
Tuan Ha-Ngoc
Max Link, Ph.D.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the
ownership of Common Stock of the Company as of February 28,
2006, unless otherwise indicated, by (1) all stockholders
known by the Company to beneficially own more than five percent
of the outstanding Common Stock, (2) each of the directors
and nominees for director, (3) each executive officer of
the Company, including those named in the Summary Compensation
Table, and (4) all directors and executive officers of the
Company as a group.
EXECUTIVE
COMPENSATION AND OTHER MATTERS
In 2005, each director who was not an employee of the Company
was eligible to receive a director’s fee of
$25,000 per year and a fee ranging from $1,500 to $2,000
for participation in each meeting of the Board of Directors or
meeting of a committee of the Board of Directors. From
January 1, 2005 to May 25, 2005, the Chairman of the
Board was entitled to an additional director fee at a rate of
$75,000 per year. Effective May 25, 2005, the Chairman
of the Board was entitled to an additional director fee at a
rate of $25,000 per year and the chairmen of the Audit and
Compensation Committees were entitled to an additional director
fee of $5,000 per year. Directors who are also employees of
the Company received no compensation for their services to the
Company as directors.
Each non-employee director is entitled to receive an automatic
grant of options 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 options to purchase
16,000 shares of Common Stock on the day immediately
following the date of each annual meeting of stockholders.
All directors are reimbursed for expenses incurred in connection
with attending meetings of the Board of Directors.
The employees named in the following table were the
Company’s Chief Executive Officer and the six other
highest-paid executive officers during 2005 (the “Named
Executive Officers”).
SUMMARY
COMPENSATION TABLE
The following table sets forth information concerning grants to
the Named Executive Officers of options to purchase shares of
the Company’s Common Stock granted in 2005.
OPTIONS
GRANTED IN 2005
The following table sets forth information with respect to
option exercises by and year-end values during 2005 for the
Named Executive Officers.
The following table sets forth information regarding the
Company’s equity compensation plans as of December 31,
2005.
In November 2004, the Company entered into an employment
agreement with Mr. Watkins in which Mr. Watkins agreed
to serve as Chief Executive Officer of the Company. Since
December 2005, he has served as Chief Executive Officer and
President of the Company. The employment agreement is for an
initial two-year period and automatic one-year periods
thereafter unless terminated by either party prior to the end of
the applicable period. Mr. Watkins is entitled to an annual
base salary as determined by the Board of Directors ($650,000 as
of March 6, 2006) and an annual bonus as determined by
the Board of Directors, with a minimum guaranteed annual bonus
of $325,000 for fiscal year 2005. Mr. Watkins is also
entitled to receive grants of stock options or other
equity-based awards as determined by the Board of Directors and
a monthly car allowance. If the Company terminates
Mr. Watkins’ employment agreement without cause or
chooses to not renew the employment agreement, or if
Mr. Watkins terminates the employment agreement with good
reason, upon such termination or non-renewal, Mr. Watkins
will be entitled to receive 24 months’ base salary and
a pro rata share of his yearly bonus.
In September 1999, the Company entered into an employment
agreement with Dr. Stump in which Dr. Stump agreed to
serve as Senior Vice President, Drug Development of the Company,
effective November 1999. Since 2003, he has served as Executive
Vice President, Drug Development of the Company. Dr. Stump
is entitled to an annual base salary as determined by the Board
of Directors ($445,000 as of March 6, 2006), and an annual
bonus as determined by the Board of Directors. In December 2004,
the Company entered into an Executive Agreement with
Dr. Stump, which provides that in the event
Dr. Stump’s employment is terminated by the Company
without cause or terminated by Dr. Stump for cause, the
Company shall pay to Dr. Stump all accrued but unpaid base
salary, any earned but unpaid bonuses for any prior period, all
earned or vested incentive compensation, deferred compensation
and other compensation or benefits, all accrued but unpaid
reimbursable business expenses and all accrued but unused
vacation time. The Company shall continue to pay
Dr. Stump’s base salary for a period of 12 months
and the Company shall also pay to Dr. Stump a pro rata
bonus payment based on the bonus earned the prior fiscal year.
Dr. Stump will be entitled to continue to participate in
the Company’s group medical, dental, life and disability
programs for a period of 12 months at the Company’s
sole expense; provided that Dr. Stump is not then eligible
to participate in a group health plan of another entity.
Dr. Stump shall have 12 months from the date of his
termination to exercise all vested stock options outstanding
upon the date of termination, but in no event may Dr. Stump
or his estate exercise any stock option beyond its term stated
in the applicable award agreement.
In April 1997, the Company entered into an employment agreement
with Dr. Davis in which Dr. Davis agreed to serve as
Senior Vice President, General Counsel and Secretary of the
Company. Since 2003, he has served as Executive Vice President,
General Counsel and Secretary. Dr. Davis is entitled to an
annual base salary as determined by the Board of Directors
($378,000 as of March 6, 2006), and an annual bonus as
determined by the Board of Directors. In December 2004, the
Company entered into an Executive Agreement with Dr. Davis,
which provides that in the event Dr. Davis’s
employment is terminated by the Company without cause or
terminated by Dr. Davis for cause, the Company shall pay to
Dr. Davis all accrued but unpaid base salary, any earned
but unpaid bonuses for any prior period, all earned or vested
incentive compensation, deferred compensation and other
compensation or benefits, all accrued but unpaid reimbursable
business expenses and all accrued but unused vacation time. The
Company shall continue to pay Dr. Davis’s base salary
for a period of 12 months and the Company shall also pay to
Dr. Davis a pro rata bonus payment based on the bonus
earned the prior fiscal year. Dr. Davis will be entitled to
continue to participate in the Company’s group medical,
dental, life and disability programs for a period of
12 months at the Company’s sole expense; provided that
Dr. Davis is not then eligible to participate in a group
health plan of another entity. Dr. Davis shall have
12 months from the date of his termination to exercise all
vested stock options outstanding upon the date of termination,
but in no event may Dr. Davis or his estate exercise any
stock option beyond its term stated in the applicable award
agreement.
In December 1996, the Company entered into an employment
agreement with Ms. Bateson McKay in which Ms. Bateson
McKay agreed to serve as Vice President, Human Resources. Since
2001, she has served as Senior Vice President, Human Resources
of the Company. Ms. Bateson McKay is entitled to an annual
base salary as determined by the Board of Directors ($271,000 as
of March 6, 2006), and an annual bonus as
determined by the Board of Directors. In December 2004, the
Company entered into an Executive Agreement with
Ms. Bateson McKay, which provides that in the event
Ms. Bateson McKay’s employment is terminated by the
Company without cause or terminated by Ms. Bateson McKay
for cause, the Company shall pay to Ms. Bateson McKay all
accrued but unpaid base salary, any earned but unpaid bonuses
for any prior period, all earned or vested incentive
compensation, deferred compensation and other compensation or
benefits, all accrued but unpaid reimbursable business expenses,
and all accrued but unused vacation time. The Company shall
continue to pay Ms. Bateson McKay’s base salary for a
period of 12 months and the Company shall also pay to
Ms. Bateson McKay a pro-rata bonus payment based on the
bonus earned for the prior fiscal year. Ms. Bateson McKay
will be entitled to continue to participate in the
Company’s group medical, dental, life and disability
programs for a period of 12 months at the Company’s
sole expense; provided that Ms. Bateson McKay is not then
eligible to participate in a group health plan of another
entity. Ms. Bateson McKay will have 12 months from the
date of her termination to exercise all vested stock options
outstanding upon the date of termination, but in no event may
Ms. Bateson McKay or her estate exercise any stock option
beyond its term stated in the applicable award agreement.
In March 2003, the Company entered into a letter agreement with
Mr. Simpson in which Mr. Simpson agreed to serve as
Vice President, Manufacturing Operations, of the Company. Since
December 2005, Mr. Simpson has served as Senior Vice
President, Operations of the Company. Mr. Simpson is
entitled to an annual base salary as determined by the Board of
Directors ($270,000 as of March 6, 2006), and an annual
bonus as determined by the Board of Directors. The letter
agreement provides that in the event Mr. Simpson’s
employment is terminated by the Company without cause, the
Company shall continue to pay Mr. Simpson’s base
salary for a period of six months or until Mr. Simpson
commences other, regular full-time employment. If
Mr. Simpson commences other, regular full time employment
within six months after termination by the Company without cause
at a base salary less than the rate of base salary in effect at
the time of termination, then the Company will continue to pay
the difference between Mr. Simpson’s most recent base
salary while employed at the Company and Mr. Simpson’s
new salary during the remainder of the six month period.
In July 1998, the Company established a Key Executive Severance
Plan for the Chief Executive Officer, the President and other
key employees of the Company, and pursuant to that plan, the
Company entered into agreements with the Named Executive
Officers. The agreements provide that in the event the
executive’s employment is terminated by the Company without
cause or by the executive for good reason, in either case within
18 months of a Change in Control of the Company (as defined
in the Key Executive Severance Plan), the Company shall make a
cash payment to the executive equal to 1.5 times the sum of the
executive’s annual salary plus bonus (2.0 times in the case
of the Chief Executive Officer) and the executive will be
entitled to continue to participate in the Company’s group
medical, dental, life and disability programs for a period of
18 months (24 months in the case of the Chief
Executive Officer) at the same rates applicable to the executive
during the executive’s 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
executive’s employment is terminated without cause or the
executive resigns for good reason, in either case within
18 months of the Change in Control. Each executive also
agreed to certain confidentiality and non-solicitation
provisions as a condition to participation in the Key Executive
Severance Plan.
In May 2004, the Company entered into an employment agreement
with Dr. Rosen in which Dr. Rosen agreed to serve as
President and Chief Operating Officer of the Company. From
February 2005 to December 12, 2005, Dr. Rosen served
as President and Chief Scientific Officer of the Company. The
employment agreement was for an initial one-year period and was
automatically extended for an additional one-year period.
Dr. Rosen was entitled to an annual base salary as
determined by the Board of Directors ($430,000 as of
January 1, 2005), and an annual bonus as determined by the
Board of Directors, with a minimum guaranteed annual bonus of
10% of Dr. Rosen’s base salary. Dr. Rosen was
also entitled to receive grants of stock options or other
equity-based awards as determined by the Board of Directors and
a monthly car allowance. The Company could terminate
Dr. Rosen’s employment agreement without cause and
Dr. Rosen could terminate the employment agreement with
good reason, and upon such termination, Dr. Rosen was
entitled to receive 18 months’ base salary and a pro
rata share of his yearly bonus. On December 7, 2005, the
Compensation Committee of the Board of Directors determined that
Dr. Rosen’s 2005 performance bonus would be $300,000,
which was paid consistent with the terms of
Dr. Rosen’s existing employment agreement. On
December 13, 2005, the Company entered into a First
Amendment to the Employment Agreement with Dr. Rosen that,
among other things, delayed the payout schedule of certain
pre-existing salary continuation benefits owed to Dr. Rosen
after the termination of his employment with the Company.
Effective December 12, 2005, Dr. Rosen resigned his
position as President and Chief Scientific Officer and a
director of the Company. Dr. Rosen ceased to be an employee
of the Company on December 31, 2005, but continues to serve
the Company as a consultant. Per Dr. Rosen’s
employment agreement from May 2004, Dr. Rosen’s
outstanding and unexercised Company stock options will continue
to vest through December 31, 2007, as they would have had
Dr. Rosen’s employment not been terminated.
Dr. Rosen has until January 31, 2008 to exercise all
vested stock options outstanding as of December 31, 2007,
but in no event may Dr. Rosen or his estate exercise any
stock option beyond the term stated in the applicable award
agreement.
In August 1996, the Company entered into an employment agreement
with Mr. Mayer in which Mr. Mayer agreed to serve as
Senior Vice President and Chief Financial Officer of the
Company. From 2003 to December 12, 2005, he served as
Executive Vice President and Chief Financial Officer of the
Company. In December 2004, the Company entered into an Executive
Agreement with Mr. Mayer, which provided that in the event
Mr. Mayer’s employment is terminated by the Company without
cause or terminated by Mr. Mayer for cause, the Company would
pay to Mr. Mayer all accrued but unpaid base salary, any
earned but unpaid bonuses for any prior period, all earned or
vested incentive compensation, deferred compensation and other
compensation or benefits, all accrued but unpaid reimbursable
business expenses and all accrued but unused vacation time. The
Company would continue to pay Mr. Mayer’s base salary
for a period of 12 months and the Company would also pay a
pro rata bonus payment based on the bonus earned the prior
fiscal year. Mr. Mayer was entitled to continue to
participate in the Company’s group medical, dental, life
and disability programs for a period of 12 months at the
Company’s sole expense; provided that Mr. Mayer was
not then eligible to participate in a group health plan of
another entity. Mr. Mayer would have had 12 months
from the date of his termination to exercise all vested stock
options outstanding upon the date of termination, but in no
event would he or his estate be able to exercise any stock
option beyond its term stated in the applicable award agreement.
On December 13, 2005, the Company entered into a letter
agreement with Mr. Mayer that, among other things, provided
for him to receive consulting fees through June 30, 2006
equal to his base salary at the time his employment with the
Company terminated and provided that he would receive a 2005
performance bonus of $137,523, to be paid on or before
December 31, 2005. Mr. Mayer was also credited, as of
December 31, 2005, with six months additional vesting under
all of his outstanding and unexercised Company stock options.
Mr. Mayer’s right to exercise all of his vested
Company stock options has been extended to December 31,
2006. Effective December 12, 2005, Mr. Mayer resigned
his position as Executive Vice President and Chief Financial
Officer of the Company. Mr. Mayer ceased being an employee
of the Company on December 31, 2005 but continues to serve
the Company as a consultant.
None of the members of the Compensation Committee is a current
or former officer or employee of the Company.
The Compensation Committee of the Board of Directors consists
entirely of non-employee directors. The Compensation Committee
is responsible for setting and administering the policies that
govern annual executive salaries, bonuses, and stock incentive
programs. The Committee annually evaluates the performance, and
determines the compensation, of the Chief Executive Officer and
the Company’s other executive officers based upon a mix of
the achievement of the corporate goals, individual performance,
and comparisons with other pharmaceutical and biotechnology
companies.
The Compensation Committee’s goals with respect to
executive officers, including the Chief Executive Officer, are
to provide compensation sufficient to attract, motivate, and
retain executives of outstanding ability, performance, and
potential, and to establish and maintain an appropriate
relationship between executive
compensation and the creation of shareholder value. When
determining adjustments to an individual’s compensation
package, the Compensation Committee evaluates the importance to
stockholders of that person’s continued service. The
executive officers’ compensation structure consists of
(1) base salary, (2) cash bonus, and (3) stock
incentive grants.
The Compensation Committee retains Watson Wyatt, a leading
independent executive compensation consulting firm, to provide
industry-specific competitive intelligence and advice about
executive compensation program design and competitive
compensation levels.
Base Salary. Salaries for 2006 were set based
on the above factors and after review of industry comparables
and discussion with Watson Wyatt.
The Company’s 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 the Company’s goals over the long term. Each
individual’s base salary is determined by the Compensation
Committee after considering a variety of factors that make up
market value and prospective value to the Company, including the
knowledge, experience, and accomplishments of the individual,
the individual’s level of responsibility, and the typical
compensation levels for individuals with similar credentials.
The Compensation Committee may, considering the advice of
Company management, change the salary of an individual on the
basis of its judgment for any reason, including the performance
of the individual or the Company, changes in responsibility, and
changes in the market for executives with similar credentials.
Determinations of appropriate base salary levels and other
compensation elements are generally made through consideration
of a variety of industry surveys and studies, as well as by
monitoring developments in the pharmaceutical and biotechnology
industries.
Cash Bonus. Bonuses are determined by the
Compensation Committee, with advice from Company management,
based upon the Committee’s subjective assessment of the
contributions of each executive toward the achievement of the
Company’s annual business goals for the prior year. In
determining bonuses for 2006, the Compensation Committee
considered, in addition to the Company’s annual business
goals, individualized goals, progress in conducting clinical
trials of current drug candidates, and continued conservation of
capital through expense management and facilities consolidation.
Stock Incentive Grants. Stock incentive grants
may include stock options, stock appreciation rights, restricted
or unrestricted stock awards, stock-equivalent units, and any
other stock-based 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 intrinsically related to
long-term stockholder value because they are linked to the value
of the Company’s common stock. Historically, the Company
has relied solely on stock options as a means of providing
equity incentives for its executives. However, the
Company’s Amended and Restated 2000 Stock Incentive Plan
approved by the Company’s stockholders in 2004 enables the
grant of all of the forms of equity-based compensation referred
to above. More recently, the Company has also awarded restricted
stock to executive officers.
The Compensation Committee believes that periodic stock
incentive grants are appropriate, particularly in view of the
absence of a Company-sponsored long-term incentive or defined
benefit pension plan. The Compensation Committee intends to
continue evaluating the appropriate form of stock incentives,
particularly in light of the new accounting standards requiring
expensing of stock options that became effective for the Company
on January 1, 2006.
Stock options are a fundamental element in the Company’s
executive compensation program because they emphasize long-term
Company performance, as measured by creation of stockholder
value, and foster a commonality of interest between stockholders
and employees. Options are generally granted to all regular
full-time and part-time employees, and particularly to key
employees expected to contribute significantly to the Company.
In determining the size of an option grant to an executive
officer, the Compensation Committee considers company
performance, competitive factors, scope of responsibility, and
the executive officer’s achievement of pre-established
individual goals. In addition, the Company makes a grant of
stock options when an executive officer joins the Company and
may, at its discretion, also grant restricted stock upon hire.
Options are granted at no less than 100% of the fair market
value on the date of grant. The Company
generally awards options to officers at regular intervals based
on performance and the importance of that person’s
continued service, but other awards may be made as well. The
Company’s stock option plans also provide for option grants
to members of the Board. Incentive awards granted to employees
generally vest over periods ranging from two to four years after
grant.
Executive officers other than the Chief Executive Officer
received options for shares on January 14, 2005 for
performance during calendar year 2004, and on March 14,
2006 for performance during calendar year 2005. Executive
officers other than the Chief Executive Officer also received
options for shares on April 7, 2005 and restricted stock on
September 21, 2005 to encourage continued service and to
foster a continuing commonality of interest between stockholders
and executive officers.
Chief Executive Officer’s
Compensation. Mr. Watkins’ base salary
was set at $650,000 per year for 2006, and he received a
grant of 325,000 stock options and a bonus of $409,000 for
performance during 2005. The Compensation Committee determined
Mr. Watkins’ base salary, stock option grant, and
bonus after considering a variety of factors, including
Mr. Watkins’ performance, his level of responsibility
within the Company, industry surveys, and the counsel provided
by Watson Wyatt.
Compensation Deduction Limit. The Compensation
Committee has considered the $1 million limit for federal
income tax purposes on deductible executive compensation that is
not performance-based, and believes that the executive
compensation paid in 2005 and prior years satisfied the
requirements of federal tax law and thus the compensation should
be fully deductible.
Compensation Committee
Max Link, Ph.D., Chair
Argeris N. Karabelas, Ph.D.
Augustine Lawlor
As part of the proxy statement disclosure requirements mandated
by the Securities and Exchange Commission, the Company is
required to provide a comparison of the cumulative total
stockholder return on its Common Stock with that of a broad
equity market index and either a published industry index or a
company-constructed peer group index. The following graph
compares the performance of the Company’s Common Stock for
the periods indicated with the performance of the Nasdaq
U.S. Stock Market Total Return Index (the “TRI”)
and the Nasdaq Pharmaceutical Index (the “NPI”). The
comparison assumes $100 was invested on December 31, 2000
in the Company’s Common Stock and in each of the foregoing
indices and assumes the reinvestment of dividends, if any.
ADDITIONAL INFORMATION
Section 16(a) of the Exchange Act requires that the
Company’s executive officers and directors, and persons who
own more than ten percent of a registered class of the
Company’s equity securities, file reports of ownership and
changes in ownership with the SEC and provide the Company with
copies of such reports. The Company has reviewed such reports
received by it and written representations from its directors
and executive officers. Based solely on such review, the Company
believes that all ownership reports were timely filed during
2005.
The Board of Directors of the Company knows of no other business
which 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.
THE COMPANY WILL PROVIDE WITHOUT CHARGE A COPY OF THE
COMPANY’S ANNUAL REPORT ON
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005, INCLUDING
FINANCIAL STATEMENTS AND SCHEDULES, TO EACH OF THE
COMPANY’S STOCKHOLDERS OF RECORD ON FEBRUARY 28, 2006,
AND TO EACH BENEFICIAL OWNER OF COMMON STOCK ON THAT DATE, UPON
RECEIPT OF A WRITTEN REQUEST THEREFOR MAILED TO THE
COMPANY’S OFFICES, 14200 SHADY GROVE ROAD, ROCKVILLE,
MARYLAND 20850, ATTENTION: INVESTOR RELATIONS OFFICE. IN THE
EVENT THAT EXHIBITS TO SUCH
FORM 10-K
ARE REQUESTED, A FEE WILL BE CHARGED FOR REPRODUCTION OF SUCH
EXHIBITS. REQUESTS FROM BENEFICIAL OWNERS OF COMMON STOCK MUST
SET FORTH A GOOD FAITH REPRESENTATION AS TO SUCH OWNERSHIP. THE
COMPANY’S FILINGS WITH THE SEC ARE AVAILABLE WITHOUT CHARGE
ON THE COMPANY’S WEBSITE: WWW.HGSI.COM AS SOON AS
REASONABLY PRACTICABLE AFTER FILING.
The deadline for submission of stockholder proposals to be
considered for inclusion in the proxy statement and form of
proxy relating to the 2007 annual meeting of stockholders is
November 22, 2006. Any such proposal received by the
Company’s principal executive offices in Rockville,
Maryland after such date will be considered untimely and may be
excluded from the proxy statement and form of proxy.
The deadline for submission of stockholder proposals to be
presented at the 2007 annual meeting of stockholders, but which
will not be included in the proxy statement and form of proxy
relating to such meeting, is January 21, 2007. Any such
proposal received by the Company’s principal executive
offices in Rockville, Maryland after such date may be considered
untimely and excluded. If such proposal is presented at the 2007
annual meeting of stockholders, the persons named in the proxy
for such meeting may exercise their discretionary voting power
with respect to such proposal.
By Order of the Board of Directors,
James H. Davis, Secretary
March 22, 2006
THE BOARD OF DIRECTORS HOPES THAT YOU WILL ATTEND THE
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE PROMPTLY
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY OR VOTE OVER
THE INTERNET OR BY TELEPHONE. IF YOU ATTEND THE MEETING, YOU MAY
REVOKE YOUR PROXY AND VOTE IN PERSON.
HUMAN GENOME SCIENCES, INC.
AUDIT COMMITTEE
Charter
The Audit Committee (the “Committee”) of the Board of
Directors (the “Board”) of Human Genome Sciences, Inc.
(the “Corporation”) will have the oversight
responsibility, authority and duties described in this Charter.
The primary purpose of the Committee is to assist the Board in
fulfilling its oversight responsibilities with respect to
(1) the integrity of the Corporation’s financial
statements and other financial information provided by the
Corporation to its stockholders, (2) the Corporation’s
compliance with legal and regulatory requirements, (3) the
Corporation’s relationship with their independent
accountants, including their engagement, performance,
qualifications and independence, (4) the performance of the
Corporation’s internal audit function, internal controls
and disclosure controls. The Committee shall prepare the report
of the Committee included in the Corporation’s annual proxy
statement as required by the Securities and Exchange Commission
(the “SEC”). In addition, the Committee provides an
avenue for communication between the independent accountants,
financial management and the Board. The Committee’s
responsibility is one of oversight, recognizing that the
Corporation’s management is responsible for preparing the
Corporation’s financial statements and that the independent
accountants are responsible for auditing those financial
statements. The independent accountants are ultimately
accountable to the Committee and the Board for such
accountants’ audit of the financial statements of the
Corporation.
The Committee shall be appointed annually by the Board on the
recommendation of the Nominating and Corporate Governance
Committee and shall comprise at least three directors, each of
whom shall meet the independence and financial literacy
requirements of the National Association of Securities Dealers
(the “NASD”), the SEC and applicable law. In addition,
at least one member of the Committee will possess accounting or
financial management expertise as defined by the NASD, the SEC
and applicable law. The Board shall designate one member as
Chair of the Committee. The Committee may, at its discretion in
accordance with applicable law or regulation, delegate to one or
more of its members the authority to act on behalf of the
Committee.
The Committee shall hold meetings as deemed necessary or
desirable by the Chair of the Committee. In addition to such
meetings of the Committee as may be required to perform the
functions described under “Duties and Powers” below,
the Committee shall meet at least annually with the chief
financial officer and the independent accountants to discuss any
matters that the Committee or any of these persons or firms
believe should be discussed. The Committee may, at its
discretion, meet in executive session with or without the
presence of the independent accountants or corporate officers.
Duties
and Powers
The following shall be the principal recurring functions of the
Committee in carrying out its oversight responsibilities. The
functions are set forth as a guide with the understanding that
the Committee may modify or supplement them as appropriate.
Independent
Accountants
1. Appoint, determine funding for and oversee the
Corporation’s independent accountants. Review the
performance and audit fee arrangements of the independent
accountants at least annually.
2. Review and provide prior approval of the engagement of
the Corporation’s independent accountants to perform
non-audit services. The Chair of the Committee may represent and
act on behalf of the entire Committee for purposes of this
review and approval.
3. Ensure that the independent accountants prepare and
deliver at least annually a formal written statement delineating
all relationships between the independent accountants and the
Corporation addressing at least the matters set forth in
Independence Standards Board, Standard No. 1,
Independence Discussions with Audit Committees, as
amended.
4. Discuss with the independent accountants any disclosed
relationships or services that may impact the objectivity and
independence of the independent accountants and recommend that
the Board take appropriate action in response to the independent
accountants’ report to satisfy itself of the independent
accountants’ independence.
5. Obtain and review at least annually a report by the
independent accountants describing: (a) the accounting
firm’s internal quality-control procedures, (b) any
material issues raised by the most recent internal
quality-control review or peer review of the accounting firm and
(c) any material issues raised by any inquiry or
investigation by governmental or professional authorities within
the preceding five years respecting one or more independent
audits carried out by the accounting firm and any steps taken to
deal with any such issues.
6. Obtain from the independent accountants assurance that
their audit of the Corporation’s financial statements was
conducted in accordance with auditing standards generally
accepted in the United States.
7. Confirm that the Corporation’s independent
accountants have complied with any applicable rotation
requirements for the lead audit partner and any reviewing audit
partner with responsibility for the Corporation’s audit.
8. Obtain and review at least annually an attestation to
and a report from the Corporation’s independent accountants
regarding management’s assessment of the effectiveness of
the Corporation’s internal controls and procedures for
financial reporting to be included in the Corporation’s
Annual Report on
Form 10-K,
in advance of such filing.
9. Pursuant to Section 10A of the Securities Exchange
Act of 1934, as amended, obtain and review from the independent
accountants a report describing (a) all critical accounting
policies and practices to be used; (b) all alternative
treatments of financial information within generally accepted
accounting principles that have been discussed with management
officials of the Corporation, ramifications of the use of such
alternative disclosures and treatments, and the treatment
preferred by the independent accountants; (c) other
material written communications between the independent
accountants and the management of the Corporation, such as any
management letter or schedule of unadjusted differences; and
(d) any illegal acts that have been detected or have
otherwise come to the attention of the independent accountants
in the course of their audit.
10. Establish and monitor enforcement of hiring policies
for employees and former employees of the independent
accountants.
Financial
Statements, Controls and Reports
11. Obtain and review an annual report from management
relating to the accounting principles, policies, issues and
practices involved in the preparation of the Corporation’s
financial statements (including those policies for which
management is required to exercise discretion or judgments
regarding the implementation thereof).
12. Obtain and review, at least annually, management’s
statement of responsibility for establishing and maintaining
adequate internal controls and procedures for financial
reporting and disclosure controls and an assessment of the
effectiveness of such internal controls and procedures for
financial reporting as well as its
disclosure controls based on management’s evaluation of
those controls and procedures as of the end of the most recent
filed year, to be included in the Corporation’s Annual
Report on
Form 10-K,
in advance of such filing.
13. Discuss with the independent accountants the matters
required to be discussed by Statement on Auditing Standards
No. 61, Communications with Audit Committees, as
amended.
14. Periodically discuss with the independent accountants,
without management being present, (i) their judgments about
the quality, appropriateness, and acceptability of the
Corporation’s accounting principles and financial
disclosure practices, as applied in its financial reporting, and
(ii) the completeness and accuracy of the
Corporation’s financial statements.
15. Meet periodically with management and/or the
independent accountants to:
16. Review the Corporation’s quarterly consolidated
financial statements with management and the independent
accountants prior to the filing of the Corporation’s
Quarterly Reports on
Form 10-Q
and the disclosures of each of the Chief Executive Officer and
Chief Financial Officer required to be included therein, and
review with the independent accountants any items identified by
them for discussion with the Committee. Review with management
its quarterly evaluation of the effectiveness of the design and
operation of the Corporation’s internal controls and
procedures for financial reporting as well as its disclosure
controls and procedures. The Chair of the Committee may
represent and act on behalf of the entire Committee for purposes
of this review.
17. Review and discuss with management and the independent
accountants Management’s Discussion and Analysis of
Financial Condition and Results of Operations to be included in
the Corporation’s Annual Report on
Form 10-K
and Quarterly Reports on
Form 10-Q
in advance of such filings. The Chair of the Committee may
represent and act on behalf of the entire Committee for purposes
of this review.
18. Review and discuss with management the financial
information in the Corporation’s earnings press releases,
including the use of “pro forma” or
“adjusted” non-GAAP information, and financial
information and earnings guidance provided to analysts and
rating agencies. The Chair of the Committee may represent and
act on behalf of the entire Committee for purposes of this
review.
Reporting
and Recommendations
19. Determine, based on the reviews and discussions noted
above, whether to recommend to the Board that the audited
financial statements be included in the Corporation’s
Annual Report on
Form 10-K
for filing with the SEC.
20. Prepare any report, including any recommendation of the
Committee, required by the rules of the SEC to be included in
the Corporation’s annual proxy statement.
21. Maintain minutes or other records of meetings and
activities of the Committee.
22. Report the Committee’s activities to the Board on
a regular basis and make such recommendations with respect to
the above as the Committee or the Board may deem necessary or
appropriate.
Other
Responsibilities
23. As appropriate, obtain advice and assistance from
outside legal, accounting or other advisors and determine
funding for such advisors.
24. Establish procedures for the receipt, retention and
treatment of complaints received by the Corporation regarding
accounting, internal accounting controls and auditing matters.
25. Review and approve (i) any change in or waiver to
the Corporation’s code of ethics and business conduct, and
(ii) any disclosure made on
Form 8-K
regarding such change or waiver.
26. Establish procedures for the confidential, anonymous
submission by employees of the Corporation of concerns regarding
questionable accounting or auditing matters and the treatment of
such submissions.
27. Review and provide prior approval of all transactions
or arrangements between the Corporation and any of its
directors, officers, principal shareholders or any of their
respective affiliates, associates or related parties.
28. Take such other actions as the Committee or the Board
Directors may deem necessary or appropriate.
29. Review the Committee’s performance of the
foregoing duties on at least an annual basis.
The Committee shall have the resources and authority appropriate
to discharge its responsibilities, including the authority to
engage independent accountants for special audits, reviews and
other procedures and to retain special counsel and other experts
or consultants.
The Committee shall review, on at least an annual basis, this
Charter and the scope of the responsibilities of this Committee.
Any proposed changes, where indicated, shall be referred to the
Board for appropriate action.
Operating
Procedures
Formal actions to be taken by the Committee shall be by
unanimous written consent or by a majority of the persons
present (in person or by conference telephone) at a meeting at
which a quorum is present. A quorum shall consist of at least
50% of the members of the Committee.
C/O AMERICAN STOCK TRANSFER VOTE BY INTERNET -
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HUMAN GENOME SCIENCES, INC.
Annual Meeting of Stockholders HUMAN GENOME SCIENCES, INC. April 26, 2006 Please date, sign and mail your proxy card back as soon as
possible * * * ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS Human Genome Sciences, Inc.’s Proxy Statement, Annual Report 10-K Wrap and Form 10-K 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, 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’ Investor Relations Department at (301) 610-5800 or at Investor_Relations@hgsi.com.
HUMAN GENOME SCIENCES, INC. PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE The undersigned hereby appoints JAMES H. DAVIS, Ph.D., J.D., and BARRY A. LABINGER, and
each of them, with full power of substitution to each, as attorneys and proxies of the undersigned,
to vote all shares which the undersigned is entitled to vote at the Annual Meeting of Stockholders
of Human Genome Sciences, Inc. (the “Company”) to be held in Room F at the Gaithersburg Marriott,
9751 Washingtonian Boulevard, Gaithersburg, MD 20878 on April 26, 2006 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 Company’s 2005 Annual Report and
Notice of Annual Meeting and Proxy Statement relating to such Annual Meeting. The undersigned
revokes all proxies heretofore 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 AND “FOR”
THE OTHER PROPOSAL.
(Continued on other side)
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