Exhibit 10.1
FIRST AMENDMENT TO THE EMPLOYMENT AGREEMENT
BY AND BETWEEN
HUMAN GENOME SCIENCES, INC. AND H. THOMAS WATKINS
     WHEREAS, HUMAN GENOME SCIENCES, INC. (the “Company”) and H. THOMAS WATKINS
(“Executive”) have entered into an employment agreement, dated as of
November 21, 2004 (the “Employment Agreement”);
     WHEREAS, the Company and Executive now desire to amend the Employment
Agreement to comply with Section 409A of the Internal Revenue Code of 1986, as
amended, and the Treasury regulations and other guidance promulgated thereunder;
     WHEREAS, Section 14 of the Employment Agreement provides that all
amendments must be in writing signed by both parties;
     NOW, THEREFORE, the Employment Agreement is hereby amended as follows:
     1. Section 4(b) is hereby amended by adding to the end thereof the
following sentence:
The bonus award shall be paid on or before March 15 of the year after the year
in which the bonus award was earned.
     2. Section 4(c)(iv) is hereby amended by modifying the first sentence
thereof as follows:
All options granted to Executive to purchase common stock of the Company and all
other equity based awards granted under any plan, program or arrangement
maintained by the Company, shall become fully vested and exercisable as of the
Effective Date of a Change of Control (as such terms are defined in the
Company’s Second Amended and Restated Key Executive Severance Plan in the form
attached hereto as Exhibit B (the “Severance Plan”), which is incorporated
herein by reference), to the extent such options and equity based awards are
then outstanding.
     3. Effective as of November 21, 2007, Section 4(h)(ii) is hereby amended in
its entirety as follows:
     (ii) The Company will also reimburse Executive for weekly roundtrip coach
class commercial air travel to Chicago, Illinois and related expenses through
November 21, 2008, or until the earlier relocation of his family to the
Maryland/Virginia/Washington D.C. area; such reimbursement of related expenses
shall be in accordance with the Company’s policies then in existence.

 

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     4. Sections 5(e)(i) and (ii) are hereby amended in their entirety as
follows:
     (i) For purposes of this Agreement, the term “Good Reason” means, without
Executive’s written consent: (A) removal from, or failure to be appointed,
elected, reappointed, or reelected to the Board or Executive’s principal
position; (B) material diminution in Executive’s title, position, duties or
responsibilities, or the assignment to Executive of duties that are
inconsistent, in a material respect, with the scope of duties and
responsibilities associated with Executive’s position under this Agreement;
(C) material reduction in Executive’s Base Salary or target bonus opportunity;
(D) relocation of Executive’s principal workplace to a location which is more
than fifty (50) miles from Rockville, Maryland; or (E) any material failure by
the Company to require any successor to assume the terms of this Agreement in
the absence of a successor agreement acceptable to Executive. For purposes of
clauses (A), (B) or (C) of the preceding sentence, an isolated and inadvertent
action not taken in bad faith and which is remedied by the Company promptly
after receipt of written notice thereof given by Executive shall be excluded.
Notwithstanding the foregoing, in the event that Executive suffers, without his
written consent, a material diminution of title, position, duties or
responsibilities as a result of the Company becoming a subsidiary of another
corporation or due to a change in the reporting hierarchy incident thereto, then
such material diminution shall constitute Good Reason under clause (B) of this
Section 5(e)(i), only if Executive delivers a Notice of Termination for Good
Reason (as defined below) to the Company within thirty (30) days after the
occurrence of the event giving rise to such material diminution, the Company or
its successor fails to remedy such material diminution within thirty (30) days
after receipt of such notice, and Executive agrees, upon the request of the
Company or its successor, to continue his employment for up to a maximum of
ninety (90) days after delivering such Notice of Termination for Good Reason.
     (ii) A termination of employment by Executive for Good Reason shall be
effected by giving the Company written notice (a “Notice of Termination for Good
Reason”) of the termination, setting forth in reasonable detail the specific
conduct of the Company that constitutes Good Reason and the specific
provision(s) of this Agreement on which the Executive relies no later than
ninety (90) days after the initial occurrence of such specific conduct of the
Company. A termination of employment by the Executive for Good Reason shall be
effective thirty-one (31) days following the date when the Notice of Termination
for Good Reason is given, unless, if applicable, the event constituting Good
Reason is remedied by the Company prior to that date. Actions by the Company
that constitute Good Reason shall be disregarded in the calculation of
termination benefits described in Section 6. Notwithstanding anything provided
in this Section 5(e), Good Reason shall not exist unless Executive’s termination
of employment occurs no later than two (2) years following the initial
occurrence of any of the conditions provided under Section 5(e)(i).

 

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     5. Section 5(f) is hereby amended in its entirety as follows:
(f) DATE OF TERMINATION. The term “Date of Termination” means the earliest of:
(i) the date of Executive’s death; (ii) the date on which the Company gives
written notice of termination of employment to Executive due to his having
become Totally Disabled; (iii) the date on which the termination of Executive’s
employment by the Company for Cause or without Cause or by Executive for Good
Reason or without Good Reason, is effective; or (iv) the last day before the
next subsequent anniversary of the Effective Date after a notice of nonrenewal
and termination of employment is given timely by the Company or Executive. Such
Date of Termination, in each case, is the date as of which the Company and
Executive reasonably anticipate that no further services will be performed by
Executive and shall be construed as the date Executive first incurs a
“separation from service” as defined under Section 409A of the Internal Revenue
Code of 1986, as amended (the “Code”). Upon Executive’s termination of
employment for any reason, Executive shall immediately resign from the Board and
from all other offices and positions he holds with the Company and its
subsidiary and affiliate companies.
     6. Sections 6(a) and 6(a)(i) are hereby amended in their entirety as
follows:
     (a) TERMINATION BY REASON OF DEATH. In the event that Executive’s
employment is terminated by reason of Executive’s death, the Company shall pay
the following amounts and provide the following benefits to Executive’s
beneficiary(ies) or estate, as applicable, within 90 days following Executive’s
death:
     (i) All accrued but unpaid Base Salary; if the Date of Termination occurs
before March 15, any earned but unpaid bonuses for the immediately preceding
year; all earned or vested incentive compensation or benefits; all accrued but
unpaid expenses required to be reimbursed under this Agreement; and all accrued
but unused vacation time (collectively referred to as “Accrued Compensation”).
     7. Section 6(b)(ii) is hereby amended in its entirety as follows:
     (ii) A pro rata bonus payment for the year in which Executive’s termination
of employment due to Total Disability occurs equal to the amount of Executive’s
target bonus for the then current fiscal year multiplied by a fraction, the
numerator of which is the number of days during the year that transpired before
the Date of Termination and the denominator of which is three hundred sixty five
(365). The bonus payment will be paid to Executive within 30 days following the
Date of Termination, unless Executive is a “specified employee” (as defined
under Section 409A of the Code and determined in good faith by the Compensation
Committee), in which case such bonus payment will be delayed for six months as
provided under Section 18(i)(vi) to the extent required under Section 409A of
the Code.

 

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     8. Section 6(d)(ii) is hereby amended in its entirety as follows:
     (ii) A pro rata bonus payment the amount of which will be the amount of
Executive’s target bonus for the then current fiscal year multiplied by a
fraction, the numerator of which is the number of days during the year of his
termination that transpired before the Date of Termination, and the denominator
of which is three hundred sixty five (365). The bonus payment will be paid to
Executive within 30 days following the Date of Termination, unless Executive is
a “specified employee” (as defined under Section 409A of the Code and determined
in good faith by the Compensation Committee), in which case such bonus payment
will be delayed for six months as provided under Section 18(i)(vi).
     9. Sections 6(f)(ii) and (iii) are hereby amended in their entirety as
follows:
     (ii) A pro rata bonus payment for the year in which the Date of Termination
occurs equal to the amount of Executive’s target bonus for the then current
fiscal year multiplied by a fraction, the numerator of which is the number of
days during the year that transpired before the Date of Termination and the
denominator of which is three hundred sixty five (365). The bonus payment will
be paid to Executive within 30 days following the Date of Termination, unless
Executive is a “specified employee” (as defined under Section 409A of the Code
and determined in good faith by the Compensation Committee), in which case such
bonus payment will be delayed for six months as provided under
Section 18(i)(vi).
     (iii) Provided that the Company is the first party that elected not to
renew the Agreement by notifying Executive in writing of its intention not to
renew in accordance with Section 2 of this Agreement and Executive was willing
and able to renew this Agreement on substantially the same terms and conditions,
continuation of Executive’s Base Salary during the twenty-four (24) month period
that commences on the Date of Termination. Such payments shall be paid at the
same time and in the same manner as Base Salary would have been paid if
Executive had remained actively employed by the Company until the end of such
twenty-four (24) month period.
     10. Section 18(c) is hereby amended in its entirety as follows:
     (c) TERMINATION OF AGREEMENT. This Agreement shall terminate upon the
termination of Executive’s employment, except that terms of this Agreement which
must survive the termination of this Agreement in order to be effectuated
(including the provisions of Sections 6, 7, 8, 9, 13, 15 and 18(i)) shall
survive until, by their terms, such provisions are no longer operative. Upon the
termination of the Executive’s employment, Executive consents to the
notification by the Company to the Executive’s new employer of Executive’s
obligations under this Agreement.

 

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     11. Section 18 is hereby amended by adding to the end thereof the following
new subsection (i):
(i) 409A COMPLIANCE.
     (i) This Agreement is intended to comply with, or otherwise be exempt from,
Section 409A of the Code and any regulations and Treasury guidance promulgated
thereunder.
     (ii) The Company and Executive agree that they will execute any and all
amendments to this Agreement as they mutually agree in good faith may be
necessary to ensure compliance with the provisions of Section 409A of the Code.
     (iii) The preceding provisions, however, shall not be construed as a
guarantee by the Company of any particular tax effect to Executive under this
Agreement. The Company shall not be liable to Executive for any payment made
under this Agreement, at the direction or with the consent of Executive, which
is determined to result in an additional tax, penalty, or interest under
Section 409A of the Code, nor for reporting in good faith any payment made under
this Agreement as an amount includible in gross income under Section 409A of the
Code.
     (iv) For purposes of Section 409A of the Code, the right to a series of
installment payments under this Agreement shall be treated as a right to a
series of separate payments.
     (v) With respect to any reimbursement of expenses of, or any provision of
in-kind benefits to, Executive, as specified under this Agreement, such
reimbursement of expenses or provision of in-kind benefits shall be subject to
the following conditions: (1) the expenses eligible for reimbursement or the
amount of in-kind benefits provided in one taxable year shall not affect the
expenses eligible for reimbursement or the amount of in-kind benefits provided
in any other taxable year, except for any medical reimbursement arrangement
providing for the reimbursement of expenses referred to in Section 105(b) of the
Code; (2) the reimbursement of an eligible expense shall be made no later than
the end of the year after the year in which such expense was incurred; and
(3) the right to reimbursement or in-kind benefits shall not be subject to
liquidation or exchange for another benefit.
     (vi) If a payment obligation under this Agreement arises on account of
Executive’s termination of employment while he is a “specified employee” (as
defined under Section 409A of the Code and determined in good faith by the
Compensation Committee), any payment of “deferred compensation” (as defined
under Treasury Regulation Section 1.409A-1(b)(1), after giving effect to the
exemptions in Treasury Regulation Sections 1.409A-1(b)(3) through (b)(12)) shall
accrue with interest and shall be made within 15 days after the end of the
six-month period beginning on the date of such termination of employment or, if

 

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earlier, within 15 days after appointment of the personal representative or
executor of Executive’s estate following his death. For purposes of the
preceding sentence, interest shall accrue at the prime rate of interest
published in the northeast edition of The Wall Street Journal on the date of
Executive’s termination of employment.
     12. In all other respects, the Employment Agreement is hereby ratified and
confirmed.
     IN WITNESS WHEREOF, the Company and Executive hereby amend the Employment
Agreement, effective as of the first day of January, 2008, except as otherwise
provided herein.

                  H. THOMAS WATKINS       WITNESS:    
 
                /s/ H. Thomas Watkins       James H. Davis, Ph.D.              
   
 
                HUMAN GENOME SCIENCES, INC.       ATTEST:    
 
               
By:
  Susan D. Bateson       Rose Hadidian    
 
               
Title:
  Senior Vice President, Human Resources