<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 24, 1999
REGISTRATION NO. 333-85319
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HUMAN GENOME SCIENCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 22-3178468
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
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9410 KEY WEST AVENUE
ROCKVILLE, MARYLAND 20850
(301) 309-8504
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
------------------------
WILLIAM A. HASELTINE PH.D.
CHIEF EXECUTIVE OFFICER
HUMAN GENOME SCIENCES, INC.
9410 KEY WEST AVENUE
ROCKVILLE, MARYLAND 20850
(301) 309-8504
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE OF AGENT FOR SERVICE)
------------------------
Copies to:
R.W. SMITH, JR., ESQUIRE
PIPER & MARBURY L.L.P.
36 SOUTH CHARLES STREET
BALTIMORE, MARYLAND 21201
(410) 539-0489
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
=================================================================================================================================
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH OF TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE PRICE(1) REGISTRATION FEE(2)
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5 1/2% Convertible Subordinated Notes due
2006....................................... $125,000,000 100% $125,000,000 $0
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Common Stock, par value $.01 (3) (4)......... 2,394,636 shares -- -- --
=================================================================================================================================
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(1) Equals the aggregate principal amount of the securities being registered.
(2) A registration fee of $34,750 was previously paid in connection with this
registration statement.
(3) Such number represents the number of shares of common stock that are
currently issuable upon conversion of the notes. Pursuant to Rule 416 under
the Securities Act, we are also registering such indeterminate number of
shares of common stock as may be issued from time to time upon conversion of
the notes as a result of the antidilution protections of the notes. Pursuant
to Rule 457(i), no registration fee is required for these shares.
(4) We will issue one right to purchase one share of our junior participating
preferred stock as a dividend on each share of our common stock being
registered. The rights initially are attached to and trade with the shares
of our common stock being registered. Value attributable to such rights, if
any, is reflected in the market price of our common stock.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
================================================================================
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING HOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OF SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED SEPTEMBER 24, 1999
HUMAN GENOME SCIENCES, INC.
------------------
$125,000,000
5 1/2% Convertible Subordinated Notes Due 2006
and
2,394,636 Shares of Common Stock
Issuable Upon Conversion of the Notes
------------------
Noteholders may offer for sale the notes and the underlying shares of our
common stock. See "Plan of Distribution." The notes have the following terms:
- We will pay interest on the notes on July 1 and January 1 of each year,
commencing on January 1, 2000.
- The notes will mature on July 1, 2006.
- The notes are subordinated to all of our existing and future senior
indebtedness.
- The notes are convertible at any time prior to maturity into shares of
our common stock at a conversion price of $52.20 per share, which is
subject to adjustment under the terms of the notes.
- We may redeem the notes on or after July 6, 2002.
- Holders may require us to repurchase the notes upon a change in control,
except that this repurchase right does not apply to certain transactions
under the terms of the notes.
- The notes are currently eligible for trading in The Portal Market of The
Nasdaq Stock Market, Inc. Our common stock is listed on the Nasdaq
National Market under the symbol "HGSI."
- The last reported bid price of our common stock on the Nasdaq National
Market on September 23, 1999 was $76.00 per share.
INVESTING IN THE NOTES OR THE COMMON STOCK INTO WHICH THE NOTES ARE
CONVERTIBLE INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated , 1999
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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SUMMARY........................ 1
RATIO OF EARNINGS TO FIXED
CHARGES...................... 4
RISK FACTORS................... 5
USE OF PROCEEDS................ 16
DESCRIPTION OF NOTES........... 17
CERTAIN UNITED STATES FEDERAL
TAX CONSIDERATIONS........... 31
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PAGE
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DESCRIPTION OF OUR CAPITAL
STOCK........................ 35
SELLING HOLDERS................ 39
PLAN OF DISTRIBUTION........... 42
LEGAL MATTERS.................. 43
EXPERTS........................ 43
WHERE YOU CAN FIND MORE
INFORMATION.................. 44
INCORPORATION BY REFERENCE..... 45
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SUMMARY
This summary highlights information about Human Genome Sciences, Inc.
Because this is a summary, it may not contain all the information you should
consider before investing in the notes or the common stock into which they are
convertible. You should read this entire prospectus carefully.
HUMAN GENOME SCIENCES, INC.
We research and develop novel compounds for treating and diagnosing human
diseases based on the discovery and understanding of the medical usefulness of
genes. We have used automated, high speed gene sequencing technology to generate
a large collection of partial human gene sequences. We believe that our
collection includes most of the genes responsible for producing proteins in the
human body. We also possess one of the largest databases of the genes of humans
and microbes, which we refer to as our "genomic database." We believe we have
created a broad base of product opportunities based on our genomic database.
We began our work in the genetics industry by identifying and cataloging
genes. We have since focused primarily on the research and development of
proteins for the treatment of human disease. We use our advanced proprietary
computer system to identify the most promising product candidates. We are able
to analyze partial gene sequences, identify the genes corresponding to partial
and full length gene sequences and the proteins encoded by those genes. As of
June 30, 1999, we had isolated and characterized several thousand full-length
genes and purified more than 300 potential proteins for the treatment of human
disease.
STRATEGY
We have a two-pronged commercialization strategy:
- Product Development and Commercialization. We use our internal
capabilities to research and develop proteins that can be produced on a
large scale and used as drugs to treat diseases. Generally, our strategy
is to develop potential products to a late laboratory or early clinical
stage and then to collaborate with pharmaceutical or biotechnology
companies for further development and commercialization.
- Corporate Collaborations. We increase our capabilities by collaborating
with pharmaceutical companies for the development and commercialization
of new products. We believe that these arrangements will enable us to
focus our internal resources on a select number of product candidates
while still exploiting the broader product opportunities presented by our
genomic database.
PRODUCTS IN HUMAN TRIALS
We have produced three drugs currently undergoing human clinical trials. We
believe these drugs are among the pharmaceutical industry's first
genomics-derived drugs to enter human trials.
- Myeloid Progenitor Inhibitory Factor-1, known as MPIF-1, is a protein
designed to protect cells that develop into blood cells from the toxic
effects of several chemotherapy drugs. We began Phase II human clinical
trials of MPIF-1 for the treatment of breast and ovarian cancer in
November 1998.
- Keratinocyte Growth Factor-2, known as KGF-2, is a protein designed to
speed the repair of damage to the mouth, throat and related tissues and
to heal serious
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<PAGE> 5
chronic wounds to the skin. KGF-2 may also be useful in treating a number
of other conditions involving injury to skin cells. We began Phase II
human clinical trials of KGF-2 for the treatment of venous ulcers, a type
of chronic wound, in February 1999.
- Vascular Endothelial Growth Factor-2, known as VEGF-2, is a gene-therapy
drug designed to regenerate, or revascularize, the blood vessels of the
heart and limbs. Phase I/II human clinical trials of VEGF-2 for the
treatment of insufficient circulation in limbs and heart disease are
ongoing. These trials are being conducted through Vascular Genetics Inc.,
a joint venture in which we hold a substantial interest.
INTELLECTUAL PROPERTY
We vigorously pursue patents to protect our intellectual property. As of
June 30, 1999, we had 62 issued U.S. patents covering 63 full-length human genes
and had filed U.S. patent applications covering more than 6,300 human genes and
the proteins they encode. In addition, we have filed patent applications with
respect to a substantial number of our large collection of partial gene
sequences, although we are uncertain as to the patentability of partial gene
sequences.
-------------------------
We are a Delaware corporation. Our headquarters are located at 9410 Key
West Avenue, Rockville, Maryland 20850-3338. Our telephone number is (301)
309-8504.
OFFERING
We present below a summary of this offering:
Securities Offered.............. $125,000,000 aggregate principal amount of
5 1/2% Convertible Subordinated Notes Due
2006.
Maturity Date................... July 1, 2006.
Interest Payment Dates.......... July 1 and January 1 of each year,
commencing January 1, 2000.
Conversion Rights............... Holders may convert some or all of their
notes at any time prior to the close of
business on the business day immediately
preceding the maturity date at a conversion
price of $52.20 per share. The initial
conversion price is equivalent to a
conversion rate of 19.1571 shares per
$1,000 principal amount of notes. The
conversion price will be adjusted in
certain circumstances. Upon conversion, you
will not receive any cash representing
accrued interest. See "Description of
Notes -- Conversion Rights."
Sinking Fund.................... None.
Optional Redemption............. We may redeem some or all of the notes at
any time on or after July 6, 2002 at the
redemption prices listed in the
"Description of Notes -- Optional
Redemption" section of this prospectus,
plus accrued and unpaid interest.
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Repurchase Right of Holders Upon
a Change in Control............. If a change in control of Human Genome
Sciences occurs, we must give the holders
of the notes the opportunity to sell their
notes to us at a purchase price equal to
100% of their face amount, plus accrued and
unpaid interest to the date of redemption,
except that this right does not apply to
transactions in which 90% of the
consideration consists of common stock and
in certain other circumstances. See
"Description of Notes -- Certain Rights to
Require Purchase of Notes Upon a Change in
Control."
Ranking......................... The notes are our unsecured obligations and
rank junior to our existing and future
senior indebtedness. At June 30, 1999, our
senior indebtedness was approximately $2.2
million, all of which was secured. The
indenture does not restrict our ability to
incur senior indebtedness. See "Description
of Notes -- Subordination."
Form and Denomination of
Notes........................... The notes are represented by a global note
which has been deposited with a custodian
for, and registered in the name of a
nominee of, DTC in New York City.
Beneficial interests in the global notes
will be shown on, and transfers of the
global notes will be effected only through,
records maintained by DTC and its
participants. See "Description of
Notes -- Book-Entry, Delivery and Form."
Use of Proceeds................. We will not receive any proceeds from the
sale of the notes or the common stock into
which the notes are convertible by the
selling holders. We will pay all expenses
of the registration and sale of the notes
and the common stock, other than selling
commissions and fees and stock transfer
taxes.
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RATIO OF EARNINGS TO FIXED CHARGES
(in thousands)
We present below the ratio of our earnings to our fixed charges. Earnings
consist of net loss plus fixed charges. Fixed charges consist of interest
expense, including amortization of debt issuance costs, and that portion of
rental expense we believe to be representative of interest.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
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1999 1998
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Deficiency of earnings available to cover fixed charges..... $(14,276) $(8,285)
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<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
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1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C>
Deficiency of earnings available to
cover fixed charges............... $(22,957) $(21,148) $(7,559) $(32,719) $9,740
</TABLE>
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RISK FACTORS
You should carefully consider the following risk factors and the other
information in this prospectus before investing in the notes.
OUR UNTESTED BUSINESS STRATEGY MAY NOT RESULT IN THE COMMERCIALIZATION OF ANY
PRODUCTS
Our business strategy is unproven so it is difficult to assess whether we
will be successful in commercializing any products. We use automated high speed
gene sequencing technology to:
- rapidly identify and obtain proprietary rights to a substantial number of
genes; and
- select from those genes promising candidates to develop novel compounds
for treating and diagnosing human diseases.
It is too early for us to determine whether or not our strategy can be
implemented successfully. Unlike other companies that target particular diseases
and try to find cures through gene-based therapies, we try to find as many genes
as possible and then use this information as the basis for development of
potential products. Our strategy may not result in the commercialization of any
products.
IF WE ARE NOT SUCCESSFUL IN SELECTING GENES THAT CAN BE DEVELOPED COMMERCIALLY,
WE MAY NOT BE ABLE TO RECOVER OUR INVESTMENT IN OUR GENE DISCOVERY EFFORT
Our success depends on our ability and that of our collaborators to
determine which genes have potential value. If we are unable to identify those
genes with potential value, we will not be able to recover our investment in our
gene discovery effort. To select potential product candidates, we invest
significant time and resources to isolate and sequence full-length genes, test
and analyze the genes, and determine their functions.
We devote an increasing portion of our resources to identify and develop
proteins for the treatment of human disease. We have recently made substantial
capital expenditures and hired additional personnel to foster these activities,
including expenditures for both laboratory and clinical trials. We will incur
additional costs to continue these activities. We may not be successful in
selecting genes with the most potential for commercial development.
WE ARE AN EARLY STAGE COMPANY IN A NEW AND RAPIDLY EVOLVING INDUSTRY, AND IF WE
ARE UNABLE TO DEVELOP OUR BUSINESS, OUR REVENUE GROWTH WILL BE LIMITED
We expect to incur continued and increasing losses over the next several
years and may not become profitable. We are in the early stages of development,
and it will be a number of years, if ever, before we are likely to receive
revenue from product sales or royalties. We expect to continue to incur
substantial expenses relating to research and development efforts. We anticipate
that these efforts will increase as we focus more of our efforts on preclinical
testing and clinical trials required for the development of product candidates.
We currently depend on our collaboration partners, like SmithKline Beecham, for
substantially all of our revenue. To date, substantially all of our revenue has
resulted from payments made under our collaboration agreements with SmithKline
Beecham and, to a lesser extent, from other collaboration, option and licensing
agreements. We expect that most of our revenue for the foreseeable future will
result from payments under our existing collaboration agreements. We may not
receive milestone or royalty payments under our collaboration agreements with
SmithKline Beecham or under our other collaboration agreements.
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IF OUR RELATIONSHIP WITH SMITHKLINE BEECHAM OR OTHER COLLABORATORS PREVENTS US
FROM ENTERING INTO OTHER COLLABORATIVE AGREEMENTS, OUR PRODUCT DEVELOPMENT
OPPORTUNITIES MAY BE LIMITED
We depend on our collaboration partners for research, development and
commercialization of products. Our collaboration agreements generally restrict
our ability to enter into other collaboration agreements in specified fields.
These agreements give SmithKline Beecham and other collaborators the right to
control the development, regulatory approval and marketing of any products
developed by them under the agreements. Our ability to achieve profitability
could be delayed or materially adversely affected if SmithKline Beecham or other
collaborators fail to:
- develop marketable products;
- obtain regulatory approvals for products; or
- successfully market products based on the genes we identify.
IF ONE OF OUR COLLABORATORS PURSUES A PRODUCT THAT COMPETES WITH OUR PRODUCTS, A
CONFLICT OF INTEREST COULD ARISE, WHICH MIGHT ADVERSELY AFFECT OUR MILESTONE AND
ROYALTY REVENUES
Each of our collaborators conducts multiple product development efforts.
Our collaborators may pursue existing or alternative technologies in preference
to products being developed under its collaboration agreements with us.
Additionally, our collaborators may develop, either alone or with others,
products that are similar to or in competition with products being developed
under their collaboration agreements with us. If our collaborators pursue these
other products it could have a material adverse effect on our receipt of
milestone and royalty revenues.
WE HAVE LIMITED EXPERIENCE IN DEVELOPING PRODUCTS, WHICH MAY MAKE OUR PRODUCT
DEVELOPMENT EFFORTS UNSUCCESSFUL
We have only recently started focusing our resources on developing product
candidates, which may make our product development efforts unsuccessful. Our
ability to develop and commercialize products based on proteins and, in the
future, other products to which we have retained commercial rights, will depend
on our ability to:
- develop products internally;
- complete preclinical and clinical testing;
- obtain necessary regulatory approvals;
- deploy sales and marketing resources effectively; and
- enter into arrangements with third parties to provide such functions.
Although we have started clinical trials with respect to product
candidates, we may not be successful in developing or commercializing these or
other protein products. We may not be able to enter into additional
collaboration agreements for products we develop on favorable terms.
WE HAVE LIMITED EXPERIENCE IN CONDUCTING PRECLINICAL AND CLINICAL DEVELOPMENT
ACTIVITIES, WHICH MAY FORCE US TO DEPEND ON OUR COLLABORATORS AND OTHER THIRD
PARTIES
We have limited experience in conducting preclinical and clinical
development activities. We may be forced to rely in large part on our
collaboration partners and third party clinical research organizations to design
and conduct most of these activities. Our
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<PAGE> 10
inability to contract for any necessary clinical activities on acceptable terms
would impair or delay our ability to complete product development. If we rely on
collaborators and third parties for preclinical and clinical development
activities, it may reduce our control over these activities and may make us
dependent upon these parties.
WE MAY NOT BE ABLE TO REPAY THE NOTES
Our ability to pay the principal of and interest on our indebtedness,
including the notes, will depend on our future performance, which is subject to
a variety of factors, uncertainties and contingencies, many of which are beyond
our control. We cannot assure you that we will generate sufficient cash flow in
the future to enable us to meet our anticipated debt service requirements,
including those with respect to the notes.
OUR INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND PREVENT US FROM
FULFILLING OUR OBLIGATIONS UNDER THE NOTES
Our indebtedness could prevent us from fulfilling our obligations under the
notes. At June 30, 1999, we had outstanding total indebtedness of approximately
$127.2 million. We are obligated to make annual payments to the Maryland
Industrial Development Financing Authority of approximately $450,000, plus
interest, in connection with the financing of the construction and equipping of
our protein expression facility. This substantial leverage will have several
important consequences for our future operations, including:
- a significant portion of our cash flow will be dedicated to the payment
of interest on, and principal of, our indebtedness;
- our ability to obtain additional financing in the future for capital
expenditures, acquisitions, general corporate purposes or other purposes
may be impaired; and
- our ability to withstand competitive pressures, adverse economic
conditions and adverse changes in governmental regulations and to make
acquisitions or otherwise take advantage of significant business
opportunities that may arise could be negatively impacted.
IF WE ARE UNABLE TO PAY OUR DEBTS, YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES
WILL BE SUBORDINATED TO ALL OF OUR EXISTING AND FUTURE SENIOR INDEBTEDNESS
The notes are general unsecured obligations, subordinated in right of
payment to all of our existing and future senior indebtedness. Upon any
distribution of our assets pursuant to any insolvency, bankruptcy, dissolution,
winding up, liquidation or reorganization, the payment of the principal of and
interest on the notes will be subordinated to the extent provided in the
indenture to the prior payment in full of all of our senior indebtedness. Senior
indebtedness includes all indebtedness for money borrowed, other than
indebtedness that is expressly junior in right of payment to the notes or ranks
equal in right of payment to the notes. At June 30, 1999, our senior
indebtedness was approximately $2.2 million, all of which was secured. The terms
of the notes do not limit the amount of additional indebtedness, including
senior indebtedness, which we can create, incur, assume or guarantee. See
"Description of Notes."
WE MAY BE UNABLE TO RAISE THE FUNDS NECESSARY TO REPURCHASE THE NOTES IN THE
EVENT OF A CHANGE IN CONTROL AND MAY BE UNABLE TO REPURCHASE YOUR NOTES, WHICH
WOULD CAUSE A DEFAULT ON THE NOTES
We cannot assure you that we will have sufficient financial resources or
will be able to arrange financing to pay the repurchase price of the notes in
the event of a change in control, which would cause a default on the notes. Our
ability to repurchase the notes may be limited by law, the indenture and the
terms of other agreements relating to borrowing
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<PAGE> 11
that constitute senior indebtedness. In addition, we may not repurchase any
notes in certain circumstances involving a change in control if at such time the
subordination provision of the indenture would prohibit us from making payments
of principal in respect of the notes. We may be required to refinance our senior
indebtedness in order to make any such payment. We may not have the financial
ability to repurchase the notes in the event payment of our senior indebtedness
is accelerated.
The term "change in control" is limited to certain specified transactions
and may not include other events that might adversely affect our financial
condition or result in a downgrade of the credit rating of the notes. The
requirement that we offer to repurchase the notes upon a change in control may
not necessarily afford holders of the notes protection in the event of a highly
leveraged transaction, reorganization, merger or similar transaction. The term
"change in control" does not apply to transactions in which 90% of the
consideration paid for our common stock in a merger or similar transactions
consists of common stock and in certain other circumstances where our common
stock is trading at a premium over its conversion price. See "Description of
Notes -- Certain Rights to Require Purchase of Notes Upon a Change in Control."
IF AN ACTIVE TRADING MARKET FOR THE NOTES DOES NOT DEVELOP, THE TRADING PRICE OF
THE NOTES COULD BE ADVERSELY AFFECTED
The notes are new issues of securities for which there currently is no
public market. Although the Credit Suisse First Boston Corporation, the initial
purchaser of the notes, has informed us that it currently intends to make a
market in the notes, it is not obligated to do so. The initial purchaser may
discontinue any such market making activity at any time without notice.
Accordingly, we cannot assure you as to the development or liquidity of any
market for the notes. If an active trading market fails to develop, the trading
price of the notes could be adversely affected.
OUR STOCK PRICE HAS BEEN AND WILL LIKELY CONTINUE TO BE VOLATILE, WHICH MAY
ADVERSELY AFFECT THE MARKET PRICE OF THE NOTES AND THE COMMON STOCK
Our stock price and the stock prices of emerging and biotechnology
companies like us have historically been highly volatile, which may adversely
affect the market price of the notes and the common stock. During the past year,
the market price of our common stock has been as low as $24.50 per share and as
high as $96.25 per share. The market price of the notes and the common stock
could fluctuate substantially because of:
- future announcements concerning our company or our competitors, including
the results of clinical testing, technological innovations or new
commercial products;
- changes in government regulations;
- regulatory actions;
- announcements relating to healthcare reform;
- developments concerning proprietary rights;
- litigation; and
- public concern as to the safety of our products.
In addition, the stock market has experienced extreme price and volume
fluctuations that have particularly affected the market price for many emerging
and biotechnology companies. These fluctuations have often been unrelated to the
operating performance of these companies. These broad market fluctuations may
adversely affect the market price of the notes or the common stock.
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WE COMPETE AGAINST NUMEROUS COMPETITORS WITH SUBSTANTIALLY GREATER FINANCIAL
RESOURCES, WHICH MAY ENABLE THEM TO DEVELOP AND COMMERCIALIZE PRODUCTS BEFORE US
Many of our potential competitors have substantially greater research and
product development capabilities and financial, scientific, marketing and human
resources which may enable them to develop and commercialize products before us.
We face substantial competition in our efforts to identify, establish the
utility of and patent as many genes as possible within a short time frame. We
face competition from entities using high speed gene sequencers to discover
genes. We also face competition from entities using more traditional methods to
discover genes related to particular diseases. We expect that competition in
this field will intensify. We believe that the majority of genes in the human
genome have been identified by our efforts or those of others conducting genomic
research. We believe that virtually all of these genes will be identified within
several years.
Our competitors include parties conducting research to identify genes and
human genome research similar to or competitive with our focus on gene
discovery, including:
- institutes, including the U.S. government and the governments of Great
Britain, France, Germany and Japan;
- small laboratories associated with universities or other not-for-profit
organizations;
- pharmaceutical and biotechnology companies; and
- government-financed programs.
These competitors may:
- succeed in identifying genes or developing products earlier than we do;
- obtain approvals from the U.S. FDA or other regulatory agencies for
products more rapidly than we do; or
- develop products that are more effective than those we propose to
develop.
The other risks of competition include the following:
- some of our competitors may be further advanced in developing potential
products that may compete with our potential products;
- research and development by others may render our products or the
products we, along with our collaborators, may seek to develop obsolete
or uneconomical;
- other companies or institutions in our field may develop treatments,
cures or diagnostics superior to any therapy or diagnostics we may
develop;
- any therapy or diagnostics we may develop may not be preferred to any
existing or newly developed technologies;
- the gene sequencing machines we use are commercially available and are
currently being used by many other companies, in some cases for business
purposes that compete with our business; and
- a number of other companies have announced plans to engage in gene
discovery and could acquire similar gene sequencing machines and develop
procedures for automated sequencing of genes.
IF WE ARE UNABLE TO DEVELOP OUR TECHNOLOGIES, OUR PRODUCT DEVELOPMENT EFFORTS
MAY BE UNSUCCESSFUL
Our development of products based on genes we discover is still in an early
stage and may ultimately prove to be unsuccessful. The development of these
products requires
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significant further research, development, testing and regulatory approvals and
is subject to the risk of failure inherent in the development of products based
on innovative technologies and the risks associated with drug development
generally. These risks include the possibility that:
- these technologies or any or all of the products based on these
technologies will be found to be ineffective or toxic, or otherwise fail
to receive necessary regulatory clearances;
- the products, if safe and effective, will be difficult to manufacture on
a large scale or uneconomical to market;
- proprietary rights of third parties will preclude us or our collaborators
from marketing products;
- third parties will market superior or equivalent products; and
- we may not be able to access newly developed gene sequencing machines
using new and superior technology which could render obsolete the gene
sequencers we use.
Our competitive position would be adversely affected if we are unable to
anticipate future developments and obtain access to new technology.
EVEN IF WE COMPLETE PRODUCT DEVELOPMENT, WE MAY BE UNABLE TO COMMERCIALIZE OUR
PRODUCTS OR RECOVER OUR DEVELOPMENT COSTS
We may not be able to develop a commercially feasible product based on the
genes or the proteins expressed by the genes we discover. To date, relatively
few products based on genes have been developed and commercialized. Some areas
of drug discovery conducted by our collaborators and other partners involve new
technologies, and existing data on the safety and effect of these technologies
is very limited. Currently, there are no products for patient use that have been
developed from these technologies or that have received FDA approval. We need to
address several significant scientific challenges before the therapeutic
potential of these technologies can be commercially realized. For example:
- commercialization of our products may take a number of years, if they are
commercialized at all; and
- development of products in new and rapidly evolving areas and
technologies could render our actual or proposed products, services or
processes obsolete before we recover a significant portion of our related
research, development and capital expenses.
IF WE ARE UNABLE TO PATENT OUR DISCOVERIES OR PROTECT OUR PROPRIETARY RIGHTS,
COMPETITORS MAY OBTAIN RIGHTS TO AND COMMERCIALIZE THE GENES WE DISCOVER
Our competitors may obtain rights to commercialize the genes we discover if
we are unable to patent our discoveries or protect our proprietary rights. We
apply for patent protection for genes identified by partial sequencing and,
subsequently, for those genes we fully sequence. We may not be able to patent
genes based on partial sequences. Even if we can get patent protection for these
sequences, it may not provide effective commercial exclusivity. We do not expect
to isolate and fully sequence a significant portion of the partial gene
sequences we discover. In some situations, we depend upon our collaborators to
file and prosecute patent applications.
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PATENT LAWS AND INTERPRETATION OF PATENT LAWS ARE SUBJECT TO CHANGES THAT MAY
ENABLE OTHERS TO DEVELOP THE PROTEINS WE DISCOVER
The patent positions of biotechnology firms generally are highly uncertain
and involve complex legal and factual questions that will ultimately determine
whether we or one of our competitors has the right to develop a particular
product. There is a substantial backlog of biotechnology patent applications at
the U.S. Patent and Trademark Office and no clear policy has emerged regarding
the breadth of claims covered in biotechnology patents. There have been, and
continue to be, intensive discussions on the scope of patent protection for both
gene fragments and full-length genes. There have also been proposals for review
of the appropriateness of patents on genes and gene fragments. The biotechnology
patent situation outside the U.S. is even more uncertain and is currently
undergoing review and revision in many countries. These proposals and other
changes in patent laws in the U.S. and other countries may result in changes in,
or interpretations of, the patent laws which will adversely affect our patent
position.
MANY OF OUR PATENT APPLICATIONS ARE PENDING AND MAY NOT RESULT IN ISSUED PATENTS
Our pending applications covering full-length genes and their corresponding
proteins may not result in the issuance of any patent. As of June 30, 1999, we
had patent applications filed for:
- more than 6,300 human genes and their corresponding proteins; and
- all or portions of genomes of eight infectious microorganisms and one
non-infectious microorganism.
As of that date, we had only 62 U.S. patents issued covering 63 full-length
human genes. Our disclosures in our applications may not be sufficient to meet
the statutory requirements for patentability in all cases. Additionally, many
genes may be covered by our patent applications and as a result we cannot
predict what issues may arise in connection with our patent applications or the
timing of the grant of patents with respect to genes covered by these patent
applications.
OUR PATENT APPLICATIONS FOR PARTIAL HUMAN GENE SEQUENCES MAY BE INSUFFICIENT AND
MAY NOT BE GRANTED
We have filed U.S. patent applications claiming more than 200,000 partial
human gene sequences which may be insufficient and may not be granted. These
applications seek to protect partial human and non-human gene sequences, the
full-length gene sequences that include the partial sequences, as well as
derived products and uses. These applications do not contain any laboratory or
clinical data with respect to these biological functions. Some court decisions
indicate that disclosure of a partial sequence may not be sufficient to support
the patentability of a full-length sequence. We believe that these court
decisions and the uncertain position of the Patent and Trademark Office, present
a significant risk that patents will not be issued based on patent disclosures
limited to partial gene sequences. Finally, even if patents are issued on the
basis of partial gene sequences, there is uncertainty as to the scope of the
coverage, enforceability and commercial protection provided by any of these
patents.
IF INFORMATION ABOUT THE GENES WE DISCOVER IS PUBLISHED BY OTHERS BEFORE WE
APPLY FOR PATENT PROTECTION, WE MAY BE UNABLE TO OBTAIN PATENT PROTECTION
If information about genes we identify is published before we apply for
patent protection based on the full-length gene, we may be unable to obtain
patent protection.
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Washington University has identified genes through partial sequencing pursuant
to funding provided by Merck & Co. and has deposited the partial sequences
identified in a public database. In January 1997, The Institute for Genomic
Research, or TIGR, in collaboration with the National Center for Biological
Information, disclosed full-length DNA sequences which are reportedly in excess
of 35,000 sequences that were assembled from partial gene sequences available in
publicly accessible databases or sequenced at TIGR. This type of disclosure
might limit the scope of claims or make unpatentable subsequent patent
applications on full length genes we file.
In July 1994, we reached an agreement with TIGR and SmithKline Beecham to
contribute a number of partial copies of DNA sequences to a database. Under the
agreement, this database was accessible only to academic scientists and
researchers at non-profit institutions that sign access agreements. In October
1996, TIGR notified us of its decision to terminate this agreement according to
its terms, effective in April 1997. The termination of this agreement eliminated
limitations on publication of those sequences in the database as of that date.
In addition, the termination eliminated previous restrictions on TIGR's ability
to publish sequence information. This publication may have adversely affected or
will adversely affect our ability to obtain patent protection for some genes in
which we may have an interest.
IF SIMILAR PATENT APPLICATIONS HAVE BEEN FILED OR SIMILAR PATENTS ARE ISSUED,
OUR PATENT APPLICATIONS MAY BE DENIED OR OUR USE RESTRICTED
Other companies or institutions may have filed patent applications or may
file patent applications in the future which attempt to patent genes similar to
our patent applications and may cause our patent applications to be denied or
our use restricted. Others have filed patent applications that cover genes for
which we have filed patent applications, including applications based on our
protein candidates. The Patent and Trademark Office would decide the priority of
competing patent claims in an interference proceeding. Any patent application
filed by a third party may have priority over patent applications we filed, in
which event we may be required to negotiate a royalty arrangement to pursue a
potential product or refrain from developing a potential product.
PATENTS MAY NOT BE ISSUED FOR OUR APPLICATIONS AND EVEN IF THEY ARE THEY MAY NOT
PROTECT OUR DISCOVERIES
Patents may not be issued for the applications we file, and if any
additional patents are issued, they may not provide commercially meaningful
protection against competitors. Any patent issued may not provide us with
competitive advantages, and may be challenged by others. Furthermore, others may
independently develop similar products which could result in an interference
proceeding in the Patent and Trademark Office. Others may be able to design
around issued patents or develop products providing similar effects to products
we are developing based on genes or proteins expressed by genes which are not
covered by our patents. In addition, others may discover uses for genes or
proteins other than those uses covered in our patent applications, and these
other uses may be separately patentable. In this case, the holder of a use
patent covering an invention as to which we have a composition of matter patent
claim could exclude us from selling a product for a use covered by their use
patent.
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IF OUR POTENTIAL PRODUCTS CONFLICT WITH PATENTS THAT HAVE BEEN OR MAY BE GRANTED
TO COMPETITORS, UNIVERSITIES OR OTHERS, WE MAY BE UNABLE TO DEVELOP THOSE
PRODUCTS
Our potential products may give rise to claims that they infringe the
patents of others. This risk increases as the biotechnology industry expands and
more patents are issued and other companies engage in the business of
discovering genes through the use of high speed sequencers. Other persons could
bring legal actions against us claiming damages and seeking to stop our
manufacturing and marketing of the affected products. If any of these actions
are successful, in addition to any potential liability for damages, we could be
required to obtain a license in order to continue to manufacture or market the
affected products. We may not prevail in any action and a required license may
not be available on acceptable terms. We believe that there will continue to be
significant litigation in the industry regarding patent and other intellectual
property rights. If we become involved in litigation, it could consume a
substantial portion of our resources.
SOME OF OUR RESEARCH WAS FUNDED BY THE U.S. DEPARTMENT OF ENERGY WHICH MAY GRANT
LICENSES UNDER OUR PATENTS IN CERTAIN CIRCUMSTANCES
A small percentage of sequences covered by our patent filings were
identified pursuant to research funded by grants from the U.S. Department of
Energy. The Department of Energy has a statutory right under certain
circumstances, including lack of action on the part of the holder of the patent
rights to achieve practical application of the invention or a need to alleviate
public health or safety concerns not reasonably satisfied by the holder of the
patent rights, to grant to other parties licenses under the patents which may be
granted based on research funded by the Department of Energy.
IF WE ARE UNABLE TO PROTECT OUR TRADE SECRETS, OTHERS MAY BE ABLE TO COMPETE
MORE EFFECTIVELY
We may not be able to meaningfully protect our trade secrets which may
enable others to compete more effectively. We rely on trade secret protection to
protect our confidential and proprietary information. We believe that we have
developed proprietary procedures for making libraries of partial copies of DNA
sequences and sequencing and analyzing genes. We have not sought patent
protection for these procedures. Additionally, we have developed a substantial
database concerning genes we have identified. While we have entered into
confidentiality agreements with employees and academic collaborators, we may not
be able to prevent their disclosure of these data or materials. Others may
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to our trade secrets or disclose our
technology. In addition, specific trade secrets important to our business have
been developed by, or are in the possession of, TIGR, including information
concerning sequencing procedures and genes identified by TIGR.
IF WE LOSE KEY MANAGEMENT OR OTHER PERSONNEL, OUR BUSINESS WILL BE ADVERSELY
AFFECTED
We depend on our senior executive officers as well as certain key
scientific and other personnel. Although we have entered into employment
agreements with some of our executives, the employment agreements are for a
limited period of time, and not all key personnel have employment agreements.
Our employment agreement with Dr. William A. Haseltine, our Chairman of the
Board and Chief Executive Officer, expires in February 2000. Although Dr.
Haseltine's employment agreement automatically extends for additional one year
terms, the agreement can be terminated by either party four months
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prior to the end of the applicable term. If Dr. Haseltine decided to terminate
his employment with us, such termination could have a material adverse effect on
our business. Further, we have not purchased key-man life insurance on any of
our executive officers or key personnel. Competition among pharmaceutical and
biotechnology companies for qualified employees is intense, and the loss of
qualified employees, or an inability to attract, retain and motivate additional
highly skilled employees required for the expansion of our activities, could,
among other things, hinder our ability to successfully complete clinical tests
and develop marketable drugs.
IF WE DO NOT OBTAIN SIGNIFICANT ADDITIONAL FUNDS ON ACCEPTABLE TERMS, WE MAY NOT
BE ABLE TO CONTINUE TO GROW OUR BUSINESS AND GENERATE ENOUGH REVENUE TO RECOVER
OUR INVESTMENT IN OUR PRODUCT DEVELOPMENT EFFORT
Since inception, we have expended, and expect to continue to expend,
substantial funds to continue our research and development programs. If we incur
unanticipated expenses or delays in receipt of revenue, we may require
additional financing to fund our operating expenses and capital requirements. We
may not be able to obtain such additional financing on acceptable terms. If we
raise additional funds by issuing equity securities, further dilution to our
existing stockholders may result.
WE ARE SUBJECT TO EXTENSIVE AND UNCERTAIN GOVERNMENT REGULATORY REQUIREMENTS,
WHICH MAY DELAY GOVERNMENT APPROVALS OF OUR PRODUCTS AND PREVENT THEIR
COMMERCIALIZATION
Our products are subject to an extensive and uncertain regulatory approval
process by the FDA and comparable agencies in other countries which may cause
significant delays and costs. The regulation of new products is extensive, and
the required laboratory and clinical testing is lengthy and expensive. We may
not obtain FDA approvals in a timely manner, or at all. We and our collaborators
may encounter significant delays or excessive costs in our efforts to secure
necessary approvals or licenses. Even if FDA regulatory approvals are obtained,
the FDA extensively regulates manufacturing, labeling, distributing, marketing,
promotion and advertising after product approval. Moreover, several areas in
which we or our collaborators may develop products involve relatively new
technology and have not been the subject of extensive product testing in humans.
Accordingly, the regulatory requirements governing these products and related
clinical procedures remain uncertain. In addition, these products may be subject
to substantial review by foreign governmental regulatory authorities which could
prevent or delay approval in those countries. Regulatory requirements ultimately
imposed on these and other areas could adversely affect our ability to test,
manufacture and market products.
WE ARE SUBJECT TO ENVIRONMENTAL PROTECTION LAWS WHICH MAY LIMIT OUR ABILITY TO
CONDUCT OUR BUSINESS
State and federal laws regarding environmental protection and hazardous
substances control affect our business. Changes in these laws may limit our
ability to conduct our business. We cannot predict the impact that these laws or
any changes in these laws may have on our future operations. Federal and state
agencies and congressional committees have expressed interest in further
regulating biotechnology. We cannot estimate the extent and impact of regulation
in the biotechnology field, including genetic testing, resulting from any future
federal, state or local legislation or administrative action.
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WE DEPEND ON A SINGLE SUPPLIER FOR GENE SEQUENCING MACHINES AND CERTAIN
REAGENTS, WHICH MAY ADVERSELY AFFECT OUR ABILITY TO IDENTIFY ADDITIONAL GENES
We currently depend on a single supplier, Applied Biosystems, a division of
PE Corporation, formerly Perkin-Elmer Corporation, to provide all of our gene
sequencing machines and certain reagents we require in connection with the gene
sequencing process. If we are unable to obtain additional machines or an
adequate supply of reagents or other ingredients at commercially reasonable
rates, our ability to continue to identify genes through gene sequencing would
be adversely affected. PE Corporation has recently created Celera Genomics
Corporation, an entity that is sequencing the human genome and could potentially
be one of our competitors. While other gene sequencing machines are available,
we do not believe that other machines are as efficient as the machines we
currently use. The gene sequencing machines or the reagents may not remain
available in commercial quantities at acceptable costs.
WE CURRENTLY HAVE A LIMITED MANUFACTURING CAPACITY AND MUST RELY ON
THIRD PARTIES TO MANUFACTURE OUR PRODUCTS FOR TRIALS OR SALE, WHICH MAY
ADVERSELY AFFECT OUR ABILITY TO OBTAIN PRODUCTS ECONOMICALLY
We do not currently have any manufacturing facilities licensed to supply
materials suitable for clinical trials or for commercial sale or any experience
in manufacturing materials suitable for clinical trials or for commercial sale.
Our dependence on third parties for manufacturing may prevent us from obtaining
products economically. We depend on these third parties to comply with current
good manufacturing practices, known as cGMPs, and other regulatory requirements
and to deliver materials on a timely basis. These third parties may not perform
adequately. Any failures by these third parties may delay clinical development
or the submission of products for regulatory approval, or otherwise impair our
competitive position.
During 1997 and 1998, we designed and the Maryland Economic Development
Corporation constructed a process development and production facility for the
preparation of clinical trial quantities of our therapeutic proteins. This
facility must be validated and inspected by the FDA to determine compliance with
cGMP requirements. A delay in validation of the facility could adversely affect
the cost and timing of clinical trials and could delay submission of products
for regulatory approval. We may not be able to successfully establish
manufacturing capabilities and manufacture our products economically or in
compliance with cGMPs and other regulatory requirements.
WE CURRENTLY HAVE NO MARKETING CAPABILITY AND MUST RELY ON THIRD PARTIES TO
MARKET OUR PRODUCTS, WHICH MAY ADVERSELY AFFECT OUR ABILITY TO COMMERCIALIZE OUR
PRODUCTS
We do not have any products that can be marketed. In the future, we
generally expect to rely on collaborators or on third parties that we may
contract with to market any products that we may develop. Our dependence on
third parties may adversely affect our ability to commercialize our products. To
date, we have collaborated with SmithKline Beecham, Schering-Plough and others.
However, we may also co-promote or retain U.S. marketing rights to certain of
our products. If we decide to market products directly, it will require
significant additional expenditures and management resources to develop an
external sales force and implement our marketing strategy. Our collaborators or
other third parties may not be successful in marketing products and we may not
be able to establish a successful marketing force.
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IF THE HEALTHCARE SYSTEM OR REIMBURSEMENT POLICIES CHANGE, IT COULD ADVERSELY
AFFECT THE PRICING AND SALES OF OUR PRODUCTS
In recent years, there have been numerous proposals to change the
healthcare system in the U.S., some of which could adversely affect the pricing
and sales of our products. These proposals included measures that would limit or
eliminate payments for certain medical procedures and treatments or subject the
pricing of pharmaceuticals to government control. In addition, newly-approved
healthcare products may not be reimbursed by healthcare systems. Government and
other third-party payors increasingly attempt to contain healthcare costs by
limiting both coverage and the level of reimbursement of new products and by
refusing, in some cases, to provide any coverage of uses of approved products
for disease indications other than those for which the FDA has granted marketing
approval. Future legislative proposals may be adopted and federal, state or
private payors for healthcare goods and services may take action to limit their
payments for such goods and services. We cannot predict the effect that changes
in the healthcare system may have on our business, and these changes may have on
the pricing and sales of our products.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH MAY NOT PROVE TO BE
ACCURATE
This prospectus, including the documents we incorporate by reference,
contains forward-looking statements and information relating to our company. We
generally identify forward-looking statements using words like "believe,"
"intend," "expect," "may," "should," "plan," "project," "contemplate,"
"anticipate" or similar statements. These statements are based on our beliefs as
well as assumptions we made using information currently available to us. Because
these statements reflect our current views concerning future events, these
statements involve risks, uncertainties and assumptions. Actual results may
differ significantly from the results discussed in these forward-looking
statements. We do not undertake to update our forward-looking statements or risk
factors to reflect future events or circumstances.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the notes and the common
stock into which the notes are convertible by the selling holders.
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DESCRIPTION OF NOTES
We issued the notes under an indenture, dated as of June 25, 1999, between
us and The Bank of New York, as trustee. The following description is only a
summary of the material provisions of the indenture, the notes and the
registration rights agreement. We urge you to read the indenture, the notes and
the registration rights agreement in their entirety because they, and not this
description, define your rights as holders of these notes. You may request
copies of these documents at our address set forth under the caption "Where You
Can Find More Information." The terms of the notes include those stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939, as amended.
GENERAL
These notes are unsecured, subordinated obligations of Human Genome
Sciences. We issued the notes in the principal amount of $125,000,000. Interest
on the notes will accrue at the rate of 5 1/2% per annum and will be payable
semiannually in arrears on July 1 and January 1 of each year commencing on
January 1, 2000. Interest on the notes will accrue from the date of original
issuance or, if interest has already been paid, from the date it was most
recently paid. We will make each interest payment to the holders of record of
these notes on the immediately preceding June 15 or December 15, whether or not
this day is a business day.
We will pay the principal of, premium, if any, and interest on the notes at
the office or agency maintained by us in the Borough of Manhattan in New York
City. Holders may register the transfer of their notes at the same location. We
reserve the right to pay interest to holders of the notes by check mailed to
such holders at their registered addresses or by wire transfer to holders of at
least $2,000,000 aggregate principal amount of notes. Interest on the notes will
be computed on the basis of a 360-day year comprised of 12 30-day months.
Except under the limited circumstances described below, the notes will be
issued only in fully-registered book-entry form, without coupons, and will be
represented by one or more global notes. There will be no service charge for any
registration of transfer or exchange of notes. We may, however, require holders
to pay a sum sufficient to cover any tax or other governmental charge payable in
connection with any such transfer or exchange.
BOOK-ENTRY, DELIVERY AND FORM
We will issue the notes in the form of one or more global notes except as
described under "-- Certificated Notes" below. The global notes will be
deposited with, or on behalf of, the clearing agency registered under the
Exchange Act that is designated to act as depositary for the notes and
registered in the name of the depositary or its nominee. The Depository Trust
Company will be the initial depositary. Except as set forth below, the global
notes may be transferred, in whole and not in part, only to the depositary or
another nominee of the depositary. You may hold your beneficial interests in the
global notes directly through the depositary if you have an account with the
depositary or indirectly through organizations which have accounts with the
depositary.
The depositary has advised us that it is:
- a limited-purpose trust company organized under the laws of the State of
New York;
- a member of the Federal Reserve System;
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- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- a "clearing agency" registered pursuant to the provisions of Section 17A
of the Exchange Act.
The depositary was created to hold securities of institutions that have accounts
with the depositary and to facilitate the clearance and settlement of securities
transactions among those institutions through electronic book-entry changes.
This eliminates the need for physical movement of securities certificates. These
institutions, known as participants, include securities brokers and dealers,
which may include the initial purchaser, banks, trust companies, clearing
corporations and certain other organizations. Access to the depositary's
book-entry system is also available to others that clear through or maintain a
custodial relationship with a participant, whether directly or indirectly.
Upon the issuance of the global notes, the depositary credited, on its
book-entry registration and transfer system, the principal amount of notes
represented by such global notes to the accounts of participants. The initial
purchaser designated the accounts to be credited. Ownership of beneficial
interests in a global note is limited to participants or persons that may hold
interests through participants. Ownership of beneficial interests in the global
notes will be shown on, and the transfer of those ownership interests will be
effected only through, records maintained by the depositary and such
participants. The laws of some jurisdictions may require that certain purchasers
of securities take physical delivery of such securities in definitive form.
These limits and laws may impair the ability to transfer or pledge beneficial
interests in a global note.
So long as the depositary or its nominee is the registered holder and owner
of a global note, the depositary or such nominee, as the case may be, will be
considered the sole legal owner and holder of the related notes for all purposes
of such notes and the indenture. Except as set forth below, as an owner of a
beneficial interest in a global note, you will be subject to the following
limitations:
- you will not be entitled to have the notes represented by the global
notes registered in your name;
- you will not receive or be entitled to receive physical delivery of
certificated notes; and
- you will not be considered to be the owners or holders of any notes under
the global notes.
We understand that under existing industry practice, in the event an owner of a
beneficial interest in a global note desires to take any action that the
depositary, as the holder of the global notes, is entitled to take, the
depositary would authorize the participants to take such action. The
participants would authorize beneficial owners owning through them to take such
action or would otherwise act upon the instructions of beneficial owners owning
through them.
Payment of principal of and premium, if any, and interest on notes
represented by a global note registered in the name of and held by the
depositary or its nominee will be made to the depositary or its nominee, as the
case may be, as the registered owner and holder of the global notes.
We expect that the depositary or its nominee, upon receipt of any payment
of principal of, premium, if any, or interest on a global note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the
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principal amount of the global notes as shown on the records of the depositary
or its nominee. We also expect that payments by participants to owners of
beneficial interests in a global note held through such participants will be
governed by standing instructions and customary practices and will be the
responsibility of such participants. We will not have any responsibility or
liability for any aspect of the records relating to, or payments made on account
of, beneficial ownership interests in the global notes for any note or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests or for any other aspect of the relationship between the
depositary and its participants or the relationship between such participants
and the owners of beneficial interests in the global notes owning through such
participants.
Unless and until the global notes are exchanged in whole or in part for
certificated Notes, the global notes may not be transferred except as a whole by
the depositary to a nominee of such depositary or by a nominee of such
depositary to another nominee of such depositary.
Although the depositary has agreed to the foregoing procedures in order to
facilitate transfers of interests in the global notes among participants of the
depositary, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither we nor
the trustee will have any responsibility for the performance by the depositary
or its participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
YEAR 2000 ISSUES RELATING TO THE DEPOSITORY TRUST COMPANY
We have been advised by the Depository Trust Company that it is aware that
some computer applications, systems and the like for processing dates that are
dependent upon calendar dates, including dates before, on or after January 1,
2000, may encounter "year 2000 problems." DTC has informed its participants and
other members of the financial community that it has developed and is
implementing a program so that its systems, as the same relate to the timely
payment of distributions, including principal and income payments, to
securityholders, book-entry deliveries and settlement of trades within DTC,
continue to function appropriately. This program includes a technical assessment
and a remediation plan, each of which is complete. Additionally, DTC's plan
includes a testing phase, which DTC expects to be completed within appropriate
time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third-party vendors from whom DTC licenses software and hardware, and
third-party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the industry that it is contacting, and will
continue to contact, third-party vendors from whom DTC acquired services to:
impress upon them the importance of such services being year 2000 compliant and
determine the extent of their efforts for year 2000 testing and remediation of
their services. In addition, DTC is in the process of developing such
contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the industry for informational purposes only and is not intended to
serve as a representation, warranty or contract modification of any kind.
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CERTIFICATED NOTES
The notes represented by the global notes are exchangeable for certificated
notes in definitive form of like tenor in denominations of $1,000 and integral
multiples of $1,000 if:
- the depositary notifies us that it is unwilling or unable to continue as
depositary for the global notes;
- the depositary ceases to be a clearing agency registered under the
Exchange Act or announces an intention permanently to cease business or
in fact does so;
- we in our discretion at any time determine not to have all of the notes
represented by the global notes; or
- an event of default, as described under the caption "-- Events of
Default," has occurred and is continuing.
Any note that is exchangeable pursuant to the above is exchangeable for
certificated notes issuable in authorized denominations and registered in such
names as the depositary shall direct. Subject to the foregoing, the global notes
are not exchangeable, except for global notes of the same aggregate denomination
to be registered in the name of the depositary or its nominee.
CONVERSION RIGHTS
A holder may, at any time prior to the close of business on the business
day immediately preceding the maturity date, convert a note or any portion of a
note into shares of common stock initially at the conversion price of $52.20 per
share, unless the note or portion thereof has been previously redeemed. The
right to convert a note called for redemption will terminate at the close of
business on the business day immediately preceding the date fixed for such
redemption, unless we default in making the payment due on the redemption date.
For information as to notices of redemption, see "-- Optional Redemption."
We will adjust the conversion price if:
- we issue common stock as a dividend or distribution on our common stock;
- we issue to all holders of our common stock rights, warrants or options
entitling them to subscribe for or purchase common stock at less than the
then current market price;
- we subdivide or combine our common stock;
- we distribute to all holders of common stock evidences of our
indebtedness, shares of capital stock, securities, cash or property,
excluding:
- those rights, warrants or options referred to above;
- any dividend or distribution paid exclusively in cash; and
- any dividend or distribution referred to above;
- we make a cash distribution to all holders of our common stock, that
together with all other all-cash distributions and consideration payable
in respect of any tender or exchange offer by us or one of our
subsidiaries for the common stock made within the preceding 12 months
exceeds 12.5% of our aggregate market capitalization on the date of such
distribution; or
- we complete a tender or exchange offer for our common stock which
involves an aggregate consideration that, together with:
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<PAGE> 24
- any cash and other consideration payable in respect of any tender
or exchange offer by us or one of our subsidiaries for our common
stock concluded within the preceding 12 months and
- the amount of any all-cash distributions to all holders of our
common stock made within the preceding 12 months,
exceeds 12.5% of our aggregate market capitalization on the expiration
of the tender or exchange offer.
No adjustment of the conversion price will be required to be made until
cumulative adjustments amount to 1% or more of the conversion price as last
adjusted.
If we distribute rights or warrants, other than those referred to in the
second clause of the preceding paragraph, pro rata to holders of common stock,
so long as any such rights or warrants have not expired or been redeemed by us,
the holder of any note surrendered for conversion will be entitled to receive,
in addition to the shares of common stock issuable upon such conversion, the
following upon such conversion:
- if conversion occurs on or prior to the date for the distribution of
certificates evidencing such rights or warrants, the holder will be
entitled to the same number of rights or warrants to which a holder
of a number of shares of common stock equal to the number of
conversion shares is entitled; and
- if conversion occurs after the distribution date, the holder will be
entitled to the same number of rights or warrants to which a holder
of the number of shares of common stock into which such note was
convertible immediately prior to such distribution date would have
been entitled on such distribution date in accordance with the terms
and provisions of and applicable to the rights or warrants.
The conversion price of the notes will not be subject to adjustment on account
of any declaration, distribution or exercise of such rights or warrants.
If our common stock is converted into the right to receive other
securities, cash or other property as a result of certain reclassifications,
consolidations, mergers, sales or transfers of assets or other transactions,
each note then outstanding would, without the consent of any holders of notes,
become convertible only into the kind and amount of securities, cash and other
property receivable upon the transaction by a holder of the number of shares of
common stock which would have been received by a holder immediately prior to
such transaction if such holder had converted its note.
We will not issue fractional shares of common stock to a holder who
converts a note. In lieu of issuing fractional shares, we will pay a cash
adjustment based upon the market price.
Except as described in this paragraph, no holder of notes will be entitled,
upon conversion of the notes, to any actual payment or adjustment on account of
accrued and unpaid interest or on account of dividends on shares of common stock
issued in connection with the conversion. If any holder surrenders a note for
conversion between the close of business on any record date for the payment of
an installment of interest and the opening of business on the related interest
payment date the Holder must deliver payment to us of an amount equal to the
interest payable on such interest payment date on the principal amount converted
together with the Note being surrendered. The foregoing sentence shall not apply
to notes called for redemption on a redemption date within the period between
and including the record date and interest payment date,
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<PAGE> 25
If we make a distribution of property to our stockholders which would be
taxable to them as a dividend for federal income tax purposes the conversion
price of the notes is reduced, this reduction may be deemed to be the receipt of
taxable income to holders of the notes.
In addition, we may make such reductions in the conversion price as our
board of directors deems advisable to avoid or diminish any income tax to
holders of shares of common stock resulting from any dividend or distribution of
stock, or rights to acquire stock, or from any event treated as such for income
tax purposes or for any other reasons.
OPTIONAL REDEMPTION
We may not redeem the notes prior to July 6, 2002. At any time on or after
July 6, 2002, we may redeem all or a portion of the notes upon at least 20 and
not more than 60 days' notice by mail to the holders of the notes, by paying the
redemption prices, plus accrued and unpaid interest. The redemption price,
expressed as a percentage of the principal amount, is as follows for the periods
set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
July 6, 2002 through June 30, 2003...................... 102.75%
July 1, 2003 through June 30, 2004...................... 101.83%
July 1, 2004 through June 30, 2005...................... 100.92%
July 1, 2005 and thereafter............................. 100.00%
</TABLE>
If we opt to redeem less than all of the notes at any time, the trustee
will select or cause to be selected the notes to be redeemed by such method as
it deems fair and appropriate. In the event of a partial redemption, the trustee
may provide for selection for redemption of portions of the principal amount of
any note of a denomination larger than $1,000.
There is no sinking fund provision in the notes.
CERTAIN RIGHTS TO REQUIRE PURCHASE OF NOTES UPON A CHANGE IN CONTROL
If a change of control occurs, each holder of notes may require that we
repurchase the holder's notes on the date fixed by us that is not less than 30
nor more than 45 days after we give notice of the change in control. We will
repurchase the notes for an amount of cash equal to 100% of the principal amount
of the notes on the date of purchase plus accrued and unpaid interest, if any,
to the date of purchase.
A change of control occurs when:
(1) any person, or any persons acting together in a manner which would
constitute a "group" for purposes of Section 13(d) of the Exchange Act,
- become the beneficial owners, directly or indirectly, of our
capital stock, entitling such person or persons and its or their
affiliates to exercise more than 50% of the total voting power of
all classes of our capital stock entitled to vote generally in
the election of our directors or
- shall succeed in having sufficient of its or their nominees
elected to the board such that such nominees, when added to any
existing directors remaining on the board after such election who
are affiliates of or acting in concert with such persons, shall
constitute a majority of the board;
(2) we are a party to any transaction pursuant to which our common
stock is converted into the right to receive other securities, cash and/or
property and the value of all such securities, cash and/or property
distributed in such transaction and any
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other transaction effected within the 12 months preceding consummation of
such transaction is more than 50% of the average of the daily closing
prices for our common stock for the five consecutive trading days ending on
the trading day immediately preceding the date of such transaction; or
(3) we consolidate with or merge into any other person or sell,
convey, transfer or lease our properties and assets substantially as an
entirety to any person other than one of our subsidiaries, or any other
person shall consolidate with or merge into us, other than, pursuant to any
consolidation or merger where persons who are our stockholders immediately
prior to the transaction become the beneficial owners of more than 50% of
the total voting power of the surviving company's capital stock.
On or prior to the date of repurchase, we will deposit with a paying agent an
amount of money sufficient to pay the aggregate repurchase price of the notes
which is to be paid on the date of repurchase.
We may not repurchase any note at any time when the subordination
provisions of the indenture otherwise would prohibit us from making payments of
principal in respect of the notes. If we fail to repurchase the notes when
required under the preceding paragraph, this failure will constitute an event of
default under the indenture whether or not repurchase is permitted by the
subordination provisions of the indenture.
Notwithstanding the foregoing, a change in control will not be deemed to
have occurred:
- if the closing price of our common stock for any five trading days during
the ten trading days immediately preceding the change in control is at
least equal to 105% of the conversion price in effect immediately
preceding the change in control; or
- if at least 90% of the consideration received or to be received by the
holders of our common stock in the transaction or transactions
constituting a change in control consists of:
- shares of common stock, or securities convertible into the shares of
common stock, of an entity organized under the laws of a U.S.
jurisdiction whose shares of common stock are, or upon issuance will
be, traded on a national securities exchange in the U.S. or through
The Nasdaq Stock Market, Inc. or
- shares of common stock of an entity organized under the laws of a
jurisdiction outside of the U.S., or American Depositary Shares
representing the shares of common stock, that are, or upon issuance
will be, traded on a national securities exchange in the U.S. or
through The Nasdaq Stock Market, Inc., if the entity has a worldwide
total market capitalization of its equity securities of at least
US$5 billion before giving effect to the transaction or transactions
constituting a change in control.
On or before the 15th day after we know or reasonably should know a change
in control has occurred, we will be required to mail to all holders of record of
the notes a notice of the occurrence of the change in control, stating:
- the date of repurchase;
- the date by which the repurchase right must be exercised;
- the repurchase price for the notes; and
- the procedures which a holder of notes must follow to exercise the
repurchase right.
To exercise the repurchase right, the holder of a note will be required to
deliver, on or before the 30th day after the date of our notice, an irrevocable
written notice to us and the
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trustee of the holder's exercise of such right. This notice must be accompanied
by certificates evidencing the note or notes with respect to which the right is
being exercised, duly endorsed for transfer. In addition, if the date of
repurchase falls between the relevant record date and the corresponding
succeeding interest payment date, the notes to be repurchased must also be
accompanied by payment from the holder of an amount equal to the interest on
such notes which the holder is to receive on such interest payment date.
The effect of these provisions granting the holders the right to require us
to purchase the notes upon the occurrence of a change in control may make it
more difficult for any person or group to acquire control of Human Genome
Sciences or to effect a business combination with us. Moreover, under the
indenture, we will not be permitted to pay principal of or interest on, or
otherwise acquire the notes, including any repurchase at the election of the
holders of notes upon the occurrence of a change in control, if a payment
default on our senior indebtedness has occurred and is continuing, or if our
senior indebtedness is not paid in full in the event of our insolvency,
bankruptcy, reorganization, dissolution or other winding up. Our ability to pay
cash to holders of notes following the occurrence of a change in control may be
limited by our then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any required
repurchases. See "Risk Factors -- We may be unable to raise the funds necessary
to repurchase the notes in the event of a change in control and may be unable to
repurchase your notes, which would cause a default on the notes."
If a change in control occurs and the holders exercise their rights to
require us to repurchase notes, we intend to comply with applicable tender offer
rules under the Exchange Act with respect to any such purchase.
The term "beneficial owner" shall be determined in accordance with Rules
13d-3 and 13d-5 promulgated by the SEC under the Exchange Act or any successor
provision thereto, except that a person shall be deemed to have "beneficial
ownership" of all shares that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time.
REGISTRATION RIGHTS
We have entered into a registration rights agreement with the initial
purchaser of the notes. Under this agreement, we must, subject to certain rights
to suspend use of the shelf registration statement, use our best efforts to keep
the shelf registration statement of which this prospectus forms a part effective
after its effective date for as long as shall be required to permit sales under
Rule 144(k) under the Securities Act or any successor rule or regulation
thereto. A holder who elects to sell any securities pursuant to the shelf
registration statement:
- will be required to be named as selling security holder;
- will be required to deliver a prospectus to purchasers;
- will be subject to certain of the civil liability provisions under the
Securities Act in connection with such sales; and
- will be bound by the provisions of the registration rights agreement
which are applicable to such holder, including certain indemnification
obligations.
If, after the shelf registration statement has been declared effective, we
fail to keep the shelf registration statement effective or usable, subject to
certain exceptions, including the right to suspend the use of the shelf
registration statement under certain circumstances for up to 60 days in
connection with resales of notes and the common stock issuable upon the
conversion thereof in accordance with and during the periods specified in the
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<PAGE> 28
registration rights agreement, then the interest rate on the notes will increase
by 0.5% per annum until the failure is cured.
We will have no other liabilities for monetary damages with respect to our
registration obligations, except that if we breach, fail to comply with or
violate certain provisions of the registration rights agreement, the holders of
the notes will be entitled to equitable relief, including injunction and
specific performance. We may not oppose the granting of such equitable relief.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We may, without the consent of the holders of any of the notes, consolidate
with or merge into any other person or convey, transfer or lease our properties
substantially as an entirety to, any other person, if:
- the successor, transferee or lessee expressly assumes our obligations
under the indenture and the notes by means of a supplemental indenture
entered into with the trustee;
- after giving effect to the transaction, no event of default and no event
which, with notice or lapse of time, or both, would constitute an event
of default, shall have occurred and be continuing;
- the successor company is:
- organized under the laws of any U.S. jurisdiction or
- is organized under the laws of a jurisdiction outside the U.S. and
has:
- common stock or American Depositary Shares representing such
common stock traded on a national securities exchange in the U.S.
or through The Nasdaq Stock Market, Inc. and
- a worldwide total market capitalization of its equity securities
of at least US$5 billion before giving effect to such
consolidation or merger; and
- certain other conditions specified in the indenture are met.
Under any consolidation by us with, or merger by us into, any other person
or any conveyance, transfer or lease of our properties and assets substantially
as an entirety as described in the preceding paragraph, the successor company
will be our successor and shall succeed to, and be substituted for, and may
exercise every right and power of, Human Genome Sciences under the indenture,
and thereafter, except in the case of a lease, the predecessor, if still in
existence, will be released from its obligations and covenants under the
indenture and the notes.
EVENTS OF DEFAULT
Each of the following is an "event of default":
(1) a default in the payment of any interest upon any of the notes
when due and payable, continued for 30 days, whether or not such payment is
prohibited by the subordination provisions of the indenture;
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<PAGE> 29
(2) a default in the payment of the principal of and premium, if any,
on any of the notes when due, including on a redemption date, whether or
not such payment is prohibited by the subordination provisions of the
indenture;
(3) a default in our obligation to provide notice of a change in
control or default in the payment of the repurchase price in respect of any
note on the repurchase date therefor, whether or not such payment is
prohibited by the subordination provisions of the indenture;
(4) a default by us in the performance, or breach, of any of our other
covenants in the indenture which are not remedied by the end of a period of
60 days after written notice to us by the trustee or to us and the trustee
by the holders of at least 25% in principal amount of the outstanding
notes;
(5) failure to pay when due the principal of, or acceleration of, any
indebtedness for money borrowed by us in excess of $10 million, if such
indebtedness is not discharged, or such acceleration is not waived or
annulled, by the end of a period of 10 days after written notice to us by
the trustee or to us and the trustee by the holders of at least 25% in
principal amount of the outstanding notes; or
(6) certain events of bankruptcy, insolvency or reorganization of
Human Genome Sciences.
If an event of default described in clauses (3), (4) or (5) occurs and is
continuing, either the trustee or the holders of at least 25% in principal
amount of the outstanding notes may declare the principal amount of and accrued
interest on all notes to be immediately due and payable. This declaration may be
rescinded if certain conditions are satisfied. If an event of default of the
type referred to in clause (6) occurs, the principal amount of and accrued
interest on the outstanding notes shall automatically become immediately due and
payable.
The holders of not less than a majority in principal amount of the
outstanding notes may direct the time, method and place of conducting any
proceedings for any remedy available to the trustee, or exercising any trust or
power conferred on the trustee; provided that such direction does not conflict
with any rule of law or with the Indenture. The trustee may take any other
action deemed proper by the trustee which is not inconsistent with such
direction.
Subject to the provisions of the indenture relating to the duties of the
trustee, if an event of default occurs and is continuing, the trustee will be
under no obligation to exercise any of the rights or powers under the indenture
at the request or direction of any of the holders of the notes unless such
holders have offered to the trustee reasonable indemnity or security against any
loss, liability or expense. Except to enforce the right to receive payment of
principal, premium, if any, or interest when due or the right to convert such
note in accordance with the indenture, no holder may institute any proceeding or
pursue any remedy with respect to the indenture or the notes unless:
- the holder has previously given the trustee notice that an event of
default is continuing;
- holders of at least 25% in principal amount of the outstanding notes have
requested the trustee to pursue the remedy;
- the holders have offered the trustee security or indemnity satisfactory
to the trustee against any loss, liability or expense;
- the trustee has not complied with such request within 60 days after the
receipt thereof and the offer of security or indemnity; and
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<PAGE> 30
- the holders of a majority in principal amount of the outstanding notes
have not given the trustee a direction inconsistent with such request
within such 60-day period.
In addition, we are required to deliver to the trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the officers
signing such certificate know of any default by us in the performance or
observance of any of the terms of the indenture. If such officers do know of a
default, the certificate must specify the status and nature of all such
defaults.
MODIFICATION AND WAIVER
We and the trustee may enter into one or more supplemental indentures that
add, change or eliminate provisions of the indenture or modify the rights of the
holders of the notes with the consent of the holders of at least a majority in
principal amount of the notes then outstanding. However, without the consent of
each holder of an outstanding note affected thereby, no supplemental indenture
may, among other things:
- change the stated maturity of the principal of or any installment of
interest on any note;
- reduce the principal amount of, or the premium or rate of interest on,
any note;
- adversely affect the right of any holder to convert any note as provided
in the indenture;
- change the place of payment where, or the coin of currency in which, the
principal of any note or any premium or interest thereon is payable;
- impair the right to institute suit for the enforcement of any such
payment on or with respect to any note on or after the stated maturity,
or, in the case of redemption, on or after the date of redemption;
- modify the subordination provisions of the indenture in a manner adverse
to the holders of the notes;
- modify the redemption provisions of the indenture in a manner adverse to
the holders of the notes;
- modify the provisions of the indenture relating to our requirement to
offer to repurchase notes upon a change in control in a manner adverse to
the holders of the notes;
- reduce the percentage in principal amount of the outstanding notes the
consent of whose holders is required for any such modification or
amendment of the indenture or for any waiver of compliance with certain
provisions of, or of certain defaults under the indenture; or
- modify the foregoing requirements.
Without the consent of any holders of notes, we and the trustee may enter
into one or more supplemental indentures for any of the following purposes:
(1) to evidence a successor to us and the assumption by such successor
of our obligations under the indenture and the notes;
(2) to add to our covenants for the benefit of the holders of the
notes or to surrender any right or power conferred on us;
(3) to secure our obligations in respect of the notes;
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<PAGE> 31
(4) to make provision with respect to the conversion rights of holders
of the notes pursuant to the requirements of the indenture;
(5) to make any changes or modifications to the indenture necessary in
connection with the registration of the notes under the Securities Act as
contemplated by the indenture;
(6) to cure any ambiguity or inconsistency in the indenture;
(7) to comply with any requirement in connection with the
qualification of the indenture under the Trust Indenture Act; or
(8) to make any other provisions with respect to matters or questions
arising under the indenture which are not inconsistent with the provisions
of the indenture.
However, no supplemental indenture entered into pursuant to clause (5), (6), (7)
or (8) above may adversely affect the interests of the holders of the notes.
The holders of a majority in principal amount of the outstanding notes may,
on behalf of the holders of all notes:
- waive compliance by us with certain restrictive provisions of the
indenture, and
- waive any past default under the indenture and its consequences, except a
default in the payment of the principal of or any premium or interest on
any note or in respect of a provision which under the indenture cannot be
modified or amended without the consent of the holder of each outstanding
note affected.
SUBORDINATION
The payment of the principal of and premium, if any, and interest on the
notes will, to the extent set forth in the indenture, be subordinated in right
of payment to the prior payment in full of all of our senior indebtedness. The
holders of all senior indebtedness will first be entitled to receive payment in
full of all amounts due or to become due thereon, or provision for such payment
in money or money's worth, before the holders of the notes will be entitled to
receive any payment in respect of the notes, when there is a payment or
distribution of assets to creditors upon our:
- liquidation,
- dissolution,
- winding up,
- reorganization,
- assignment for the benefit of creditors,
- marshaling of assets,
- bankruptcy,
- insolvency or similar proceedings.
No payments on account of the notes or on account of the purchase or
acquisition of notes may be made if a default in any payment with respect to
senior indebtedness has occurred and is continuing or if any judicial proceeding
is pending with respect to any such default. By reason of this subordination, in
the event of insolvency, our creditors who are not holders of senior
indebtedness, including holders of the notes, may recover less, ratably, than
holders of senior indebtedness.
"Senior indebtedness" means the principal of and premium, if any, and
interest on all our indebtedness for money borrowed, other than the notes,
whether outstanding on the date of the execution of the indenture or thereafter
created, incurred, guaranteed or
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<PAGE> 32
assumed. Senior indebtedness does not include indebtedness that by the terms of
the instrument or instruments by which such indebtedness was created or incurred
expressly provides that it is junior in right of payment to the notes or any
other indebtedness of ours or ranks equal in right of payment to the notes.
"Indebtedness for money borrowed" means any of our obligations or
obligations we guarantee:
- for the repayment of borrowed money, whether or not evidenced by bonds,
debentures, notes or other written instruments;
- with respect to interest rate hedging arrangements to hedge interest
rates relating to our senior indebtedness;
- for the payment of the purchase price of property or assets evidenced by
a note or similar instrument; and
- for the payment of rent or other amounts under a lease of property or
assets which obligation is required to be classified and accounted for as
a capitalized lease on our balance sheet under generally accepted
accounting principles.
At June 30, 1999, our senior indebtedness was approximately $2.2 million,
all of which was secured. We expect from time to time to incur additional
indebtedness. The indenture does not limit or prohibit us from incurring
additional senior indebtedness or additional indebtedness. See "Risk
Factors -- If we are unable to pay our debts, your right to receive payments on
the notes will be subordinated to all of our existing and future senior
indebtedness."
DEFEASANCE
We at any time, upon satisfaction of the requirements described below, may
terminate all of our obligations under the notes and the indenture, known as
legal defeasance, except for certain obligations, including those:
- to maintain a registrar and paying agents and hold moneys for payment in
trust,
- to register the transfer or exchange of the notes,
- to replace mutilated, destroyed, lost or stolen notes,
- to provide for conversion of the notes,
- to comply with the registration rights agreement, and
- to repurchase the notes in the event of a change in control.
In addition, we may terminate our obligations to comply with certain
restrictive covenants, known as covenant defeasance, relating to the maintenance
of our properties and payment of taxes and other claims, the operation of the
cross default and cross acceleration provisions and the subordination provisions
of the notes.
We may exercise our legal defeasance option notwithstanding our prior
exercise of our covenant defeasance option. If we exercise our defeasance
option, payment of the notes may not be accelerated because of the occurrence of
certain events of default.
To exercise either defeasance option, we must irrevocably deposit in trust
with the trustee money and/or U.S. government obligations that will provide
money in an amount sufficient in the written opinion of a nationally recognized
firm of independent public
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<PAGE> 33
accountants to pay the principal of, premium, if any, and each installment of
interest on the outstanding notes. We may only establish such trust if, among
other things:
- no event of default, or event that with the passing of time or the giving
of notice, or both, would constitute an event of default, shall have
occurred or be continuing;
- we have delivered to the trustee an opinion of counsel to the effect that
such deposit shall not cause the trust so created to be subject to the
Investment Company Act of 1940, as amended;
- in the case of legal defeasance, we have delivered to the trustee an
opinion of counsel to the effect that we have received from, or there has
been published by, the Internal Revenue Service a ruling or there has
been a change in law, which in the opinion of our counsel, provides that
holders of the notes will not recognize gain or loss for federal income
tax purposes as a result of such action and will be subject to federal
income tax on the same amount, in the same manner and at the same times
as would have been the case if such action had not occurred;
- in the case of covenant defeasance, we have delivered to the trustee an
opinion of counsel to the effect that the holders of the notes will not
recognize gain or loss for federal income tax purposes as a result of
such action and will be subject to federal income tax on the same amount,
in the same manner and at the same times as would have been the case if
such action had not occurred; and
- we satisfy certain other customary conditions precedent.
"U.S. government obligations" are securities that are:
- direct obligations of the United States of America for the payment of
which its full faith and credit is pledged; or
- obligations of a person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the payment of
which is unconditionally guaranteed as a full faith and credit obligation
by the United States of America,
which, in either case, are not callable or redeemable at the option of the
issuer thereof, and shall also include a depository receipt issued by a bank, as
defined in Section 3(a)(2) of the Securities Act, as custodian with respect to
any such obligation or a specific payment of principal of or interest on any
such obligation held by such custodian for the account of the holder of such
depository receipt; provided that, except as required by law, such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the obligation or the specific payment of principal of or interest on the
obligation evidenced by such depository receipt.
REGARDING THE TRUSTEE
The Bank of New York is the trustee under the indenture.
GOVERNING LAW
The indenture and the notes will be governed by and construed in accordance
with the laws of the State of New York without regard to conflict of laws
principles.
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<PAGE> 34
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The following is a general discussion of the material United States federal
income tax considerations relevant to purchasing, owning and disposing of the
Notes and the common stock into which you may convert the notes. This discussion
is based on currently existing provisions of the Internal Revenue Code of 1986,
as amended, existing and proposed Treasury regulations promulgated thereunder
and administrative and judicial interpretations thereof, all as in effect or
proposed on the date hereof and all of which are subject to change, possibly
with retroactive effect, or different interpretations.
This discussion does not deal with all aspects of U.S. federal income
taxation that may be important to holders of the notes or shares of the common
stock received upon conversion thereof, and it does not include any description
of the tax laws of any state, local or foreign government. This discussion is
limited to beneficial owners who hold the notes and the shares of common stock
received upon conversion thereof as capital assets within the meaning of Section
1221 of the Code. Moreover, this discussion is for general information only and
does not purport to address all of the U.S. federal income tax consequences that
may be relevant to particular purchasers. Particular purchasers may be subject
to special rules.
For the purpose of this discussion, a "U.S. holder" refers to a beneficial
owner of a note or common stock who or which is:
- a citizen or resident of the U.S. for U.S. federal income tax purposes;
- a corporation, partnership or other entity created or organized in or
under the laws of the U.S. or political subdivision thereof, unless
otherwise provided in regulations in the case of a partnership;
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source;
- a trust, if a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more U.S. fiduciaries have
authority to control all substantial decisions of the trust; or
- otherwise subject to U.S. federal income tax on a net income basis in
respect of its worldwide taxable income.
The term "non-U.S. holder" refers to any beneficial owner of note or common
stock who or which is not a U.S. holder.
PROSPECTIVE PURCHASERS AND URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO
THE PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE
ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE CONVERSION OF
THE NOTES INTO SHARES OF COMMON STOCK, AND THE EFFECT THAT THEIR PARTICULAR
CIRCUMSTANCES MAY HAVE ON SUCH TAX CONSEQUENCES.
CERTAIN FEDERAL TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS
Interest on Notes. Interest paid on the notes will be taxable to a U.S.
holder as ordinary interest income in accordance with such holder's method of
tax accounting. We expect that the notes will not be issued with original issue
discount within the meaning of the Code.
Constructive Dividend. Certain corporate transactions, such as
distributions of assets to holders of common stock, may cause a deemed
distribution to the holders of the notes if
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<PAGE> 35
the conversion price or conversion ratio of the notes is adjusted to reflect
such corporate transaction. Such deemed distributions will be taxable as a
dividend, return of capital, or capital gain in accordance with the earnings and
profits rules discussed under "Dividends on Shares of Common Stock."
Sale or Exchange of Notes or Shares of Common Stock. In general, a U.S.
holder of notes will recognize gain or loss upon the sale, redemption,
retirement or other disposition of the notes measured by the difference between:
- the amount of cash and the fair market value of any property received,
except to the extent attributable to the payment of accrued interest and
- the U.S. holder's tax basis in the notes.
A U.S. holder's tax basis in notes generally will equal the cost of the notes to
the holder. In general, each U.S. holder of common stock into which the notes
have been converted will recognize gain or loss upon the sale, exchange,
redemption, or other disposition of the common stock under rules similar to
those applicable to the notes. Special rules may apply to redemptions of the
common stock which may result in the amount paid being treated as a dividend.
Gain or loss on the disposition of the notes or shares of common stock will be
capital gain or loss and will be long-term capital gain or loss if the holding
period of the notes or the common stock that was disposed of exceeded one year.
Net capital gain realized by individual taxpayers is taxable at a maximum rate
of 20%.
Conversion of Notes. A U.S. holder of notes generally will not recognize
gain or loss on the conversion the notes solely into shares of common stock,
other than cash received in lieu of fractional shares. The U.S. holder's tax
basis in the shares of common stock received upon conversion of the notes will
be equal to the holder's aggregate tax basis in the notes exchanged therefor,
less any portion allocable to cash received in lieu of a fractional share. The
holding period of the shares of common stock received by the holder upon
conversion of notes generally will generally include the period during which the
holder held the notes prior to the conversion.
Cash received in lieu of a fractional share of common stock should be
treated as a payment in exchange for such fractional share rather than as a
dividend. Gain or loss recognized on the receipt of cash paid in lieu of such
fractional shares generally will equal the difference between the amount of cash
received and the amount of tax basis allocable to the fractional shares
exchanged therefor.
Dividends on Shares of Common Stock. Distributions on shares of common
stock will constitute dividends for U.S. federal income tax purposes to the
extent of our current or accumulated earnings and profits as determined under
U.S. federal income tax principles. Dividends paid to holders that are U.S.
corporations may qualify for the dividends-received deduction.
To the extent, if any, that a U.S. holder receives distributions on shares
of common stock that would otherwise constitute dividends for U.S. federal
income tax purposes but that exceed our current and accumulated earnings and
profits, such distribution will be treated first as a non-taxable return of
capital reducing the holder's basis in the shares of common stock. Any such
distribution in excess of the holder's basis in the shares of common stock will
be treated as capital gain.
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<PAGE> 36
CERTAIN FEDERAL TAX CONSIDERATIONS APPLICABLE TO NON-U.S. HOLDERS
Interest on Notes. Generally, interest paid on the notes to a non-U.S.
holder will not be subject to U.S. federal income tax if:
- such interest is not effectively connected with the conduct of a trade or
business within the U.S. by such non-U.S. holder;
- the non-U.S. holder does not actually or constructively own 10% or more
of the total voting power of all classes of our stock entitled to vote
and is not a controlled foreign corporation with respect to which we are
a "related person" within the meaning of the Code; and
- the beneficial owner, under penalty of perjury, certifies that the owner
is not a U.S. person and provides the owner's name and address.
If certain requirements are satisfied, the certification described the last
clause above may be provided by a securities clearing organization, a bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business. Under recently adopted U.S. Treasury
regulations, which generally are effective for payments made after December 31,
2000, subject to certain transition rules, the certification described in the
last clause above may also be provided by a qualified intermediary on behalf of
one or more beneficial owners, or other intermediaries, provided that such
intermediary has entered into a withholding agreement with the Internal Revenue
Service and certain other conditions are met. A holder that is not exempt from
tax under these rules will be subject to U.S. federal income tax withholding at
a rate of 30% unless the interest is effectively connected with the conduct of a
U.S. trade or business, in which case the interest will be subject to the U.S.
federal income tax on net income that applies to U.S. persons generally.
Corporate non-U.S. holders that receive interest income that is effectively
connected with the conduct of a trade or business within the U.S. may also be
subject to an additional "branch profits" tax on such income. Non-U.S. holders
should consult applicable income tax treaties, which may provide different
rules.
Sales or Exchange of Notes or Shares of Common Stock. A non-U.S. holder
generally will not be subject to U.S. federal income tax on gain recognized upon
the sale or other disposition of the notes or shares of common stock unless:
- the gain is, or is treated as, effectively connected with the conduct of
a trade or business within the U.S. by the non-U.S. holder; or
- in the case of non-U.S. holder who is a nonresident alien individual and
holds the common stock as a capital asset, such holder is present in the
U.S. for 183 or more days in the taxable year and certain other
circumstances are present.
Conversion of Notes. A non-U.S. holder generally will not be subject to
U.S. federal income tax on the conversion of a note into shares of common stock.
To the extent a non-U.S. holder receives cash in lieu of a fractional share on
conversion, such cash may give rise to gain that would be subject to the rules
described above with respect to the sale or exchange of a note or common stock.
Dividends on Shares of Common Stock. Generally, any distribution on shares
of common stock to a non-U.S. holder will be subject to U.S. federal income tax
withholding at a rate of 30% unless the dividend is effectively connected with
the conduct of a trade or business within the U.S. by the non-U.S. holder, in
which case the dividend will be subject to the U.S. federal income tax on net
income that applies to U.S. persons generally. Corporate non-U.S. holders that
receive dividend income that is effectively connected with the conduct of a
trade or business within the U.S. may also be subject to an additional
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<PAGE> 37
"branch profits" tax on such income. Non-U.S. holders should consult any
applicable income tax treaties, which may provide for a lower rate of
withholding or other rules different from those described above. A non-U.S.
holder and any entities, partners, shareholders or other beneficiaries of
non-U.S. holders may be required to satisfy certain certification requirements
in order to claim a reduction of or exemption from withholding under the
foregoing rules.
Federal Estate Taxes. A note beneficially owned by an individual who is a
non-U.S. holder at the time of his or her death generally will not be subject to
U.S. federal estate tax as a result of such individual's death; provided that:
- such individual does not actually or constructively own 10% or more of
the total combined voting power of all classes of our stock entitled to
vote within the meaning of section 871(h)(3) of the Code; and
- interest payments with respect to such note would not have been, if
received at the time of such individual's death, effectively connected
with the conduct of a U.S. trade or business by such individual.
Common stock owned or treated as owned by an individual who is a non-U.S. holder
at the time of his or her death will be included in such individual's estate for
U.S. federal estate tax purposes and thus will be subject to U.S. federal estate
tax, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
United States Holders. Information reporting and backup withholding may
apply to payments of interest or dividends on or the proceeds of the sale or
other disposition of the notes or shares of common stock made us with respect to
certain non-corporate U.S. holders. These U.S. holders generally will be subject
to backup withholding at a rate of 31% unless the recipient of such payment
supplies a taxpayer identification number, certified under penalties of perjury,
as well as certain other information, or otherwise establishes, in the manner
prescribed by law, an exemption from backup withholding. Any amount withheld
under backup withholding is allowable as a credit against the U.S. holder's
federal income tax, upon furnishing the required information to the Internal
Revenue Service.
Non-United States Holders. Generally, information reporting and backup
withholding of U.S. federal income tax at a rate of 31% may apply to payment of
principal, interest and premium, if any, to non-U.S. holders if the payee fails
to certify that the holder is a non-U.S. person or if we or our paying agent has
actual knowledge that the payee is a U.S. person.
The payment of the proceeds on the disposition of notes or shares of common
stock to or through the U.S. office of a U.S. or foreign broker will be subject
to information reporting and backup withholding unless the owner provides the
certification described above or otherwise establishes an exemption. The
proceeds of the disposition by a non-U.S. holder of notes or shares of common
stock to or through a foreign office of a broker will not be subject to backup
withholding. However, if such broker is a U.S. person, a controlled foreign
corporation for U.S. tax purposes, or a foreign person 50% or more of whose
gross income from all sources for certain periods is from activities that are
effectively connected with a U.S. trade or business, information reporting will
apply unless such broker has documentary evidence in its files of the owner's
foreign status and has no actual knowledge to the contrary or unless the owner
otherwise establishes and exemption.
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<PAGE> 38
Both backup withholding and information reporting will apply to the proceeds
from such dispositions if the broker has actual knowledge that the payee is a
U.S. holder.
Recently adopted U.S. Treasury regulations, which generally are effective
for payments made after December 31, 2000, subject to certain transition rules,
alter the foregoing rules in certain respects. Among other things, such
regulations provide presumptions under which a non-U.S. holder is subject to
information reporting and backup withholding at the rate of 31% unless we
receive certification from the holder of non-U.S. status. Depending on the
circumstances, this certification will need to be provided:
- directly by the non-U.S. holder;
- in the case of a non-U.S. holder that is treated as a partnership or
other fiscally transparent entity, by the partners, shareholders or other
beneficiaries of such entity; or
- certain qualified financial institutions or other qualified entities on
behalf of the non-U.S. holder.
DESCRIPTION OF OUR CAPITAL STOCK
Our authorized capital stock consists of 50,000,000 shares of common stock,
par value $0.01 per share, and 1,000,000 shares of preferred stock, par value
$0.01 per share. The following is a description of our capital stock.
COMMON STOCK
We are authorized to issue 50,000,000 shares of common stock. Each
stockholder of record is entitled to one vote for each outstanding share of our
common stock owned by that stockholder on every matter properly submitted to the
stockholders for their vote. After satisfaction of the dividend rights of
holders of preferred stock, holders of common stock are entitled to any dividend
declared by the board of directors out of funds legally available for this
purpose. After the payment of liquidation preferences to holders of any
outstanding preferred stock, holders of our common stock are entitled to
receive, on a pro rata basis, all our remaining assets available for
distribution to the stockholders in the event of our liquidation, dissolution,
or winding up. Holders of our common stock do not have any preemptive right to
become subscribers or purchasers of additional shares of any class of our
capital stock. The rights, preferences and privileges of holders of our common
stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock that we may designate and
issue in the future.
PREFERRED STOCK
Our certificate of incorporation allows us to issue without stockholder
approval preferred stock having rights senior to those of our common stock. Our
board is authorized, without further stockholder approval, to issue up to
1,000,000 shares of preferred stock in one or more series and to fix and
designate the rights, preferences, privileges and restrictions thereof,
including:
- dividend rights;
- conversion rights;
- voting rights;
- terms of redemption; and
- liquidation preferences.
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<PAGE> 39
Our board may fix the number of shares constituting any series and the
designations of these series. We have issued rights that are in some cases
exercisable for shares of junior participating preferred stock. See "-- Rights
Agreement."
Our issuance of preferred stock may have the effect of delaying or
preventing a change in control. Our issuance of preferred stock could decrease
the amount of earnings and assets available for distribution to the holders of
our common stock or could adversely affect the rights and powers, including
voting rights, of the holders of our common stock. The issuance of preferred
stock could have the effect of decreasing the market price of our common stock.
INDEMNIFICATION AND LIMITATION OF LIABILITY
As permitted by the Delaware General Corporation Law, our certificate of
incorporation provides that our directors will not be personally liable to us or
our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:
- for any breach of the director's duty of loyalty to us or our
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law, relating to
unlawful payment of dividends or unlawful stock purchase or redemption of
stock; or
- for any transaction from which the director derives an improper personal
benefit.
As a result of this provision, we and our stockholders may be unable to
obtain monetary damages from a director for breach of his or her duty of care.
Our bylaws provide for the indemnification of our directors and officers to
the fullest extent authorized by the Delaware General Corporation Law, except
that we will indemnify a director or officer in connection with an action
initiated by that person only if the action was authorized by our board of
directors. The indemnification provided under our certificate of incorporation
and bylaws includes the right to be paid expenses in advance of any proceeding
for which indemnification may be had, provided that the payment of these
expenses incurred by a director or officer in advance of the final disposition
of a proceeding may be made only upon delivery to us of an undertaking by or on
behalf of the director or officer to repay all amounts so paid in advance if it
is ultimately determined that the director or officer is not entitled to be
indemnified. If we do not pay a claim for indemnification within 60 days after
we have received a written claim, the claimant may at any time thereafter bring
an action to recover the unpaid amount of the claim and, if successful the
director or officer will be entitled to be paid the expense of prosecuting the
action to recover these unpaid amounts.
Under our bylaws, we have the power to purchase and maintain insurance on
behalf of any person who is or was one of our directors, officers, employees or
agents, or is or was serving at our request as a director, officer, employee or
agent of another entity, against any liability asserted against the person or
incurred by the person in any of these capacities, and related expenses, whether
or not we would have the power to indemnify the person against the claim under
the provisions of the Delaware General Corporation Law.
POSSIBLE ANTI-TAKEOVER EFFECTS
Our certificate of incorporation and bylaws contain provisions that are
intended to enhance the likelihood of continuity and stability in the
composition of our board of directors and in the policies formulated by our
board of directors. In addition, provisions of
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<PAGE> 40
Delaware law may hinder or delay an attempted takeover of our company other than
through negotiation with our board of directors. These provisions could have the
effect of discouraging attempts to acquire us or remove our management even if
some or a majority of our stockholders believe this action to be in their best
interest, including attempts that might result in the stockholders' receiving a
premium over the market price for the shares of our common stock held by the
stockholders.
Classified Board of Directors; Removal, Vacancies. Our certificate of
incorporation provides that our board of directors will be divided into three
classes of directors serving staggered three-year terms. The classification of
directors has the effect of making it more difficult for stockholders to change
the composition of our board of directors in a relatively short period of time.
Our certificate of incorporation provides that directors may be removed only for
cause. In addition, vacancies and newly created directorships resulting from any
increase in the size of our board of directors may be filled only by the
affirmative vote of a majority of the directors then in office, a quorum, or by
a sole remaining director. These provisions would prevent stockholders from
removing incumbent directors without cause and filling the resulting vacancies
with their own nominees.
Special Stockholders' Meetings. Our certificate of incorporation and
bylaws provide that, special meetings of stockholders, unless otherwise
prescribed by statute, may be called only:
- by the board of directors or by our chairman or president; or
- by the holders of at least majority of our securities outstanding and
entitled to vote generally in the election of directors.
Section 203 of Delaware Law. In addition to these provisions of our
certificate of incorporation and bylaws, we are subject to the provisions of
Section 203 of the Delaware General Corporation Law. Section 203 prohibits
publicly held Delaware corporations from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes mergers, asset sales and other transactions resulting in a
financial benefit to the interested stockholder. Generally, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within three years did own, 15% or more of a corporation's voting stock. These
provisions could have the effect of delaying, deferring or preventing a change
in control of our company or reducing the price that certain investors might be
willing to pay in the future for shares of our common stock.
RIGHTS AGREEMENT
Our board of directors has adopted a rights plan pursuant to which one
preferred share purchase right was issued for each outstanding share of common
stock. One preferred share purchase right will be issued for each additional
share of common stock that we issue, including shares issuable upon conversion
of the notes. The rights become exercisable ten days after a person or group
acquires 15%, or 20% in the case of some of our stockholders, or more of the
outstanding common stock or commences or announces a tender or exchange offer
which would result in such ownership. Each right that becomes exercisable
entitles the registered holder to purchase one one-thousandth of a share of
junior participating preferred stock, par value $.01 per share, at a price of
$250.00 per one one-thousandth of a share, subject to adjustment.
If, after the rights become exercisable, we were to be acquired through a
merger or other business combination transaction or 50% or more of our assets or
earning power were
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<PAGE> 41
sold, each right would permit the holder to purchase, for the exercise price,
common stock of the acquiring company having a market value of twice the
exercise price. In addition, if any person acquires 15%, or 20% in the case of
some of our stockholders, or more of our outstanding common stock, each right
not owned by such person would permit the purchase, for the exercise price, of
common stock having a market value of twice the exercise price.
The rights expire on May 20, 2008, unless earlier redeemed or exchanged by
us. The purchase price payable and the shares of preferred stock issuable upon
exercise of the rights are subject to adjustment from time to time as specified
in the rights agreement. In addition, our board of directors retains the
authority to redeem, at $0.001 per right, and replace the rights with new rights
at any time, provided that no redemption may occur after a person or group
acquires 15% or more of our outstanding common stock.
Shares of this preferred stock, when issued upon exercise of the rights,
will be non-redeemable and will rank junior to all series of any other class of
preferred stock. Each share of this preferred stock will be entitled to a
cumulative preferential quarterly dividend payment equal to the greater of
$250.00 per share or 1,000 times the dividend declared per share of common
stock. In the event of liquidation, the holders of shares of this preferred
stock will be entitled to a preferential liquidation payment equal to the
greater of $1,000 per share or 1,000 times the payment made per share of common
stock. Each share of this preferred stock will entitle the holder to 1,000
votes, voting together with the common stock. Finally, in the event of any
merger, consolidation or other transaction in which common stock is exchanged,
each share of this preferred stock will be entitled to receive 1,000 times the
amount received per share of common stock. These rights are subject to
anti-dilution adjustments.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company, New York, New York.
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<PAGE> 42
SELLING HOLDERS
The notes were originally issued by us and sold by Credit Suisse First
Boston Corporation, as initial purchaser, in a transaction exempt from the
registration requirements of the Securities Act to persons reasonably believed
by the initial purchaser to be qualified institutional buyers or other
institutional accredited investors. Selling holders, including their
transferees, pledgees or donees or their successors, may from time to time offer
and sell pursuant to this prospectus any or all of the notes and common stock
into which the notes are convertible.
The selling holders have represented to us that they purchased the notes
and the shares issuable upon conversion for their own account for investment
only and not with a view toward selling or distributing them, except pursuant to
sales registered under the Securities Act or exemptions. We agreed with the
selling holders to file this registration statement to register the resale of
the notes and the shares. We agreed to prepare and file all necessary amendments
and supplements to the registration statement to keep it effective until the
date on which the notes and the common stock into which the notes are
convertible no longer qualify as "registrable securities" under our registration
rights agreement.
The following table sets forth information, as of September 24, 1999, with
respect to the selling holders and the respective principal amounts of notes
beneficially owned by each selling holder that may be offered under this
prospectus. The information is based on information provided by or on behalf of
the selling holders.
The selling holders may offer all, some or none of the notes or common
stock into which the notes are convertible. Thus, no estimate can be given as to
the amount of the notes or the common stock that will be held by the selling
holders upon termination of any sales. The column showing ownership after
completion of the offering assumes that the selling holders will sell all of the
securities offered hereby. In addition, the selling holders identified below may
have sold, transferred or otherwise disposed of all or a portion of their notes
since the date on which they provided the information regarding their notes in
transactions exempt from the registration requirements of the Securities Act.
None of the selling holders has had any material relationship with us or our
affiliates within the past three years.
This table assumes that any other holders of notes or any future transferee
from any such holder does not beneficially own any common stock other than
common stock into which the notes are convertible. No selling holder named in
the table below beneficially owns one percent or more of our common stock,
except that:
- FMR Corp., an affiliate of Fidelity Financial Trust: Fidelity Convertible
Securities Fund, beneficially owned 9.6% prior to the offering and will
own 9.4% after the offering; and
- Lipper Convertibles, L.P. beneficially owned 1.7% prior to the offering
and will own 0.0% after the offering.
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<PAGE> 43
<TABLE>
<CAPTION>
PRINCIPAL COMMON
AMOUNT OF COMMON STOCK OWNED
NOTES STOCK AFTER
BENEFICIALLY OWNED PRIOR COMMON COMPLETION
OWNED AND TO THE STOCK OF THE
NAME OFFERED OFFERING OFFERED OFFERING
---- ------------ ----------- --------- -----------
<S> <C> <C> <C> <C>
Angelo, Gordon & Co., L.P. ........ $ 800,000 15,325 15,325 --
Argent Classic Convertible
Arbitrage Fund (Bermuda) L.P. ... 8,300,000 159,003 159,003 --
Argent Classic Convertible
Arbitrage Fund L.P. ............. 5,000,000 95,785 95,785 --
BankAmerica Pension Plan........... 1,000,000 19,157 19,157 --
BNP Arbitrage SNC.................. $ 5,250,000 100,574 100,574 --
David Lipscomb University General
Endowment........................ 65,000 1,245 1,245 --
Deeprock & Co. .................... 2,000,000 38,314 38,314 --
Deutsche Bank Securities Inc. ..... 5,000,000 95,785 95,785 --
Equitable Life Assurance Separate
Account--Balanced................ 75,000 1,436 1,436 --
Equitable Life Assurance Separate
Account Convertibles............. 1,265,000 24,233 24,233 --
Fidelity Financial Trust: Fidelity
Convertible Securities Fund...... 1,700,000 2,205,717 32,567 2,173,150
Forest Alternative Strategies Fund
II LP Series A5I................. 125,000 2,394 2,394 --
Forest Alternative Strategies Fund
II LP Series A5M................. 40,000 766 766 --
Forest Fulcrum Fund LP............. 1,900,000 36,398 36,398 --
Forest Global Convertible Fund
Series A-5....................... 2,985,000 57,183 57,183 --
Forest Performance Fund............ 300,000 5,747 5,747 --
General Motors Welfare Benefit
Trust (L-T Veba)................. 1,000,000 19,157 19,157 --
Global Bermuda Limited
Partnership...................... 1,000,000 35,757 19,157 16,600
Highbridge International LLC....... 11,000,000 210,727 210,727 --
Hudson River Trust Balanced
Account.......................... 1,150,000 22,030 22,030 --
Hudson River Trust Growth & Income
Account.......................... 2,305,000 44,157 44,157 --
Hudson River Trust Growth
Investors........................ 965,000 18,486 18,486 --
Lakeshore International, Ltd. ..... 2,000,000 71,514 38,314 33,200
Lehman Brothers Inc. .............. 1,000,000 19,157 19,157 --
Lipper Convertibles, L.P. ......... 20,800,000 398,467 398,467 --
LLT Limited........................ 150,000 2,873 2,873 --
Memphis Light, Gas & Water
Retirement Fund.................. 980,000 18,773 18,773 --
Michaelangelo, L.P. ............... 1,600,000 30,651 30,651 --
Oz Master Fund, Ltd. .............. 7,000,000 134,099 134,099 --
Ramius, L.P. ...................... 1,500,000 28,735 28,735 --
Ramius Securities, LLC............. 400,000 7,662 7,662 --
Raphael, L.P. ..................... 600,000 11,494 11,494 --
RCG Baldwin, L.P. ................. 700,000 13,409 13,409 --
RCG Multi-Strategy Account,
L.P. ............................ 2,000,000 38,314 38,314 --
Retail Clerks Pension Trust........ 1,000,000 19,157 19,157 --
SG Cowen Securities Corp. ......... 3,000,000 57,471 57,471 --
SoundShore Holdings Ltd. .......... 1,000,000 19,157 19,157 --
Sylvan IMA Ltd. ................... 500,000 9,578 9,578 --
The Frist Foundation............... 195,000 3,735 3,735 --
</TABLE>
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<PAGE> 44
<TABLE>
<CAPTION>
PRINCIPAL COMMON
AMOUNT OF COMMON STOCK OWNED
NOTES STOCK AFTER
BENEFICIALLY OWNED PRIOR COMMON COMPLETION
OWNED AND TO THE STOCK OF THE
NAME OFFERED OFFERING OFFERED OFFERING
---- ------------ ----------- --------- -----------
<S> <C> <C> <C> <C>
Triarc Companies, Inc. ............ 400,000 7,662 7,662 --
Triton Capital Investments,
Ltd. ............................ 3,000,000 57,471 57,471 --
Any other holder of notes or future
transferee from any holder....... 23,950,000 458,831 458,831 --
------------ ---------- --------- ----------
Total.................... $125,000,000 4,617,586 2,394,636 2,222,950
============ ========== ========= ==========
</TABLE>
Information concerning the selling holders may change from time to time and
any changed information will be set forth in supplements to this prospectus if
and when necessary. In addition, the per share conversion price, and therefore
the number of shares of common stock issuable upon conversion of the notes, is
subject to adjustment under certain circumstances. Accordingly, the aggregate
principal amount of notes and the number of shares of common stock into which
the notes are convertible may increase or decrease.
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<PAGE> 45
PLAN OF DISTRIBUTION
The selling holders and their successors, including their transferees,
pledgees or donees or their successors, may sell the notes and the common stock
into which the notes are convertible directly to purchasers or through
underwriters, broker-dealers or agents, who may receive compensation in the form
of discounts, concessions or commissions from the selling holders or the
purchasers. These discounts, concessions or commissions as to any particular
underwriter, broker-dealer or agent may be in excess of those customary in the
types of transactions involved.
The notes and the common stock into which the notes are convertible may be
sold in one or more transactions at fixed prices, at prevailing market prices at
the time of sale, at prices related to such prevailing market prices, at varying
prices determined at the time of sale, or at negotiated prices. Such sales may
be effected in transactions:
- on any national securities exchange or quotation service on which the
Notes or the common stock may be listed or quoted at the time of sale;
- in the over-the-counter market;
- in transactions otherwise than on such exchanges or services or in the
over-the-counter market;
- through the writing of options, whether such options are listed on an
options exchange or otherwise;
- through the settlement of short sales;
- through the distribution by a holder to its partners, members or
stockholders; or
- through a combination of any of the above, which may involve crosses or
block transactions.
In connection with the sale of the notes and the common stock into which
the notes are convertible or otherwise, the selling holders may enter into
hedging transactions with broker-dealers or other financial institutions which
may in turn engage in short sales of the notes or the common stock into which
the notes are convertible and deliver these securities to close out such short
positions, or loan or pledge the notes or the common stock into which the notes
are convertible to broker-dealers that in turn may sell these securities.
The aggregate proceeds to the selling holders from the sale of the notes or
common stock into which the notes are convertible offered by them hereby will be
the purchase price of the notes or common stock less discounts and commissions,
if any. Each of the selling holders reserves the right to accept and, together
with their agents from time to time, to reject, in whole or in part, any
proposed purchase of notes or common stock to be made directly or through
agents. We will not receive any of the proceeds from this offering.
Our outstanding common stock is listed for trading on the Nasdaq National
Market. While the notes are eligible for trading in The Portal Market, we do not
expect the notes to remain eligible for trading on that market. We do not intend
to list the notes for trading on any national securities exchange or on the
Nasdaq National Market. We can give no assurance about the development of any
trading market for the notes. If a trading market for the notes fails to
develop, the trading price of the notes may be adversely affected.
In order to comply with the securities laws of some states, if applicable,
the notes and common stock into which the notes are convertible may be sold in
these jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states the notes and common stock into which the notes are
convertible may not be sold unless they have been
-42-
<PAGE> 46
registered or qualified for sale or an exemption from registration or
qualification requirements is available and is complied with.
The selling holders and any underwriters, broker-dealers or agents that
participate in the sale of the notes and common stock into which the notes are
convertible may be "underwriters" within the meaning of Section 2(11) of the
Securities Act. Any discounts, commissions, concessions or profit they earn on
any resale of the shares may be underwriting discounts and commissions under the
Securities Act. Selling holders who are "underwriters" within the meaning of
Section 2(11) of the Securities Act will be subject to the prospectus delivery
requirements of the Securities Act. The selling holders have acknowledged that
they understand their obligations to comply with the provisions of the Exchange
Act and the rules thereunder relating to stock manipulation, particularly
Regulation M, and have agreed that they will not engage in any transaction in
violation of such provisions.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. A selling holder
may not sell any notes or common stock described in this prospectus and may not
transfer, devise or gift such securities by other means not described in this
prospectus.
To the extent required, the specific notes or common stock to be sold, the
names of the selling holders, the respective purchase prices and public offering
prices, the names of any agent, dealer or underwriter, and any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement of which this prospectus is a part.
We entered into a registration rights agreement for the benefit of holders
of the notes to register their notes and common stock under applicable federal
and state securities laws under certain circumstances and at certain times. The
registration rights agreement provides for cross-indemnification of the selling
holders and Human Genome Sciences and their respective directors, officers and
controlling persons against certain liabilities in connection with the offer and
sale of the notes and the common stock, including liabilities under the
Securities Act. We will pay all of our expenses and substantially all of the
expenses incurred by the selling holders incident to the offering and sale of
the notes and the common stock, provided that each selling holder will be
responsible for payment of commissions, concessions and discounts of
underwriters, broker-dealers or agents.
LEGAL MATTERS
Piper & Marbury L.L.P. will provide us with an opinion as to legal matters
in connection with the notes and the common stock offered by this prospectus.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements included in our annual report on form 10-K for the year ended
December 31, 1998, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in this registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
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<PAGE> 47
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC under the Exchange Act. The Exchange Act file number
for our SEC filings is 000-22962. You may read and copy any document we file at
the following SEC public reference rooms:
<TABLE>
<S> <C> <C>
500 West Madison
Judiciary Plaza Street 7 World Trade Center
450 Fifth Street, N.W. 14th Floor Suite 1300
Rm. 1024 Chicago, Illinois New York, New York
Washington, D.C. 20549 60661 10048
</TABLE>
You may obtain information on the operation of the public reference room in
Washington, D.C. by calling the SEC at 1-800-SEC-0330. We file information
electronically with the SEC. Our SEC filings are available from the SEC's
Internet site at http://www.sec.gov, which contains reports, proxy and
information statements and other information regarding issuers that file
electronically. Our common stock is listed on the Nasdaq National Market under
the symbol HGSI. You may read and copy our SEC filings and other information at
the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act. This prospectus does not contain all of the information in the
registration statement. We have omitted certain parts of the registration
statement, as permitted by the rules and regulations of the SEC. You may inspect
and copy the registration statement, including exhibits, at the SEC's public
reference facilities or Internet site. Our statements in this prospectus about
the contents of any contract or other document are not necessarily complete. You
should refer to the copy of each contract or other document we have filed as an
exhibit to the registration statement for complete information.
-44-
<PAGE> 48
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" certain documents we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information in the documents incorporated
by reference is considered to be part of this prospectus, and information in
documents that we file later with the SEC will automatically update and
supersede information in this prospectus. We incorporate by reference the
documents listed below and any future filings we will make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act:
- Annual Report on Form 10-K for the year ended December 31, 1998;
- Quarterly Reports on Form 10-Q for the three months ended March 31, 1999
and June 30, 1999; and
- Description of Common Stock contained in Form 8-A filed pursuant to the
Exchange Act.
We will provide a copy of the documents we incorporate by reference, at no
cost, to any person who receives this prospectus. To request a copy of any or
all of these documents, you should write or telephone us at: 9410 Key West
Avenue, Rockville, Maryland 20850, (301) 309-8504, Attention: Senior Vice
President and Chief Financial Officer.
-------------------------
We furnish our stockholders with annual reports that contain audited
financial statements and quarterly reports for the first three quarters of each
year that contain unaudited interim financial information.
-------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT AUTHORIZED
ANYONE ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. THE SELLING HOLDERS ARE
NOT MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE
FRONT OF THE DOCUMENT.
-45-
<PAGE> 49
[HUMAN GENOME SCIENCES, INC. LOGO]
<PAGE> 50
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities
registered hereby. All of the amounts shown are estimated except the Securities
and Exchange Commission registration and Nasdaq National Market listing fees.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 34,750
Nasdaq National Market listing fee.......................... 17,500
Printing expenses........................................... 10,000
Legal fees and expenses..................................... 15,000
Accounting fees and expenses................................ 10,000
Miscellaneous expenses...................................... 12,750
--------
Total..................................................... $100,000
========
</TABLE>
15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law ("Section 145") permits
indemnification of directors, officers, agents and controlling persons of a
corporation under certain conditions and subject to certain limitations. The
Registrant's Bylaws include provisions to require the Registrant to indemnify
its directors and officers to the fullest extent permitted by Section 145,
including circumstances in which indemnification is otherwise discretionary.
Section 145 also empowers the Registrant to purchase and maintain insurance that
protects its officers, directors, employees and agents against any liabilities
incurred in connection with their service in such positions.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.
II-1
<PAGE> 51
16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
3.1* Restated Certificate of Incorporation of the Registrant
3.2* Restated Bylaws of the Registrant
4.1** Rights Agreement between the Registrant and American Stock
Transfer & Trust Company, as Rights Agent, dated as of May
20, 1998
4.2*** Indenture dated as of June 25, 1999 between Human Genome
Sciences, Inc. and The Bank of New York, as trustee,
including the form of 5 1/2% Convertible Subordinated Notes
due 2006 included in Article II thereof
4.3*** Registration Rights Agreement dated as of June 25, 1999
between Human Genome Sciences, Inc. and the Initial
Purchaser
5.1 Opinion of Piper & Marbury L.L.P.
12.1+ Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Piper & Marbury L.L.P (include in Exhibit 5.1)
24.1+ Powers of Attorney
25.1+ Form T-1 Statement of Eligibility of The Bank of New York to
act as Trustee under the Indenture
</TABLE>
- -------------------------
* Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1997.
** Incorporated by reference to the Registrant's Current Report on Form 8-K
filed with the SEC on May 28, 1998.
*** Incorporated by reference to the Registrant's Current Report on Form 8-K
filed with the SEC on June 28, 1999.
+ Previously filed.
17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price, set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
II-2
<PAGE> 52
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
provided, however, that paragraphs (i) and (ii) above do not apply
if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference into the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that
is incorporated by reference in the registration statement shall be deemed to be
a new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under Section
310 of the Trust Indenture Act in accordance with the rules and regulations
prescribed by the Commission under Section 305(b)(2) of the Trust Indenture Act.
II-3
<PAGE> 53
SIGNATURES
Pursuant to the requirements of the Securities Act, the Company has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Rockville, Maryland, on
the 24th day of September, 1999.
HUMAN GENOME SCIENCES, INC.
By: /s/ WILLIAM A. HASELTINE
-----------------------------------
William A. Haseltine, Ph.D.
Chairman of the Board and
Chief Executive Officer
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ WILLIAM A. HASELTINE Chairman of the Board, Chief September 24, 1999
- --------------------------------------- Executive Officer and Director
William A. Haseltine, Ph.D. (Principal Executive Officer)
* Senior Vice President of September 24, 1999
- --------------------------------------- Research and Development and
Craig Rosen, Ph.D. Director
* Senior Vice President and Chief September 24, 1999
- --------------------------------------- Financial Officer (Principal
Steven C. Mayer Accounting and Financial Officer
* Director September 24, 1999
- ---------------------------------------
Jurgen Drews, M.D.
Director
- ---------------------------------------
Beverly Sills Greenough
* Director September 24, 1999
- ---------------------------------------
Robert D. Hormats
* Director September 24, 1999
- ---------------------------------------
Max Link, Ph.D.
* Director September 24, 1999
- ---------------------------------------
Alan G. Spoon
* Director September 24, 1999
- ---------------------------------------
Laura D'Andrea Tyson, Ph.D.
Director
- ---------------------------------------
James B. Wyngaarden, M.D.
*By: /s/ WILLIAM A. HASELTINE
---------------------------------
William A. Haseltine
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 54
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
3.1* Restated Certificate of Incorporation of the Registrant
3.2* Restated Bylaws of the Registrant
4.1** Rights Agreement between the Registrant and American Stock
Transfer & Trust Company, as Rights Agent, dated as of May
20, 1998
4.2*** Indenture dated as of June 25, 1999 between Human Genome
Sciences, Inc. and The Bank of New York, as trustee,
including the form of 5 1/2% Convertible Subordinated Notes
due 2006 included in Article II thereof
4.3*** Registration Rights Agreement dated as of June 25, 1999
between Human Genome Sciences, Inc. and the Initial
Purchaser
5.1 Opinion of Piper & Marbury L.L.P.
12.1+ Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Piper & Marbury L.L.P (include in Exhibit 5.1)
24.1+ Powers of Attorney
25.1+ Form T-1 Statement of Eligibility of The Bank of New York to
act as Trustee under the Indenture
</TABLE>
- -------------------------
* Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1997.
** Incorporated by reference to the Registrant's Current Report on Form 8-K
filed with the SEC on May 28, 1998.
*** Incorporated by reference to the Registrant's Current Report on Form 8-K
filed with the SEC on June 28, 1999.
+ Previously filed.
II-5
<PAGE> 1
EXHIBIT 5.1
PIPER & MARBURY
L.L.P.
CHARLES CENTER SOUTH WASHINGTON
36 SOUTH CHARLES STREET NEW YORK
BALTIMORE, MARYLAND 21201-3018 PHILADELPHIA
410-539-2530 RESTON
FAX: 410-539-0489 EASTON
August 16, 1999
HUMAN GENOME SCIENCES, INC.
9410 Key West Avenue
Rockville, Maryland 20850
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel for Human Genome Sciences, Inc., a Delaware
corporation (the "Company"), in the preparation and filing with the Securities
and Exchange Commission of a Registration Statement on Form S-3 (the
"Registration Statement") relating to (i) $125,000,000 aggregate principal
amount of the Company's 5 1/2% Convertible Subordinated Notes due 2006 (the
"Notes") and (ii) such indeterminable number of shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), as may be required for
issuance upon conversion of the Notes (the "Conversion Shares"). The Notes and
Conversion Shares will be offered and sold by certain security holders of the
Company.
In such capacity, we have reviewed the following documents:
(a) The Certificate of Incorporation of the Company, certified by the
Delaware Secretary of State;
(b) The By-Laws of the Company, as certified by an officer of the
Company;
(c) The Registration Statement;
(d) The Indenture dated as of June 25, 1999 (the "Indenture") between
the Company and The Bank of New York, as trustee (the "Trustee")
relating to the Notes;
<PAGE> 2
PIPER & MARBURY
L.L.P.
HUMAN GENOME SCIENCES, INC.
August 16, 1999
Page 2
(e) The form of the Notes;
(f) Certified resolutions of the Board of Directors of the Company
relating to the Registration Statement and the authorization and
issuance of the Notes and the Conversion Shares;
(g) A good standing certificate for the Company, dated a recent date,
issued by the Delaware Secretary of State;
(h) An officer's certificate (the "Certificate") of the Company, dated
the date hereof, as to certain factual matters; and
(i) Such other documents as we have considered necessary to the
rendering of the opinion expressed below.
In our examination of the aforesaid documents, we have assumed, without
independent investigation, the genuineness of all signatures, the legal capacity
of all individuals who have executed any of the aforesaid documents, the
authenticity of all documents submitted to us as originals, the conformity with
originals of all documents submitted to us as copies (and the authenticity of
the originals of such copies), and that all public records reviewed are accurate
and complete. In making our examination of documents executed by parties other
than the Company, we have assumed that such parties had the power, corporate or
other, to enter into and perform all obligations thereunder, and we have also
assumed the due authorization by all requisite action, corporate or other, and
the valid execution and delivery by such parties of such documents and the
validity, binding effect and enforceability thereof with respect to such
parties. As to any facts material to this opinion which we did not independently
establish or verify, we have relied solely upon the Certificate.
Based upon and subject to the foregoing and having regard for such legal
considerations as we deem relevant, we are of the opinion that, as of the date
hereof:
1. The Notes have been duly authorized and, when duly authenticated
by the Trustee in accordance with the terms of the Indenture, are
valid and binding obligations of the Company, subject to
applicable bankruptcy and incolvency laws and the application of
general principles of equity.
2. Upon conversion of the Notes in accordance with their terms and
the Indenture, the Conversion Shares will be duly authorized,
validly issued, fully paid and nonnassessable.
<PAGE> 3
PIPER & MARBURY
L.L.P.
HUMAN GENOME SCIENCES, INC.
August 16, 1999
Page 3
The foregoing opinion is rendered as of the date hereof. We assume no
obligation to update such opinion to reflect any facts or circumstances which
may hereafter come to our attention or changes in the law which may hereafter
occur. We hereby consent to (i) the reference to this firm under the under the
caption "Legal Matters" in the Prospectus forming a part of the Registration
Statement and (ii) the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Piper & Marbury L.L.P.
<PAGE> 1
EXHIBIT 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" in
Amendment No.1 to the Registration Statement (Form S-3 No. 333-85319) and
related Prospectus of Human Genome Sciences, Inc. and to the incorporation by
reference therein of our report dated February 8, 1999, with respect to the
financial statements of Human Genome Sciences, Inc. included in its Annual
Report (Form 10-K) for the year ended December 31, 1998, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Vienna, Virginia
September 23, 1999
