<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 7, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HUMAN GENOME SCIENCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8731 22-3178468
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION NUMBER) IDENTIFICATION NUMBER)
</TABLE>
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:
<TABLE>
<S> <C>
R.W. SMITH, JR. ROBERT ROSENMAN
PIPER MARBURY RUDNICK & WOLFE LLP CRAVATH, SWAINE & MOORE
36 SOUTH CHARLES STREET WORLDWIDE PLAZA
BALTIMORE, MARYLAND 21201 825 EIGHTH AVENUE
(410) 539-0489 NEW YORK, NEW YORK 10019
(212) 474-1300
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check following box. [ ]
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. [ ]
- ---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(2) PRICE(2) REGISTRATION FEE(2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01(1).............. $125,000,000 259.75% $324,687,500 $90,264
- ---------------------------------------------------------------------------------------------------------------------------------
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</TABLE>
(1) The registrant will issue one share of its Junior Participating Preferred
Stock as a dividend on each share of Common Stock being registered. The
rights initially are attached to and trade with the shares of Common Stock
being registered.
(2) Estimated solely for calculating the registration fee pursuant to Rule
457(f). The proposed maximum offering price per unit, proposed maximum
aggregate offering price and the amount of the registration fee are based on
the market price of the registrant's $125,000,000 aggregate principal amount
of 5 1/2% Convertible Subordinated Notes due 2006 to be exchanged, which was
259.75% of par on December 3, 1999.
------------------------
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.
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- --------------------------------------------------------------------------------
<PAGE> 2
SUBJECT TO COMPLETION, DATED DECEMBER 7, 1999
HUMAN GENOME SCIENCES, INC.
Offer to Convert
5 1/2% Convertible Subordinated Notes Due 2006
For Additional Shares of Common Stock
----------------------
We hereby offer, upon the terms and subject to the conditions described in
this prospectus and the accompanying letter of transmittal, to convert all our
outstanding 5 1/2% Convertible Subordinated Notes Due 2006 for shares of our
common stock, $.01 par value per share. Holders who tender their Notes for
conversion prior to , 2000 will receive for each $1,000 principal
amount a total of:
- 19.1571 shares of common stock issuable on conversion of the Notes in
accordance with their terms;
- $180.00 payable in shares of our common stock based upon the average of
the closing prices on the three days prior to the last day of the offer;
and
- accrued interest from January 1, 2000 payable in cash.
An aggregate principal amount of $125,000,000 of Notes is outstanding. See
"The Offer."
THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
2000, UNLESS THE OFFER IS EXTENDED.
SEE RISK FACTORS BEGINNING ON PAGE 7 FOR A DISCUSSION OF FACTORS YOU SHOULD
CONSIDER IN EVALUATING OUR OFFER.
Our common stock is listed on the Nasdaq National Market under the symbol
"HGSI." The last reported bid price of our common stock on December 3, 1999 was
$129.25 per share.
Neither the Securities and Exchange Commission 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.
The Dealer Manager for the Offer is:
CREDIT SUISSE FIRST BOSTON
Prospectus dated December , 1999
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SUMMARY......................... 1
RATIO OF EARNINGS TO FIXED
CHARGES......................... 6
RISK FACTORS.................... 7
USE OF PROCEEDS................. 19
PRICE RANGE OF COMMON STOCK..... 19
DIVIDEND POLICY................. 19
CAPITALIZATION.................. 20
SELECTED FINANCIAL DATA......... 21
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS.................... 21
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE OFFER....................... 21
CERTAIN UNITED STATES FEDERAL
TAX CONSIDERATIONS............ 28
DESCRIPTION OF OUR CAPITAL
STOCK......................... 30
LEGAL MATTERS................... 33
EXPERTS......................... 33
WHERE YOU CAN FIND MORE
INFORMATION................... 34
INCORPORATION BY REFERENCE...... 34
</TABLE>
-------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE ELSE TO PROVIDE YOU
WITH DIFFERENT INFORMATION. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL TO
SELL THESE SECURITIES. THE INFORMATION IN THIS PROSPECTUS MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
-------------------------
<PAGE> 4
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 deciding whether to accept our offer and convert your Notes into
our common stock. 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. The sequence in which chemicals appear in a gene controls the function of
the gene. We have used automated, high speed technology to discover the
sequences of chemicals in genes and 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 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 made by those genes. As of November
30, 1999, we had isolated and characterized thousands of full-length genes and
purified more than 300 potential proteins for the treatment of human disease.
PRODUCTS IN DEVELOPMENT
We have produced three drugs currently undergoing studies in humans. We
believe these drugs are among the pharmaceutical industry's first
genomics-derived drugs to reach the stage of testing on humans.
- 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 the second phase of human
studies 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 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 the second phase of human studies 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 the blood vessels of, or revascularize, the
heart and limbs. The first and second phases of human studies 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.
We have discovered several other drugs that are in various stages of
testing in the laboratory, including:
- B Lymphocyte Stimulator, known as BLyS, a novel immune stimulant that we
believe could have significant impact on the treatment and prevention of
infectious diseases,
1
<PAGE> 5
and could lead to improved treatment of immune deficiency disorders and
types of leukemia and lymphoma. We are currently engaged in testing BlyS
in the laboratory.
INTELLECTUAL PROPERTY
We vigorously pursue patents to protect our intellectual property. As of
November 30, 1999, we had 102 issued U.S. patents covering 83 full-length human
genes and had filed U.S. patent applications covering more than 7,400 human
genes and the proteins they make. In addition, we have filed patent applications
with respect to a substantial number of the large collection of partial gene
sequences we have discovered.
RECENT EVENTS
We are currently conducting a private offering of $150 million principal
amount of new convertible subordinated notes due 2006 pursuant to an exemption
from registration under the Securities Act of 1933. The new notes will be
convertible into our common stock. We have agreed to file a registration
statement for the resale of the notes and the shares of common stock issuable
upon their conversion within 60 days after closing the offering.
-------------------------
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.
2
<PAGE> 6
OFFER
We present below a summary of this offer:
The Offer....................... We are offering, upon the terms and subject
to the conditions described in this
prospectus and in the accompanying letter of
transmittal, additional shares of our common
stock to holders who convert our 5 1/2%
Convertible Subordinated Notes Due 2006.
Holders who tender their Notes for conversion
prior to , 2000 will receive for
each $1,000 principal amount a total of:
- 19.1571 shares of common stock issuable on
conversion of the Notes in accordance with
their terms;
- $180.00 payable in shares of our common
stock based upon the average of the closing
prices on the three days prior to the last
day of the offer; and
- accrued interest from January 1, 2000
payable in cash.
We will accept for conversion all Notes
validly tendered and not withdrawn on or
prior to , 2000, on the terms
and conditions of the offer described in this
prospectus. We will pay cash in lieu of
issuing fractional shares.
As of the date of this prospectus,
$125,000,000 in aggregate principal amount of
Notes was outstanding. As of December 3,
1999, all the Notes were registered in the
name of Cede & Co., Inc., which held the
Notes for its participants. See "The
Offer -- Terms of the Offer."
Purpose and Effects............. The offer will encourage Note holders to
convert their Notes before the expiration of
the offer. Conversion of the Notes will
improve our capitalization by increasing our
outstanding equity base and reducing our
indebtedness, which we consider to be
particularly important in light of our new
offering of $150,000,000 of convertible
subordinated notes. We believe that improving
our capitalization will provide us with
enhanced access to the capital markets and
expand our opportunities for future growth.
Note holders participating in the offer will
receive more shares of common stock per
$1,000 in principal amount of Notes than they
would otherwise receive upon conversion
outside of the offer. Therefore,
participating Note holders have an
opportunity to share in any long-term
appreciation in the value of our common stock
to a greater extent than non-participating
holders.
3
<PAGE> 7
January 1, 2000 Interest
Payment......................... Tendering Note holders will receive the
January 1, 2000 interest payment on the Notes
in accordance with the terms of the Notes.
Expiration Date................. 5:00 p.m., New York City time, on
, 2000. We may extend the
expiration date. See "The Offer -- Expiration
Date; Extensions; Amendments."
Termination of the Offer........ We reserve the right to terminate the offer
at any time prior to the completion of the
offer. See "The Offer -- Termination of the
Offer."
Procedures for Tendering
Notes........................... Holders of Notes wishing to accept the offer
must complete and sign the Letter of
Transmittal as described in the instructions
included in it and forward or hand deliver
the Letter of Transmittal and any other
documents required by the Letter of
Transmittal to the Exchange Agent at the
address listed on the Letter of Transmittal.
See "The Offer -- Procedures for Tendering
Notes."
Guaranteed Delivery
Procedures...................... Holders of Notes who wish to tender their
Notes and (1) whose Notes are not immediately
available or (2) who cannot deliver their
Notes or any other documents required by the
Letter of Transmittal or any other related
document to the Exchange Agent prior to the
Expiration Date (or complete the procedure
for book-entry transfer on a timely basis),
may tender their Notes according to the
guaranteed delivery procedures described in
the Letter of Transmittal. See "The Offer --
Guaranteed Delivery Procedures."
Acceptance of Notes and Delivery
of Shares of Common Stock....... When the registration statement of which this
prospectus is a part is declared effective by
the SEC and the offer is completed, we will,
subject to the terms and conditions described
in this prospectus, accept all Notes that are
properly tendered in the offer prior to 5:00
p.m., New York City time, on ,
2000. The shares of common stock issued as
part of the offer and cash payment for any
accrued interest will be delivered promptly
after we accept the Notes. See "The Offer --
Acceptance of Notes for Conversion; Delivery
of Shares of Common Stock."
Withdrawal Rights............... Holders may withdraw the Notes they have
tendered at any time prior to 5:00 p.m., New
York City time, on , 2000. See
"The Offer -- Withdrawal Rights."
Federal Income Tax
Consequences.................... We expect that tendering Note holders will
not recognize gain or loss for federal income
tax purposes when they convert their Notes
solely into that number
4
<PAGE> 8
of shares of common stock provided for under
the original conversion right, other than
cash received in lieu of fractional shares.
We believe, and intend to take the position,
that such nonrecognition treatment would
extend to the additional shares of common
stock received as a result of accepting the
offer. It is also possible, however, that the
Internal Revenue Service would contend that
those holders who accept the offer should
recognize income equal to the fair market
value of the common stock received in excess
of the number of shares received pursuant to
the original conversion right. For a
discussion of the federal income tax
consequences of conversion of the Notes, see
"Certain United States Federal Tax
Considerations."
Market Price and Trading........ On December 3, 1999, the last reported bid
price for our common stock on the Nasdaq
National Market was $129.25 per share. The
Notes are not currently traded on an
exchange. On December 3, 1999, the last
reported bid price for the Notes was 259.75%
of par, as reported by Credit Suisse First
Boston Corporation, which makes a market in
the Notes.
The Exchange Agent.............. The Bank of New York is the exchange agent.
In this capacity, we refer to The Bank of New
York in this prospectus as the Exchange
Agent. The address and telephone number of
the Exchange Agent are listed in "The
Offer -- The Exchange Agent; Assistance" and
the back cover of this prospectus. The Bank
of New York is also the trustee for the
Notes.
The Information Agent........... Georgeson Shareholder Communications Inc. is
the Information Agent. The address and
telephone numbers of the Information Agent
are listed on the back cover of this
prospectus.
Questions....................... Any questions regarding the offer, including
the procedure for tendering Notes in the
offer, should be directed to the Information
Agent or the Dealer Manager at the addresses
and telephone numbers listed on the back
cover of this prospectus.
Fees and Expenses............... We will pay all expenses we incur in
connection with the offer. See "The
Offer -- Fees and Expenses."
Brokerage Commissions........... None.
Transfer Taxes.................. None, if the shares of common stock we issue
pursuant to the offer are issued to the
registered holders of the Notes converted.
Rights of Non-Tendering
Holders......................... Holders who do not tender their Notes
pursuant to the offer will have no appraisal
rights under applicable state law or
otherwise. They will continue to have the
same rights under the Notes as they are
entitled to today.
5
<PAGE> 9
RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
We present below the ratio of our earnings to our fixed charges. Earnings
consist of net income (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. The "pro
forma" information for the nine months ended September 30, 1999 reflects the
original issuance of the 5 1/2% Convertible Subordinated Notes due 2006 and the
issuance of our new $150 million of convertible subordinated notes, as if these
events had occurred as of January 1, 1999. The "pro forma" information for the
year ended December 31, 1998 reflects these same events as if they had occurred
on January 1, 1998.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------
1999 1999
(PRO FORMA) (ACTUAL) 1998
----------- -------- --------
<S> <C> <C> <C>
Deficiency of earnings available to cover
fixed charges.............................. $(33,637) $(23,989) $(10,412)
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1998 1998
(PRO FORMA) (ACTUAL) 1997 1996 1995 1994
----------- -------- -------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
(Deficiency) excess of
earnings available to
cover fixed charges... $(38,082) $(22,957) $(21,148) $(7,559) $(32,719) $9,740
</TABLE>
6
<PAGE> 10
RISK FACTORS
You should carefully consider the following risk factors and the other
information in this prospectus before deciding whether to accept our offer and
convert your Notes into our common stock.
BECAUSE OUR BUSINESS STRATEGY IS UNTESTED, WE DO NOT KNOW WHETHER WE WILL BE
ABLE TO COMMERCIALIZE ANY OF OUR PRODUCTS AND GENERATE REVENUE
We do not know whether we can implement our business strategy successfully
because we are in the early stages of development. We try to find as many genes
as possible and then use this information to develop potential 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 compounds for
treating and diagnosing human diseases.
Other companies target particular diseases and then try to find cures
through gene-based therapies. Nobody has tested our strategy. If our strategy
does not result in the development of products that we can sell profitably, we
will be unable to generate revenue.
IF WE ARE UNABLE TO IDENTIFY GENES WITH POTENTIAL VALUE, THEN 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. 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 identifying and developing
proteins for the treatment of human disease. We have recently made substantial
capital expenditures and hired additional personnel to foster these activities.
Before we can commercialize a product, we must extensively test the product in
the laboratory and complete several phases of study of its effects on humans. We
incur expenses for testing and study before we know whether we can sell a
product successfully. We will incur additional costs to continue these
activities. Ultimately, we may not be successful in identifying genes which we
can develop commercially.
BECAUSE WE ARE AN EARLY STAGE COMPANY, WE DO NOT KNOW WHETHER WE CAN DEVELOP OUR
BUSINESS AND ACHIEVE PROFITABILITY
We expect to incur continued and increasing losses 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 we will increase these
efforts as we focus on the laboratory testing and studies in humans that are
required before we can sell a product. The development of our products requires
significant further research, development, testing and regulatory approvals. We
may not succeed in developing products that will be commercially successful and
that will generate revenue in excess of the cost of development.
7
<PAGE> 11
BECAUSE OUR PRODUCT DEVELOPMENT EFFORTS DEPEND ON NEW TECHNOLOGIES, WE DO NOT
KNOW WHETHER OUR EFFORTS WILL BE SUCCESSFUL
To date, companies have developed and commercialized relatively few
products based on genes. Commercialization involves risks 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 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 prevent us or our collaborators
from marketing products;
- third parties will market superior or equivalent products; and
- we may not be able to obtain gene sequencing machines using new and
superior technology which could render obsolete the gene sequencers we
use.
BECAUSE WE HAVE LIMITED EXPERIENCE IN DEVELOPING PRODUCTS, WE MAY BE
UNSUCCESSFUL IN OUR EFFORTS TO DEVELOP PRODUCTS
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 laboratory testing and human studies;
- obtain necessary regulatory approvals;
- deploy sales and marketing resources effectively; and
- enter into arrangements with third parties to provide these functions.
Although we have started human studies with respect to potential products,
we have limited experience with these activities and may not be successful in
developing or commercializing these or other products.
BECAUSE WE DEPEND ON REVENUE FROM OUR COLLABORATION PARTNERS, WE MAY NOT BECOME
PROFITABLE IF WE LOSE THE REVENUE FROM ANY COLLABORATION PARTNER
To date, we have received substantially all of our revenue 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 we will receive most of our revenue for the foreseeable future from
payments under our existing collaboration agreements. We may not receive
expected milestone or royalty payments under our collaboration agreements. We
may not become profitable in a timely manner, or at all, if our collaborators
fail to:
- develop marketable products;
- obtain regulatory approvals for products; or
- successfully market products based on the genes we identify.
8
<PAGE> 12
IF OUR RELATIONSHIP WITH ANY OF OUR COLLABORATORS PREVENTS US FROM ENTERING INTO
OTHER COLLABORATIVE AGREEMENTS, THEN WE MAY HAVE LIMITED OPPORTUNITIES FOR
PRODUCT DEVELOPMENT AND REVENUE GROWTH
Our collaboration agreements generally restrict our ability to enter into
collaboration agreements with additional collaboration partners. Our
collaborators may prevent us from obtaining the additional revenue and
assistance that additional collaborators could provide. Because our existing
collaboration partners may force us to rely on them, these partners may be able
to exercise a greater degree of control over our business.
IF ONE OF OUR COLLABORATORS PURSUES A PRODUCT THAT COMPETES WITH OUR PRODUCTS,
THEN THEY MAY HAVE A CONFLICT OF INTEREST AND WE MAY NOT RECEIVE THE MILESTONE
PAYMENTS OR ROYALTY REVENUE THAT WE EXPECT
Each of our collaborators conducts multiple product development efforts.
Our collaborators may pursue existing or alternative technologies instead of
products they are developing in collaboration with us. Additionally, our
collaborators may develop products that are similar to or compete with products
they are developing in collaboration with us. If our collaborators pursue these
other products instead of our products, we may be unable to achieve our payment
milestones or our royalty revenue may decrease.
BECAUSE WE MAY DEPEND ON OUR COLLABORATORS AND OTHER THIRD PARTIES TO CONDUCT
LABORATORY TESTING AND HUMAN STUDIES, WE MAY ENCOUNTER DELAYS IN OR LOSE SOME
CONTROL OVER OUR EFFORTS TO DEVELOP PRODUCTS
We may rely in large part on our collaboration partners and third party
research organizations to design and conduct our laboratory testing and human
studies. If we are unable to contract for any necessary testing activities on
acceptable terms, we may not complete our product development efforts in a
timely manner. If we rely on collaborators and third parties for laboratory
testing and human studies, we may lose some control over these activities and
become too dependent upon these parties. Collaborators and third parties may not
complete testing activities on schedule or when we request.
BECAUSE OF OUR SUBSTANTIAL INDEBTEDNESS, WE MAY BE UNABLE TO ADJUST TO MEET
CHANGING CONDITIONS IN THE FUTURE
At September 30, 1999, we had outstanding total indebtedness of
approximately $127.2 million. For the nine months ended September 30, 1999, our
fixed charges exceeded our earnings by approximately $24.0 million. We are
offering $150 million of new convertible subordinated notes due 2006. If we had
issued all of these new notes and the Notes as of January 1, 1999, our fixed
charges for the nine months ended September 30, 1999 would have exceeded our
earnings by approximately $33.6 million.
A variety of uncertainties and contingencies will affect our future
performance, many of which are beyond our control. We may not generate
sufficient cash flow in the future to enable us to meet our anticipated fixed
charges, including our debt service requirements. Our substantial leverage will
have several important consequences for our future operations. For instance:
- we will dedicate a significant portion of our cash flow to pay interest
on, and principal of, our indebtedness;
9
<PAGE> 13
- we may be unable to obtain additional financing in the future for capital
expenditures, acquisitions, debt servicing or general corporate purposes;
- we may be unable to withstand changing competitive pressures, economic
conditions and governmental regulations; and
- we may be unable to make acquisitions or otherwise take advantage of
significant business opportunities that may arise.
WE MAY BE REQUIRED TO REGISTER THE SHARES OF SOME OF OUR STOCKHOLDERS UPON
EVENTS LIKE THE FILING OF A SHELF REGISTRATION STATEMENT
We may agree, pursuant to a registration rights agreement with the initial
purchaser of additional convertible notes, for the benefit of the holders of the
notes and the common stock issuable upon their conversion, that we will, at our
cost:
- as promptly as practicable, but in no event more than 60 days following
the initial issuance of the notes, file a registration statement on Form
S-3, or shelf registration statement, covering resales of the notes and
the common stock issuable upon their conversion pursuant to Rule 415
under the Securities Act;
- use our best efforts to cause this shelf registration statement to be
declared effective under the Securities Act no later than 120 days after
the initial issuance of the notes; and
- use our best efforts to keep this shelf registration statement effective
after its effective date for as long as shall be necessary to enable a
non-affiliate holder of notes purchased in this offering to sell the
notes under Rule 144(k) under the Securities Act.
We will agree to the rights described above with the purchasers of the $150
million of convertible subordinated notes now being offered by us. In addition,
some of our stockholders may be entitled to demand registration rights with
respect to their shares of common stock, as well as incidental registration
rights with respect to their shares if we propose to file certain registration
statements. The proposal to file the shelf registration statement may trigger
the rights of these stockholders to have their shares registered for resale.
These stockholders may choose to exercise their registration rights, which could
result in additional shares of our common stock being offered for sale in the
public market.
BECAUSE OUR STOCK PRICE HAS BEEN AND WILL LIKELY CONTINUE TO BE VOLATILE, THE
MARKET PRICE OF THE COMMON STOCK MAY BE LOWER THAN YOU EXPECTED
Our stock price and the stock prices of emerging and biotechnology
companies like us have historically been highly volatile. During the past year,
the market price of our common stock has been as low as $28.75 per share and as
high as $133.00 per share. The market price of the common stock could fluctuate
substantially because of:
- future announcements about our company or our competitors, including the
results of testing, technological innovations or new commercial products;
- changes in government regulations;
- regulatory actions;
- announcements relating to healthcare reform;
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<PAGE> 14
- our failure to acquire or loss of proprietary rights to the gene
sequences we discover or the products we develop;
- 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
cause the market price of the common stock to be lower than you expected.
BECAUSE MANY OF OUR COMPETITORS HAVE SUBSTANTIALLY GREATER CAPABILITIES AND
RESOURCES, THEY MAY BE ABLE TO DEVELOP AND COMMERCIALIZE PRODUCTS BEFORE US
We are in a race to identify, establish uses for and patent as many genes
as possible and to bring to market the products we develop. Many of our
potential competitors have substantially greater research and product
development capabilities and financial, scientific, marketing and human
resources. We believe that companies conducting genomic research, like us, have
identified the majority of genes in the human genome and will identify virtually
all of these genes within several years. 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 our field will intensify.
Our competitors include parties conducting research to identify genes and
human genome research similar to or competing with our focus on gene discovery,
including:
- institutes, like 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;
- develop treatments or cures that are more effective than those we propose
to develop; or
- acquire similar gene sequencing machines and engage in the automated
sequencing of genes.
The other risks of competition include the following:
- research and development by others may make our products, or the products
we and our collaborators may develop, obsolete or uneconomical;
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<PAGE> 15
- consumers may prefer existing or newly developed technologies to any
product we develop; and
- other companies use the same gene sequencing machines we use, in some
cases for business purposes that compete with our business.
IF PATENT LAWS OR THE INTERPRETATION OF PATENT LAWS CHANGE, OUR COMPETITORS MAY
BE ABLE TO DEVELOP AND COMMERCIALIZE OUR DISCOVERIES
The patent positions of biotechnology firms generally are highly uncertain
and involve complex legal and factual questions that will determine who has the
right to develop a particular product. 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
partial gene sequences and full-length genes. There have also been proposals for
review of the appropriateness of patents on genes and partial gene sequences.
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 different interpretations of, the patent laws which might allow
others to use our discoveries or develop and commercialize our products.
IF OUR PATENT APPLICATIONS DO NOT RESULT IN ISSUED PATENTS, THEN OUR COMPETITORS
MAY OBTAIN RIGHTS TO AND COMMERCIALIZE THE DISCOVERIES WE ATTEMPTED TO PATENT
Our pending applications covering full-length genes and their corresponding
proteins may not result in the issuance of any patents. As of November 30, 1999,
we had filed patent applications for:
- more than 7,400 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 102 U.S. patents issued covering 83
full-length human genes. Our disclosures in our applications may not be
sufficient to meet the statutory requirements for patentability in all cases.
Additionally, our patent applications may cover many genes. 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 our
patent applications.
BECAUSE PATENT APPLICATIONS FOR PARTIAL HUMAN GENE SEQUENCES MAY BE LEGALLY
INSUFFICIENT, WE MAY BE UNABLE TO OBTAIN ISSUED PATENTS FOR MANY OF OUR PATENT
APPLICATIONS, AND OTHERS MAY OBTAIN RIGHTS TO OUR DISCOVERIES
We have filed U.S. patent applications claiming more than 300,000 partial
human gene sequences. The Patent and Trademark Office may not grant patents on
these applications because they may be insufficient. 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 data from laboratory testing or
human studies. 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
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<PAGE> 16
significant risk that the Patent and Trademark Office will not issue patents
based on patent disclosures limited to partial gene sequences. Finally, we are
uncertain about the scope of the coverage, enforceability and commercial
protection provided by any patents issued on the basis of partial gene
sequences.
IF INFORMATION ABOUT THE GENES WE DISCOVER IS PUBLISHED BY OTHERS BEFORE WE
APPLY FOR PATENT PROTECTION, THEN WE MAY BE UNABLE TO OBTAIN PATENT PROTECTION,
WHICH WOULD ENABLE OTHERS TO DEVELOP AND COMMERCIALIZE OUR DISCOVERIES
Washington University has identified genes through partial sequencing
funded by Merck & Co. and has deposited those partial sequences 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 public disclosure might limit the scope of
our 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, only academic scientists and researchers at non-profit institutions
that sign agreements could access the database. In October 1996, TIGR notified
us that it was terminating this agreement according to its terms, effective in
April 1997. The termination of this agreement eliminated limits on publication
of sequences in the database on that date. In addition, the termination
eliminated previous restrictions on TIGR's ability to publish sequence
information. This publication may prevent us from obtaining patent protection
for some genes in which we may have an interest.
IF OTHERS FILE SIMILAR PATENT APPLICATIONS OR OBTAIN SIMILAR PATENTS, THEN THE
PATENT AND TRADEMARK OFFICE MAY DENY OUR PATENT APPLICATIONS OR OTHERS MAY
RESTRICT THE USE OF OUR DISCOVERIES
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. Others have filed patent applications that cover genes
for which we have filed patent applications, including applications based on our
potential products. 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 the third party may require us to stop pursuing a potential product
or to negotiate a royalty arrangement to pursue the potential product.
IF OUR POTENTIAL PRODUCTS CONFLICT WITH PATENTS THAT COMPETITORS, UNIVERSITIES
OR OTHERS HAVE OBTAINED, THEN WE MAY BE UNABLE TO COMMERCIALIZE THOSE PRODUCTS
Our potential products may give rise to claims that they infringe the
patents of others. This risk will increase as the biotechnology industry expands
and as other companies obtain more patents and attempt to discover genes through
the use of high speed sequencers. Other persons could bring legal actions
against us to claim damages or 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, these persons may require us to obtain a
license in order to continue to manufacture or market the affected products. We
believe that there will
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<PAGE> 17
continue to be significant litigation in our industry regarding patent and other
intellectual property rights. If we become involved in litigation, it could
consume a substantial portion of our resources.
BECAUSE ISSUED PATENTS MAY NOT FULLY PROTECT OUR DISCOVERIES, OUR COMPETITORS
MAY BE ABLE TO COMMERCIALIZE PRODUCTS SIMILAR TO THOSE COVERED BY OUR ISSUED
PATENTS
Issued patents may not provide commercially meaningful protection against
competitors. Any issued patent may not provide us with competitive advantages.
Others may challenge our patents or independently develop similar products which
could result in an interference proceeding in the Patent and Trademark Office.
Others may be able to design around our issued patents or develop products
providing effects similar to our products. In addition, others may discover uses
for genes or proteins other than those uses covered in our patents, and these
other uses may be separately patentable. The holder of a patent covering the use
of an invention as to which we have a patent claim could exclude us from selling
a product for a use covered by their patent.
BECAUSE THE U.S. DEPARTMENT OF ENERGY FUNDED SOME OF OUR RESEARCH, IT MAY GRANT
LICENSES UNDER OUR PATENTS THAT WOULD ENABLE OTHERS TO USE OUR DISCOVERIES
We identified a small percentage of sequences covered by our patent filings
through research funded by grants from the U.S. Department of Energy. The
Department of Energy has a statutory right to grant to other parties licenses
under patents which may be issued based on research funded by the Department of
Energy. The Department of Energy may exercise this right in the event of:
- 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.
IF WE ARE UNABLE TO PROTECT OUR TRADE SECRETS, THEN OTHERS MAY BE ABLE TO USE
OUR SECRETS TO COMPETE MORE EFFECTIVELY
We may not be able to meaningfully protect our trade secrets. 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
DNA sequences and 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 information and techniques. In addition, TIGR has
developed or possesses specific trade secrets important to our business,
including information about sequencing procedures and genes identified by TIGR.
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<PAGE> 18
IF WE LOSE KEY MANAGEMENT OR OTHER PERSONNEL, WE MAY EXPERIENCE DELAYS IN OUR
PRODUCT DEVELOPMENT EFFORT
We depend on our senior executive officers as well as 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, either party can terminate
the agreement four months prior to the end of the applicable term. If Dr.
Haseltine decides to terminate his employment with us, this termination could
delay the commercialization of our products or prevent us from becoming
profitable. Further, we have not purchased key-man life insurance on any of our
executive officers or key personnel, and therefore may not have adequate funds
to find an acceptable replacement if Dr. Haseltine or other valuable executives
die. 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 hinder our ability to complete human
studies successfully and develop marketable products.
IF WE DO NOT OBTAIN SIGNIFICANT ADDITIONAL FUNDS ON ACCEPTABLE TERMS, THEN 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 additional financing on acceptable terms. If we raise
additional funds by issuing equity securities, the new securities may dilute the
interests of our existing stockholders.
BECAUSE WE ARE SUBJECT TO EXTENSIVE AND UNCERTAIN GOVERNMENT REGULATORY
REQUIREMENTS, WE MAY BE ABLE TO OBTAIN GOVERNMENT APPROVAL OF OUR PRODUCTS IN A
TIMELY MANNER
Our products are subject to an extensive and uncertain regulatory approval
process by the FDA and comparable agencies in other countries. The regulation of
new products is extensive, and the required process of laboratory testing and
human studies 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 we obtain FDA regulatory approvals, 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. 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 our
products could limit our ability to test, manufacture and, ultimately,
commercialize our products.
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BECAUSE WE ARE SUBJECT TO ENVIRONMENTAL PROTECTION LAWS, WE MAY BE UNABLE TO
CONDUCT OUR BUSINESS IN THE MANNER WE CURRENTLY INTEND
State and federal laws regarding environmental protection and hazardous
substances control affect 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.
BECAUSE WE DEPEND ON A SINGLE SUPPLIER FOR GENE SEQUENCING MACHINES AND
CHEMICALS, WE MAY BE UNABLE TO IDENTIFY ADDITIONAL GENES IF WE LOSE THAT
SUPPLIER
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 the chemicals we require in connection with our gene
sequencing process. If we are unable to obtain additional machines or an
adequate supply of these chemicals or other ingredients at commercially
reasonable rates, we may be unable to continue to identify genes through gene
sequencing. 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.
Gene sequencing machines or chemicals may not remain available in commercial
quantities at acceptable costs.
BECAUSE WE CURRENTLY HAVE A LIMITED MANUFACTURING CAPACITY AND RELY ON THIRD
PARTIES TO MANUFACTURE OUR PRODUCTS FOR STUDIES AND SALE, WE MAY BE UNABLE TO
OBTAIN NECESSARY 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 human studies or for commercial sale. We
depend on 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 our development of products or their submission
for regulatory approval.
During 1997 and 1998, we designed and the Maryland Economic Development
Corporation constructed a process development and production facility for the
preparation of quantities of our proteins for human studies. The FDA must
validate and inspect this facility to determine compliance with cGMP
requirements. A delay in validation of the facility could delay or increase the
cost of human studies and could delay submission of our products for regulatory
approval. Construction of an expansion of this facility has begun. We intend to
lease the expansion on terms comparable to the lease of our existing facility,
although we cannot assure you that we will be able to obtain a lease on
comparable terms, or at all. We may not be able to successfully establish
manufacturing capabilities and manufacture our products economically or in
compliance with cGMPs and other regulatory requirements.
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BECAUSE WE CURRENTLY HAVE NO MARKETING CAPABILITY AND RELY ON THIRD PARTIES TO
MARKET OUR PRODUCTS, WE MAY BE UNABLE 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 collaborators or
other third parties may not be successful in marketing 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 our products. If we
decide to market products directly, we will incur significant additional
expenditures and commit significant additional management resources to develop
an external sales force and implement our marketing strategy. We may not be able
to establish a successful marketing force.
IF THE HEALTHCARE SYSTEM OR REIMBURSEMENT POLICIES CHANGE, THEN THE PRICES OF
OUR POTENTIAL PRODUCTS MAY FALL OR OUR POTENTIAL SALES MAY DECLINE
In recent years, officials have made numerous proposals to change the
healthcare system in the U.S. 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. Government and other
third-party payors increasingly attempt to contain healthcare costs by limiting
both coverage and the level of reimbursement of newly approved healthcare
products. In some cases, they may also refuse to provide any coverage of uses of
approved products for disease indications other than those for which the FDA has
granted marketing approval. Governments may adopt future legislative proposals
and federal, state or private payors for healthcare goods and services may take
action to limit their payments for goods and services. Any of these events could
limit our ability to commercialize our products successfully.
WE MAY BE AFFECTED BY YEAR 2000 PROBLEMS
Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field. These date code fields
will need to accept four-digit entries to distinguish 21st century dates from
20th century dates. As a result, many companies' software and computer systems
may need to be upgraded or replaced in order to become Year 2000, or "Y2K,"
compliant. Failure to achieve Y2K compliance could lead to system failure or
miscalculations, causing disruptions of operations, reductions in revenues and
increases in expenses.
We have always used four-digit date entries in our internally developed
databases, and we believe the majority of our purchased computer systems,
operating systems, and database management systems are Y2K compliant. However,
we cannot guarantee the Y2K-readiness of our suppliers, electrical power, voice
and data communications, shipping, and government agencies and other third
parties on which we rely. We cannot be certain that all of our critical internal
systems will perform properly in the new millennium. If they do not, we may be
forced to spend substantial amounts to fix or replace them, and we may face
substantial operating difficulties. If our efforts to address Y2K issues are
ineffective, or if third parties with whom we do business do not successfully
address this issue, we could experience system failures beyond our control. This
could cause prolonged computer, telecommunications or electrical failure, which
would make it difficult or impossible for us to conduct business.
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FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET COULD DEPRESS OUR STOCK
PRICE
Sales of substantial amounts of our common stock in the public market
following this offer, or the appearance that a large number of shares is
available for sale, could adversely affect the market price for our common
stock. In connection with the offer to you, we expect to issue additional shares
of our common stock. The number of additional shares of common stock we issue is
based on the average of the closing prices on the three consecutive trading days
immediately prior to, but not including, the day this offer expires,
, 2000. These shares will be in addition to the aggregate of
2,394,636 shares of our common stock otherwise deliverable upon conversion of
the Notes under the indenture. All of these shares will be freely tradable if
the offer is completed. In addition, our offer of $150 million of convertible
subordinated notes may result in the issuance of additional shares of our common
stock upon their conversion.
BECAUSE THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS, IT 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. We base these statements 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.
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<PAGE> 22
PRICE RANGE OF COMMON STOCK
Our common stock has been traded on the Nasdaq National Market under the
symbol "HGSI" since December 2, 1993. The high and low closing prices of our
common stock, as reported by the Nasdaq National Market, are shown below.
<TABLE>
<CAPTION>
HIGH LOW
-------- -------
<S> <C> <C>
1997
First Quarter............................ $ 48.000 $32.500
Second Quarter........................... $ 39.250 $30.750
Third Quarter............................ $ 43.500 $30.500
Fourth Quarter........................... $ 45.250 $38.125
1998
First Quarter............................ $ 45.125 $35.750
Second Quarter........................... $ 43.250 $35.000
Third Quarter............................ $ 40.000 $23.313
Fourth Quarter........................... $ 36.250 $25.563
1999
First Quarter............................ $ 36.750 $29.625
Second Quarter........................... $ 46.000 $34.938
Third Quarter............................ $ 89.500 $40.875
Fourth Quarter (through December 3,
1999).................................. $129.313 $74.188
</TABLE>
The last reported bid price of our common stock on the Nasdaq National
Market on December 3, 1999 was $129.25 per share.
DIVIDEND POLICY
We have never declared or paid any cash dividends. We do not anticipate
declaring or paying cash dividends for the foreseeable future. Instead, we will
retain our earnings, if any, for the future operation and expansion of our
business.
USE OF PROCEEDS
We will not receive any proceeds from the conversion of the Notes into
common stock.
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<PAGE> 23
CAPITALIZATION
The following table shows our current assets and long-term investments and
capitalization at September 30, 1999 (1) on an actual basis, (2) as adjusted to
give effect to the offering and the application of the estimated proceeds we
expect to receive in the offering of $150,000,000 of new convertible
subordinated notes due 2006 (net of estimated fees and expenses) and (3) as
further adjusted to give effect to the assumed conversion of $125,000,000
aggregate principal amount of 5 1/2% Convertible Subordinated Notes due 2006 in
response to the offer made by this prospectus. You should also refer to our
financial statements and the related notes included in our filings with the SEC.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1999
----------------------------------------
AS FURTHER
ACTUAL AS ADJUSTED ADJUSTED(2)(3)
--------- ----------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.................... $ 62,493 $ 207,793 $ 207,793
Short-term investments..................... 219,156 219,156 219,156
Prepaid expenses and other current
assets.................................. 5,940 5,940 5,940
--------- --------- ---------
Total current assets............... $ 287,589 $ 432,889 $ 432,889
========= ========= =========
Long-term investments........................ $ 20,144 $ 20,144 $ 20,144
========= ========= =========
Long-term obligations, net of current
portion:
Other long-term debt, net of current
portion................................. $ 1,780 $ 1,780 $ 1,780
5 1/2% Convertible Subordinated Notes due
2006.................................... 125,000 125,000 --
% Convertible Subordinated Notes due
2006.................................... -- 150,000 150,000
--------- --------- ---------
Total long-term obligations, net of
current portion.................. 126,780 276,780 151,780
Stockholders' equity:
Common stock, $0.01 par value, 50,000,000
shares authorized, 23,133,092 shares
issued and outstanding, actual and as
adjusted, 25,706,093 shares issued and
outstanding as further adjusted(1)(2)... 231 231 257
Additional paid-in capital................. 294,828 294,828 442,302
Unearned portion of compensatory stock..... (383) (383) (383)
Retained deficit(3)........................ (102,918) (102,918) (129,342)
Accumulated other comprehensive income
(deficit)............................... (6,272) (6,272) (6,272)
--------- --------- ---------
Total stockholders' equity......... 185,486 185,486 306,562
--------- --------- ---------
Total capitalization............... $ 312,266 $ 462,266 $ 458,342
========= ========= =========
</TABLE>
- -------------------------
(1) Excludes the shares of common stock issuable upon conversion of the new
notes and 5,152,164 shares of our common stock reserved for issuance under
our stock option plans, pursuant to which options to purchase 3,444,089
shares were outstanding on September 30, 1999.
(2) The "as further adjusted" column assumes that all of our 5 1/2% Convertible
Subordinated Notes due 2006 will be converted into an aggregate of 2,573,001
shares of our common stock, based on the average of the closing prices of
the common stock for the three trading days ended December 3, 1999 which was
$126.146.
(3) The "as further adjusted" column reflects a charge of approximately $22.5
million to our statements of operations for the fair market value of the
additional common stock consideration we will pay if all of the Notes are
tendered.
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SELECTED FINANCIAL DATA
See "Selected Financial Data" and the related financial statements included
in our most recent annual report on Form 10-K and quarterly report on Form 10-Q.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our most recent annual report on Form 10-K and
quarterly report on Form 10-Q.
THE OFFER
PURPOSE AND EFFECT
The offer will encourage holders of our 5 1/2% Convertible Subordinated
Notes Due 2006 to convert their Notes before the expiration of the offer.
Conversion of the Notes will improve our capitalization by increasing our
outstanding equity base and reducing our indebtedness, which we consider to be
particularly important in light of our recent offering of $150,000,000 of
convertible subordinated notes. In addition, conversion reduces our interest
expense and allows us to conserve cash for use in our business. We expect that
it will improve our ability to issue new notes at attractive rates and
beneficial terms, which may lower our long-term capital costs. We believe that
improving our capitalization will provide us with enhanced access to the capital
markets and expand our opportunities for future growth.
Note holders participating in the offer will receive more shares of common
stock per $1,000 in principal amount of Notes than they would otherwise receive
upon conversion outside of the offer. Therefore, participating Note holders have
an opportunity to share in any long-term appreciation in the value of our common
stock to a greater extent than non-participating holders.
CONSEQUENCES OF FAILURE TO TENDER NOTES
Following the expiration of the offer, the liquidity of the market for a
holder's Notes could be adversely affected if a significant number of holders
elect to participate in the offer. Furthermore, after expiration of the offer,
holders of the Notes who convert will receive only the number of shares of
common stock issuable on conversion of the Notes under the indenture governing
the Notes. Holders who do not convert their Notes will continue to be entitled
to interest payments in accordance with the terms of the indenture governing the
Notes.
TERMS OF THE OFFER
We are offering, upon the terms and subject to the conditions described in
this prospectus and in the accompanying Letter of Transmittal, to convert all of
the outstanding
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<PAGE> 25
Notes for shares of our common stock. Holders who tender their Notes for
conversion prior to , 2000 will receive for each $1,000 principal
amount a total of:
- 19.1571 shares of common stock issuable on conversion of the Notes in
accordance with their terms;
- $180.00 payable in shares of our common stock based upon the average of
the closing prices on the three days prior to the last day of the offer;
and
- accrued interest from January 1, 2000 payable in cash.
The number of additional shares to be issued per $1,000 principal amount of
Notes will be determined by dividing $180.00 by the average of the closing price
of the common stock on the Nasdaq National Market on the three trading days
immediately preceding, but not including, the last day of the offer. We will not
issue fractional shares of our common stock to a holder in connection with this
offer. In lieu of issuing fractional shares, we will pay a cash adjustment based
upon the closing price of the common stock on the last day of the offer. Tenders
of the Notes may be withdrawn at any time prior to 5:00 p.m., New York City
time, on , 2000.
Holders may only tender Notes in multiples of $1,000. Holders of Notes may
tender less than the aggregate principal amount of Notes held by them, provided
that they appropriately indicate this fact on the Letter of Transmittal
accompanying the tendered Notes (or so indicate pursuant to the procedures for
book-entry-transfer).
As of the date of this prospectus, $125,000,000 in aggregate principal
amount of the Notes are outstanding. As of December 3, 1999, there was one
registered holder of the Notes, Cede & Co., Inc., which held the Notes for its
participants. Only a holder of the Notes (or the holder's legal representative
or attorney-in-fact) may participate in the offer. We believe that, as of the
date of this prospectus, no holder of Notes is an affiliate (as defined in Rule
405 under the Securities Act).
We will accept Notes as validly tendered Notes when, as and if we have
given oral or written notice of acceptance to the Exchange Agent. The Exchange
Agent will act as agent for the tendering holders of Notes.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Expiration Date will be , 2000 at 5:00 p.m., New York City
time, unless we, in our sole discretion, extend the offer, in which case the
Expiration Date shall be the latest date and time to which the offer is
extended.
We expressly reserve the right in our sole discretion at any time or from
time to time, to extend the period of time during which the offer is open, and
thereby delay acceptance for conversion of any Notes, by giving oral or written
notice of such extension to the Exchange Agent.
The offer, the Letter of Transmittal and other relevant materials are being
mailed to record holders of Notes and furnished to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the Note holder list or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Notes.
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If we make a material change in the terms of the offer or the information
concerning the offer, or if we waive a material condition of the offer, we will
extend the offer consistent with Rule 13e-4 under the Exchange Act. The SEC has
taken the position that the minimum period during which an offer must remain
open following material changes in the terms of the offer or information
concerning the offer (other than a change in price or a change of more than two
percent in percentage of securities sought, for which an extension of ten
business days is required) will depend upon the facts and circumstances,
including the relative materiality of the terms or information. For purposes of
the offer, a "business day" means any day other than a Saturday, Sunday or
federal holiday, and consists of the time period from 12:01 a.m. through 12:00
Midnight, New York City time.
We also expressly reserve the right (1) to delay acceptance for conversion
of any Notes tendered pursuant to the offer, regardless of whether any such
Notes were previously accepted for conversion, and (2) at any time, or from time
to time, to amend the offer in any manner which would not adversely affect the
holders of Notes. Our reservation of the right to delay conversion of Notes that
we have accepted for payment is limited by Rule 13e-4 under the Exchange Act,
which requires that a bidder must pay the consideration offered or return the
securities deposited by or on behalf of security holders promptly after the
termination or withdrawal of any offer. Any extension, delay in payment, or
amendment will be followed as promptly as practicable by public announcement
thereof, such announcement in the case of an extension to be issued no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. Without limiting the manner in which we
may choose to make any public announcement, we will have no obligation to
publish, advertise or otherwise communicate any such public announcement, other
than by issuing a release to the Dow Jones News Service.
TERMINATION OF THE OFFER
We reserve the right to terminate the offer at any time prior to completion
of the offer.
ACCOUNTING TREATMENT
The accounting for the conversion of the Notes to common stock will result
in a reclassification of the original aggregate principal amount of the Notes to
the stockholders' equity section of our balance sheet and the recognition of
ordinary expense for the fair value of any additional consideration paid to
induce the conversion. Fair value is measured and recognized as of the date the
offer is accepted.
PROCEDURES FOR TENDERING NOTES
The tender of a holder's Notes described below and the acceptance of
tendered Notes by us will constitute a binding agreement between the tendering
holder and us upon the terms and conditions described in this prospectus and in
the accompanying Letter of Transmittal. Except as described below, a holder who
wishes to tender Notes for conversion in response to the offer must deliver the
Notes, together with a properly completed and duly executed Letter of
Transmittal, including all other documents required by the Letter of
Transmittal, to the Exchange Agent at the address listed on the back cover page
of this prospectus prior to 5:00 p.m., New York City time, on ,
2000. All Notes not converted in response to the offer, will be returned to the
tendering Note holders at our expense as promptly as practicable following the
Expiration Date.
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<PAGE> 27
THE METHOD OF DELIVERY OF NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT
THE HOLDER USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
Any financial institution that is a participant in a Book-Entry Transfer
Facility may make book-entry delivery of the Notes by causing the Book-Entry
Transfer Facility to transfer the Notes into the Exchange Agent's account in
accordance with that facility's procedures for the transfer. In connection with
a book-entry transfer, a Letter of Transmittal need not be transmitted to the
Exchange Agent, as long as the book-entry transfer procedure is complied with
prior to 5:00 p.m., New York City time, on the Expiration Date and an Agent's
Message (as defined below) is received by the Exchange Agent prior to 5:00 p.m.,
New York City time, on the Expiration Date. The Term "Agent's Message" means a
message, transmitted by a Book-Entry Transfer Facility to, and received by, the
Exchange Agent, which states that (1) the Book-Entry Transfer Facility has
received an express acknowledgement from the participant in the Book-Entry
Transfer Facility tendering Notes, (2) the participant has received and agrees
to be bound by the terms of the Letter of Transmittal and (3) we may enforce the
agreement against the participant.
Each signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed, unless the Notes surrendered for conversion
with that Letter of Transmittal are tendered (1) by a registered holder of the
Notes who has not completed either the box entitled "Special Conversion
Instructions" or the box entitled "Special Delivery Instructions" in the Letter
of Transmittal, or (2) for the account of a financial institution (including
most commercial banks, savings and loan associations and brokerage houses) that
is a participant in the Security Transfer Agent Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program, known as an Eligible Institution. In the event that a
signature on a Letter of Transmittal or a notice of withdrawal, as the case may
be, is required to be guaranteed, the guarantee must be by an Eligible
Institution. If the Letter of Transmittal is signed by a person other than the
registered holder of the Notes, the Notes surrendered for conversion must either
(1) be endorsed by the registered holder, with the signature guaranteed by an
Eligible Institution, or (2) be accompanied by a bond power, in satisfactory
form as determined by us in our sole discretion, duly executed by the registered
holder, with the signature guaranteed by an Eligible Institution. The term
"registered holder" as used in this paragraph with respect to the Notes means
any person in whose name the Notes are registered on the books of the Registrar
for the Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Notes tendered for conversion will be
determined by us in our sole discretion. Our determination will be final and
binding. We and the Exchange Agent reserve the absolute right to reject any and
all Notes not properly tendered and to reject any Notes the acceptance of which
might, in our judgment or in the judgment of the Exchange Agent or their
counsel, be unlawful. We and the Exchange Agent also reserve the absolute right
to waive any defects or irregularities or conditions of the offer as to
particular Notes either before or after the Expiration Date (including the right
to waive the ineligibility of any holder who seeks to tender Notes in the
offer). The interpretation of the terms and conditions of the offer (including
the Letter of Transmittal and the instructions) by us will be final and binding
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on all parties. Unless waived, any defects or irregularities in connection with
tenders of Notes for conversion must be cured within the period of time we
determine. We and the Exchange Agent will use reasonable efforts to give
notification of defects or irregularities with respect to tenders of Notes for
conversion but will not incur any liability for failure to give the
notification. We will not deem Notes tendered until irregularities have been
cured or waived.
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, corporation or other person acting in a fiduciary or representative
capacity, the signatory should so indicate when signing, and, unless waived by
us, submit proper evidence of the person's authority to so act, which evidence
must be satisfactory to us in our sole discretion.
Any beneficial owner of the Notes whose Notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Notes in the offer should contact the registered holder promptly and
instruct the registered holder to tender on the beneficial owner's behalf. If
the beneficial owner wishes to tender directly, the beneficial owner must, prior
to completing and executing the Letter of Transmittal and tendering Notes, make
appropriate arrangements to register ownership of the Notes in the beneficial
owner's name. Beneficial owners should be aware that the transfer of registered
ownership may take considerable time.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Notes and (1) whose Notes are not
immediately available or (2) who cannot deliver their Notes or any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date (or complete the procedure for book-entry transfer on a
timely basis), may tender their Notes according to the guaranteed delivery
procedures described in the Letter of Transmittal. According to those
procedures: (1) the tender must be made by or through an Eligible Institution
and a Notice of Guaranteed Delivery (as defined in the Letter of Transmittal)
must be signed by the holder, (2) on or prior to the Expiration Date, the
Exchange Agent must have received from the holder and the Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
holder, the certificate number or numbers of the tendered Notes, and the
principal amount of tendered Notes, stating that the tender is being made
thereby and guaranteeing that, within three business days after the date of
delivery of the Notice of Guaranteed Delivery, the tendered Notes, a duly
executed Letter of Transmittal or an Agent's Message, and any other required
documents will be deposited by the Eligible Institution with the Exchange Agent,
and (3) the properly completed and executed documents required by the Letter of
Transmittal and the tendered Notes in proper form for transfer (or confirmation
of a book-entry transfer of such Notes into the Exchange Agent's account at a
Book-Entry Transfer Facility and the receipt of an Agent's Message) must be
received by the Exchange Agent within three business days after the date of
delivery of the Notice of Guaranteed Delivery. Any holder who wishes to tender
Notes pursuant to the guaranteed delivery procedures described above must ensure
that the Exchange Agent receives the Notice of Guaranteed Delivery relating to
the Notes prior to 5:00 p.m., New York City time, on the Expiration Date.
ACCEPTANCE OF NOTES FOR CONVERSION; DELIVERY OF SHARES OF COMMON STOCK
When all the conditions to the offer are satisfied or waived, we will
accept any and all Notes that are properly tendered in the offer prior to 5:00
p.m., New York City time, on the
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Expiration Date. The shares of common stock issued as part of the offer will be
delivered promptly after acceptance of the Notes. For purposes of the offer and
cash payment for accrued interest we will be deemed to have accepted validly
tendered Notes, when, as, and if we have given oral or written notice of our
acceptance of the Notes to the Exchange Agent.
In all cases, issuances of shares of common stock for Notes that are
accepted for conversion pursuant to the offer will be made only after timely
receipt by the Exchange Agent of the Notes, a properly completed and duly
executed Letter of Transmittal and all other required documents (or of
confirmation of a book-entry transfer of the Notes into the Exchange Agent's
account at a Book-Entry Transfer Facility and the receipt of an Agent's
Message). We reserve the absolute right to waive any defects or irregularities
in the tender or conditions of the offer. If any tendered Notes are not accepted
for any reason, those unaccepted Notes will be returned without expense to the
tendering holder thereof as promptly as practicable after the expiration or
termination of the offer.
WITHDRAWAL RIGHTS
Tenders of the Notes may be withdrawn by delivery of a written notice to
the Exchange Agent, at its address listed on the back cover page of this
prospectus, at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. Any notice of withdrawal must (1) specify the name of the
person having deposited the Notes to be withdrawn, (2) identify the Notes to be
withdrawn (including the certificate number or numbers and principal amount of
the Notes, as applicable) and (3) be signed by the holder in the same manner as
the original signature on the Letter of Transmittal by which the Notes were
tendered and must be guaranteed by an Eligible Institution. Any questions as to
the validity, form and eligibility (including time of receipt) of notices of
withdrawal will be determined by us, in our sole discretion. The Notes so
withdrawn will be deemed not to have been validly tendered for conversion for
purposes of the offer. Any Notes which have been tendered for conversion but
which are withdrawn will be returned to their holder without cost to the holder
as soon as practicable after withdrawal. Properly withdrawn Notes may be
retendered by following one of the procedures described under "The
Offer -- Procedures for Tendering Notes" at any time on or prior to the
Expiration Date.
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THE EXCHANGE AGENT; ASSISTANCE
The Bank of New York is the Exchange Agent. All tendered Notes, executed
Letters of Transmittal and other related documents should be directed to the
Exchange Agent as follows:
THE BANK OF NEW YORK
<TABLE>
<CAPTION>
BY MAIL, OVERNIGHT OR HAND DELIVERY:
<S> <C> <C>
The Bank of New York
101 Barclay Street
Reorganization
Floor 7 East
New York, NY 10286
Attention: Tolutope Adeyoju
</TABLE>
By Facsimile Transmission:
(For Eligible Institutions Only)
(212) 815-6339
Confirm by Telephone:
(212) 815-3738
THE INFORMATION AGENT; ASSISTANCE
Georgeson Shareholder Communications Inc. is the Information Agent. All
questions regarding the offer, including requests for additional copies of this
prospectus, the Letter of Transmittal and other related documents, should be
addressed to the Information Agent at its address and telephone numbers listed
on the back cover of this prospectus.
FEES AND EXPENSES
All expenses incident to completing the offer will be borne by us,
including: (1) all registration and filing fees (including, without limitation,
fees and expenses of compliance with state securities or Blue Sky laws), (2)
printing expenses (including, without limitation, expenses of printing
certificates for the shares of common stock in a form eligible for deposit with
The Depository Trust Company and of printing prospectuses), (3) messenger,
telephone and delivery expenses, (4) fees and disbursements of our counsel, (5)
fees and disbursements of independent certified public accountants, (6) our
internal expenses (including all salaries and expenses of our officers and
employees, performing legal or accounting duties), and (7) fees and expenses
incurred in connection with the listing of the shares of common stock on a
securities exchange.
We have retained Credit Suisse First Boston Corporation to act as Dealer
Manager in connection with the offer. Additionally, Credit Suisse First Boston
Corporation is acting as the initial purchaser in connection with our offering
of the $150,000,000 of new convertible subordinated notes due 2006. Credit
Suisse First Boston Corporation is also acting as our financial advisor and, as
such, is advising us with respect to, among other things, the terms and timing
of this offer. In its capacity as Dealer Manager, Credit Suisse First Boston
Corporation may contact holders of beneficial interests in the Notes regarding
the offer and
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<PAGE> 31
may request brokers, dealers and other nominees to forward this prospectus and
related materials to beneficial owners of shares of the Notes. Questions and
requests for assistance may be directed to the Dealer Manager at its address and
telephone number listed on the back cover of this prospectus.
We have agreed to pay Credit Suisse First Boston Corporation reasonable and
customary fees for its services as Dealer Manager and financial advisor in
connection with this offer. In addition, we will reimburse the Dealer Manager
for its reasonable out-of-pocket expenses, including attorneys' fees, and has
agreed to indemnify Credit Suisse First Boston Corporation against certain
liabilities and expenses in connection with the offer. Other than as described
above, we will not make any payments to brokers, dealers or others for
soliciting acceptance of the offer.
In the ordinary course of its business, Credit Suisse First Boston
Corporation engages in securities trading, market making and brokerage
activities and may, at any time, hold long or short positions and may trade or
otherwise effect transactions in our securities.
We will pay all transfer taxes, if any, applicable to the conversion of
Notes in response to this offer. If, however, a transfer tax is imposed for any
reason other than the conversion of Notes in response to the offer, then the
amount of any such transfer taxes (whether imposed on the registered holder or
any other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption is not submitted with the Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The following is a general discussion of the material U.S. federal income
tax considerations relevant to converting the Notes pursuant to the offer. This
discussion is based on currently existing provisions of the Internal Revenue
Code of 1986, as amended, existing and proposed Treasury regulations promulgated
under the Code and administrative and judicial interpretations, all as presently
in effect or proposed 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, 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 as capital assets
within the meaning of Section 1221 of the Code. This discussion is for general
information only and does not address all of the U.S. federal income tax
consequences that may be relevant to particular purchasers. Some 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 who or which is:
- a citizen or resident of the U.S. for U.S. federal income tax purposes;
- a corporation or other entity taxable as a corporation created or
organized in or under the laws of the U.S. or political subdivision of
the U.S.;
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source;
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<PAGE> 32
- 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 who or
which is not a U.S. holder.
HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE CONVERSION OF
THE NOTES INTO SHARES OF COMMON STOCK PURSUANT TO THE OFFER, AND THE EFFECT THAT
THEIR PARTICULAR CIRCUMSTANCES MAY HAVE ON THESE TAX CONSEQUENCES.
Conversion of Notes. A holder of Notes generally will not recognize gain
or loss on converting the Notes solely into that number of shares of common
stock provided for under the original conversion right, other than cash received
in lieu of fractional shares. We believe, and intend to take the position, that
such nonrecognition treatment would extend to the additional shares of common
stock received as a result of accepting the offer. It is possible, however, that
the Internal Revenue Service could contend that those holders who accept the
offer should recognize income equal to the fair market value of the common stock
received in excess of the number of shares received pursuant to the original
conversion right. Holders should consult their own tax advisors regarding the
consequences to them if the IRS were successfully to contend that the conversion
of the Notes into common stock pursuant to the offer (the "Overall Transaction")
were partially taxable in this manner. Assuming that the Overall Transaction is
entirely tax-free for U.S. federal income tax purposes, the 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 converted, less any
portion allocable to cash received in lieu of a fractional share and the holding
period of the shares of common stock received by the holder upon conversion of
notes generally will 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 the fractional share rather than as a
dividend. Gain or loss recognized on the receipt of cash paid in lieu of
fractional shares generally will equal the difference between the amount of cash
received and the amount of tax basis allocable to the fractional share
exchanged. Cash received for accrued interest should be taxable to holders as
ordinary interest income.
Special Considerations for Non-U.S. Holders. A non-U.S. holder generally
will not be subject to U.S. federal income tax on gain recognized upon the
receipt of cash in lieu of a fractional share 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, the holder is present in the
U.S. for 183 or more days in the taxable year.
If the common stock received by a non-U.S. holder in excess of the number of
shares provided for under the original conversion right were treated as income,
then this income
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<PAGE> 33
could be subject to a tax at the rate of 30% or such lower rate as may be
prescribed under an applicable treaty.
Backup Withholding. Certain non-corporate Note holders may be subject to
backup withholding at a 31% rate on cash payments received in lieu of fractional
shares. Backup withholding will not apply, however, to a holder that (1)
furnishes a correct taxpayer identification number and certifies that the holder
is not subject to backup withholding on the substitute Form W-9 included in the
Letter of Transmittal, (2) provides a certification of foreign status on a Form
W-8 or W-8BEN or successor form or (3) is otherwise exempt from backup
withholding.
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. We have called a special meeting of our stockholders for
December 16, 1999 to approve an increase in our capital stock to 250,000,000
shares of common stock and 20,000,000 shares of preferred stock. 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 injured 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 of the preferred
stock, including:
- dividend rights;
- conversion rights;
- voting rights;
- terms of redemption; and
- liquidation preferences.
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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. We may pay these expenses in advance of
the final disposition of a proceeding only if the director or officer agrees to
repay these amounts 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, the claimant may 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 for 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 Delaware
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law may hinder or delay an attempted takeover of our company other than through
negotiation with our board of directors. These provisions could discourage
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 our stockholders' receiving a premium over the
market price of their shares of our common stock.
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 required
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. As a result, we issued
one preferred share purchase right 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 and in connection with this offer. 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.
32
<PAGE> 36
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 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 as described in the rights
agreement. In addition, our board of directors retains the authority to redeem,
at $0.001 per right, or replace the rights with new rights at any time. Our
board of directors may not redeem the rights 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.
LEGAL MATTERS
Piper Marbury Rudnick & Wolfe LLP will provide us with an opinion as to
legal matters in connection with 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 the 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.
33
<PAGE> 37
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-4 under the
Securities Act of 1933, as amended, with respect to the shares of common stock
to be issued in this offer. This prospectus, which is a part of the registration
statement, omits certain information contained in the registration statement and
reference is made to the registration statement and the exhibits and schedules
for further information with about us and the shares of our common stock. We are
subject to the reporting requirements of the Exchange Act and file reports and
other information with the SEC. You may read and copy any document we file at
the following SEC public reference rooms: 450 Fifth Street, N.W., Washington,
D.C. 20549; 7 World Trade Center, Suite 1300, New York, New York 10048 and 500
West Madison Street, 14th Floor, Chicago, Illinois 60661. 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. Our SEC filings are also 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.
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,
June 30, 1999 and September 30, 1999;
- Description of Common Stock contained in Form 8-A filed pursuant to the
Exchange Act; and
- Current Reports on Form 8-K filed on June 28, 1999 and December 6, 1999.
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 20850-33389, (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.
34
<PAGE> 38
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by each Note holder or the Note holder's broker, dealer,
commercial bank, trust company or other nominee to the Exchange Agent at one if
its addresses set forth below.
The Exchange Agent for the Offer is:
THE BANK OF NEW YORK
By Mail, Overnight or Hand Delivery:
The Bank of New York
101 Barclay Street
Floor 7 East
New York, NY 10286
Attention: Tolutope Adeyoju
By Facsimile Transmission:
(For Eligible Institutions Only)
(212) 815-6339
Confirm by Telephone:
(212) 815-3738
Questions and requests for assistance or additional copies of this
prospectus, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. You may also contact your broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning this offer.
The Information Agent for the Offer is:
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
17 State Street
10th Floor
New York, New York 10004
Bankers and brokers call collect: (212) 440-9800
All others call toll-free: (800) 223-2064
The Dealer Manager for the Offer is:
CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free (800)
<PAGE> 39
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
20. 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.
21. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
1.1 Form of Dealer Manager Agreement
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
5.1 Opinion of Piper Marbury Rudnick & Wolfe LLP
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 Rudnick & Wolfe LLP (include in
Exhibit 5.1)
24.1 Powers of Attorney (included in signature pages)
25.1**** Form T-1 Statement of Eligibility of The Bank of New York to
act as Trustee under the Indenture
99.1 Letter of Transmittal
99.2 Notice of Guaranteed Delivery
</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.
II-1
<PAGE> 40
*** Incorporated by reference to the Registrant's Current Report on Form 8-K
filed with the SEC on June 28, 1999.
**** Incorporated by reference to the Registrant's Registration Statement on
Form S-3 filed with the SEC on August 16, 1999, File No. 333-85319.
22. UNDERTAKINGS
(1) The undersigned registrant hereby undertakes:
(a) 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 end 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 a 20 percent change
in the maximum aggregate offering price, set forth in the "Calculation
of Registration Fee" table in the effective registration statement; and
(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 in the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, 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
(c) 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.
(2) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement 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.
II-2
<PAGE> 41
(3) 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 Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 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 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 of 1933 and will be governed by the final adjudication of such issue.
(4) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(5) The undersigned registrant hereby undertakes that (1) for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective; and (2) for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus 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.
(6) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
II-3
<PAGE> 42
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 7th day of December, 1999.
HUMAN GENOME SCIENCES, INC.
By: /s/ WILLIAM A. HASELTINE
-----------------------------------
William A. Haseltine, Ph.D.
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated. Each person whose signature appears
below in so signing also makes, constitutes and appoints William A. Haseltine,
Ph.D. and Craig Rosen, Ph.D., and each of them acting alone, his true and lawful
attorney-in-fact, with full power of substitution, for him in any and all
capacities, to execute and cause to be filed with the Securities and Exchange
Commission any and all amendments and post-effective amendments to this
Registration Statement, with exhibits thereto and other documents in connection
therewith, and hereby ratifies and confirms all that said attorney-in-fact or
his substitute or substitutes may do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ WILLIAM A. HASELTINE Chairman of the Board, Chief December 7, 1999
- --------------------------------------- Executive Officer and Director
William A. Haseltine, Ph.D. (Principal Executive Officer)
/s/ CRAIG ROSEN Senior Vice President of Research December 7, 1999
- --------------------------------------- and Development and Director
Craig Rosen, Ph.D.
/s/ STEVEN C. MAYER Senior Vice President and Chief December 7, 1999
- --------------------------------------- Financial Officer (Principal
Steven C. Mayer Accounting and Financial Officer
/s/ JURGEN DREWS Director December 7, 1999
- ---------------------------------------
Jurgen Drews, M.D.
/s/ BEVERLY SILLS GREENOUGH Director December 7, 1999
- ---------------------------------------
Beverly Sills Greenough
/s/ ROBERT D. HORMATS Director December 7, 1999
- ---------------------------------------
Robert D. Hormats
/s/ MAX LINK Director December 7, 1999
- ---------------------------------------
Max Link, Ph.D.
</TABLE>
II-4
<PAGE> 43
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ ALAN G. SPOON Director December 7, 1999
- ---------------------------------------
Alan G. Spoon
/s/ LAURA D'ANDREA TYSON Director December 7, 1999
- ---------------------------------------
Laura D'Andrea Tyson, Ph.D.
/s/ JAMES B. WYNGAARDEN Director December 7, 1999
- ---------------------------------------
James B. Wyngaarden, M.D.
</TABLE>
II-5
<PAGE> 44
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
1.1 Form of Dealer Manager Agreement
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
5.1 Opinion of Piper Marbury Rudnick & Wolfe LLP
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 Rudnick & Wolfe LLP (include in
Exhibit 5.1)
24.1 Powers of Attorney (included in signature pages)
25.1**** Form T-1 Statement of Eligibility of The Bank of New York to
act as Trustee under the Indenture
99.1 Letter of Transmittal
99.2 Notice of Guaranteed Delivery
</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.
**** Incorporated by reference to the Registrant's Registration Statement on
Form S-3 filed with the SEC on August 16, 1999, File No. 333-85319.
II-6
<PAGE> 1
EXHIBIT 1.1
DEALER MANAGER AGREEMENT
December [ ], 1999
CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue
New York, NY 10010-3629
Ladies and Gentlemen:
1. The Offer. Human Genome Sciences, Inc., a Delaware corporation (the
"Company"), is making an offer (hereinafter referred to, together with any
amendments, supplements or extensions thereof, as the "Offer") to deliver
additional shares of common stock, par value $.01 (the "Common Stock"), and
pay accrued interest (together, the "Additional Consideration") to holders
of any and all of its $125,000,000 aggregate principal amount of 5_%
Convertible Subordinated Notes due 2006 (the "Bonds") who shall convert
their Bonds into shares of Common Stock, on the terms and subject to the
conditions set forth in the final prospectus dated [ ] (the "Prospectus"),
the related letter to beneficial owners of the Bonds (the "Letter of
Transmittal") and the notice of guaranteed delivery included in the Form
S-4 Registration Statement that has been filed by the Company with the
Securities and Exchange Commission (the "Commission") (hereinafter referred
to, together with any amendments, supplements and exhibits thereto, as the
"Exchange Offer Registration Statement") attached hereto as Exhibit A. The
Company intends to commence the Offer as soon as possible after the
Exchange Offer Registration Statement becomes effective under the
Securities Act (the "Commencement Date") by publicly announcing its
commencement of the Offer and by mailing, or causing to be mailed on its
behalf, copies of the Prospectus, the related Letter of Transmittal and
such other Offer Material (as defined below) as is required, or as the
Company elects, to each holder of the Bonds.
2. Appointment as Dealer Manager.
(a) The Company hereby appoints you as Dealer Manager (the "Dealer Manager")
and authorizes you to act as such in connection with the Offer. As Dealer
Manager, you agree, in accordance with your customary practice, to perform
those services in connection with the Offer as are customarily performed by
investment banks in connection with offers of a like nature, including, but
not limited to, using reasonable efforts to solicit tenders of Bonds for
conversion pursuant to the Offer and communicating generally regarding the
Offer with brokers, dealers, commercial banks and trust companies and other
holders of Bonds. In such capacity, you shall act as an independent
contractor, and each of your duties arising out of your engagement pursuant
to this Agreement shall be owed solely to the Company.
(b) The Company further authorizes you to communicate with The Bank of New
York, in its capacity as depositary (the "Depositary"), and with Georgeson
Shareholder Communications Inc., in its capacity as information agent (the
"Information Agent"),
<PAGE> 2
2
with respect to matters relating to the Offer. The Company has or by the
Commencement Date will have entered into appropriate agreements with the
Depositary and the Information Agent for purposes of the Offer. The Company
has instructed the Depositary to advise you at least daily as to the number
of Bonds which have been tendered for conversion pursuant to the Offer and
as to such other matters in connection with the Offer as you may request.
3. No Liability for Acts of Dealers, Banks and Trust Companies. You shall have
no liability to the Company or any other person for any losses, claims,
damages, liabilities and expenses (each a "Loss" and collectively, the
"Losses") arising from any act or omission on the part of any broker or
dealer in securities (a "Dealer"), bank or trust company, or any other
person, and neither you nor any of your affiliates shall be liable for any
Losses arising from your own acts or omissions in performing your
obligations as Dealer Manager or as a Dealer hereunder or otherwise in
connection with the Offer, except for any such Losses which are finally
judicially determined to have resulted primarily from your bad faith or
gross negligence. In soliciting or obtaining tenders of Bonds for
conversion, no Dealer, bank or trust company is to be deemed to be acting
as your agent or the agent of the Company or any of its affiliates, and
you, as Dealer Manager, are not to be deemed the agent of any Dealer, bank
or trust company or the agent or fiduciary of the Company or any of its
affiliates, equity holders, creditors or of any other person. In soliciting
or obtaining tenders of Bonds for conversion, you shall not be and shall
not be deemed for any purpose to act as a partner or joint venture of or a
member of a syndicate or group with the Company or any of its affiliates in
connection with the Offer, any conversion of the Bonds, or otherwise, and
neither the Company nor any of its affiliates shall be deemed to act as
your agent.
4. The Offer Material. The Company agrees to furnish you, at its expense, with
as many copies as you may reasonably request of the Exchange Offer
Registration Statement, the Tender Offer Statement on Schedule 13E-4
(together with all exhibits, amendments and supplements thereto, the
"Schedule 13E-4") and all statements and other documents filed or to be
filed with the Commission or any other federal, state, local or foreign
governmental or regulatory agencies, bodies or authorities or any court
(each an "Other Agency" and collectively, the "Other Agencies") and any
amendments or supplements to any such statements and documents (the
definitive forms of all of the foregoing materials are hereinafter
collectively referred to as the "Offer Material") to be used by the Company
in connection with the Offer, and you are authorized to use copies of the
Offer Material in connection with the Offer. The Offer Material has been or
will be prepared and approved by, and is the sole responsibility of, the
Company.
You hereby agree, as Dealer Manager, that you will not disseminate any
written material for or in connection with the solicitation of tenders of
Bonds for conversion pursuant to the Offer other than the Offer Material,
and you agree that you will not make any statements in connection with such
solicitation, other than the statements that are set forth in the Offer
Material or as otherwise authorized by the Company.
The Company agrees that no Offer Material will be used in connection with
the Offer or filed with the Commission or any Other Agency with respect to
the Offer without
<PAGE> 3
3
first obtaining your prior approval, which approval shall not be
unreasonably withheld. In the event that the Company uses or permits the
use of any Offer Material in connection with the Offer or files any such
material with the Commission or any Other Agency without your prior
approval, then you shall be entitled to withdraw as Dealer Manager in
connection with the Offer without any liability or penalty to you or any
Indemnified Person (as hereinafter defined), and you shall remain entitled
to the indemnification provided in Section 11 hereof and to receive the
payment of all fees and expenses payable under this Agreement which have
accrued to the date of such withdrawal or would otherwise be due to you on
such date. If you withdraw as Dealer Manager, the fees accrued and
reimbursement for your expenses through the date of such withdrawal shall
be paid to you promptly after such date.
5. Compensation. The Company agrees to pay you, as compensation for your
services as Dealer Manager in connection with the Offer, a fee equal to
1.00% of the aggregate principal amount of Bonds validly converted pursuant
to the Offer.
6. Expenses of Dealer Manager and Others. In addition to your compensation for
your services hereunder pursuant to Section 5 hereof, the Company agrees to
pay directly, or reimburse you, as the case may be, for (i) all expenses
incurred by you relating to the preparation, printing, filing, mailing and
publishing of all Offer Material, (ii) all fees and expenses of the
Depositary and Information Agent, (iii) all advertising charges in
connection with the Offer, including those of any public relations firm or
other person or entity rendering services in connection therewith, (iv) all
fees, if any, payable to Dealers (including you), and banks and trust
companies as reimbursement for their customary mailing and handling
expenses incurred in forwarding the Offer Material to their customers and
(v) all other fees and expenses incurred by you in connection with the
Offer or otherwise in connection with the performance of your services
hereunder (including reasonable fees and disbursements of your legal
counsel). All payments to be made by the Company pursuant to this Section 6
shall be made promptly against delivery to the Company of statements
therefor. The Company shall be liable for the foregoing payments whether or
not the Offer is commenced, withdrawn, terminated or canceled prior to the
conversion of any Bonds or whether the Company or any of its affiliates
acquires any Bonds pursuant to the Offer or whether you withdraw pursuant
to Section 4 hereof.
7. Securityholder Lists. The Company will cause you to be provided with cards
or lists or other records in such form as you may reasonably request
showing the names and addresses of, and the number of Bonds held by, the
holders of Bonds as of a recent date and will cause you to be advised from
day to day during the period of the Offer as to any transfers of record of
Bonds.
8. Representations and Warranties of the Company. The Company represents and
warrants to you as of the date hereof that:
a) The Company has been duly incorporated and is an existing corporation
in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and conduct
its business as
<PAGE> 4
4
described in the Offer Material; and the Company is duly qualified to
do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification.
b) The Company has full corporate power and authority to take and has
duly taken all necessary corporate action to authorize (i) the Offer,
(ii) the issuance of Common Stock upon conversion of the Bonds and as
part of the Additional Consideration pursuant to the Offer and (iii)
the execution, delivery and performance of this Agreement; this
Agreement has been duly executed and delivered on behalf of the
Company and, assuming due authorization, execution and delivery of
this Agreement by you, is a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms,
except that the enforceability hereof may be limited by (x)
bankruptcy, insolvency, reorganization, moratorium and other laws now
or hereafter in effect relating to creditors' rights generally and (y)
general principles of equity.
c) The Company has, or will have at the time the Company becomes
obligated to convert Bonds and deliver the Additional Consideration,
sufficient funds to pay any cash portion of the Additional
Consideration payable pursuant to the Offer, and the fees and expenses
payable hereunder.
d) The Offer Material complies or will comply in all material respects
with the applicable provisions of the Securities Act of 1933 (the
"Securities Act") and Securities Exchange Act of 1934 (the "Exchange
Act") and the rules and regulations promulgated by the Commission
thereunder. The Offer Material does not and will not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which
they are made, not misleading; provided, however, that no
representation is made with respect to any statements contained in, or
any matter omitted from, the Offer Material in reliance upon and in
conformity with information furnished or confirmed in writing by you
to the Company expressly for use therein, it being understood and
agreed that only such information consists of paragraph four under
"The Offer--Fees and Expenses" of the Prospectus. Except as disclosed
in the Offer Material, on the date of this Agreement, the Company's
Annual Report on Form 10-K most recently filed with the Commission,
the Company's Quarterly Report on Form 10-Q most recently filed with
the Commission, the description of Common Stock contained in the
Company's Registration Statement on Form 8-A, the press release with
respect to the Offer contained in the Company's Current Report on Form
8-K and all subsequent reports (collectively, the "Exchange Act
Reports") which have been filed by the Company with the Commission or
sent to shareholders pursuant to the Exchange Act prior to or as of
the date hereof do not include any untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. Such documents, when they were filed with the
Commission, conformed in all material respects to the requirements of
the Exchange Act and the rules and regulations of the Commission
thereunder.
<PAGE> 5
5
e) The Company will file, if required, any and all necessary amendments
or supplements to the documents filed with the Commission or Other
Agencies relating to the Offer and will promptly furnish to you true
and complete copies of each such amendment and supplement upon the
filing thereof.
f) The Offer, the conversion of Bonds and delivery of the Additional
Consideration pursuant to the Offer, and the execution, delivery and
performance of this Agreement by the Company, comply and will comply
in all material respects with all applicable requirements of federal
or state law, including, without limitation, any applicable
regulations of the Commission and Other Agencies, and all applicable
judgments, orders or decrees; and no consent, authorization, approval,
order, exemption, registration, qualification or other action of, or
filing with or notice to, the Commission or any Other Agency is
required in connection with the execution, delivery and performance of
this Agreement by the Company, the making or consummation by the
Company of the Offer or the consummation of the other transactions
contemplated by this Agreement or the Exchange Offer Registration
Statement. All such required consents, authorizations, approvals,
orders, exemptions, registrations, qualifications and other actions of
and filings with and notices to the Commission and the Other Agencies
will have been obtained, taken or made, as the case may be, and all
statutory or regulatory waiting periods will have elapsed, prior to
the conversion of the Bonds pursuant to the Offer.
g) The Offer, the conversion of Bonds and delivery of the Additional
Consideration pursuant to the Offer, and the execution, delivery and
performance of this Agreement by the Company, do not and will not
result in a breach or violation of any of the terms and provisions of,
or constitute a default under, (i) any statute, any rule, regulation
or order of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Company or any of its
properties, (ii) any agreement or instrument to which the Company is a
party or by which the Company is bound or to which any of the
properties of the Company is subject, or (iii) the charter or by-laws
of the Company.
h) The Exchange Offer Registration Statement has become effective; except
as disclosed in the Offer Material, no stop order, restraining order
or denial of an application for approval has been issued and there are
no pending actions, suits or proceedings against or affecting the
Company, or any of its properties (i) that, if determined adversely to
the Company, would, individually or in the aggregate, have a material
adverse effect on the condition (financial or other), business,
properties or results of operations of the Company ("Material Adverse
Effect"), or would materially and adversely affect the ability of the
Company to perform its obligations under this Agreement or to
consummate the Offer or the other transactions contemplated by this
Agreement or the Offer Material; or (ii) with respect to the Offer;
and no such actions, suits or proceedings are, to the Company's
knowledge, threatened or contemplated.
i) The financial statements incorporated by reference in the Offer
Material present fairly the financial position of the Company as of
the dates shown and their
<PAGE> 6
6
results of operations and cash flows for the periods shown, and such
financial statements have been prepared in conformity with the
generally accepted accounting principles in the United States applied
on a consistent basis.
j) Except as disclosed in the Offer Material, since the date of the
latest audited financial statements included in the Offer Material,
there has been no material adverse change, nor any development or
event involving a prospective material adverse change, in the
condition (financial or other), business, properties or results of
operations of the Company, and, except as disclosed in or contemplated
by the Offer Material, there has been no dividend or distribution of
any kind declared, paid or made by the Company on any class of its
capital stock.
k) The Company is not an open-end investment company, unit investment
trust or face-amount certificate company that is or is required to be
registered under Section 8 of the United States Investment Company Act
of 1940 (the "Investment Company Act"); the Company is not and, after
giving effect to the conversion of the Bonds and delivery of the
Additional Consideration that it may become obligated to convert or
deliver pursuant to the terms of the Offer, will not be an "investment
company" as defined in the Investment Company Act.
l) The Company has, and shall have at the time of the conversion of
Bonds, duly authorized and reserved for issuance shares of Common
Stock to be issued upon conversion of such Bonds and as part of the
delivery of the Additional Consideration pursuant to the Offer, and
when issued, such shares of Common Stock will be validly issued, fully
paid and nonassessable and will conform to the description thereof
contained in the Offer Material; any outstanding shares of Common
Stock have been duly authorized and validly issued, are fully paid and
nonassessable and conform to the description thereof in the Offer
Material; and the stockholders of the Company have no preemptive
rights with respect to the Bonds or shares of Common Stock to be
issued upon conversion of such Bonds that have not been waived.
9. Opinionsof the Company's Counsel and Letter of Certified Accountants. The
Company shall deliver to you (a) opinions addressed to you and dated the
date hereof of James H. Davis, General Counsel of the Company, and Piper
Marbury Rudnick & Wolfe LLP, special counsel to the Company, with respect
to the matters set forth in Exhibits B-1 and B-2, respectively and (b) (i)
a letter dated the date hereof, of Ernst & Young LLP confirming that they
are independent public accountants within the meaning of the Securities Act
and the applicable published rules and regulations thereunder ("Rules and
Regulations") and with respect to the matters set forth in Exhibit C hereto
and (ii) a letter dated the date of the conversion of the Bonds pursuant to
the Offer (the "Exchange Date") Exchange Date of Ernst & Young LLP in form
and substance reasonably satisfactory to the Dealer Manager to the effect
that such accountants reaffirm the statements made in the letter furnished
pursuant to clause (b)(i) hereof.
10. Notification of Certain Events. The Company shall advise you promptly of
(a) the occurrence of any event which could cause the Company to withdraw,
rescind or
<PAGE> 7
7
terminate the Offer, (b) the occurrence of any event, or the discovery of
any fact, the occurrence or existence of which it believes would require
the making of any change in any of the Offer Material then being used or
would cause any representation or warranty contained in this Agreement to
be untrue or inaccurate in any material respect, (c) any proposal or
requirement to make, amend or supplement any filing required by the
Exchange Act in connection with the Offer or to make any filing in
connection with the Offer pursuant to any other applicable law, rule or
regulation, (d) the issuance by the Commission or any Other Agency of any
comment or order or the taking of any other action concerning the Offer
(and, if in writing, will furnish you with a copy thereof), (e) any
material developments in connection with the Offer, including, without
limitation, the commencement of any lawsuit concerning the Offer and (f)
any other information relating to the Offer, the Offer Material or this
Agreement which you may from time to time reasonably request.
11. Indemnification. (a) The Company agrees to hold harmless and indemnify you
(including any affiliated companies) and any officer, director, partner,
employee or agent of you or any of such affiliated companies and any entity
or person controlling (within the meaning of Section 20(a) of the Exchange
Act) you, including any affiliated companies (collectively, the
"Indemnified Persons"), from and against any and all Losses whatsoever
(including, but not limited to, any and all expenses incurred in
investigating, preparing or defending against any litigation or proceeding,
commenced or threatened, or any claims whatsoever whether or not resulting
in any liability) (i) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Offer Material
or in any other material used by the Company, or authorized by the Company
for use in connection with the Offer or the transactions contemplated
thereby, or arising out of or based upon the omission or alleged omission
to state in any such document a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading (other than statements or
omissions made in reliance with information furnished by you to the Company
expressly for use therein), (ii) arising out of or based upon any
withdrawal by the Company of, or failure by the Company to make or
consummate, the Offer or the transactions contemplated thereby or any other
failure to comply with the terms and conditions specified in the Offer
Material, (iii) arising out of the breach or alleged breach by the Company
of any representation, warranty or covenant set forth in this Agreement or
(iv) arising out of, relating to or in connection with any other action
taken or omitted to be taken by an Indemnified Person with respect to the
Offer or (v) otherwise arising out of, relating to or in connection with
the Offer, the other transactions described in the Offer Material or your
services as Dealer Manager hereunder. The Company shall not, however, be
responsible for any Loss pursuant to clauses (iv) or (v) of the preceding
sentence of this Section 11 which has been finally judicially determined to
have resulted primarily from the bad faith or gross negligence on the part
of any Indemnified Person, other than any Loss arising out of or resulting
from actions performed at the request of, with the consent of, or in
conformity with actions taken or omitted to be taken by, the Company.
<PAGE> 8
8
(b) The Company and you agree that if any indemnification sought by any
Indemnified Person pursuant to this Section 11 is unavailable for any
reason or insufficient to hold you harmless, then the Company and you shall
contribute to the Losses for which such indemnification is held unavailable
or insufficient in such proportion as is appropriate to reflect the
relative benefits received (or anticipated to be received) by the Company,
on the one hand, and actually received by you, on the other hand, in
connection with the transactions contemplated by this Agreement or, if such
allocation is not permitted by applicable law, not only such relative
benefits but also the relative faults of the Company, on the one hand, and
you, on the other hand, as well as any other equitable considerations,
subject to the limitation that in any event the aggregate contribution by
you to all Losses with respect to which contribution is available hereunder
shall not exceed the fees actually received by you in connection with your
engagement hereunder. It is hereby agreed that the relative benefits to the
Company, on the one hand, and you, on the other hand, with respect to the
Offer and the transactions contemplated thereby shall be deemed to be in
the same proportion as (i) the total value of the aggregate conversion
price of all shares of Common Stock issued by the Company upon conversion
of the Bonds and as part of the Additional Consideration after the date of
this Agreement bears to (ii) the fees actually received by you from the
Company in connection with your engagement hereunder.
(c) The foregoing rights to indemnity and contribution shall be in addition to
any other right which you and the other Indemnified Persons may have
against the Company at common law or otherwise. If any litigation or
proceeding is brought against any Indemnified Person in respect of which
indemnification may be sought against the Company pursuant to this Section
11, such Indemnified Person shall promptly notify the Company in writing of
the commencement of such litigation or proceeding, but the failure so to
notify the Company shall relieve the Company from any liability which it
may have hereunder only if, and to the extent that, such failure results in
the forfeiture by the Company of substantial rights and defenses, and will
not in any event relieve the Company from any other obligation or liability
that they may have to any Indemnified Person other than under this
Agreement. In case any such litigation or proceeding shall be brought
against any Indemnified Person and such Indemnified Person shall notify the
Company in writing of the commencement of such litigation or proceeding,
the Company shall be entitled to participate in such litigation or
proceeding, and, after written notice from the Company to such Indemnified
Person, to assume the defense of such litigation or proceeding with counsel
of its choice at its expense; provided, however, that such counsel shall be
satisfactory to the Indemnified Person in the exercise of its reasonable
judgment. Notwithstanding the election of the Company to
assume the defense of such litigation or proceeding, such Indemnified
Person shall have the right to employ separate counsel and to participate
in the defense of such litigation or proceeding, and the Company shall bear
the reasonable fees, costs and expenses of such separate counsel and shall
pay such fees, costs and expenses at least quarterly (provided that with
respect to any single litigation or proceeding or with respect to several
litigations or proceedings involving substantially similar legal claims,
the Company shall not be required to bear the fees, costs and expenses of
more than one such counsel in addition to any local counsel) if (i) in the
reasonable judgment of such Indemnified Person the use of counsel chosen by
the Company to repre-
<PAGE> 9
9
sent such Indemnified Person would present such counsel with a conflict of
interest, (ii) the defendants in, or targets of, any such litigation or
proceeding include both an Indemnified Person and the Company, and such
Indemnified Person shall have reasonably concluded that there may be legal
defenses available to it or to other Indemnified Persons which are
different from or additional to those available to the Company (in which
case the Company shall not have the right to direct the defense of such
action on behalf of the Indemnified Person), (iii) the Company shall not
have employed counsel satisfactory to such Indemnified Person, in the
exercise of the Indemnified Person's reasonable judgment, to represent such
Indemnified Person within a reasonable time after notice of the institution
of such litigation or proceeding or (iv) the Company shall authorize in
writing such Indemnified Person to employ separate counsel at the expense
of the Company. In any action or proceeding the defense of which the
Company assumes, the Indemnified Person shall have the right to participate
in such litigation and retain its own counsel at such Indemnified Person's
own expense. The Company and you agree to notify the other promptly of the
assertion of any claim against it, any of its officers or directors or any
entity or person who controls it within the meaning of Section 20(a) of the
Exchange Act in connection with the Offer. The foregoing indemnification
commitments shall apply whether or not the Indemnified Person is a formal
party to such litigation or proceeding.
(d) The Company also agrees to reimburse each Indemnified Person for all
expenses (including fees and disbursements of counsel) as they are incurred
by such Indemnified Person in connection with investigating, preparing for,
defending or providing evidence (including appearing as a witness) with
respect to any action, claim, investigation, inquiry, arbitration or other
proceeding referred to in this Section 11 or enforcing this Agreement,
whether or not in connection with pending or threatened litigation in which
any Indemnified Person is a party.
(e) The Company agrees that it will not, without your prior written consent,
settle, compromise or consent to the entry of any judgment in any pending
or threatened claim, action or proceeding in respect of which
indemnification may be sought hereunder (whether or not you, any other
Indemnified Person or the Company is an actual or potential party), unless
such settlement, compromise or consent (i) includes an unconditional
release of each Indemnified Person from all liability arising out of such
claim, action or proceeding and (ii) does not include a statement as to, or
an admission of, fault, culpability or a failure to act by or on behalf of
an Indemnified Person.
12. Conditions to Obligations of the Dealer Manager. Your obligations hereunder
shall at all times be subject to the conditions that (a) all
representations, warranties and other statements of the Company contained
herein are as of the Commencement Date, at all times during the period of
the Offer and as of the Exchange Date shall be, true and correct in all
material respects and (b) the Company at all times shall have performed in
all material respects all of their obligations hereunder theretofore to be
performed.
13. Termination. This Agreement shall terminate upon the expiration,
termination or withdrawal of the Offer or upon withdrawal by you as Dealer
Manager pursuant to
<PAGE> 10
10
Section 4 hereof, it being understood that Sections 3, 5, 6, 8, 11, 13, 15,
16, 19, 20, 21 and 22 hereof shall survive any termination of this
Agreement.
14. Notices.All notices and other communications required or permitted to be
given under this Agreement shall be in writing and shall be given (and
shall be deemed to have been given upon receipt) by delivery in person, by
cable, by telecopy, by telegram, by telex or by registered or certified
mail (postage prepaid, return receipt requested) to the applicable party at
the addresses indicated below:
a) if to you:
CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue
New York, NY 10010-3629
Telecopy No.: (212) 325-8278
Attention: Investment Banking Department--Transactions
Advisory Department
b) if to the Company:
HUMAN GENOME SCIENCES, INC.
9410 Key West Avenue
Rockville, MD 20850-3338
Telecopy No.: (301) 309-8439
Attention: James H. Davis
c) with a copy to:
PIPER MARBURY RUDNICK & WOLFE
LLP 36 South Charles Street
Baltimore, MD 21201
Telecopy No.: (410) 576-5052
Attention: R.W. Smith, Jr.
15. Consent to Jurisdiction; Service of Process. The Company hereby (a) submits
to the jurisdiction of any New York State or Federal court sitting in the
City of New York with respect to any actions and proceedings arising out of
or relating to this Agreement, (b) agrees that all claims with respect to
such actions or proceedings may be heard and determined in such New York
State or Federal court, (c) waives the defense of an inconvenient forum,
(d) agrees not to commence any action or proceeding relating to this
Agreement other than in a New York State or Federal court sitting in the
City of New York and (e) agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law.
16. Joint and Several Obligations, Etc. In the event that the Company makes the
Offer through one or more of its affiliates, each reference in this
Agreement to the Company shall be deemed to be a reference to the Company
and any such
<PAGE> 11
11
affiliates, and the representations, warranties, covenants and agreements
of the Company and any such affiliates hereunder shall be joint and
several.
17. Entire Agreement. This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and undertakings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.
18. Amendment. This Agreement may not be amended except in writing signed by
each party to be bound thereby.
19. Governing Law. The validity and interpretation of this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of New York, without regard to conflicts of law principles thereof.
20. Waiver of Jury Trial. THE COMPANY HEREBY AGREES ON ITS OWN BEHALF AND, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS SECURITY HOLDERS,
TO WAIVE ANY RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY CLAIM,
COUNTER-CLAIM OR ACTION ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY (INCLUDING, WITHOUT LIMITATION, THE
OFFER).
21. Counterparts; Severability. This Agreement may be executed in two or more
separate counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. Any term or
provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions
of this Agreement in any other jurisdiction.
22. Parties in Interest. This Agreement, including rights to indemnity and
contribution hereunder, shall be binding upon and inure solely to the
benefit of each party hereto, the Indemnified Persons and their respective
successors, heirs and assigns, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
<PAGE> 12
12
Please indicate your willingness to act as Dealer Manager and your acceptance of
the foregoing provisions by signing in the space provided below for that purpose
and returning to us a copy of this Agreement so signed, whereupon this Agreement
and your acceptance shall constitute a binding agreement between us.
Very truly yours,
HUMAN GENOME SCIENCES, INC.
By:
--------------------------
Name:
Title:
Accepted as of the
date first above written:
CREDIT SUISSE FIRST BOSTON CORPORATION
By:
-----------------------
Name:
Title:
<PAGE> 13
Exhibit A
Exchange Offer Registration Statement
<PAGE> 14
2
Exhibit B-1
Matters to be Addressed in the Opinion of James H. Davis
a) The Offer, the conversion of Bonds and the delivery of Additional
Consideration pursuant to the Offer, and the execution, delivery and
performance of this Agreement by the Company, do not and will not
result in a breach or violation of any of the terms and provisions of,
or constitute a default under, (i) any statute, any rule, regulation
or order of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Company or any of its
properties, (ii) any agreement or instrument to which the Company is a
party or by which the Company is bound or to which any of the
properties of the Company is subject, or (iii) the charter or by-laws
of the Company.
b) To such counsel's knowledge, after due inquiry, no stop order,
restraining order or denial of an application for approval has been
issued and there are no pending actions, suits or proceedings against
or affecting the Company or any of its properties (i) that, if
determined adversely to the Company, would, individually or in the
aggregate, have a Material Adverse Effect or would materially and
adversely affect the ability of the Company to perform its obligations
under this Agreement or to consummate the Offer or the other
transactions contemplated by this Agreement or the Offer Material; or
(ii) with respect to the ownership of the Bonds by the Company; and no
actions, suits or proceedings are, to such counsel's knowledge,
threatened or contemplated.
c) To such counsel's knowledge, after due inquiry, there is no action,
suit or proceeding pending before or threatened by any court or public
or governmental authority or arbitrator involving the Company of a
character required to be disclosed in the Offer Material which is not
adequately disclosed or incorporated by reference in the Offer
Material.
d) Excluding the matters contained under the caption "Certain United
States Federal Tax Considerations," the description in the Offer
Material of statutes (excluding Federal securities laws), legal and
governmental proceedings, and contracts relevant to the Company and
its business in all material respects are accurate statements or
summaries of the matters set forth therein.
e) The outstanding shares of Common Stock have been duly authorized and
validly issued, are fully paid and nonassessable and conform to the
description thereof contained in the Exchange Offer Registration
Statement.
Such counsel shall also advise that the Offer Material complies or will comply
in all material respects with the applicable provisions of the Securities Act
and the Exchange Act and the rules and regulations promulgated by the Commission
thereunder and that no facts have come to its attention which has caused it to
believe that the Offer Material, or any amendment or supplement thereto, or any
other document incorporated by reference therein, contains any untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading (except that counsel
need express no view as to financial statements, schedules and other financial
information included or incorporated by reference therein). With respect to such
<PAGE> 15
3
statements, such counsel may state that their belief is based upon the
procedures set forth therein, but is without independent check and verification.
<PAGE> 16
4
Exhibit B-2
Matters to be Addressed in the Opinion of Piper Marbury Rudnick & Wolfe LLP
a) The Company has been duly incorporated and is an existing corporation in good
standing under the laws of the State of Delaware, with corporate power and
authority to own its properties and conduct its business as described in the
Offer Material; and the Company is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which its ownership
or lease of property or the conduct of its business requires such qualification
except where the failure to so qualify would not have a Material Adverse Effect
on the Company.
b) The Company has all requisite corporate power and authority to take and has
duly taken all necessary corporate action to authorize (i) the Offer, (ii) the
issuance of Common Stock upon conversion of Bonds and as part of the Additional
Consideration pursuant to the Offer and (iii) the execution, delivery and
performance of this Agreement, and this Agreement has been duly executed and
delivered on behalf of the Company and, assuming due authorization, execution
and delivery of this Agreement by CREDIT SUISSE FIRST BOSTON CORPORATION, is a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except that the enforceability thereof may
be limited by (x) bankruptcy, insolvency, reorganization, moratorium and other
laws now or hereafter in effect relating to creditors' rights generally and (y)
general principles of equity including public policy limitations with respect to
the enforceability of the indemnification provisions of this Agreement.
c) The Offer, the conversion of Bonds and the delivery of Additional
Consideration pursuant to the Offer, and the execution, delivery and performance
of this Agreement by the Company, comply and will comply in all material
respects with all applicable requirements of federal or state law, including,
without limitation, any applicable regulations of the Commission and Other
Agencies, and, to such counsel's knowledge, all applicable judgments, orders or
decrees, and no consent, authorization, approval, order, exemption,
registration, qualification or other action of, or filing with, the Commission
or any Other Agency is required in connection with the execution, delivery and
performance of this Agreement by the Company, the making or consummation by the
Company of the Offer, the issuance and delivery of share of Common Stock upon
conversion and as part of the Additional Consideration, or the consummation of
the other transactions contemplated by this Agreement or the Exchange Offer
Registration Statement except (i) those consents, authorizations, approvals,
orders, exemptions, registrations, qualifications which have heretofore been
obtained and (ii) such as may be required under state securities laws.
d) The Offer, the conversion of Bonds and the delivery of Additional
Consideration pursuant to the Offer, and the execution, delivery and performance
of this Agreement by the Company, do not and will not result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
(i) any statute, any rule, regulation or order of any governmental agency or
body or any court, domestic or foreign, having jurisdiction over the Company or
any of its properties, (ii) to the knowledge of such counsel, any agreement or
instrument to which the Company is a party or by which the Company is bound or
to which any of the properties of the Company is subject, or (iii) the charter
or by-laws of the Company.
e) The Company has, and shall have at the time of the conversion of Bonds, duly
authorized and reserved for issuance shares of Common Stock to be issued upon
conversion of such Bonds and as part of the Additional Consideration pursuant to
the Offer, and when issued, such shares of Common Stock will be validly issued,
fully paid and nonassessable and will conform in all material
<PAGE> 17
5
respects to the description thereof contained in the Exchange Offer Registration
Statement. The stockholders of the Company have no preemptive rights with
respect to the Bonds or shares of Common Stock to be issued upon conversion
thereof or as delivered as part of the Additional Consideration under the
Company's certificate of incorporation, bylaws or the Delaware General
Corporation Law, or to the knowledge of such counsel, under any document or
agreement to which the Company is a party, other than any such preemptive rights
waived by the holder thereof.
f) To such counsel's knowledge, no stop order, restraining order or denial of an
application for approval has been issued and there are no pending actions, suits
or proceedings against or affecting the Company or any of its properties (i)
that, if determined adversely to the Company, would, individually or in the
aggregate, have a Material Adverse Effect or would materially and adversely
affect the ability of the Company to perform its obligations under this
Agreement or to consummate the Offer or the other transactions contemplated by
this Agreement or the Exchange Offer Registration Statement; or (ii) with
respect to the ownership of the Bonds by the Company; and no actions, suits or
proceedings are, to such counsel's knowledge, threatened or contemplated.
g) The Company is not, nor will be as a result of the conversion of Bonds and
delivery of the Additional Consideration that it may become obligated to convert
or deliver pursuant to the terms of the Offer, an "investment company" under the
Investment Company Act, as amended, and the rules and regulations promulgated by
the Commission thereunder.
h) To such counsel's knowledge, there is no action, suit or proceeding pending
before or threatened by any court or public or governmental authority or
arbitrator involving the Company of a character required to be disclosed in the
Exchange Offer Registration Statement which is not adequately disclosed or
incorporated by reference in the Exchange Offer Registration Statement.
i) The statements in the Exchange Offer Registration Statement under the caption
"Description of our Capital Stock" insofar as they describe the provisions of
the documents and instruments therein described, constitute fair summaries
thereof accurate in all material respects, and the statements in the Exchange
Offer Registration Statement under the caption "Certain United States Federal
Tax Considerations" insofar as they purport to describe federal income tax laws
of the United States fairly present in all material respects the information set
forth therein.
Such counsel shall also advise that the Offer Material complies or will comply
in all material respects with the applicable provisions of the Securities Act
and the Exchange Act and the rules and regulations promulgated by the Commission
thereunder and that no facts have come to its attention which has caused it to
believe that the Offer Material, or any amendment or supplement thereto, or any
other document incorporated by reference therein, contains any untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading (except that counsel
need express no view as to financial statements, schedules and other financial
information included or incorporated by reference therein). With respect to such
statements, such counsel may state that their belief is based upon the
procedures set forth therein, but is without independent check and verification.
<PAGE> 18
6
Exhibit C
Matters to be Addressed in the Letter of Ernst & Young LLP
The Purchaser shall have received a letter, dated the date of this Agreement, of
Ernst & Young LLP confirming that they are independent public accountants within
the meaning of the Securities Act and the related Rules and Regulations and to
the effect that
a) in their opinion, the financial statements examined by them and
included in the Exchange Act Reports comply as to form in all material
respects with the applicable accounting requirements of the Securities
Act and the related published Rules and Regulations;
b) they have performed the procedures specified by the American Institute
of Certified Public Accountants for a review of interim financial
information as described in Statement of Auditing Standards No. 71,
Interim Financial Information, on the unaudited financial statements
included in the Exchange Act Reports;
c) on the basis of the review referred to in clause (ii) above, a reading
of the latest available interim financial statements of the Company,
inquiries of officials of the Company who have responsibility for
financial and accounting matters and other specified procedures,
nothing came to their attention that caused them to believe that: at
the date of the latest available balance sheet read by such
accountants, or at a subsequent specified date not more than three
business days prior to the date of this Agreement, there was any
change in the capital stock or any increase in short-term indebtedness
or long-term debt of the Company or, at the date of the latest
available balance sheet read by such accountants, there was any
decrease in consolidated net assets, as compared with amounts shown on
the latest balance sheet included in the Exchange Act Reports, except
in all cases set forth above for changes, increases or decreases which
the Exchange Offer Registration Statement discloses have occurred or
may occur or which are described in such letter; or for the period
from the closing date of the latest income statement included in the
Exchange Act Reports to the closing date of the latest available
income statement read by such accountants, there were any decreases,
as compared with the corresponding period of the previous year in
consolidated net sales, net operating income or in the total or per
share amounts of consolidated net income or in the ratio of earnings
to fixed charges; and
d) they have compared specified dollar amounts (or percentages derived
from such dollar amounts) and other financial information contained in
the Exchange Act Reports and the Exchange Offer Registration Statement
(in each case to the extent that such dollar amounts, percentages and
other financial information are derived from the general accounting
records of the Company subject to the internal controls of the
Company's accounting system or are derived directly from such records
by analysis or computation) with the results obtained from inquiries,
a reading of such general accounting records and other procedures
specified in such letter and have found such
<PAGE> 19
7
dollar amounts, percentages and other financial information to be in
agreement with such results, except as otherwise specified in such
letter.
<PAGE> 1
Exhibit 5.1
[LETTERHEAD OF PIPER MARBURY RUDNICK & WOLFE LLP]
December 6, 1999
HUMAN GENOME SCIENCES, INC.
9410 Key West Avenue
Rockville, Maryland 20850
Re: Registration Statement on Form S-4
----------------------------------
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-4 (the
"Registration Statement") relating the conversion in an exchange transaction
(the "Exchange Transaction") of up to $125,000,000 aggregate principal amount
of the Company's 5-1/2% Convertible Subordinated Notes due 2006 (the "Notes")
into (i) 2,394,636 shares of the Company's common stock, par value $.01 per
share (the "Common Stock") issuable upon conversion of the Notes (the
"Conversion Shares"), (ii) such additional number of shares of Common Stock
having a value of up to $22,500,000, as determined according to the formula set
forth in the Registration Statement (the "Inducement Shares"), and (iii) a cash
payment for accrued interest. The Conversion Shares and the Inducement Shares
are collectively referred to herein as the "Shares."
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 RUDNICK & WOLFE LLP LOGO] HUMAN GENOME SCIENCES, INC.
December 6, 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, the Exchange Transaction and
the authorization and issuance of the Notes and the Shares;
(g) A good standing certificate for the Company, dated a recent date,
issued by the Delaware Secretary of State;
(h) 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.
Based upon and subject to the foregoing and having regard for such legal
considerations as we deem relevant, we are of the opinion that, upon conversion
of the Notes in accordance with the terms of the Exchange Transaction and the
Indenture, the Shares will be duly authorized, validly issued, fully paid and
nonassessable.
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 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 Rudnick & Wolfe LLP
<PAGE> 1
EXHIBIT 12.1
RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Pro forma
Nine Months Nine Months Nine Months
Ended Ended Ended
September 30, September 30, September 30,
1999 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Fixed charges:
Interest expense on
indebtedness (including
amortization of debt
expense and discount) $ 5,908 $ 15,556 $ 103
Interest expense on
portion of rent expense
representative of interest 2,247 2,247 1,038
-------- -------- --------
Total Fixed Charges $ 8,155 $ 17,803 $ 1,141
======== ======== ========
Earnings (Loss):
Net loss before provision
for income taxes $(23,989) $(33,637) $(10,412)
Fixed charges per above 8,155 17,803 1,141
-------- -------- --------
Total Earnings (Loss) $(15,834) $(15,834) $ (9,271)
======== ======== ========
Ratio of Earnings to Fixed Charges (1.94) (0.89) (8.13)
Coverage deficiency $(23,989) $(33,637) $(10,412)
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Pro forma Year Ended December 31,
1998 1998 1997 1996 1995 1994
-------- -------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense on
indebtedness (including
amortization of debt
expense and discount) $ 192 $ 15,317 $ 446 $ 422 $ 565 $ 401
Interest expense on
portion of rent expense
representative of interest 1,299 1,299 1,072 843 724 511
-------- -------- -------- ------- -------- -------
Total Fixed Charges $ 1,490 $ 16,615 $ 1,518 $ 1,265 $ 1,290 $ 912
======== ======== ======== ======= ======== =======
Earnings (Loss):
Net loss before provision
for income taxes $(22,957) $(38,082) $(21,148) $(7,559) $(32,719) $ 9,740
Fixed charges per above 1,490 16,615 1,518 1,265 1,290 912
-------- -------- -------- ------- -------- -------
Total Earnings (Loss) $(21,467) $(21,467) $(19,630) $(6,294) $(31,429) $10,652
======== ======== ======== ======= ======== =======
Ratio of Earnings to Fixed Charges (14.41) (1.29) (12.93) (4.98) (24.37) 11.68
Coverage deficiency $(22,957) $(38,082) $(21,148) $(7,559) $(32,719) $ 9,740
======== ======== ======== ======= ======== =======
</TABLE>
<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 the
Registration Statement (Form S-4 No. 333- ) and related Prospectus of Human
Genome Sciences, Inc. for the registration of up to 2,700,636 shares of its
common stock 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
McLean, Virginia
December 3, 1999
<PAGE> 1
EXHIBIT 99.1
HUMAN GENOME SCIENCES, INC.
LETTER OF TRANSMITTAL
TO CONVERT 5 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2006 OF
HUMAN GENOME SCIENCES, INC. INTO ADDITIONAL SHARES OF ITS COMMON STOCK
This Letter of Transmittal (the "Letter of Transmittal") is to be
completed, signed and mailed or delivered by the holders (the "Holders") of the
5 1/2% Convertible Subordinated Notes Due 2006 (the "Notes") of Human Genome
Sciences, Inc., a Delaware corporation (the "Company"), who wish to convert
their Notes into 19.1571 shares of the Company's Common Stock, $.01 par value
per share (the "Common Stock") per $1,000 aggregate principal amount of Notes,
and to receive an additional $180 for each $1,000 aggregate principal amount of
Notes so converted payable in shares of its Common Stock based upon the average
of the closing prices on the three days prior to the last day of the offer and
accrued interest from January 1, 2000 payable in cash, upon the terms and
subject to the conditions set forth in the Prospectus dated December , 1999
(the "Prospectus") and this Letter of Transmittal.
THE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON
, 2000, (AS SUCH DATE MAY BE EXTENDED, THE "EXPIRATION DATE").
NOTES TENDERED MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
The Exchange Agent is:
THE BANK OF NEW YORK
By Mail, Overnight or Hand Delivery:
The Bank of New York
101 Barclay Street
Reorganization
Floor 7 East
New York, NY 10286
Attention: Tolutope Adeyoju
By Facsimile Transmission:
(For Eligible Institutions Only)
(212) 815-6339
Confirm by Telephone:
(212) 815-3738
<PAGE> 2
- --------------------------------------------------------------------------------
DESCRIPTION OF NOTES TENDERED (SEE INSTRUCTIONS 5 AND 7)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) NOTES TENDERED
(PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) ON NOTE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL PRINCIPAL
AMOUNT OF NOTES
NOTE CERTIFICATE REPRESENTED BY PRINCIPAL AMOUNT OF
NUMBER(S)* NOTE CERTIFICATE(S) NOTES TENDERED**
--------------------------------------------------------------------
<S> <C> <C> <C>
---------------------------------------------------------------
---------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Principal Amount of Notes
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Note holders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Notes represented
by any certificates delivered to the Exchange Agent are being tendered. See
Instruction 5 and 9.
- --------------------------------------------------------------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE LISTED ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THE LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used if Notes are to be forwarded
herewith or if delivery of Notes is to be made by book-entry transfer to the
Exchange Agent's account at The Depository Trust Company ("DTC") or (hereinafter
collectively referred to as the "Book-Entry Transfer Facility") pursuant to the
procedures set forth in the Prospectus. Note holders who cannot deliver their
Notes and all other documents required hereby to the Exchange Agent by
, 2000 (the "Expiration Date") must tender their Notes pursuant to
the guaranteed delivery procedure set forth in the Prospectus. See Instruction
2. Delivery of documents to the Company or to a Book-Entry Transfer Facility
does not constitute a valid delivery.
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE EXCHANGE AGENT'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING:
DTC Account No.:
- --------------------------------------------------------------------------------
DTC Transaction Code No.:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Note Holder(s)
- ------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
- ---------------------------------------------------------
Name of Institution that Guaranteed Delivery
- ----------------------------------------------------------------
If Delivery is by Book-Entry Transfer:
DTC Account No.:
- --------------------------------------------------------------------------------
DTC Transaction Code No.:
- --------------------------------------------------------------------------------
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
To The Bank of New York, as Exchange Agent:
The undersigned hereby acknowledges that he or she has received the
Prospectus of Human Genome Sciences, Inc., a Delaware corporation (the
"Company"), dated December , 1999 (the "Prospectus"), and this Letter of
Transmittal, which together constitute the Company's offer (the "Offer") to
convert, subject to the terms and conditions set forth in the offer, its 5 1/2%
Convertible Subordinated Notes Due 2006 (the "Notes") for 19.1571 shares of its
common stock, $.01 par value per share (the "Common Stock"), for each $1,000 in
principal amount of Notes and to issue an additional $180 for each $1,000
aggregate principal amount of Notes so converted payable in shares of its Common
Stock based upon the average of the closing prices of its Common Stock on the
three days prior to the last day of the offer and accrued interest from January
1, 2000 payable in cash.
The undersigned hereby tenders to the Company the above-described Notes for
conversion pursuant to the offer. The undersigned wishes to tender the principal
amount of Notes set forth above for conversion into shares of Common Stock
pursuant to the offer.
The undersigned understands that tenders of Notes pursuant to the
procedures described in the Prospectus under the heading "The
Offer -- Procedures for Tendering Notes" and the instructions to this Letter of
Transmittal will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions described in the
Prospectus. The undersigned represents and warrants that the undersigned has
full power and authority to surrender and deliver to you the above listed Notes,
and to tender, sell and assign the Notes being tendered pursuant hereto, without
restriction. The undersigned shall, upon request, execute and deliver any
additional documents necessary or desirable to complete the surrender of such
Notes.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the undersigned's true and lawful agent and attorney-in-fact, with full
power of substitution, such power of attorney being deemed to be an irrevocable
power coupled with an interest, to deliver to the Company the above listed Notes
(together with all accompanying evidence of authenticity), against receipt by
the Exchange Agent (as agent of the undersigned) of certificates representing
that number of shares of Common Stock and cash that the undersigned is entitled
to receive for such Notes pursuant to the offer. All authority conferred or
agreed to be conferred herein shall survive the death or incapacity of the
undersigned and all obligations of the undersigned shall be binding upon the
successors, heirs, executors, administrators, legal representatives and assigns
of the undersigned.
The undersigned understands that tenders of Notes pursuant to any one of
the procedures described in the Prospectus and in the instructions hereto will
constitute an agreement between the undersigned and the Company upon the terms
and subject to the conditions of the offer.
The undersigned recognizes that, under certain circumstances set forth in
the Prospectus, the Company may terminate or amend the offer or may postpone the
acceptance for conversion of Notes tendered or may not be required to convert
any of the Notes tendered hereby other than in accordance with their terms or
may accept for conversion fewer than all of the Notes tendered hereby.
Unless otherwise indicated under the "Special Conversion Instructions,"
please issue Common Stock and a check for accrued interest and payments in lieu
of fractional shares, and any untendered Notes in the name(s) of the
undersigned. Similarly, unless otherwise indicated under the "Special Delivery
Instructions," please mail the certificates representing Common Stock and a
check for accrued interest and payments in lieu of fractional shares and any
untendered Notes (and accompanying documents, as appropriate) to the undersigned
at the address shown below the undersigned's signature(s). In the event that
both the "Special Conversion Instructions" and the "Special Delivery
Instructions" are completed, please issue certificates representing Common Stock
Notes and a check for accrued interest and payments in lieu of fractional shares
and any untendered Notes in the name(s) of, and forward certificates
representing Common Stock to, the person(s) so indicated.
<PAGE> 4
SIGN HERE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF OWNER(S))
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Note certificate(s) or by person(s) authorized to become registered holder(s) by
certificates and documents transmitted herewith. If signature is by an officer
of a corporation, trustee, executor, administrator, guardian, attorney or other
person acting in a fiduciary or representative capacity, please set forth full
title. For general information see Instructions. For information concerning
signature guarantees see Instruction 3.)
Dated:________________, _______________
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title):
- --------------------------------------------------------------------------------
(SEE INSTRUCTIONS)
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
- ----------------------------------------------------------------------------
GUARANTEE OF SIGNATURES
(SEE INSTRUCTIONS)
Authorized Signature:
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
Title:
- --------------------------------------------------------------------------------
Name of Firm:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
- ----------------------------------------------------------------------------
Dated:________________, _______________
<PAGE> 5
SPECIAL CONVERSION INSTRUCTIONS
To be completed ONLY if certificates for shares of Common Stock or Notes
not tendered or accepted for conversion and the check for accrued interest and
cash in lieu of fractional shares, are to be issued in the name of and sent to
someone other than the undersigned.
Issue Certificate(s) to:
Name
- -------------------------------------------
(PLEASE PRINT)
Address
- -----------------------------------------
- ---------------------------------------------------
(INCLUDE ZIP CODE)
- ---------------------------------------------------
(TAX IDENTIFICATION OR
SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 BELOW)
- ---------------------------------------------------
- ---------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
To be completed ONLY if certificates for shares of Common Stock, issued in
the name of the undersigned, or the cash for accrued interest and in lieu of
fractional shares or Notes not tendered or accepted for conversion, are to be
sent to someone other than the undersigned or to the undersigned at an address
other than that shown above.
Mail Certificate(s) to:
Name
- -------------------------------------------
(PLEASE PRINT)
Address
- -----------------------------------------
- ---------------------------------------------------
(INCLUDE ZIP CODE)
- ---------------------------------------------------
- ---------------------------------------------------
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE OFFER
1. LETTER OF TRANSMITTAL.
This Letter of Transmittal is being provided to you to effect the
conversion of Notes for shares of the Company's Common Stock and acceptance of
the Offer.
2. GUARANTEED DELIVERY PROCEDURES.
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available or (ii) who cannot deliver their Notes or any other
documents required by this Letter of Transmittal to the Exchange Agent prior to
the Expiration Date (or complete the procedure for book-entry transfer on a
timely basis), may tender their Notes according to the guaranteed delivery
procedures set forth herein. Pursuant to such procedures: (i) such tender must
be made by or through an Eligible Institution and a Notice of Guaranteed
Delivery (as defined in the Letter of Transmittal) must be signed by such
Holder, (ii) on or prior to the Expiration Date, the Exchange Agent must have
received from the holder and the Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or
hand delivery) setting forth the name and address of the holder, the certificate
number or numbers of the tendered Notes, and the principal amount of tendered
Notes, stating that the tender is being made thereby and guaranteeing that,
within three business days after the date of delivery of the Notice of
Guaranteed Delivery, the tendered Notes, a duly executed Letter of Transmittal
or an Agent's Message (as defined in the Letter of Transmittal) and any other
required documents will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) such properly completed and executed documents
required by the Letter of Transmittal and the tendered Notes in proper form for
transfer (or confirmation of a book-entry transfer of such Notes into the
Exchange Agent's account at any Book-Entry Transfer Facility and the receipt of
an Agent's Message) must be received by the Exchange Agent within three business
days after the date of delivery of the Notice of Guaranteed Delivery. Any holder
who wishes to tender Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery relating to such Notes prior to 5:00 p.m., New York City
time, on the Expiration Date.
3. SIGNATURES.
(a) All signatures must correspond exactly with the way your name is
written on the Note certificate(s) without alteration, variation or any change
whatsoever.
(b) If the Note(s) surrendered with this Letter of Transmittal is (are)
owned of record by two or more joint owners, all such owners must sign the
Letter of Transmittal.
(c) If your Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of Notes.
(d) If the Letter of Transmittal is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity and such person is not
the registered Note holder, such person must indicate their capacity when
signing this Letter of Transmittal and must submit proper evidence of his or her
authority to act.
4. SIGNATURE GUARANTEE.
Each signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Notes surrendered for exchange
pursuant hereto are tendered (i) by a registered holder of the Notes who has not
completed either the box entitled "Special Conversion Instructions" or the box
entitled "Special Delivery Instructions" in the Letter of Transmittal, or (ii)
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a
<PAGE> 7
participant in the Security Transfer Agent Medallion Program, the New York Stock
Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion
Program (an "Eligible Institution"). In the event that a signature on a Letter
of Transmittal or a notice of withdrawal, as the case may be, is required to be
guaranteed, such guarantee must be by an Eligible Institution. If the Note
holder is a person other than the signer of this Letter of Transmittal, see
Instruction 7.
5. DESCRIPTION OF NOTES TENDERED.
Please review, and if required, make any corrections to, the form entitled
"DESCRIPTION OF NOTES TENDERED" which sets forth the Notes which are to be
delivered to the Company with this Letter of Transmittal upon your acceptance of
the offer.
6. INADEQUATE SPACE.
If the space provided is inadequate, the numbers of the Note certificate(s)
delivered for exchange should be listed on a separate signed schedule and
attached hereto.
7. BOND POWERS AND ENDORSEMENTS.
If the Letter of Transmittal is signed by a person other than the
registered holder of the Notes, the Notes surrendered for exchange must either
(i) be endorsed by the registered holder, with the signature thereon guaranteed
by an Eligible Institution, or (ii) be accompanied by a bond power, in
satisfactory form as determined by the Company in its sole discretion, duly
executed by the registered holder, with the signature thereon guaranteed by an
Eligible Institution. The term "registered holder" as used herein with respect
to the Notes means any person in whose name the Notes are registered on the
books of the Registrar.
8. PARTIAL TENDERS (NOT APPLICABLE TO NOTE HOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If fewer than all the Notes represented by any Note certificate delivered
to the Exchange Agent are to be tendered, fill in the number of Notes that are
to be tendered in the box entitled "Number of Notes Tendered." In such case, a
new Note certificate for the remainder of the Notes represented by the old Note
certificate will be sent to the person(s) signing this Letter of Transmittal,
unless otherwise provided in the "Special Exchange Instructions" or "Special
Delivery Instructions" boxes on this Letter of Transmittal, as promptly as
practicable following the expiration or termination of the offer. All Notes
represented by Note certificates delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise indicated.
9. SPECIAL DELIVERY INSTRUCTIONS.
Unless instructions to the contrary are given in the Special Delivery
Instructions on this Letter of Transmittal, certificates for shares of Common
Stock issued pursuant to this Letter of Transmittal, together with any
untendered Note(s), check for accrued interest and cash in lieu of factional
shares, will be mailed to the address of the registered owner shown in the
records of the Company.
10. ADDITIONAL COPIES.
Additional copies of this Letter of Transmittal may be obtained from, and
all inquires with respect to the surrender of the Notes should be made directly
Georgeson Shareholder Communications Inc. at its address and telephone numbers
listed on the back of this Letter of Transmittal.
<PAGE> 8
11. SUBSTITUTE FORM W-9; WITHHOLDING.
Each surrendering Note holder is required to provide the Exchange Agent
with such Note holder's correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 provided below and to certify whether the Note holder is
subject to backup withholding. The TIN that must be provided is that of the
registered holder of the Note(s) or of the last transferee appearing in the
transfers attached to or endorsed on the Note certificate(s). Failure to provide
the information on the Substitute Form W-9 may subject the surrendering Note
holder to backup withholding on cash payments made to such surrendering Note
holder with respect to the Notes and on future interest payments or dividends,
if any, paid by the Company. A Note holder must cross out item (2) in the
Certification box of Substitute Form W-9 (Part 3) if such Note holder has been
notified by the Internal Revenue Service that such Note holder is currently
subject to backup withholding. The box in Part 2 of the Substitute Form W-9
should be checked if the surrendering Note holder has not been issued a TIN and
has applied for a TIN or intends to apply for a TIN in the near future. If the
box in Part 2 is checked and the Exchange Agent is not provided with a TIN
within sixty (60) days thereafter, the Exchange Agent will withhold 31% of all
such interest payments and dividends until a TIN is provided to the Exchange
Agent. Foreign investors should consult their tax advisors regarding the need to
complete IRS Form W-8 and any other forms that may be required.
IMPORTANT TAX INFORMATION
Under federal income tax law, the Exchange Agent is required to file a
report with the Internal Revenue Service ("IRS") disclosing any payments of cash
being made to each Note holder pursuant to the Offer and to impose backup
withholding if required. If the correct certifications on Substitute Form W-9
are not provided, a $50 penalty may be imposed by the IRS and payments made for
Notes may be subject to backup withholding. Withholding is also required if the
IRS notifies the recipient that it is subject to backup withholding as a result
of a failure to report interest and dividends.
In order to avoid backup withholding of Federal income tax resulting from a
failure to provide a correct certification, a recipient who is a United States
citizen or resident must provide the Exchange Agent with his or her correct
Taxpayer Identification Number ("TIN") on the Substitute Form W-9 as set forth
on this Letter of Transmittal. Such recipient must certify under penalties of
perjury that such number is correct and that such recipient is not otherwise
subject to backup withholding. The TIN that must be provided is that of the
registered holder of the Note(s) or of the last transferee appearing on the
transfers attached to or endorsed on the Note certificate(s). Foreign investors
should consult their tax advisors regarding the need to complete IRS Form W-8
and any other forms that may be required.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the recipient. Backup withholding is not an
additional Federal income tax. Rather, the Federal income tax liability of a
person subject to backup withholding will be the amount of tax withheld. If
backup withholding results in an overpayment of taxes, a refund may be obtained
from the IRS.
<PAGE> 9
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
PAYER: THE BANK OF NEW YORK (PLEASE SEE INSTRUCTION 12)
- ------------------------------------------------------------------------------------------------------------------------
Social Security Number(s) or
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT THE RIGHT Employer Identification
FORMW-9 AND CERTIFY BY SIGNING AND DATING BELOW Number ____________
-------------------------------------------------------------------------------------------
DEPARTMENT OF THE
TREASURY INTERNAL PART 2--Certification under penalties of perjury, I
REVENUE SERVICE certify that (1) the number shown on this form is my [ ]
PAYER'S REQUEST FOR correct Taxpayer Identification Number (or I am waiting
TAXPAYER IDENTIFICATION for a number to be issued for me) and (2) I am not
NUMBER (TIN) subject to backup withholding because: (a) I am exempt
from backup withholding, (b) I have not been notified
that I am subject to backup withholding as a result of a
failure to report all interest or dividends or (c) the
Internal Revenue Service has notified me that I am no
longer subject to backup withholding.
--------------------------------------------------------
PART 3--Awaiting TIN [ ] PART
4--Exempt TIN [ ]
--------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must cross out item (2) in Part 2 above if you have been
notified by the IRS that you are subject to backup withholding because of underreporting
interest or dividends on your tax returns. However, if after being notified by the IRS
that you are subject to backup withholding, you received another notification from the
IRS stating that you are no longer subject to backup withholding, do not cross out such
item (2). If you are exempt from backup withholding, check the box in Part 4.
Signature ________________________________________ Date ________________
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF THE SUBSTITUTE FORM W-9.
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been issued to
me, and either (a) I have mailed or delivered an application to receive a taxpayer identification
number to the appropriate Internal Revenue Service Center or Social Security Administration
Office, or (b) I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within sixty (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a number.
Signature ______________________________________________________ Date ---------------------
Signature ______________________________________________________ Date ---------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
<PAGE> 10
The Information Agent for the Offer is:
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
17 State Street
10th Floor
New York, New York 10004
Bankers and brokers call collect: (212) 440-9800
All others call toll-free: (800) 223-2064
The Dealer Manager for the Offer is:
CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free (800)
December , 1999
<PAGE> 1
EXHIBIT 99.2
HUMAN GENOME SCIENCES, INC.
NOTICE OF GUARANTEED DELIVERY OF
5 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2006
This form, or a form substantially equivalent to this form, must be used to
accept the Offer (as defined below) if the 5 1/2% Convertible Subordinated Notes
Due 2006 (the "Notes") of Human Genome Sciences, Inc., a Delaware corporation
(the "Company") are not immediately available, if the procedure for book-entry
transfer cannot be completed on a timely basis, or if time will not permit all
other documents required by the Letter of Transmittal to be delivered to the
Exchange Agent on or prior to the Expiration Date (as defined in the
Prospectus). Such form may be delivered by hand or transmitted by mail, or (for
Eligible Institutions only) by facsimile transmission, to the Exchange Agent.
See the Prospectus.
THE ELIGIBLE INSTITUTION WHICH COMPLETES THIS FORM MUST COMMUNICATE THE
GUARANTEE TO THE EXCHANGE AGENT AND MUST DELIVER THE LETTER OF TRANSMITTAL, THE
NOTES AND ANY OTHER REQUIRED DOCUMENTS, OR, IN THE CASE OF A BOOK-ENTRY
TRANSFER, AN AGENT'S MESSAGE AND ANY OTHER REQUIRED DOCUMENTS, TO THE EXCHANGE
AGENT WITHIN THE TIME SHOWN HEREIN. FAILURE TO DO SO COULD RESULT IN A FINANCIAL
LOSS TO SUCH ELIGIBLE INSTITUTION.
The Exchange Agent for the Offer is:
THE BANK OF NEW YORK
By Overnight Courier:
The Bank of New York
101 Barclay Street
Reorganization
Floor 7 East
New York, NY 10286
Attention: Tolutope Adeyoju
By Facsimile Transmission:
(For Eligible Institutions Only)
(212) 815-6339
Confirm by Telephone:
(212) 815-3738
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE LISTED ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Human Genome Sciences, Inc., a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Company's Prospectus dated December , 1999 (the "Prospectus"),
and the related Letter of Transmittal (which together constitute the "Offer"),
receipt of which is hereby acknowledged, the principal amount of 5 1/2%
Convertible Subordinated Notes Due 2006 (the "Notes") of the Company noted
below, pursuant to the guaranteed delivery procedure set forth in the
Prospectus.
<TABLE>
<S> <C>
- ----------------------------------------------------- -----------------------------------------------------
PRINCIPAL AMOUNT OF NOTES SIGNATURE(S)
- ----------------------------------------------------- -----------------------------------------------------
CERTIFICATE NOS. (IF AVAILABLE) NAME(S) (PLEASE PRINT)
If Notes will be tendered by book entry transfer:
- ------------------------------------------------------------------------------------------------------------
(ADDRESS)
- ------------------------------------------------------------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER
Account No. at The Depository Trust Company:
- ------------------------------------------------------------------------------------------------------------
Dated:______________________________________, ________________
</TABLE>
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national
securities exchange or the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States which is a participant in an approved Signature Guarantee Medallion
Program, guarantees (a) that the above-named person(s) has a net long position
in the Notes being tendered within the meaning of Rule 14e-4 promulgated under
the Securities Act of 1933, as amended, (b) that such tender of Notes complies
with Rule 14e-4 and (c) to deliver to the Exchange Agent at one of its addresses
set forth above the Notes tendered hereby, in proper form for transfer, or a
confirmation of the book-entry transfer of the Notes tendered hereby into the
Exchange Agent's account at The Depository Trust Company, together with a
properly completed and duly executed Letter(s) of Transmittal (or facsimile(s)
thereof), with any required signature guarantee(s), or, in the case of a
book-entry transfer, on Agent's Message, and any other required documents, all
within three (3) business days after the date hereof.
Name of Firm:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE
Name:
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Address:
- --------------------------------------------------------------------------------
City, State, Zip Code:
- --------------------------------------------------------------------------------
Title:
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
--------------------------------------------------------------------------
Dated:
- --------------------------------------------------------------------------------
DO NOT SEND NOTES WITH THIS FORM. YOUR NOTES MUST BE SENT WITH THE LETTER OF
TRANSMITTAL.
