10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

Commission File Number 001-14169

HUMAN GENOME SCIENCES, INC.

(Exact name of registrant)

Delaware
(State of organization) 22-3178468
(I.R.S. employer
identification number)

14200 Shady Grove Road, Rockville, Maryland 20850-7464
(address of principal executive offices and zip code)

(301) 309-8504
(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common stock, par value $0.01 per share	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ     No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  Yes o     No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

The number of shares of the registrant’s common stock outstanding on January 31, 2010 was 185,605,268. As of June 30, 2009, the aggregate market value of the common stock held by non-affiliates of the registrant based on the closing price reported on the National Association of Securities Dealers Automated Quotations System was approximately $319,024,086.*

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Human Genome Sciences, Inc.’s Notice of Annual Stockholder’s Meeting and Proxy Statement, to be filed within 120 days after the end of the registrant’s fiscal year, are incorporated by reference into Part III of this Annual Report.

*  Excludes 24,897,966 shares of common stock deemed to be held by officers and directors and stockholders whose ownership exceeds five percent of the shares outstanding at June 30, 2009. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant, or that such person is controlled by or under common control with the registrant.

PART I

ITEM 1.   BUSINESS

This annual report on Form 10-K contains forward-looking statements, within the meaning of the Securities Exchange Act of 1934 and the Securities Act of 1933, that involve risks and uncertainties. In some cases, forward-looking statements are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may” and similar expressions. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. All of these forward-looking statements are based on information available to us at this time, and we assume no obligation to update any of these statements. Actual results could differ from those projected in these forward-looking statements as a result of many factors, including those identified in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere. We urge you to review and consider the various disclosures made by us in this report, and those detailed from time to time in our filings with the Securities and Exchange Commission, that attempt to advise you of the risks and factors that may affect our future results.

Overview

Human Genome Sciences, Inc. (“HGS” or the “Company”) is a commercially focused biopharmaceutical company advancing toward the market with three products in late-stage development: BENLYSTA^tm for systemic lupus erythematosus (“SLE”), ZALBIN^tm for chronic hepatitis C, and raxibacumab for inhalation anthrax.

BENLYSTA and ZALBIN continue to progress toward commercialization. In July and November 2009, we reported that BENLYSTA successfully met its primary endpoints in two Phase 3 clinical trials in patients with systemic lupus. We and GlaxoSmithKline (“GSK”) plan to submit marketing applications for BENLYSTA in the United States and Europe in the second quarter of 2010. In March 2009, we reported that ZALBIN successfully met its primary endpoint in the second of two Phase 3 clinical trials in chronic hepatitis C. HGS submitted a Biologics License Application (“BLA”) for ZALBIN in the United States in November 2009, and Novartis submitted a Marketing Authorization Application (“MAA”) under the brand name JOULFERON^® in Europe in December 2009. We received confirmation from the U.S. Food and Drug Administration (“FDA”) in February 2010 that the BLA submission was accepted for filing with a Prescription Drug User Fee Act (“PDUFA”) date of October 4, 2010.

In the first half of 2009 we achieved our first product sales and recognized $162.5 million in product sales and manufacturing and development services revenue by delivering 20,001 doses of raxibacumab to the U.S. Strategic National Stockpile (“SNS”). In July 2009, the U.S. Government (“USG”) exercised its option to purchase 45,000 additional doses to be delivered over a three-year period. We expect to receive a total of approximately $152.0 million from the second order, including $17.7 million in revenue recognized from our first delivery under the new award in the fourth quarter of 2009. In May 2009, HGS submitted a BLA to the FDA for raxibacumab for the treatment of inhalation anthrax. We received a Complete Response Letter in November 2009, and we continue to work closely with the FDA to determine the additional steps necessary to obtain approval.

In addition to these products in the HGS internal pipeline, we have substantial financial rights to two novel drugs that GSK has advanced to late-stage development. In December 2009, GSK initiated the second Phase 3 clinical trial of darapladib, which was discovered by GSK based on HGS technology, to evaluate whether darapladib can reduce the risk of adverse cardiovascular events such as a heart attack or stroke. With more than 27,000 patients enrolled, the Phase 3 clinical program for darapladib is among the largest ever conducted to evaluate the safety and efficacy of any cardiovascular medication. In the first quarter of 2009, we received a $9.0 million milestone payment related to GSK’s initiation of a Phase 3 program to evaluate the safety and efficacy of Syncria^® (albiglutide) in the long-term treatment of type 2 diabetes mellitus. We created Syncria using our proprietary albumin-fusion technology and licensed it to GSK in 2004. Six Phase 3 trials of Syncria are currently ongoing.

HGS also has several novel drugs in earlier stages of clinical development for the treatment of cancer, led by our TRAIL receptor antibody mapatumumab and a small-molecule antagonist of IAP (inhibitor of apoptosis) proteins.

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Strategic partnerships are an important driver of our commercial success. We have co-development and commercialization agreements with prominent pharmaceutical companies for both of our lead products — GSK for BENLYSTA and Novartis for ZALBIN. Raxibacumab is being developed under a contract with the Biomedical Advanced Research and Development Authority (“BARDA”) of the Office of the Assistant Secretary for Preparedness and Response (“ASPR”), U.S. Department of Health and Human Services (“HHS”). Our strategic partnerships with leading pharmaceutical and biotechnology companies allow us to leverage our strengths and gain access to sales and marketing infrastructure, as well as complementary technologies. Some of these partnerships provide us with licensing or other fees, clinical development cost-sharing, milestone payments and rights to royalty payments as products are developed and commercialized. In some cases, we are entitled to certain commercialization, co-promotion, revenue-sharing and other product rights.

In the second half of 2009, we received $812.9 million in net proceeds from two public offerings of our common stock, bringing our cash and investments at year-end 2009 to $1.2 billion. With a strong cash position, a management team experienced in bringing products to market, an experienced drug development organization and significant capabilities in biologicals manufacturing, we believe HGS has the resources and capabilities necessary to achieve near-term commercial success while sustaining a viable pipeline that supports the long-term growth of the Company.

We are a Delaware corporation headquartered at 14200 Shady Grove Road, Rockville, Maryland, 20850-7464. Our telephone number is (301) 309-8504. Our website address is www.hgsi.com. Information contained on our website is not a part of, and is not incorporated into, this annual report on Form 10-K. Our filings with the SEC are available without charge on our website as soon as reasonably practicable after filing. HGS, Human Genome Sciences, BENLYSTA, BLyS and ZALBIN are trademarks of Human Genome Sciences, Inc. Other trademarks referenced are the property of their respective owners.

Strategy

Over the last few years, HGS has made strategic decisions that have transformed the Company on multiple levels and created multiple paths for success. Our two lead products, BENLYSTA and ZALBIN, have significant therapeutic potential and the commercial potential to achieve important positions in the marketplace. Raxibacumab continues to generate revenues under our contract with the USG. Key strategies include:

•  Continue to accelerate the development and commercialization of our late-stage products.  Our priority focus is on completing clinical development, obtaining regulatory approvals, and preparing for the global launch and commercialization of BENLYSTA and ZALBIN.

•  Build strong partnerships with global leaders in the pharmaceutical industry.  The co-development and commercialization agreements we have in place with GSK for BENLYSTA and Novartis for ZALBIN could help HGS assure that these products achieve their full therapeutic and commercial potential. As our earlier-stage products continue to progress, we will consider each individually to assess whether similar collaborations are strategically beneficial.

•  Ensure sustainable growth into the future by continuing to invest in our mid- and early-stage clinical pipeline.  We have taken a number of actions to strengthen our oncology program. Three randomized chemotherapy combination trials of our TRAIL receptor antibody mapatumumab (HGS-ETR1) are currently ongoing to evaluate its potential in the treatment of specific cancers, including non-small cell lung cancer, multiple myeloma and hepatocellular cancer. In November 2009, we initiated a Phase 1 trial of our lead IAP inhibitor HGS1029 as monotherapy in patients with advanced lymphoid tumors. HGS1029 as monotherapy is also being studied in an ongoing Phase 1 study initiated in 2008 in patients with advanced solid tumors. Our novel small-molecule inhibitors of IAP proteins show early promise in the treatment of a number of cancers, and we plan to continue the study of HGS1029 both alone and in combination with other anti-cancer agents, including mapatumumab. We will remain opportunistic in our search for new product candidates, assessing the best of the therapeutic opportunities discovered by HGS alongside therapeutic opportunities discovered by other organizations.

•  Pursue strategic acquisitions and collaborations.  We will pursue strategic acquisitions and collaborations to augment our capabilities, provide access to complementary technologies, and expand our portfolio of new drug candidates. We also rely on collaborations for the development of certain products discovered by HGS

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or others based on our technology, including those to which we have substantial financial rights in the GSK clinical pipeline. In addition, we are engaging in collaborations to leverage our extensive capabilities in protein and antibody process development and manufacturing to produce near-term revenue.

•  Capitalize on our intellectual property portfolio.  We pursue patents to protect our intellectual property and have developed a significant intellectual property portfolio, with hundreds of issued U.S. patents covering genes, proteins, antibodies and proprietary technologies. We have also filed U.S. patent applications covering many additional discoveries and inventions. We will seek opportunities to monetize intellectual property assets that we do not plan to develop ourselves internally.

•  Maintain a strong cash position.  HGS has cash resources in place that allow us to maintain a priority focus on advancing our late-stage products to commercialization, while also exploring longer-term opportunities that will drive momentum beyond our lead products. While we expect net cash burn in 2010 to increase as we prepare for commercialization, controlling net cash burn and maintaining a strong cash position will continue to be an important ongoing priority.

Products

HGS has three products in late-stage clinical development: BENLYSTA for systemic lupus, ZALBIN for chronic hepatitis C, and raxibacumab for inhalation anthrax. We also have substantial financial rights to certain products in the GSK clinical pipeline. GSK has advanced two of these products to Phase 3 clinical trials, darapladib for cardiovascular disease and Syncria for type 2 diabetes mellitus. In addition, we have a portfolio of novel drugs in earlier stages of development, led by our TRAIL receptor antibody mapatumumab in mid-stage development for cancer.

Clinical Programs

Late-Stage Products

BENLYSTA for systemic lupus and ZALBIN for chronic hepatitis C have met the primary efficacy endpoints of their pivotal Phase 3 trials and have the potential to receive regulatory approval in the United States in 2010. Under our contract with the USG, our third late-stage product, raxibacumab, is generating revenue as we complete deliveries to the SNS for emergency use in the treatment of inhalation anthrax, and we continue to work closely with the FDA to determine the additional steps necessary to achieve licensure.

BENLYSTA (belimumab)

BENLYSTA is a human monoclonal antibody that specifically recognizes and inhibits the biological activity of B-lymphocyte stimulator, or BLyS^®. In lupus, rheumatoid arthritis and certain other autoimmune diseases, elevated levels of BLyS are believed to contribute to the production of autoantibodies — antibodies that attack and destroy the body’s own healthy tissues. BENLYSTA is being developed by HGS and GSK as a potential treatment for systemic lupus under a co-development and commercialization agreement entered into in 2006 (described below under “Lead Commercial Collaborations”).

In July and November 2009, HGS and GSK announced that BENLYSTA met the primary efficacy endpoints in BLISS-52 and BLISS-76, thus becoming the first drug specifically for lupus to achieve positive results in Phase 3 trials. The data showed that BENLYSTA plus standard of care achieved a clinically and statistically significant improvement in patient response rate, compared with placebo plus standard of care. BLISS study results also showed that BENLYSTA was generally well tolerated, with rates of overall adverse events and discontinuations due to adverse events comparable between BENLYSTA and placebo treatment groups.

With nearly 1,700 patients participating, the BLISS studies comprise the largest clinical trial program ever conducted in lupus. In October 2009, HGS provided a full presentation of BLISS-52 results at the Annual Scientific Meeting of the American College of Rheumatology. The BLISS-76 study was analyzed after 52 weeks in support of a potential BLA in the United States and MAAs in Europe and other regions. We expect that additional data from BLISS-76 will be available in the second quarter of 2010 following completion of the full 76-week study period.

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HGS and GSK expect to submit marketing applications for BENLYSTA to regulatory authorities in the United States and Europe in the second quarter of 2010, and we believe it has the potential to receive regulatory approval in the U.S. in the fourth quarter of 2010.

ZALBIN (albinterferon alfa-2b)

ZALBIN (also known as JOULFERON) is a genetic fusion of human albumin and interferon alfa that was created using the Company’s proprietary albumin-fusion technology. ZALBIN is being developed by HGS and Novartis for the treatment of chronic hepatitis C under an exclusive worldwide co-development and commercialization agreement entered into in 2006 (described below under “Lead Commercial Collaborations”).

HGS submitted a BLA to the FDA for ZALBIN (albinterferon alfa-2b) in the United States in November 2009, and Novartis submitted an MAA under the brand name JOULFERON to the European Medicines Agency (“EMEA”) in Europe in December 2009. HGS received confirmation from the FDA in February 2010 that the BLA submission was accepted for filing with a PDUFA date of October 4, 2010. ZALBIN will be the brand name for albinterferon alfa-2b in the United States, and JOULFERON will be the brand name in the rest of the world, subject to confirmation by health authorities at the time of product approval.

The regulatory submissions include the results of two pivotal Phase 3 clinical trials, known as ACHIEVE 1 and ACHIEVE 2/3, showing that 900-mcg ZALBIN dosed every two weeks met its primary endpoint of non-inferiority to Pegasys (peginterferon alfa-2a) dosed once each week. Patients also received oral ribavirin. The primary efficacy endpoint of both trials was sustained virologic response, defined as undetectable HCV (hepatitis C) RNA at 24 weeks following the end of treatment. In both studies, ZALBIN, with half the injections, achieved sustained virologic response comparable to that achieved by Pegasys. The rates of serious and/or severe adverse events were also comparable in these studies. ACHIEVE 1 was conducted in patients infected with genotype 1 virus, and ACHIEVE 2/3 was conducted in patients with genotypes 2 or 3 virus. The two studies treated a total of 2,255 patients.

We announced in January 2009 that Novartis initiated a separate Phase 2b trial to explore various doses of ZALBIN administered monthly, in combination with ribavirin, in treatment-naïve patients with genotypes 2 and 3 chronic hepatitis C. In June 2009, Novartis completed the enrollment and randomization of 391 patients randomized into four treatment groups, including three that receive ZALBIN administered once every four weeks (900 mcg, 1200 mcg or 1500 mcg), in addition to the active-control group, which receives peginterferon alfa-2a at the standard 180-mcg dose once every week. All patients in the study receive 800-mg daily oral ribavirin. The total duration of treatment is 24 weeks. The primary efficacy endpoint is sustained virologic response (SVR) at Week 48 (24 weeks following the end of treatment). We expect to have results from the monthly dosing study available in the first half of 2010.

Raxibacumab

Raxibacumab is a human monoclonal antibody that specifically targets and blocks Bacillus anthracis protective antigen, which research has shown to be the key facilitator of the deadly toxicity of anthrax infection. Raxibacumab represents a new way to address the anthrax threat. While antibiotics can kill the anthrax bacteria, they are not effective against the deadly toxins that the bacteria produce. Raxibacumab targets anthrax toxins after they are released by the bacteria into the blood and tissues. In an inhalation anthrax attack, people may not know they are infected with anthrax until the toxins already are circulating in their blood, and it may be too late for antibiotics alone to be effective.

We are developing raxibacumab under a contract entered into in 2006 with BARDA. In the first half of 2009, our Company achieved its first product sales and recognized $162.5 million in product sales and manufacturing and development services revenue by delivering 20,001 doses of raxibacumab to the SNS. In July 2009, the USG exercised its option to purchase 45,000 additional doses to be delivered over a three-year period. HGS expects to receive approximately $142.0 million from the second order as deliveries are completed, including $17.7 million recognized as revenue from delivery of approximately 5,600 doses in fourth quarter 2009. We expect to deliver approximately 15,000 doses to the SNS in 2010.

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Also under our contract, HGS submitted a BLA to the FDA for raxibacumab for the treatment of inhalation anthrax in May 2009. The BLA submission included safety and efficacy data published in the July 9, 2009 edition of The New England Journal of Medicine. We received a Complete Response Letter in November 2009, and we will continue to work closely with the FDA to obtain approval. HGS will receive $20.0 million from the USG upon FDA licensure of raxibacumab.

Oncology Products

As our Company’s late-stage products are nearing commercialization, we continue to invest strategically to expand and advance our oncology portfolio around our leading expertise in the apoptosis, or programmed cell death, pathway.

Mapatumumab (HGS-ETR1)

HGS has pioneered the development of highly targeted agonistic antibody therapies for cancer based on the TRAIL receptor apoptotic pathway. Mapatumumab is a human monoclonal antibody that specifically binds to the TRAIL receptor 1 and causes it to induce apoptosis in cancer cells. We believe mapatumumab is the most advanced of any product in development that targets the TRAIL pathway. We have advanced mapatumumab to a proof-of-concept phase that currently includes three randomized trials to evaluate its potential in combination with chemotherapy for the treatment of specific cancers:

Non-small cell lung cancer:  A randomized Phase 2 trial of mapatumumab in combination with paclitaxel and carboplatin as first-line therapy is ongoing in patients with advanced non-small cell lung cancer (“NSCLC”). We expect to have results from the study in the first quarter of 2010. NSCLC accounts for approximately 75-80% of all lung cancers and is currently the leading cause of cancer death in developed countries in both men and women.

Multiple myeloma:  A randomized Phase 2 trial of mapatumumab in combination with bortezomib (Velcade) is ongoing in patients with advanced multiple myeloma. The initial data from this study, reported in September 2008, showed that mapatumumab was well tolerated and suggested that disease response rates to that date were comparable for this combination versus bortezomib alone. Patients continue on treatment until the progression of disease, and HGS expects to have final time-to-progression data available from this study in mid-2010. Multiple myeloma is a cancer of the plasma cells in bone marrow and accounts for about 10 percent of all hematologic cancers.

Hepatocellular cancer:  The safety lead-in to a randomized Phase 2 trial of mapatumumab in combination with Nexavar (sorafenib) is ongoing in patients with advanced hepatocellular cancer, which accounts for 80-90% of all liver cancers. We expect to initiate the randomization stage of this study in 2010.

IAP Inhibitors

In November 2009, HGS announced the initiation of a Phase 1 trial of our lead IAP inhibitor, HGS1029, as monotherapy in patients with advanced lymphoid tumors. The study’s primary objectives include evaluation of safety and tolerability, and dose selection for Phase 2 trials. HGS1029 as monotherapy is also being studied in an ongoing Phase 1 study in patients with advanced solid tumors.

The IAP inhibitors are a novel class of compounds that block the activity of IAP (inhibitor of apoptosis) proteins, allowing apoptosis to proceed and causing the cancer cells to die. When IAP proteins are over-expressed in cancer cells, they can help cancer cells resist apoptosis and resume growth and proliferation. Preclinical studies of HGS1029 in combination with mapatumumab demonstrated dramatic synergistic activity against a number of cancer types, including prostate, breast, esophageal, colorectal and non-small cell lung. HGS1029 has also shown significant anti-tumor activity alone and in combination with other agents in a broad range of cancers. We plan to develop mapatumumab and our IAP inhibitors in combination with one another and in combination with other therapeutic agents.

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Products in the GSK Pipeline

HGS has substantial financial rights to certain products in the GSK clinical development pipeline (described below under “Lead Commercial Collaborations”). GSK has advanced two of these products, darapladib and Syncria, to Phase 3 development.

Darapladib

Darapladib was discovered by GSK based on our technology. It is a small-molecule inhibitor of lipoprotein-associated phospholipase-A2 (Lp-PLA₂), an enzyme associated with the formation of atherosclerotic plaques and identified in clinical trials as an independent risk factor for coronary heart disease and ischemic stroke. GSK is developing darapladib as a treatment for atherosclerosis, and we believe it has the potential to be an important treatment for the prevention of cardiovascular risk.

In December 2009, GSK announced the initiation of its second pivotal Phase 3 trial to evaluate whether darapladib can reduce the risk of adverse cardiovascular events such as a heart attack or stroke. This second Phase 3 trial will enroll and randomize approximately 11,500 men and women with acute coronary syndrome. GSK initiated its first pivotal Phase 3 trial of darapladib in December 2008. In 2009, the first trial completed enrollment ahead of schedule of approximately 15,000 men and women with chronic artery disease. With more than 27,000 patients enrolled in the two trials, the Phase 3 clinical program for darapladib is among the largest ever conducted to evaluate the safety and efficacy of any cardiovascular medication. HGS will receive 10% royalties on worldwide sales if darapladib is commercialized, and has a 20% co-promotion option in North America and Europe.

Syncria (albiglutide)

Syncria is a biological product generated from the genetic fusion of human albumin and modified human GLP-1 peptide, and is designed to act throughout the body to help maintain normal blood-sugar levels and to control appetite. GSK is developing Syncria as a treatment for type 2 diabetes mellitus.

HGS received a $9.0 million milestone payment during the first quarter of 2009, following GSK’s initiation of a Phase 3 program to evaluate the efficacy, safety and tolerability of Syncria in the long-term treatment of type 2 diabetes mellitus. Six Phase 3 trials of Syncria are currently ongoing. Syncria was created by HGS using its proprietary albumin-fusion technology, and the product was licensed to GSK in 2004. HGS is entitled to fees and milestone payments that could amount to as much as $183.0 million – including $33.0 million received to date – in addition to single-digit royalties on worldwide sales if Syncria is commercialized.

Research and Development

HGS has developed core competencies in the discovery and understanding of human genes and their biological functions, and in the discovery and development of human protein and antibody drugs.

Human Antibody Technology

We have acquired rights to a variety of human antibody technologies, have integrated these technologies into our research and development program, and continue to collaborate with certain antibody companies. Many medical conditions are the result of an excess of a specific protein in the body, and some antibody drugs can inactivate such proteins and bring therapeutic benefits to patients. These drugs are known as antagonistic antibodies. For example, BENLYSTA, which is in Phase 3 clinical trials for the treatment of systemic lupus, is an antagonistic human monoclonal antibody.

In certain medical conditions, it may be desirable to stimulate a specific biological activity. Antibodies that stimulate biological activity are known as agonistic antibodies. Mapatumumab is an agonistic antibody that binds to TRAIL receptor 1 and triggers programmed cell death in cancer cells. We believe that it was the first human agonistic monoclonal antibody to enter clinical trials.

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Albumin-Fusion Technology

Our albumin-fusion technology allows us to create long-acting forms of protein drugs by fusing the gene that expresses human albumin to the gene that expresses a therapeutically active protein. We and our partners are actively pursuing the development of albumin-fusion drugs based on therapeutic proteins already on the market. For example, ZALBIN is a genetic fusion of human albumin and human interferon alfa, and Syncria was created through the genetic fusion of human albumin and glucagon-like peptide-1 (GLP-1).

Based on preclinical and clinical results to date, we believe that albumin-fusion proteins may provide long-acting treatment options that have efficacy and safety similar to or better than that of existing protein drugs, with the potential additional benefit of considerably more convenient dosage schedules. Albumin-fusion technology also provides for efficient manufacture and purification of the product in our existing facilities.

Drug Development

We have built a drug development organization that has the expertise necessary to design and implement well focused, high-quality clinical trials of multiple compounds. We seek to gather, document and analyze clinical trial data in such a way that they can be submitted to regulatory authorities and used to support BLAs at the appropriate time. We have assembled experienced teams in key strategic areas of development, including:

•  Clinical Research and Biostatistics.  The clinical research and biostatistics groups are responsible for the design, planning and analysis of clinical trials.

•  Clinical Operations.  The clinical operations group executes clinical trials and is responsible for managing clinical trial sites and ensuring that all proper procedures are followed during the collection of clinical data. The group includes our data management team.

•  Project Management.  Our project management team oversees the process of development of a drug from the earliest stages of research through the conduct of clinical development and regulatory filings.

•  Regulatory Affairs.  The regulatory affairs group manages communications with and submissions to regulatory authorities.

•  Drug Safety.  As our products advance in clinical testing, our drug safety group collects and analyzes information on drug experience and safety, and ensures that accurate medical information is distributed.

•  Quality Assurance.  The quality assurance group ensures compliance with all regulatory requirements for the clinical development and manufacture of our products.

•  Bioanalytical Sciences.  The bioanalytical sciences group develops and performs highly specialized assays that are used during monitoring of preclinical tests and clinical trials. Other assays help to ensure the quality and consistency of our products.

•  Biopharmaceutical Development.  The biopharmaceutical development group develops robust manufacturing processes and product formulations to support clinical studies and future commercial supply.

Strategic Collaborations

Strategic collaborations are a key aspect of the HGS business strategy. We have co-development and commercialization agreements with prominent pharmaceutical companies for two of our late-stage products, and our third late-stage product is being developed under a contract with the USG. Strategic collaborations are an important source of revenues and clinical development cost-sharing. They also allow us to leverage our strengths and gain access to sales and marketing infrastructure, international distribution, and complementary technologies.

Other potential collaborations may provide sources of exciting new product opportunities for in-licensing. In addition, we have assets that may be a better fit for another company than for HGS, and therefore could be out-licensed. Each of these collaborative models is of interest to HGS, and we are committed to remaining alert to new opportunities.

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Lead Commercial Collaborations

Novartis

ZALBIN.  In 2006, we entered into an exclusive worldwide agreement for the co-development and commercialization of albinterferon alfa-2b with Novartis, a global leader in the pharmaceutical industry. Under the agreement, HGS and Novartis will co-commercialize albinterferon alfa-2b in the United States under the brand name ZALBIN, and will share clinical development costs, U.S. commercialization costs and U.S. profits equally. Novartis will be responsible for commercialization of albinterferon alfa-2b in the rest of the world under the brand name JOULFERON, and will pay HGS a royalty on those sales. HGS has primary responsibility for the bulk manufacture of albinterferon alfa-2b, and Novartis will have responsibility for commercial manufacturing of the finished drug product.

Clinical development, commercial milestone and other payments to HGS could total as much as $507.5 million. To date, we have received $207.5 million under our agreement with Novartis. The remaining payments to HGS under the agreement relate to the achievement of certain regulatory approval and commercial milestones. We are recognizing these payments ratably over the remaining clinical development period. We recognized revenues of $35.4 million in 2008 and $54.2 million in 2009. The Novartis agreement also includes cost-sharing provisions under which we and Novartis share clinical costs. We recorded cost reimbursement from Novartis of $36.1 million in 2008 and $0.9 million in 2009 under this provision, which was reflected as a reduction in expenses. This agreement will expire on the later of (i) the expiration of Novartis’ obligation to pay royalties under the agreement, which could be as early as 2023, and (ii) the date that we and Novartis cease to co-promote ZALBIN in the United States. Novartis has the right to terminate the agreement (i) without cause or (ii) if there are material safety risks associated with ZALBIN or ZALBIN is not approved by the FDA or the EMEA. In addition, either party may terminate if the other party commits a material breach of the agreement or if the other party is bankrupt or insolvent.

GlaxoSmithKline

BENLYSTA.  In 2006, we entered into an agreement with GSK for the co-development and commercialization of BENLYSTA. GSK is a world leader that brings global pharmaceutical development and marketing capabilities to the BENLYSTA program. Under the BENLYSTA agreement, we and GSK will share Phase 3 and 4 development costs, sales and marketing expenses, and profits equally. We are conducting Phase 3 clinical trials with assistance from GSK, and will have primary responsibility for bulk manufacturing. We have received an execution fee of $24.0 million under this agreement and we are recognizing this payment ratably over the estimated remaining development period. We recognized revenues of $6.5 million in 2008 and $4.7 million in 2009. The GSK BENLYSTA agreement includes cost-sharing provisions under which we and GSK share clinical development costs. We recorded cost reimbursement from GSK under this provision of $51.8 million in 2008 and $43.1 million in 2009, which was reflected as a reduction in expenses. This agreement will expire three years after the later of (i) the expiration date of certain patent rights related to BENLYSTA and (ii) a period of ten years after the first commercial sale of BENLYSTA. These certain patent rights are expected to expire by 2023, with the potential for later expiration that may result from any issuance of additional patent and/or patent term extensions. GSK may terminate the agreement if (i) upon the basis of competent scientific evidence or data regarding commercial potential, GSK determines BENLYSTA does not merit incurring additional development or marketing expenses or (ii) BENLYSTA is not approved by the FDA or EMEA. In addition, either party may terminate if the other party commits a material breach of the agreement or if the other party is bankrupt or insolvent.

Darapladib.  In December 2008, GSK initiated Phase 3 development of darapladib, a small-molecule Lp-PLA₂ inhibitor discovered by GSK based on HGS technology. In December 2009, GSK announced the initiation of its second pivotal Phase 3 trial to evaluate whether darapladib can reduce the risk of adverse cardiovascular events such as a heart attack or stroke. With more than 27,000 patients enrolled in the two trials, the Phase 3 clinical program for darapladib is among the largest ever conducted to evaluate the safety and efficacy of any cardiovascular medication. GSK is developing darapladib as a treatment for atherosclerosis, and it has the potential to become an important treatment for the prevention of cardiovascular risk. We will receive a 10% royalty on worldwide sales of darapladib if it is commercialized, and we have a 20% co-promotion option in North America

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and Europe. We are also entitled to receive a milestone payment if darapladib moves through clinical development into registration.

Syncria.  In February 2009, GSK initiated a Phase 3 clinical trial program to evaluate the efficacy, safety and tolerability of Syncria in the long-term treatment of type 2 diabetes mellitus. HGS received a $9.0 million milestone payment related to this initiation during the first quarter of 2009. Syncria was created by HGS using its proprietary albumin-fusion technology, and the product was licensed to GSK in 2004. Six Phase 3 trials of Syncria are currently ongoing. HGS is entitled to fees and milestone payments that could amount to as much as $183.0 million – including $33.0 million received to date. We are also entitled to single-digit royalties on worldwide sales if Syncria is commercialized.

United States Government

Raxibacumab.  In September 2005, we entered into a two-phase contract to supply raxibacumab for inhalation anthrax with BARDA. HHS is the lead agency for public health and medical response to man-made or natural disasters, including acts of bioterrorism. Under the first phase of the contract, we supplied ten grams of raxibacumab to HHS for comparative in vitro and in vivo testing. In June 2006, under the second phase of the contract, the USG exercised its option to purchase raxibacumab and we agreed to manufacture and deliver 20,001 doses to the SNS. In the first half of 2009, we achieved our company’s first product sales by completing these deliveries and recognized $162.5 million in product sales and manufacturing and development services revenue. In July 2009, the USG exercised its option to purchase 45,000 additional doses to be delivered over a three-year period. HGS expects to receive approximately $142.0 million from the second award as deliveries are completed. This includes $17.7 million recognized in the fourth quarter of 2009 as revenue from delivery of approximately 5,600 doses. We expect to deliver approximately 15,000 doses to the SNS in 2010. Also under our contract, HGS submitted a BLA to the FDA for raxibacumab for the treatment of inhalation anthrax in May 2009. We received a Complete Response Letter in November 2009, and we will continue to work closely with the FDA to obtain approval. HGS will receive $20.0 million from the USG upon FDA licensure of raxibacumab. Our raxibacumab agreement can be terminated by the USG if it determines that a termination is in its interest.

Product Collaborations and Agreements

Aegera Therapeutics.  In December 2007, we and Aegera Therapeutics, Inc. (“Aegera”) completed a licensing and collaboration agreement providing us with exclusive worldwide rights (excluding Japan) to develop and commercialize HGS1029 (formerly AEG40826) and other small-molecule inhibitors of IAP (inhibitor of apoptosis) proteins in oncology. Under the agreement, we made an upfront payment to Aegera of $20.0 million as a licensing fee and for an equity investment. Aegera is entitled to receive up to $295.0 million in additional development and commercial milestone payments, including a $5.0 million milestone paid in 2008 upon FDA clearance of an Investigational New Drug Application (“IND”). Aegera will receive low double-digit royalties on net sales in the HGS territory. In North America, Aegera will have the option to co-promote, under which it will share certain expenses and profits (30%) in lieu of its royalties. Aegera retains the non-oncology rights to its IAP inhibitors that are not selected for development under this agreement.

CoGenesys.  In June 2006, we completed a transaction establishing CoGenesys as an independent company to focus on the early development of selected product opportunities and the monetization of certain HGS intellectual property and technology assets that HGS did not plan to develop internally. In February 2008, Teva Pharmaceutical Industries Ltd. (“Teva”) acquired all the outstanding shares of CoGenesys. We received a total of approximately $52.6 million for our 14% equity interest, approximately $47.3 million of which was received upon closing of the transaction in February 2008, and $5.3 million of which was received in February 2009. We are also entitled to a portion of the revenue that Teva may receive from outlicensing or sales of certain therapeutic and diagnostic products successfully developed and commercialized.

Research and Technology Collaborations

HGS has a rich heritage of scientific discovery that has produced a substantial intellectual property estate and a library of thousands of therapeutic and diagnostic targets. After careful review, we have selected targets for further

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research and potential development, with the goal of filing new INDs to develop the selected targets through co-development or research collaborations, as well as through our own internal research, including the application of antibody development technology from various collaborators.

Process Development and Manufacturing Alliances

Protein and antibody process development and manufacturing are core HGS competencies. We currently develop and produce several protein and antibody drugs in three state-of-the-art current good manufacturing practices (“cGMP”)-compliant process development and manufacturing facilities — totaling approximately 520,000 square feet. We are leveraging these capabilities to produce near-term revenue by entering into strategically appropriate process development and manufacturing alliances.

Patents and Proprietary Rights

We seek U.S. and foreign patent protection for the genes, proteins and antibodies that we discover, as well as patents on therapeutic and diagnostic products and processes, screening and manufacturing technologies, and other inventions based on genes, proteins and antibodies. We also seek patent protection or rely upon trade secret rights to protect certain technologies which may be used to discover and characterize genes, proteins and antibodies and which may be used to develop novel therapeutic and diagnostic products and processes. We believe that, in the aggregate, our patent applications, patents and licenses under patents owned by third parties are of material importance to our operations.

Important legal issues remain to be resolved as to the extent and scope of available patent protection for biotechnology products and processes in the U.S. and other important markets outside the U.S. We expect that litigation or administrative proceedings will likely be necessary to determine the validity and scope of certain of our and others’ proprietary rights. We are currently involved in a number of administrative proceedings and litigations relating to the scope of protection of our patents and those of others, and are likely to be involved in additional proceedings that may affect directly or indirectly patents and patent applications related to our products or the products of our partners. For example, we have been involved in interference and opposition proceedings related to products based on TRAIL receptor 2 (such as HGS-ETR2) and interference, opposition and revocation proceedings related to products based on BLyS (such as BENLYSTA). Any such lawsuit or proceeding may result in a significant commitment of resources in the future. In addition, changes in, or different interpretations of, patent laws in the U.S. and other countries may result in patent laws that allow others to use our discoveries or develop and commercialize our products. We cannot assure you that the patents we obtain or the unpatented technology we hold will afford us significant commercial protection.

We have filed U.S. patent applications with respect to many human genes and their corresponding proteins. We have also filed U.S. patent applications with respect to all or portions of the genomes of several infectious and non-infectious microorganisms. We have hundreds of U.S. patents covering genes, proteins, antibodies and proprietary technologies. Our remaining applications may not result in the issuance of any patents. Our applications may not be sufficient to meet the statutory requirements for patentability in all cases. In certain instances, we will be dependent upon our collaborators to file and prosecute patent applications.

Other companies or institutions have filed, and may in the future file, patent applications that attempt to patent genes similar to those covered in our patent applications, including applications based on our potential products. Any patent application filed by a third party may prevail over our patent applications, 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.

We also are aware that others, including universities and companies working in the biotechnology and pharmaceutical fields, have filed patent applications and have been granted patents in the U.S. and in other countries that cover subject matter potentially useful or necessary to our business. Some of these patents and patent applications claim only specific products or methods of making products, while others claim more general processes or techniques useful in the discovery and manufacture of a variety of products. The risk of additional patents and patent applications will continue to increase as the biotechnology industry progresses. We cannot predict the ultimate scope and validity of existing patents and patents that have been or may be granted to third

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parties, nor can we predict the extent to which we may wish or be required to obtain licenses to such patents, or the availability and cost of acquiring such licenses. To the extent that licenses are required, the owners of the patents could bring legal actions against us to claim damages or to stop our manufacturing and marketing of the affected products.

Issued patents may not provide commercially meaningful protection against competitors and may not provide us with competitive advantages. Other parties may challenge our patents or design around our issued patents or develop products providing effects similar to our products. Furthermore, patents are issued for a limited time period and may expire before the useful life of the covered product. In addition, others may discover uses for genes, proteins or antibodies 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 a gene, protein or antibody for which we have a patent claim could exclude us from selling a product for a use covered by its patent.

We rely on trade secret protection to protect our confidential and proprietary information. We believe we have developed proprietary procedures for making libraries of DNA sequences and genes. We have not sought patent protection for these procedures. We have developed a substantial database concerning genes we have identified. We have taken security measures to protect our data and continue to explore ways to further enhance the security for our data. However, we may not be able to meaningfully protect our trade secrets. While we have entered into confidentiality agreements with employees and collaborators, we may not be able to prevent their disclosure of these data or materials. Others may independently develop substantially equivalent information and techniques.

Competition

General.  We face intense competition from a wide range of pharmaceutical, biotechnology and diagnostic companies, as well as academic and research institutions and government agencies. Some of these competitors have substantially greater financial, marketing, research and development and human resources. Most large pharmaceutical companies have considerably more experience in undertaking clinical trials and in obtaining regulatory approval to market pharmaceutical products.

Basis of Competition.  Principal competitive factors in our industry include:

•  the quality and breadth of an organization’s technology;

•  the skill of an organization’s employees and ability to recruit and retain skilled employees;

•  an organization’s intellectual property estate;

•  the range of capabilities, from target identification and validation to drug discovery and development to manufacturing and marketing; and

•  the availability of substantial capital resources to fund discovery, development, manufacturing and commercialization activities.

We believe that the quality and breadth of our technology platform, the skill of our employees and our ability to recruit and retain skilled employees, our patent portfolio, our capabilities for research and drug development, and our capital resources are competitive strengths. However, many large pharmaceutical and biotechnology companies have significantly larger intellectual property estates than we do, more substantial capital resources than we have, and greater capabilities and experience than we do in preclinical and clinical development, sales, marketing, manufacturing and regulatory affairs.

Products.  We are aware of products in research or development by our competitors that address all of the diseases we are targeting. Any of these products may compete with our product candidates. Our competitors may succeed in developing their products before we do, obtaining approvals from the FDA or other regulatory agencies for their products more rapidly than we do, or developing products that are more effective than our products. These products or technologies might render our technology obsolete or noncompetitive. In addition, our albumin fusion protein products are designed to be long-acting versions of existing products. While we believe our albumin fusion protein products will be a more attractive alternative to the existing products, the existing product in many cases has an established market that may make the introduction of our product more difficult. Competition is based primarily

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on product efficacy, safety, timing and scope of regulatory approvals, availability of supply, marketing and sales capability, reimbursement coverage, price and patent position.

Government Regulation

Regulations in the U.S. and other countries have a significant impact on our research, product development and manufacturing activities and will be a significant factor in the marketing of our products. All of our products require regulatory approval prior to commercialization. In particular, our products are subject to rigorous preclinical and clinical testing and other premarket approval requirements by the FDA and similar regulatory authorities in other regions. Various statutes and regulations also govern or influence the manufacturing, safety, labeling, storage, record keeping and marketing of our products. The lengthy process of seeking these approvals, and the subsequent compliance with applicable statutes and regulations, require the expenditure of substantial resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals could materially adversely affect our ability to commercialize our products in a timely manner, or at all.

Preclinical Testing.  Before a drug may be clinically tested in the U.S., it must be the subject of rigorous preclinical testing. Preclinical tests include laboratory evaluation of product chemistry and animal studies to assess the potential safety and efficacy of the product and its formulations. The results of these studies must be submitted to the FDA as part of an IND, which is reviewed by the FDA before clinical testing in humans can begin.

Clinical Testing.  Typically, clinical testing involves a three-phase process, which generally lasts four to seven years, and sometimes longer:

•  Phase 1 clinical trials are conducted with a small number of subjects to determine the early safety profile and the pattern of drug distribution and metabolism.

•  Phase 2 clinical trials are conducted with groups of patients afflicted with a specified disease in order to provide enough data to evaluate preliminary efficacy and optimal dosages statistically and to expand evidence of safety.

•  Phase 3 clinical trials are large-scale, multi-center, comparative trials, which are designed to gather additional information for proper dosage and labeling of the drug and to demonstrate its overall safety and efficacy.

The FDA monitors the progress of each phase of testing, and may require the modification, suspension or termination of a trial if it is determined to present excessive risks to patients. The clinical trial process may be accompanied by substantial delay and expense and there can be no assurance that the data generated in these studies will ultimately be sufficient for marketing approval by the FDA.

Marketing Approvals.  Before a product can be marketed and sold, the results of the preclinical and clinical testing must be submitted to the FDA for approval. This submission will be either a new drug application or a biologics license application, depending on the type of drug. In responding to a new drug application or a biologics license application, the FDA may grant marketing approval, request additional information or deny the application if it determines that the application does not provide an adequate basis for approval. We cannot assure you that any approval required by the FDA will be obtained on a timely basis, or at all.

In addition, the FDA may condition marketing approval on the conduct of specific post-marketing studies to further evaluate safety and efficacy (such as Phase 4 trials). Rigorous and extensive FDA regulation of pharmaceutical products continues after approval, particularly with respect to compliance with cGMPs, reporting of adverse effects, advertising, promotion and marketing. Discovery of previously unknown problems or failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions, any of which could materially adversely affect our business.

Other Regulation.  We are also subject to various laws and regulations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances used in connection with our research, including radioactive compounds and

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infectious disease agents. We also cannot accurately predict the extent of regulations that might result from any future legislative or administrative action.

In addition, ethical, social and legal concerns about genetic testing and genetic research could result in additional regulations restricting or prohibiting the processes we or our suppliers may use. Federal and state agencies, congressional committees and foreign governments have expressed interest in further regulating biotechnology. More restrictive regulations or claims that our products are unsafe or pose a hazard could prevent us from commercializing our products.

Foreign Regulation.  We must obtain regulatory approval by governmental agencies in other countries prior to commercialization of our products in those countries. Foreign regulatory systems may be just as rigorous, costly and uncertain as in the U.S.

Possible Pricing Restrictions.  The levels of revenues and profitability of biopharmaceutical companies like ours may be affected by the continuing efforts of government and third party payers to contain or reduce the costs of health care through various means. For example, in certain foreign markets, pricing or profitability of therapeutic and other pharmaceutical products is subject to governmental control. In the U.S. there have been, and we expect that there will continue to be, a number of federal and state proposals to implement similar governmental control. While we cannot predict whether any legislative or regulatory proposals will be adopted, the adoption of such proposals could have a material adverse effect on our business, financial condition and profitability. In addition, in the U.S. and elsewhere, sales of therapeutic and other pharmaceutical products depend in part on the availability of reimbursement to the consumer from third party payers, such as government and private insurance plans. Third party payers are increasingly challenging the prices charged for medical products and services. We cannot assure you that any of our products will be considered cost effective or that reimbursement to the consumer will be available or will be sufficient to allow us to sell our products on a competitive and profitable basis.

Sources of Supply

Most raw materials and other supplies required in our business are generally available from various suppliers in quantities adequate to meet our needs. Certain materials and other supplies required for manufacturing are currently available only from single sources. As we prepare for commercialization of our products, we intend to identify alternative sources of supply wherever possible.

Manufacturing

We are able to manufacture multiple protein and antibody drugs for use in research, clinical and commercial activities. We produce and purify these protein and antibody drugs in three process development and manufacturing facilities that total approximately 520,000 square feet and offer both small-scale and large-scale manufacturing capabilities. We do not currently manufacture any products approved for commercial use. We are, however, manufacturing raxibacumab for supply to the SNS. We believe that we have sufficient manufacturing capacity to launch BENLYSTA, if it is approved by the FDA, and to supply commercial quantities of BENLYSTA to approximately 45,000 to 55,000 patients. If the demand for BENLYSTA exceeds our capacity to supply BENLYSTA to patients, we will need to contract for additional manufacturing capacity with a third-party manufacturer or buy or build additional manufacturing capacity. We cannot assure you that we will be able in the future to consistently manufacture our products economically or in compliance with cGMPs and other regulatory requirements.

Currently each of our products, BENLYSTA, ZALBIN and raxibacumab, is produced at a single manufacturing site. BENLYSTA is produced at our large-scale manufacturing facility in Rockville, Maryland and ZALBIN and raxibacumab are produced in separate parts of our small-scale manufacturing facility also in Rockville, Maryland. Each of these facilities is the sole source for these products. We cannot guarantee that one or more of these manufacturing plants will not encounter problems, including but not limited to loss of power, equipment

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failure or viral or microbial contamination, which could impact our ability to deliver adequate supply of one or more of these products to the market.

In the future, we may contract with additional third party manufacturers or develop products with partners and use the partners’ manufacturing capabilities. If we use others to manufacture our products, we will depend on those parties to comply with cGMPs and other regulatory requirements, and to deliver materials on a timely basis. These parties may not perform adequately. Any failures by these third parties may delay our development of products or the submission of these products for regulatory approval.

Marketing

We have a strategic marketing group to analyze the commercial value of our product portfolio and the competitive environment. The strategic marketing group also analyzes patient needs and customer preferences with respect to our product development and planning. If we develop products that can be marketed, we intend to market the products either independently or together with collaborators or strategic partners. BENLYSTA and ZALBIN, if approved, will be our first products to be marketed. We have no marketing experience and, therefore, we will be dependent on creating a sales force or retaining outside contractors to meet those needs. We expect to use common pharmaceutical company marketing techniques, including sales representatives calling on individual physicians, medical education programs, professional symposia, promotional materials and public relations. If approved by the FDA, we plan to establish our sales force in the United States for BENLYSTA and ZALBIN and in Europe for BENLYSTA.

GSK has co-marketing rights with respect to BENLYSTA and Novartis has co-marketing rights with respect to ZALBIN. We expect to use the marketing capabilities of our partners with respect to these products. GSK and others also have co-marketing rights with respect to certain of our other products. For any products that we market together with partners, we will rely, in whole or in part, on the marketing capabilities of those parties. We may also contract with third parties to market certain of our products. Ultimately, we and our partners may not be successful in marketing our products. The prices for our products may be impacted by various factors, including economic analyses of the burden of the applicable disease, the perceived value of the product and third party reimbursement policies.

Employees

As of February 1, 2010 we had approximately 850 full-time employees. None of our employees is covered by a collective bargaining agreement and we consider relations with our employees to be good.

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ITEM 1A.   RISK FACTORS

There are a number of risk factors that could cause our actual results to differ materially from those that are indicated by forward-looking statements. Those factors include, without limitation, those listed below and elsewhere herein.

RISKS RELATED TO OUR BUSINESS

If we are unable to commercialize our Phase 3 and earlier development molecules, we may not be able to recover our investment in our product development, manufacturing and marketing efforts.

We have invested significant time and resources to isolate and study genes and determine their functions. We now devote most of our resources to developing proteins, antibodies and small molecules for the treatment of human disease. We are also devoting substantial resources to our own manufacturing capabilities, to support clinical testing, to supply raxibacumab to the SNS and for potential commercialization of our other products. We expect to devote substantial resources to establish and maintain a marketing capability for any of our products that are approved by the FDA. We have made and are continuing to make substantial expenditures in advance of commercializing any products. Before we can commercialize a product, we must rigorously test the product in the laboratory and complete extensive human studies. We cannot assure you that the tests and studies will yield products approved for marketing by the FDA in the United States or similar regulatory authorities in other countries, or that any such products will be profitable. We will incur substantial additional costs to continue these activities. If we are not successful in commercializing our Phase 3 and earlier development molecules, we may be unable to recover the large investment we have made in research, development, manufacturing and marketing efforts.

If we are unable to obtain marketing approval for BENLYSTA^TM or ZALBIN^TM, our results of operations and business will be materially and adversely affected.

In July 2009, we reported the results from the first of our two Phase 3 clinical trials for BENLYSTA. In that trial BENLYSTA met its primary efficacy endpoint. In November 2009, we reported the 52-week results from the second of our two Phase 3 clinical trials for BENLYSTA. In that trial, BENLYSTA at a dose of 10 mg/kg also met its primary efficacy endpoint. Although the primary efficacy endpoint of the BLISS-76 trial was assessed after 52 weeks, we will continue to collect additional data from this trial for an additional 24 weeks. There can be no assurance that the additional data collected will be positive. Despite our determination that the results from the two BENLYSTA trials were positive, the FDA may determine that the results from the two trials are insufficient to file a BLA or do not support marketing approval or are insufficient to obtain marketing approval. In March 2009, we reported the results from the second of our two Phase 3 clinical trials for ZALBIN. In that trial, as well as the trial we reported on in December 2008, ZALBIN met its primary efficacy endpoint. In January 2008, we modified the dosing in our two ZALBIN Phase 3 clinical trials. Patients who had been receiving the 1200-mcg dose were moved to the 900-mcg dose based on a recommendation made by our independent data monitoring committee. The recommendation was based on the incidence rate of serious pulmonary adverse events in the 1200-mcg arm of the two ZALBIN trials. In November 2009, we filed a BLA with the FDA on ZALBIN. Despite our determination that the results from the two ZALBIN trials were positive, the FDA may determine that the results do not support marketing approval or are insufficient to obtain marketing approval. In addition, our partners, Novartis for ZALBIN and GSK for BENLYSTA, may determine that the results of these trials do not warrant further development or commercialization and may terminate their respective collaboration agreements. If the results of the BENLYSTA trials are not sufficient to file a BLA, or if we are unable to obtain marketing approval for either or both products or if either of our partners terminates its collaboration agreement, our results of operations and business will be materially adversely affected and we may not have sufficient resources to continue development of these or other products.

We may be unable to successfully establish commercial manufacturing capability and may be unable to obtain required quantities of our product candidates for commercial use.

We have not yet manufactured any products approved for commercial use and, except for raxibacumab, have limited experience in manufacturing materials suitable for commercial use. We have only limited experience manufacturing in a large-scale manufacturing facility built to increase our capacity for protein and antibody drug

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production. The FDA must inspect and license our facilities to determine compliance with cGMP requirements for commercial production. We may not be able to successfully establish sufficient manufacturing capabilities or manufacture our products economically or in compliance with cGMPs and other regulatory requirements. For example, we believe that we have sufficient manufacturing capacity to launch BENLYSTA, if it is approved by the FDA, and to supply commercial quantities of BENLYSTA to approximately 45,000 to 55,000 patients. If the demand for BENLYSTA exceeds our capacity to supply BENLYSTA to patients, we will need to contract for additional manufacturing capacity with a third-party manufacturer or buy or build additional manufacturing capacity. We believe that engaging a third-party manufacturer or buying or building additional manufacturing capacity will take between two and five years or longer due, in part, to the required regulatory approvals and will require substantial expenditures. We may not be able to contract with a third-party manufacturer on commercially reasonable terms, or at all, or find or build such capacity in the timeframe to meet demand, and our revenues may be limited from BENLYSTA if we are unable to do so successfully.

Currently each of our products, BENLYSTA, ZALBIN and raxibacumab, is produced at a single manufacturing site. BENLYSTA is produced at our large-scale manufacturing facility in Rockville, Maryland and ZALBIN and raxibacumab are produced in separate parts of our small-scale manufacturing facility also in Rockville, Maryland. Each of these facilities is the sole source for these products. We cannot guarantee that one or more of these manufacturing plants will not encounter problems, including but not limited to loss of power, equipment failure or viral or microbial contamination, which could impact our ability to deliver adequate supply of one or more of these products to the market.

While we have expanded our manufacturing capabilities, we have previously contracted and expect to contract with third-party manufacturers or develop products with collaboration partners and use the collaboration partners’ manufacturing capabilities. If we use others to manufacture our products, we will depend on those parties to comply with cGMPs, and other regulatory requirements and to deliver materials on a timely basis. These parties may not perform adequately, or comparability between the licensed product and that produced at the third-party may not be established successfully. Any failures by these third parties may delay our development of products or the submission of these products for regulatory approval.

Because we currently have only a limited marketing capability and in light of various factors, we may be unable to price or sell any of our products effectively.

We do not have any marketed products, although we have sold raxibacumab to the U.S. Government. If we receive approval for products that can be marketed, we intend to market the products either independently or together with collaborators or strategic partners. GSK, Novartis and others have co-commercialization rights with respect to certain of our products. If we decide to market any products, either independently or together with partners, we will incur significant additional expenditures and commit significant additional management resources to establish a sales force. For any products that we market together with partners, we will rely, in whole or in part, on the marketing capabilities of those parties. We may also contract with third parties to market certain of our products. Ultimately, we and our partners may not be successful in marketing our products. In addition, the prices for our products may be impacted by various factors, including economic analyses of the burden of the applicable disease, the perceived value of the product and third party reimbursement policies. We can provide no assurance as to the price at which we may be able to sell any of our products, or that we will be able to price any of our products at a level that is consistent with other similar products.

If we are unable to expand label usage of BENLYSTA, we may not recognize the full value of the product candidate and there may be adverse effects on our expected financial and operating results.

BENLYSTA is a human monoclonal antibody that recognizes and inhibits the biological activity of B-lymphocyte stimulator, or BLyS^®, and is being developed as a potential treatment for SLE. If the FDA approves BENLYSTA for the treatment of SLE, we intend to seek expansion of the approved uses, or labeled uses, of BENLYSTA in the U.S. However, we may be unable to obtain approval for such label expansion in full or in part. If we are not able to obtain approval for expansion of the labeled uses for BENLYSTA, or if we are otherwise unable to fulfill our marketing, sales and distribution plans for BENLYSTA, sales of BENLYSTA may be limited. We may conduct additional trials in support of a supplemental BLA for additional approved uses of BENLYSTA. There can

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be no guarantee that these trials will be successful or that the FDA will approve a supplemental BLA for expansion of the labeled uses for BENLYSTA.

Because our product development efforts depend on new technologies, we cannot be certain that our efforts will be successful.

Our work depends on new technologies and on the marketability and profitability of innovative products. 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 Phase 3 and earlier development molecules based on these technologies will be ineffective or toxic, or otherwise fail to receive necessary regulatory clearances;

•  the products, even 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 exploiting technologies or marketing products; and

•  third parties will market superior or equivalent products.

Because we are a late-stage development company, we cannot be certain that we can develop our business or achieve profitability.

We expect to continue to incur losses and we cannot assure you that we will ever become profitable on a sustainable basis. A number of our products are in late-stage development; however, it could be one or more years, if ever, before we are likely to receive continuing revenue from product sales or substantial royalty payments. We will continue to incur substantial expenses relating to research, development and manufacturing efforts and human studies. Depending on the stage of development, our products may require significant further research, development, testing and regulatory approvals. We may not be able to develop products that will be commercially successful or that will generate revenue in excess of the cost of development.

We are continually evaluating our business strategy, and may modify this strategy in light of developments in our business and other factors.

We continue to evaluate our business strategy and, as a result, may modify this strategy in the future. In this regard, we may, from time to time, focus our product development efforts on different products or may delay or halt the development of various products. In addition, as a result of changes in our strategy, we may also change or refocus our existing drug discovery, development, commercialization and manufacturing activities. This could require changes in our facilities and personnel and the restructuring of various financial arrangements. For example, in March 2009, we reduced the scope of efforts in a number of our programs resulting in cost savings for fiscal year 2009, a portion of which came from a reduction in headcount. However, we cannot assure you that changes will occur or that any changes that we implement will be successful.

Several years ago, we sharpened our focus on our most promising drug candidates. We reduced the number of drugs in early development and focused our resources on the drugs that address the greatest unmet medical needs with substantial growth potential. In 2006, we spun off our CoGenesys division (“CoGenesys”) as an independent company, in a transaction that was treated as a sale for accounting purposes. In 2008, CoGenesys was acquired by Teva Pharmaceuticals Industries, Ltd. (“Teva”) and became a wholly-owned subsidiary of Teva called Teva Biopharmaceuticals USA, Inc. (“Teva Bio”).

Our ability to discover and develop new products will depend on our internal research capabilities and our ability to acquire products. Our internal research capability was reduced when we completed the spin-off of CoGenesys. Although we continue to conduct research and development activities on products, our limited resources for new products may not be sufficient to discover and develop new drug candidates.

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PRODUCT DEVELOPMENT RISKS

Because we have limited experience in developing and commercializing products, we may be unsuccessful in our efforts to do so.

Although we are conducting human studies with respect to a number of products, we have limited experience with these activities and may not be successful in developing or commercializing these or other products. Our ability to develop and commercialize products based on proteins, antibodies and small molecules will depend on our ability to:

•  successfully complete laboratory testing and human studies;

•  obtain and maintain necessary intellectual property rights to our products;

•  obtain and maintain necessary regulatory approvals related to the efficacy and safety of our products;

•  maintain production facilities meeting all regulatory requirements or enter into arrangements with third parties to manufacture our products on our behalf; and

•  deploy sales and marketing resources effectively or enter into arrangements with third parties to provide these functions.

Because clinical trials for our products are expensive and protracted and their outcome is uncertain, we must invest substantial amounts of time and money that may not yield viable products.

Conducting clinical trials is a lengthy, time-consuming and expensive process. Before obtaining regulatory approvals for the commercial sale of any product, we must demonstrate through laboratory, animal and human studies that the product is both effective and safe for use in humans. We will incur substantial additional expense for and devote a significant amount of time to conducting ongoing trials and initiating new trials.

Before a drug may be marketed in the United States, a drug must be subject to rigorous preclinical testing. The results of this testing must be submitted to the FDA as part of an IND, which is reviewed by the FDA before clinical testing in humans can begin. The results of preclinical studies do not predict clinical success. A number of potential drugs have shown promising results in early testing but subsequently failed to obtain necessary regulatory approvals. Data obtained from tests are susceptible to varying interpretations, which may delay, limit or prevent regulatory approval. Regulatory authorities may refuse or delay approval as a result of many other factors, including changes in regulatory policy during the period of product development.

Completion of clinical trials may take many years. The time required varies substantially according to the type, complexity, novelty and intended use of the product candidate. The progress of clinical trials is monitored by both the FDA and independent data monitoring committees, which may require the modification, suspension or termination of a trial if it is determined to present excessive risks to patients. Our rate of commencement and completion of clinical trials may be delayed by many factors, including:

•  our inability to manufacture sufficient quantities of materials for use in clinical trials;

•  variability in the number and types of patients available for each study;

•  difficulty in maintaining contact with patients after treatment, resulting in incomplete data;

•  unforeseen safety issues or side effects;

•  poor or unanticipated effectiveness of products during the clinical trials; or

•  government or regulatory delays.

To date, data obtained from our clinical trials may not be sufficient to support an application for regulatory approval without further studies. Studies conducted by us or by third parties on our behalf may not demonstrate sufficient effectiveness and safety to obtain the requisite regulatory approvals for these or any other potential products. For example, we have submitted BLAs to the FDA for raxibacumab and ZALBIN, but the studies we have conducted to date may not be sufficient to obtain FDA approval. In November 2009, we received a Complete Response Letter from the FDA related to our BLA for raxibacumab. In this letter, the FDA determined that it cannot

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approve the BLA for raxibacumab in its present form and requested additional studies and data that would be needed prior to the FDA making a decision as to whether or not to approve the raxibacumab BLA. We may not be able to complete the requested studies or to generate the required data in a timely manner, if at all. If the FDA requires that we complete the additional studies and generate the additional data requested in the Complete Response Letter, we may be required to withdraw our existing BLA and resubmit our BLA after completion of such studies. This will start a new review cycle. Even if we could complete such studies and generate such data, the studies and data may not be sufficient for FDA approval. In addition, based on the results of a human study for a particular product candidate, regulatory authorities may not permit us to undertake any additional clinical trials for that product candidate. The clinical trial process may also be accompanied by substantial delay and expense and there can be no assurance that the data generated in these studies will ultimately be sufficient for marketing approval by the FDA. In February 2010, the FDA accepted our ZALBIN BLA filing with a PDUFA action date of October 4, 2010.

The development programs for ZALBIN and BENLYSTA have each involved two large-scale, multi-center Phase 3 clinical trials and have been more expensive than our Phase 1 and Phase 2 clinical trials. In December 2008 and March 2009, we announced that we had completed the Phase 3 clinical studies for ZALBIN; in both studies, ZALBIN met its primary efficacy endpoint of non-inferiority to peginterferon alfa-2a. In November 2009, we filed a BLA for ZALBIN with the FDA. In July 2009, we reported the results from the first of our two Phase 3 clinical trials for BENLYSTA. In that trial, BENLYSTA met its primary efficacy endpoint. In November, 2009, we reported the 52 week data from the second Phase 3 clinical trial for BENLYSTA. In that trial, BENLYSTA at a dose of 10 mg/kg also met its primary efficacy endpoint. Although the primary efficacy endpoint of the BLISS-76 study was assessed after 52 weeks, we will continue to collect additional data from this trial for an additional 24 weeks. We may not be able to complete this second BENLYSTA Phase 3 clinical trial successfully or obtain FDA approval of ZALBIN or BENLYSTA. Even if FDA approval is obtained, it may include limitations on the indicated uses for which ZALBIN and/or BENLYSTA may be marketed.

We face risks in connection with our raxibacumab product in addition to risks generally associated with drug development.

The development of raxibacumab presents risks beyond those associated with the development of our other products. Numerous other companies and governmental agencies are known to be developing biodefense pharmaceuticals and related products to combat anthrax disease. These competitors may have financial or other resources greater than ours, and may have easier or preferred access to the likely distribution channels for biodefense products. In addition, since the primary purchaser of biodefense products is the U.S. Government and its agencies, the success of raxibacumab will depend on government spending policies and pricing restrictions. The funding of government biodefense programs is dependent, in part, on budgetary constraints, political considerations and military developments. In the case of the U.S. Government, executive or legislative action could attempt to impose production and pricing requirements on us. We have entered into a two-phase contract, which may be terminated at any time, to supply raxibacumab, a human monoclonal antibody developed for use in the treatment of anthrax disease, to the U.S. Government. Under the first phase of the contract, we supplied ten grams of raxibacumab to the HHS for comparative in vitro and in vivo testing. Under the second phase of the contract, the U.S. Government ordered 20,001 doses of raxibacumab for the U.S. SNS for use in the treatment of anthrax disease. We completed delivery of these doses and the U.S. Government accepted our deliveries. In July 2009, the U.S. Government agreed to purchase 45,000 additional doses. We, therefore, have future deliveries to make and ongoing obligations under the contract, including the obligation to obtain FDA approval. We will continue to face risks related to the requirements of the contract. If we are unable to meet our obligations associated with this contract, the U.S. Government will not be required to make future payments related to that order. Although we have received U.S. Government approval for two orders of raxibacumab, we cannot assure you we will receive additional orders. In November 2009, we received a Complete Response Letter from the FDA related to our BLA for raxibacumab. In this letter, the FDA determined that it cannot approve our BLA for raxibacumab in its present form and requested additional studies and data that would be needed prior to the FDA making a decision as to whether or not to approve the raxibacumab BLA. We may not be able to complete the requested studies or to generate the required data in a timely manner, if at all. If the FDA requires that we complete the additional studies and generate the additional data requested in the Complete Response Letter, we may be required to withdraw our existing BLA

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and resubmit our BLA after completion of such studies. This will start a new review cycle. Even if we could complete such studies and generate such data, the studies and data may not be sufficient for FDA approval. Although the government has accepted shipment of raxibacumab subsequent to the receipt of the FDA’s Complete Response Letter, we cannot assure you that the government will continue to accept future shipments or place additional orders.

Because neither we nor any of our collaboration partners have received marketing approval for any product candidate resulting from our research and development efforts, and because we may never be able to obtain any such approval, it is possible that we may not be able to generate any product revenue other than with respect to raxibacumab.

Although we have submitted BLAs for two of our products (raxibacumab and ZALBIN), we cannot assure you that any of these products will receive marketing approval. It is possible that we will not receive FDA marketing approval for any of our product candidates even if the results of clinical trials are positive. All products being developed by our collaboration partners will also require additional research and development, preclinical studies and extensive clinical trials and regulatory approval prior to any commercial sales. In some cases, the length of time that it takes for our collaboration partners to achieve various regulatory approval milestones may affect the payments that we are eligible to receive under our collaboration agreements. We and our collaboration partners may need to successfully address a number of technical challenges in order to complete development of our products. Moreover, these products may not be effective in treating any disease or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude obtaining regulatory approval or prevent or limit commercial use.

RISK FROM COLLABORATION RELATIONSHIPS AND STRATEGIC ACQUISITIONS

Our plan to use collaborations to leverage our capabilities and to grow in part through the strategic acquisition of other companies and technologies may not be successful if we are unable to integrate our partners’ capabilities or the acquired companies with our operations or if our partners’ capabilities do not meet our expectations.

As part of our strategy, we intend to continue to evaluate strategic partnership opportunities and consider acquiring complementary technologies and businesses. In order for our future collaboration efforts to be successful, we must first identify partners whose capabilities complement and integrate well with ours. Technologies to which we gain access may prove ineffective or unsafe. Our current agreements that grant us access to such technology may expire and may not be renewable or could be terminated if we or our partners do not meet our obligations. These agreements are subject to differing interpretations and we and our partners may not agree on the appropriate interpretation of specific requirements. Our partners may prove difficult to work with or less skilled than we originally expected. In addition, any past collaborative successes are no indication of potential future success.

In order to achieve the anticipated benefits of an acquisition, we must integrate the acquired company’s business, technology and employees in an efficient and effective manner. The successful combination of companies in a rapidly changing biotechnology industry may be more difficult to accomplish than in other industries. The combination of two companies requires, among other things, integration of the companies’ respective technologies and research and development efforts. We cannot assure you that this integration will be accomplished smoothly or successfully. The difficulties of integration may be increased by any need to coordinate geographically separated organizations and address possible differences in corporate cultures and management philosophies. The integration of certain operations will require the dedication of management resources which may temporarily distract attention from the day-to-day operations of the combined companies. The business of the combined companies may also be disrupted by employee retention uncertainty and lack of focus during integration. The inability of management to integrate successfully the operations of the two companies, in particular, the integration and retention of key personnel, or the inability to integrate successfully two technology platforms, could have a material adverse effect on our business, results of operations and financial condition.

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We reacquired rights to HGS-ETR1 from GSK, as well as all GSK rights to other TRAIL Receptor antibodies. We may be unsuccessful in developing and commercializing products from these antibodies without a collaborative partner.

As part of our September 1996 agreement with GSK, we granted a 50/50 co-development and co-commercialization option to GSK for certain human therapeutic products that successfully completed Phase 2a clinical trials. In August 2005, we announced that GSK had exercised its option to develop and commercialize HGS-ETR1 (mapatumumab) jointly with us. In April 2008, we announced that we had reacquired all rights to our TRAIL receptor antibodies (including rights to HGS-ETR1 and HGS-ETR2) from GSK, in return for a reduction in royalties due to us if Syncria^®, a GSK product for which we would be owed royalties, is commercialized. We also announced that our agreement with the pharmaceutical division of Kirin Brewery Company, Ltd. for joint development of antibodies to TRAIL receptor 2 had been terminated. Takeda Pharmaceutical Company, Ltd. has the right to develop HGS-ETR1 in Japan. As a result of these actions, we have assumed full responsibility for the development and commercialization of products based on these antibodies, except for HGS-ETR1 in Japan.

Our ability to receive revenues from the assets licensed in connection with our CoGenesys transaction will depend on Teva Bio’s ability to develop and commercialize those assets.

We will depend on Teva Bio to develop and commercialize the assets licensed as part of the spin-off of CoGenesys. If Teva Bio is not successful in its efforts, we will not receive any revenue from the development of these assets. In addition, our relationship with Teva Bio will be subject to the risks and uncertainties inherent in our other collaborations.

Because we currently depend on our collaboration partners for substantial revenue, we may not become profitable on a sustainable basis if we cannot increase the revenue from our collaboration partners or other sources.

We have received substantial revenue from payments made under collaboration agreements with GSK and Novartis, and to a lesser extent, other agreements. The research term of our initial GSK collaboration agreement and many of our other collaboration agreements expired in 2001. None of the research terms of these collaboration agreements was renewed and we may not be able to enter into additional collaboration agreements. While our partners under our initial GSK collaboration agreement have informed us that they have been pursuing research programs involving different genes for the creation of small molecule, protein and antibody drugs, we cannot assure you that any of these programs will be continued or will result in any approved drugs.

Under our present collaboration agreements, we are entitled to certain development and commercialization payments based on our development of the applicable product or certain milestone and royalty payments based on our partners’ development of the applicable product. We may not receive payments under these agreements if we or our collaborators fail to:

•  develop marketable products;

•  obtain regulatory approvals for products; or

•  successfully market products.

Further, circumstances could arise under which one or more of our collaboration partners may allege that we breached our agreement with them and, accordingly, seek to terminate our relationship with them. Our collaboration partners may also terminate these agreements without cause or if competent scientific evidence or safety risks do not justify moving the applicable product forward. If any one of these agreements terminates, this could adversely affect our ability to commercialize our products and harm our business.

If one of our collaborators pursues a product that competes with our products, there could be a conflict of interest and we may not receive milestone or royalty payments.

Each of our collaborators is developing a variety of products, some with other partners. Our collaborators may pursue existing or alternative technologies to develop drugs targeted at the same diseases instead of using our licensed technology to develop products in collaboration with us. Our collaborators may also develop products that are similar to or compete with products they are developing in collaboration with us. If our collaborators pursue

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these other products instead of our products, we may not receive milestone or royalty payments. For example, GSK has been developing for the treatment of insomnia an orexin inhibitor based on our technology and to which we are entitled to milestones, royalties and co-promotion rights. In July 2008, GSK announced a collaboration with Actelion Ltd. to co-develop and co-commercialize a different orexin inhibitor. While GSK has stated publicly that it intends to continue work on the inhibitor derived from our technology, there can be no assurance that it will continue to do so or that such work will lead to a commercial product.

REGULATORY RISKS

Because we are subject to extensive changing government regulatory requirements, we may be unable to obtain government approval of our products in a timely manner.

Regulations in the United States and other countries have a significant impact on our research, product development and manufacturing activities and will be a significant factor in the marketing of our products. All of our products require regulatory approval prior to commercialization. In particular, our products are subject to rigorous preclinical and clinical testing and other premarket approval requirements by the FDA and similar regulatory authorities in other regions, such as Europe and Asia. Various statutes and regulations also govern or influence the manufacturing, safety, labeling, storage, record keeping and marketing of our products. The lengthy process of seeking these approvals, and the subsequent compliance with applicable statutes and regulations, require the expenditure of substantial resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals could materially adversely affect our ability to commercialize our products in a timely manner, or at all.

Marketing Approvals.  Before a product can be marketed and sold in the United States, the results of the preclinical and clinical testing must be submitted to the FDA for approval. This submission will be either a new drug application or a biologics license application, depending on the type of drug. In responding to a new drug application or a BLA, the FDA may grant marketing approval, request additional information or deny the application if it determines that the application does not provide an adequate basis for approval. We cannot assure you that any approval required by the FDA will be obtained on a timely basis, or at all. For example, in November 2009, we received a Complete Response Letter from the FDA related to our BLA for raxibacumab. In this letter, the FDA determined that it cannot approve our BLA for raxibacumab in its present form and requested additional studies and data that would be needed prior to the FDA making a decision as to whether or not to approve the raxibacumab BLA. We may not be able to complete the requested studies or to generate the required data in a timely manner if at all. If the FDA requires that we complete the additional studies and generate the additional data requested in the Complete Response Letter, we may be required to withdraw our existing BLA and resubmit our BLA after completion of such studies. This will start a new review cycle. Even if we could complete such studies and generate such data, the studies and data may not be sufficient for FDA approval. In addition, based on the results of a human study for a particular product candidate, regulatory authorities may not permit us to undertake any additional clinical trials for that product candidate.

In November 2009, we filed a BLA with the FDA for ZALBIN. In February 2010, the FDA accepted our ZALBIN BLA filing with a PDUFA action date of October 4, 2010. We plan to file a BLA with the FDA for BENLYSTA in the second quarter of 2010 and to request priority review of that application. The FDA may not grant priority review of our BENLYSTA BLA and may not act on our BLAs in a timely manner. The FDA may determine that our BLAs are insufficient to support marketing approval or may deny our BLAs for either or both products, either of which would materially adversely affect our results of operations and business.

The FDA may condition marketing approval on the conduct of specific post-marketing studies to further evaluate safety and efficacy. Rigorous and extensive FDA regulation of pharmaceutical products continues after approval, particularly with respect to compliance with cGMPs, reporting of adverse effects, advertising, promotion and marketing. Discovery of previously unknown problems or failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions, any of which could materially adversely affect our business.

Foreign Regulation.  We must obtain regulatory approval by governmental agencies in other countries prior to commercialization of our products in those countries. Foreign regulatory systems may be just as rigorous, costly and uncertain as in the United States.

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Because we are subject to environmental, health and safety laws, we may be unable to conduct our business in the most advantageous manner.

We are subject to various laws and regulations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals, emissions and wastewater discharges, and the use and disposal of hazardous or potentially hazardous substances used in connection with our research, including radioactive compounds and infectious disease agents. We also cannot accurately predict the extent of regulations that might result from any future legislative or administrative action. Any of these laws or regulations could cause us to incur additional expense or restrict our operations.

INTELLECTUAL PROPERTY RISKS

If our patent applications do not result in issued patents or if patent laws or the interpretation of patent laws change, our competitors may be able to obtain rights to and commercialize our discoveries.

Our pending patent applications, including those covering full-length genes and their corresponding proteins, may not result in the issuance of any patents. Our applications may not be sufficient to meet the statutory requirements for patentability in all cases or may be subject to challenge, if they do issue. Important legal issues remain to be resolved as to the extent and scope of available patent protection for biotechnology products and processes in the United States and other important markets outside the United States, such as Europe and Japan. In the United States, Congress is considering significant changes to U.S. intellectual property laws which could affect the extent and scope of existing protections for biotechnology products and processes. Foreign markets may not provide the same level of patent protection as provided under the U.S. patent system. We expect that litigation or administrative proceedings will likely be necessary to determine the validity and scope of certain of our and others’ proprietary rights. We are currently involved in a number of litigation and administrative proceedings relating to the scope of protection of our patents and those of others in both the United States and in the rest of the world.

We are involved in a number of interference proceedings brought by the United States Patent and Trademark Office (“PTO”) and may be involved in other interference proceedings in the future. These proceedings determine the priority of inventions and, thus, the right to a patent for technology in the U.S. For example, we were recently involved in interferences in the United States with both Genentech, Inc. and Immunex Corporation, a wholly-owned subsidiary of Amgen, Inc., related to products based on TRAIL Receptor 2 (such as HGS-ETR2). In four of these interferences, we initiated district court litigation to review adverse decisions by the PTO. In two of these cases, we also sought appellate review of a jurisdictional issue decided by the district court. In light of the multiple adverse judgments by the PTO and district court, we requested dismissal of both the district court and appellate actions. Consequently, we will not be able to obtain patent protection for TRAIL Receptor 2 from any of the patents or patent applications that were involved in these litigations. The adverse judgments in these litigations also may prevent us from obtaining other issued patents related to TRAIL Receptor 2.

We are also involved in proceedings in connection with foreign patent filings, including opposition and revocation proceedings and may be involved in other opposition proceedings in the future. For example, we are involved in European opposition proceedings against an issued patent of Biogen Idec. In this opposition, the European Patent Office (“EPO”) found the claims of Biogen Idec’s patent to be valid. The claims relate to a method of treating autoimmune diseases using an antibody to BLyS (such as BENLYSTA). We and GSK have entered into a definitive license agreement with Biogen Idec that provides for an exclusive license to this European patent. This patent is still under appeal in Europe. We also have been involved in an opposition proceeding brought by Eli Lilly and Company with respect to our European patent related to BLyS compositions, including antibodies. In 2008, the Opposition Division of the EPO held our patent invalid. We appealed this decision, and in October 2009, a Technical Board of Appeal of the EPO reversed the Opposition Division decision and held that our European patent is valid. Although decisions of a Technical Board of Appeal can be appealed only in limited circumstances, Eli Lilly may appeal this decision. In addition, Eli Lilly instituted a revocation proceeding against our United Kingdom patent that corresponds to our BLyS European patent; in this proceeding the United Kingdom trial court found the patent invalid. We appealed this decision and the UK Court of Appeal upheld the lower court ruling that our United Kingdom patent was invalid. We intend to appeal this decision to the UK Supreme Court.

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We have also opposed European patents issued to Genentech, Inc. and Immunex Corporation related to products based on TRAIL Receptor 2. Genentech, Inc. and Immunex Corporation also opposed our European patent related to products based on TRAIL Receptor 2. HGS has withdrawn this opposed European patent. Genentech, Inc. also has opposed our Australian patent related to products based on TRAIL Receptor 2. In addition, Genentech, Inc. has opposed our European patent related to products based on TRAIL Receptor 1 (such as HGS-ETR1).

We cannot assure you that we will be successful in any of these proceedings. Moreover, any such litigation or proceeding may result in a significant commitment of resources in the future and could force us to do one or more of the following: cease selling or using any of our products that incorporate the challenged intellectual property, which would adversely affect our revenue; obtain a license from the holder of the intellectual property right alleged to have been infringed, which license may not be available on reasonable terms, if at all; and redesign our products to avoid infringing the intellectual property rights of third parties, which may be time-consuming or impossible to do. In addition, such litigation or proceeding may allow others to use our discoveries or develop or commercialize our products. Changes in, or different interpretations of, patent laws in the United States and other countries may result in patent laws that allow others to use our discoveries or develop and commercialize our products or prevent us from using or commercializing our discoveries and products. We cannot assure you that the patents we obtain or the unpatented technology we hold will afford us significant commercial protection.

If others file patent applications or obtain patents similar to ours, then the United States Patent and Trademark Office may deny our patent applications, or others may restrict the use of our discoveries.

We are aware that others, including universities and companies working in the biotechnology and pharmaceutical fields, have filed patent applications and have been granted patents in the United States and in other countries that cover subject matter potentially useful or necessary to our business. Some of these patents and patent applications claim only specific products or methods of making products, while others claim more general processes or techniques useful in the discovery and manufacture of a variety of products. The risk of third parties obtaining additional patents and filing patent applications will continue to increase as the biotechnology industry expands. We cannot predict the ultimate scope and validity of existing patents and patents that may be granted to third parties, nor can we predict the extent to which we may wish or be required to obtain licenses to such patents, or the availability and cost of acquiring such licenses. To the extent that licenses are required, the owners of the patents could bring legal actions against us to claim damages or to stop our manufacturing and marketing of the affected products. We believe that there will 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 and may not provide us with competitive advantages. Other parties may challenge our patents or design around our issued patents or develop products providing effects similar to our products. In addition, others may discover uses for genes, proteins or antibodies 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 a gene, protein or antibody for which we have a patent claim could exclude us from selling a product for a use covered by its patent.

We rely on our collaboration partners to seek patent protection for the products they develop based on our research.

A significant portion of our future revenue may be derived from royalty payments from our collaboration partners. These partners face the same patent protection issues that we and other biotechnology or pharmaceutical companies face. As a result, we cannot assure you that any product developed by our collaboration partners will be patentable, and therefore, revenue from any such product may be limited, which would reduce the amount of any royalty payments. We also rely on our collaboration partners to effectively prosecute their patent applications. Their failure to obtain or protect necessary patents could also result in a loss of royalty revenue to us.

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If we are unable to protect our trade secrets, 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 we have acquired or developed proprietary procedures and materials for the production of proteins and antibodies. We have not sought patent protection for these procedures. While we have entered into confidentiality agreements with employees and collaborators, we may not be able to prevent their disclosure of these data or materials. Others may independently develop substantially equivalent information and processes.

FINANCIAL AND MARKET RISKS

Because of our substantial indebtedness and lease obligations, we may be unable to adjust our strategy to meet changing conditions in the future.

As of December 31, 2009, we had convertible subordinated debt of $349.8 million ($403.9 million on a face value basis) and a long-term lease financing for our large-scale manufacturing facility of $248.6 million on our balance sheet. During 2009 we made cash interest payments on our convertible subordinated debt of $9.9 million. In addition we repurchased $106.2 million of our convertible subordinated debt during 2009 for approximately $50.0 million plus accrued interest. During 2009 we made cash payments on our long-term lease financing of $24.0 million. In addition, we have operating leases, primarily our long-term operating lease for our headquarters, for which we made cash payments of $22.3 million during 2009. Our substantial debt and long-term lease obligations will have several important consequences for our future operations. For instance:

•  payments of interest on, and principal of, our indebtedness and our long-term lease obligations will be substantial and may exceed then current income and available cash;

•  we may be unable to obtain additional future financing for continued clinical trials, capital expenditures, acquisitions 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 not have adequate resources available to repay our Convertible Subordinated Notes due 2011 (“2011 Notes”) and our Convertible Subordinated Notes due 2012 (“2012 Notes”) at maturity.

As of December 31, 2009, we had $403.9 million in face value of convertible subordinated debt outstanding, with $197.1 million and $206.8 million due in 2011 and 2012, respectively. Those notes are convertible into our common stock at conversion prices of approximately $15.55 and $17.78 per share, respectively. If our stock price does not exceed the applicable conversion price of those notes, upon maturity, we may need to pay the note holders in cash or restructure some or all of the debt. Our recent stock price has been above the conversion price and we currently have sufficient unrestricted cash should note holders seek cash payment upon maturity. However, since it may be one or more years, if ever, before we are likely to generate significant positive cash flow from operations, we may not have enough cash, cash equivalents, short-term investments and marketable securities available to repay our debt upon maturity.

To become a successful biopharmaceutical company, we may need additional funding in the future. If we do not obtain this funding on acceptable terms, we may not be able to generate sufficient revenue to repay our convertible debt, to launch and market successfully our products and to continue our biopharmaceutical discovery and development efforts.

We continue to expend substantial funds on our research and development programs and human studies on current and future drug candidates. We expect to expend significant funds to support pre-launch and commercial marketing activities and acquire additional manufacturing capacity. We may need additional financing to fund our operating expenses, including pre-commercial launch activities, manufacturing activities, marketing activities,

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research and development and capital requirements. In addition, even if our products are successful, if our stock price does not exceed the applicable conversion price when our remaining convertible debt matures, we may need to pay the note holders in cash or restructure some or all of the debt. If we are unable to restructure the debt, we may not have enough cash, cash equivalents, short-term investments and marketable securities available to repay the remaining debt. We may not be able to obtain additional financing on acceptable terms either to fund operating expenses or to repay the convertible debt. If we raise additional funds by issuing equity securities, equity-linked securities or debt securities, the new equity securities may dilute the interests of our existing stockholders and the new debt securities may contain restrictive financial covenants. For example, in August 2009 and December 2009, we completed public offerings of 26,697,250 and 17,825,000 newly issued shares of common stock, respectively.

Our need for additional funding will depend on many factors, including, without limitation:

•  the amount of revenue or cost sharing, if any, that we are able to obtain from our collaborations, any approved products, and the time and costs required to achieve those revenues;

•  the timing, scope and results of preclinical studies and clinical trials;

•  the size and complexity of our development programs;

•  the time and costs involved in obtaining regulatory approvals;

•  the timing and costs of increasing our manufacturing capacity;

•  the costs of launching our products;

•  the costs of commercializing our products, including marketing, promotional and sales costs;

•  the commercial success of our products;

•  our stock price;

•  our ability to establish and maintain collaboration partnerships;

•  competing technological and market developments;

•  the costs involved in filing, prosecuting and enforcing patent claims; and

•  scientific progress in our research and development programs.

If we are unable to raise additional funds, we may, among other things:

•  delay, scale back or eliminate some or all of our research and development programs;

•  delay, scale back or eliminate some or all of our commercialization activities;

•  lose rights under existing licenses;

•  relinquish more of, or all of, our rights to product candidates on less favorable terms than we would otherwise seek; and

•  be unable to operate as a going concern.

Our short-term investments, marketable securities and restricted investments are subject to certain risks which could materially adversely affect our overall financial position.

We invest our cash in accordance with an established internal policy and customarily in instruments which historically have been highly liquid and carried relatively low risk. However, the capital and credit markets have been experiencing extreme volatility and disruption. Over the past two years, the volatility and disruption have reached unprecedented levels. We maintain a significant portfolio of investments in short-term investments, marketable debt securities and restricted investments, which are recorded at fair value. Certain of these transactions expose us to credit risk in the event of default by the issuer. To minimize our exposure to credit risk, we invest in securities with strong credit ratings and have established guidelines relative to diversification and maturity with the objective of maintaining safety of principal and liquidity. We do not invest in derivative financial instruments or auction rate securities, and we generally hold our investments in debt securities until maturity. In September 2008,

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Lehman Brothers Holdings, Inc. (“LBHI”) filed for bankruptcy and the debt securities issued by LBHI experienced a significant decline in market value, which caused an other-than-temporary impairment of our investment in LBHI. As a result, we recorded an impairment charge of $6.3 million during 2008. In recent years, certain financial instruments, including some of the securities in which we invest, have sustained downgrades in credit ratings and some high quality short-term investment securities have suffered illiquidity or events of default. Deterioration in the credit market may have an adverse effect on the fair value of our investment portfolio. Should any of our short-term investments, marketable securities or restricted investments lose significant value or have their liquidity impaired, it could materially and adversely affect our overall financial position by imperiling our ability to fund our operations and forcing us to seek additional financing sooner than we would otherwise. Such financing may not be available on commercially attractive terms or at all.

Our insurance policies are expensive and protect us only from some business risks, which could leave us exposed to significant, uninsured liabilities.

We do not carry insurance for all categories of risk that our business may encounter. We currently maintain general liability, property, auto, workers’ compensation, product liability, fiduciary and directors’ and officers’ insurance policies. We do not know, however, if we will be able to maintain existing insurance with adequate levels of coverage. For example, the premiums for our directors’ and officers’ insurance policy have increased in the past and may increase in the future, and this type of insurance may not be available on acceptable terms or at all in the future. Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our cash position and results of operations.

We may be subject to product liability or other litigation, which could result in an inefficient allocation of our critical resources, delay the implementation of our business strategy and, if successful, materially and adversely harm our business and financial condition as a result of the costs of liabilities that may be imposed thereby.

Our business exposes us to the risk of product liability claims. If any of our product candidates harm people, or are alleged to be harmful, we may be subject to costly and damaging product liability claims brought against us by clinical trial participants, consumers, health care providers, corporate partners or others. We have product liability insurance covering our ongoing clinical trials and raxibacumab, but do not have insurance for any of our other commercial activities. If we are unable to obtain insurance at an acceptable cost or otherwise protect against potential product liability claims, we may be exposed to significant litigation costs and liabilities, which may materially and adversely affect our business and financial position. If we are sued for injuries allegedly caused by any of our product candidates, our litigation costs and liability could exceed our total assets and our ability to pay. In addition, we may from time to time become involved in various lawsuits and legal proceedings which arise in the ordinary course of our business. Any litigation to which we are subject could require significant involvement of our senior management and may divert management’s attention from our business and operations. Litigation costs or an adverse result in any litigation that may arise from time to time may adversely impact our operating results or financial condition.

OTHER RISKS RELATED TO OUR BUSINESS

Many of our competitors have substantially greater capabilities and resources and may be able to develop and commercialize products before we do or develop generic drugs that are similar to our products.

We face intense competition from a wide range of pharmaceutical and biotechnology companies, as well as academic and research institutions and government agencies.

Principal competitive factors in our industry include:

•  the quality and breadth of an organization’s technology;

•  the skill of an organization’s employees and ability to recruit and retain skilled employees;

•  an organization’s intellectual property portfolio;

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•  the range of capabilities, from target identification and validation to drug discovery and development to manufacturing and marketing; and

•  the availability of substantial capital resources to fund discovery, development and commercialization activities.

Many large pharmaceutical and biotechnology companies have significantly larger intellectual property estates than we do, more substantial capital resources than we have, and greater capabilities and experience than we do in preclinical and clinical development, sales, marketing, manufacturing and regulatory affairs.

We are aware of existing products and products in research or development by our competitors that address the diseases we are targeting. Any of these products may compete with our product candidates. Our competitors may succeed in developing their products before we do, obtaining approvals from the FDA or other regulatory agencies for their products more rapidly than we do, or developing products that are more effective than our products. These products or technologies might render our technology or drugs under development obsolete or noncompetitive. In addition, our albumin fusion protein product, ZALBIN, is designed to be a longer-acting version of existing products. The existing products in many cases have an established market that may make the introduction of ZALBIN more difficult.

If our products are approved and marketed, we may also face risks from generic drug manufacturers. Legislation currently pending in the United States Congress and regulatory and legislative activity in other countries may make it easier for generic drug manufacturers to manufacture and sell in the United States biological drugs similar or identical to ZALBIN, BENLYSTA and raxibacumab which might affect the profitability or commercial viability of our products.

If any of our product candidates for which we receive regulatory approval do not achieve broad market acceptance (including as a result of failing to differentiate our products from competitor products or as a result of failing to obtain reimbursement rates for our products that are competitive from the healthcare provider’s perspective), the revenues we generate from their sales will be limited and our business may not be profitable.

Our success will depend in substantial part on the extent to which our products for which we obtain marketing approval from the FDA and comparable foreign regulatory authorities are accepted by the medical community and reimbursed by third-party payors, including government payors. The degree of market acceptance will depend upon a number of factors, including, among other things:

•  our product’s perceived advantages over existing treatment methods (including relative convenience and ease of administration and prevalence and severity of any adverse events, including any unexpected adverse events of which we become aware after marketing approval);

•  claims or other information (including limitations or warnings) in our product’s approved labeling;

•  reimbursement and coverage policies of government and other third-party payors;

•  pricing and cost-effectiveness;

•  in the United States, the ability of group purchasing organizations, or GPOs (including distributors and other network providers), to sell our products to their constituencies;

•  the establishment and demonstration in the medical community of the safety and efficacy of our products and our ability to provide acceptable evidence of safety and efficacy;

•  availability of alternative treatments; and

•  the prevalence of off-label substitution of biologically equivalent products.

We cannot predict whether physicians, patients, healthcare insurers or maintenance organizations, or the medical community in general, will accept or utilize any of our products. If our products are approved but do not achieve an adequate level of acceptance by these parties, we may not generate sufficient revenues from these

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products to become or remain profitable. In addition, our efforts to educate the medical community and third-party payors regarding the benefits of our products may require significant resources and may never be successful.

If the health care system or reimbursement policies change, the prices of our potential products may be lower than expected and our potential sales may decline.

The levels of revenues and profitability of biopharmaceutical companies like ours may be affected by the continuing efforts of government and third-party payors to contain or reduce the costs of health care through various means. For example, in certain foreign markets, pricing or profitability of therapeutic and other pharmaceutical products is subject to governmental control. In the United States, there have been, and we expect that there will continue to be, a number of federal and state proposals to implement similar governmental control. In addition, in the United States, a number of proposals have been made to reduce the regulatory burden of follow-on biologics, which could affect the prices and sales of our products in the future. Additional and broad health care proposals currently are being considered by the United States Congress. While we cannot predict whether any legislative or regulatory proposals will be adopted, the adoption of such proposals could have a material adverse effect on our business, financial condition and profitability. In addition, in the United States and elsewhere, sales of therapeutic and other pharmaceutical products depend in part on the availability of reimbursement to the consumer from third-party payors, such as government and private insurance plans. Third-party payors are increasingly challenging the prices charged for medical products and services. We cannot assure you that any of our products will be considered cost effective or that reimbursement to the consumer will be available or will be sufficient to allow us to sell our products on a competitive and profitable basis.

If we lose or are unable to attract key management or other personnel, we may experience delays in product development.

We depend on our senior executive officers as well as other key personnel. If any key employee decides to terminate his or her employment with us, this termination could delay the commercialization of our products or prevent us from becoming profitable. Competition for qualified employees is intense among pharmaceutical and biotechnology companies, 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. The reduction in scope of some programs in March 2009 included decreasing headcount. This reduction in headcount may adversely affect our ability to attract, retain and motivate current and new employees.

We may be unable to fulfill the terms of our agreement with Hospira, Inc. and other agreements, if any, with potential customers for manufacturing process development and supply of selected biopharmaceutical products.

We have entered into agreements for manufacturing process development, clinical and commercial supply of certain biopharmaceutical products, including an agreement with Hospira, Inc., and may enter into similar agreements with other potential customers. We may not be able to successfully manufacture products under the agreement with Hospira or under other agreements, if any. We have not yet manufactured any products approved for commercial use and, except for raxibacumab, have limited experience in manufacturing materials suitable for commercial use. We have limited experience manufacturing in a large-scale manufacturing facility built to increase our capacity for protein and antibody drug production. The FDA must inspect and license our facilities to determine compliance with cGMP requirements for commercial production. We may not be able to enter into additional agreements with other customers. Hospira or any future customer may decide to discontinue the products contemplated under the agreements, and therefore we may not receive revenue from these agreements.

Because we depend on third parties to conduct many of our human studies, we may encounter delays in or lose some control over our efforts to develop products.

We are dependent on third-party research organizations to conduct most of our human studies. We have engaged contract research organizations to manage our global Phase 3 clinical studies. If we are unable to obtain any necessary services on acceptable terms, we may not complete our product development efforts in a timely manner. If we rely on third parties for the management of these human studies, we may lose some control over these activities and become too dependent upon these parties. These third parties may not complete the activities on schedule.

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RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

Because our stock price has been and will likely continue to be highly volatile, the market price of our common stock may be lower or more volatile than you expected.

Our stock price, like the stock prices of many other biotechnology companies, has been highly volatile. During the preceding twelve months, the closing price of our common stock has been as low as $0.48 per share and as high as $31.15 per share. The market price of our common stock could fluctuate widely because of:

•  future announcements about our company or our competitors, including the results of testing, clinical trials, technological innovations or new commercial products;

•  negative regulatory actions with respect to our potential products or regulatory approvals with respect to our competitors’ products;

•  changes in government regulations;

•  developments in our relationships with our collaboration partners;

•  developments affecting our collaboration partners;

•  announcements relating to health care reform and reimbursement levels for new drugs;

•  our failure to acquire or maintain proprietary rights to the gene sequences we discover or the products we develop;

•  litigation; and

•  public concern as to the safety of our products.

The stock market has experienced 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 our common stock to be lower or more volatile than you expected.

The issuance and sale of shares underlying our outstanding convertible debt securities and options, as well as the sale of additional equity or equity-linked securities may materially and adversely affect the price of our common stock.

Sales of substantial amounts of shares of our common stock or securities convertible into or exchangeable for our common stock in the public market, or the perception that those sales may occur, could cause the market price of our common stock to decline. We have used and may continue to use our common stock or securities convertible into or exchangeable for our common stock to acquire technology, product rights or businesses, or for other purposes. Our authorized capital stock consists of 400,000,000 shares of common stock, par value $0.01 per share. As of December 31, 2009, we had 185,254,660 shares of common stock outstanding, including an aggregate of 44,522,250 shares issued in public offerings in August and December 2009. In addition, an aggregate of approximately 24,306,115 shares of our common stock are issuable upon conversion of our outstanding 2011 Notes and outstanding 2012 Notes at an applicable conversion price of $15.55 and $17.78 per share, respectively; 24,601,174 shares of our common stock are issuable upon the exercise of options outstanding as of December 31, 2009, having a weighted-average exercise price of $13.62 per share, including 4,352,003 stock options granted during the year ended December 31, 2009 with a weighted-average grant date fair value of $0.91 per share; and 205,737 shares of our common stock are issuable upon the vesting of restricted stock unit awards outstanding as of December 31, 2009. If we issue additional equity securities, including in exchange for our outstanding convertible debt, the price of our common stock may be materially and adversely affected and the holdings of our existing stockholders would be diluted. The issuance and sale of shares issuable upon conversion of our outstanding convertible debt securities and options or the sale of additional equity or equity-linked securities could materially and adversely affect the price of our common stock.

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Our certificate of incorporation and bylaws could discourage acquisition proposals, delay a change in control or prevent transactions that are in your best interests.

Provisions of our certificate of incorporation and bylaws, as well as Section 203 of the Delaware General Corporation Law, may discourage, delay or prevent a change in control of our company that you as a stockholder may consider favorable and may be in your best interest. Our certificate of incorporation and bylaws contain provisions that:

•  authorize the issuance of up to 20,000,000 shares of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares and discourage a takeover attempt;

•  limit who may call special meetings of stockholders; and

•  establish advance notice requirements for nomination of candidates for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholders’ meetings.

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ITEM 1B.   UNRESOLVED STAFF COMMENTS

None.

ITEM 2.   PROPERTIES

We currently lease and occupy approximately 1,020,000 square feet of laboratory, manufacturing and office space in Rockville, Maryland. Our space includes approximately 200,000 square feet of laboratory space, approximately 520,000 square feet of manufacturing and manufacturing support space and approximately 300,000 square feet of office space. This excludes a portion of our headquarters facility under lease which is not being utilized.

We anticipate that existing commercial real estate or the available land located at our laboratory and office campus will enable us to continue to expand our operations in close proximity to one another. We believe that our properties are generally in good condition, well maintained, suitable and adequate to carry on our business.

ITEM 3.   LEGAL PROCEEDINGS

We are party to various claims and legal proceedings from time to time. We are not aware of any legal proceedings that we believe could have, individually or in the aggregate, a material adverse effect on our results of operations, financial condition or liquidity.

ITEM 4.   (REMOVED AND RESERVED)

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PART II

ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is traded on the NASDAQ Global Market under the symbol HGSI. The following table presents the quarterly high and low closing prices as quoted by NASDAQ.

	High		Low
2008
First Quarter	$	11.79	$	4.86
Second Quarter	$	6.79	$	5.21
Third Quarter	$	7.94	$	5.17
Fourth Quarter	$	6.06	$	1.24
2009
First Quarter	$	2.78	$	0.48
Second Quarter	$	3.19	$	0.82
Third Quarter	$	20.50	$	2.39
Fourth Quarter	$	31.15	$	17.96

As of January 31, 2010, there were approximately 624 holders of record of our common stock. We have never declared or paid any cash dividends. We do not anticipate declaring or paying cash dividends for the foreseeable future, in part because existing contractual agreements prohibit such dividends. Instead, we will retain our earnings, if any, for the future operation and expansion of our business.

The following graph compares the performance of our Common Stock for the periods indicated with the performance of the NASDAQ U.S. Stock Market Total Return Index (the “TRI”) and the NASDAQ Pharmaceutical Index (the “NPI”). The comparison assumes $100 was invested on December 31, 2004 in our Common Stock and in each of the foregoing indices and assumes the reinvestment of dividends, if any.

Comparison of 5 Year Cumulative Total Return

The performance graph and related information shall not be deemed “soliciting material” or be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference into such filing.

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ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA

We present below our selected consolidated financial data for the years ended December 31, 2009, 2008 and 2007, and as of December 31, 2009 and 2008, which have been derived from the audited consolidated financial statements included elsewhere herein and should be read in conjunction with such consolidated financial statements and the accompanying notes. We present below our selected financial data for the years ended December 31, 2006 and 2005, and as of December 31, 2007, 2006 and 2005, which have been derived from audited financial statements not included herein. The results of operations of prior periods are not necessarily indicative of results that may be expected for any other period. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.”

	Year Ended December 31,
	2009			2008			2007			2006			2005
	(in thousands, except per share and ratio data)
Statement of Operations Data:
Revenue:
Product sales	$	154,074		$	—		$	—		$	—		$	—
Manufacturing and development services		50,653			—			—			—			—
Research and development collaborative agreements		71,022			48,422			41,851			25,755			19,113
Total revenue		275,749			48,422			41,851			25,755			19,113
Costs and expenses:
Cost of product sales		15,805			—			—			—			—
Cost of manufacturing and development services		18,215			—			—			—			—
Research and development expenses		173,709			243,257			246,293			209,515			228,717
General and administrative expenses		61,073			60,865			55,874			53,101			42,066
Facility-related exit charges (credits)		759			—			(3,673	)		29,510			—
Total costs and expenses		269,561			304,122			298,494			292,126			270,783
Income (loss) from operations		6,188			(255,700	)		(256,643	)		(266,371	)		(251,670	)
Investment income		12,727			23,487			32,988			27,131			24,218
Interest expense		(58,424	)		(62,912	)		(60,716	)		(39,606	)		(17,199	)
Gain (loss) on extinguishment of debt		38,873			—			—			—			(1,204	)
Gain on sale of long-term equity investment		5,259			32,518			—			14,759			1,302
Other expense		(238	)		(6,284	)		—			—			—
Income (loss) before taxes		4,385			(268,891	)		(284,371	)		(264,087	)		(244,553	)
Income tax benefit		1,274			—			—			—			—
Net income (loss)	$	5,659		$	(268,891	)	$	(284,371	)	$	(264,087	)	$	(244,553	)
Net income (loss) per share, basic and diluted	$	0.04		$	(1.99	)	$	(2.12	)	$	(2.00	)	$	(1.87	)
Other Data:
Ratio of earnings to fixed charges		1.06			—			—			—			—
Coverage deficiency	$	—		$	(268,891	)	$	(284,371	)	$	(264,087	)	$	(244,553	)

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ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA, CONTINUED

	As of December 31,
	2009			2008			2007			2006			2005
	(in thousands)
Balance Sheet Data:
Cash, cash equivalents, short-term investments, marketable securities and restricted investments(1)	$	1,191,660		$	372,939		$	603,840		$	763,084		$	646,220
Total assets(1)		1,530,630			686,832			961,566			1,161,922			1,001,963
Total debt and lease financing, less current portion(2)		598,435			664,074			637,513			612,811			351,034
Accumulated deficit		(2,186,666	)		(2,192,325	)		(1,923,434	)		(1,639,063	)		(1,374,322	)
Total stockholders’ equity (deficit)		755,415			(136,304	)		117,145			364,892			580,849

(1)	“Cash, cash equivalents, short-term investments, marketable securities and restricted investments” and “Total assets” for 2009, 2008, 2007, 2006 and 2005 include $88,437, $69,360, $70,931, $61,165 and $220,171 respectively, of restricted investments relating to certain leases.
(2)	“Total debt and lease financing, less current portion” for 2009, 2008, 2007, 2006 and 2005 does not include any operating lease obligations under various facility and equipment lease arrangements. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for additional discussion.

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ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Human Genome Sciences, Inc. (“HGS”) is a commercially focused biopharmaceutical company advancing toward the market with three products in late-stage development: BENLYSTA^tm for systemic lupus erythematosus (“SLE”), ZALBIN^tm for chronic hepatitis C, and raxibacumab for inhalation anthrax.

BENLYSTA and ZALBIN continue to progress toward commercialization. In July and November 2009, we reported that BENLYSTA successfully met its primary endpoints in two Phase 3 clinical trials in patients with systemic lupus. We and GlaxoSmithKline (“GSK”) plan to submit marketing applications for BENLYSTA in the United States and Europe in the second quarter of 2010. In March 2009, we reported that ZALBIN successfully met its primary endpoint in the second of two Phase 3 clinical trials in chronic hepatitis C. HGS submitted a Biologics License Application (“BLA”) for ZALBIN in the United States in November 2009, and Novartis submitted a Marketing Authorization Application (“MAA”) under the brand name JOULFERON^® in Europe in December 2009. We received confirmation from the U.S. Food and Drug Administration (“FDA”) in February 2010 that the BLA submission was accepted for filing with a Prescription Drug User Fee Act (“PDUFA”) date of October 4, 2010.

In the first half of 2009 we achieved our first product sales and recognized $162.5 million in product sales and manufacturing and development services revenue by delivering 20,001 doses of raxibacumab to the U.S. Strategic National Stockpile (“SNS”). In July 2009, the U.S. Government (“USG”) exercised its option to purchase 45,000 additional doses to be delivered over a three-year period. We expect to receive a total of approximately $152.0 million from the second order, including $17.7 million in revenue recognized from our first delivery under the new award in the fourth quarter of 2009. In May 2009, we submitted a BLA to the FDA for raxibacumab for the treatment of inhalation anthrax. We received a Complete Response Letter in November 2009, and we continue to work closely with the FDA to determine the additional steps necessary to obtain approval.

In addition to these products in our internal pipeline, we have substantial financial rights to two novel drugs that GSK has advanced to late-stage development. In December 2009, GSK initiated the second Phase 3 clinical trial of darapladib, which was discovered by GSK based on our technology, to evaluate whether darapladib can reduce the risk of adverse cardiovascular events such as a heart attack or stroke. With more than 27,000 patients enrolled, the Phase 3 clinical program for darapladib is among the largest ever conducted to evaluate the safety and efficacy of any cardiovascular medication. In the first quarter of 2009, we received a $9.0 million milestone payment related to GSK’s initiation of a Phase 3 program to evaluate the safety and efficacy of Syncria^® (albiglutide) in the long-term treatment of type 2 diabetes mellitus. We created Syncria using our proprietary albumin-fusion technology and licensed it to GSK in 2004. Six Phase 3 trials of Syncria are currently ongoing.

We also have several novel drugs in earlier stages of clinical development for the treatment of cancer, led by our TRAIL receptor antibody mapatumumab and a small-molecule antagonist of IAP (inhibitor of apoptosis) proteins.

Strategic partnerships are an important driver of our commercial success. We have co-development and commercialization agreements with prominent pharmaceutical companies for both of our lead products — GSK for BENLYSTA and Novartis for ZALBIN. Raxibacumab is being developed under a contract with the Biomedical Advanced Research and Development Authority (“BARDA”) of the Office of the Assistant Secretary for Preparedness and Response (“ASPR”), U.S. Department of Health and Human Services (“HHS”). Our strategic partnerships with leading pharmaceutical and biotechnology companies allow us to leverage our strengths and gain access to sales and marketing infrastructure, as well as complementary technologies. Some of these partnerships provide us with licensing or other fees, clinical development cost-sharing, milestone payments and rights to royalty payments as products are developed and commercialized. In some cases, we are entitled to certain commercialization, co-promotion, revenue-sharing and other product rights.

In the second half of 2009, we received $812.9 million in net proceeds from two public offerings of our common stock, bringing our cash and investments at December 31, 2009 to approximately $1.2 billion.

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Overview (continued)

During 2006, we entered into a collaboration agreement with Novartis. Under this agreement, Novartis will co-develop and co-commercialize ZALBIN and share development costs, sales and marketing expenses and profits of any product that is commercialized in the U.S. Novartis will be responsible for commercialization outside the U.S. and will pay us a royalty on these sales. We received a $45.0 million up-front fee from Novartis upon the execution of the agreement. Including this up-front fee, we are entitled to payments aggregating up to $507.5 million upon the successful attainment of certain milestones. As of December 31, 2009, we have contractually earned and received payments aggregating $207.5 million, including $75.0 million received in 2009. We are recognizing these payments as revenue ratably over the estimated remaining development period, estimated to end in the fall of 2010.

In 2005, GSK exercised its option to co-develop and co-commercialize BENLYSTA. In accordance with a co-development and co-commercialization agreement signed during 2006, we and GSK will share Phase 3 and 4 development costs, and will share equally in sales and marketing expenses and profits of any product that is commercialized. We received a $24.0 million payment during 2006 as partial consideration for entering into this agreement with respect to BENLYSTA and are recognizing this payment as revenue ratably over the development period, estimated to end in the fall of 2010.

We expect that any significant revenue or income through at least 2010 may be limited to raxibacumab revenue, payments under collaboration agreements (to the extent milestones are met), cost reimbursements from GSK and Novartis, payments from the license of product rights, payments under manufacturing agreements, such as our agreement with Hospira, Inc., investment income and other payments from other collaborators and licensees under existing or future arrangements, to the extent that we enter into any future arrangements, and possibly initial sales of BENLYSTA and/or ZALBIN. We expect to continue to incur substantial expenses relating to our research and development efforts and increased expenses relating to our commercialization efforts. As a result, we expect to incur losses over at least the next two years unless we are able to realize additional revenues under existing or any future agreements. The timing and amounts of such revenues, if any, cannot be predicted with certainty and will likely fluctuate sharply. Results of operations for any period may be unrelated to the results of operations for any other period. In addition, historical results should not be viewed as indicative of future operating results.

Critical Accounting Policies and the Use of Estimates

A “critical accounting policy” is one that is both important to the portrayal of our financial condition and results of operations and that requires management’s most difficult, subjective or complex judgments. Such judgments are often the result of a need to make estimates about the effect of matters that are inherently uncertain. The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. See Note B, Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements for further discussion.

We currently believe the following accounting policies to be critical:

Investments.  We account for investments in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“FASB ASC”) Topic 320, Investments - Debt and Equity Securities. We carry our investments at their respective fair values. We periodically evaluate the fair values of our investments to determine whether any declines in the fair value of investments represent an other-than-temporary impairment. This evaluation consists of a review of several factors, including but not limited to the length of time and extent that a security has been in an unrealized loss position, the existence of an event that would impair the issuer’s future repayment potential, the near term prospects for recovery of the market value of a security and our intent to hold the security until the market value recovers, which may be maturity. We also evaluate whether it is more likely than not that we will be required to sell the security before its anticipated recovery. If management determines that such an impairment exists we would recognize an impairment charge. Because we may determine that market or business conditions may lead us to sell a short-term investment or marketable security prior to maturity, we classify our short-term investments and marketable securities as “available-for-sale.” Investments in securities that are classified as

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Critical Accounting Policies and the Use of Estimates (continued)

available-for-sale and have readily determinable fair values are measured at fair market value in the balance sheets, and unrealized holding gains and losses for these investments are reported as a separate component of stockholders’ equity until realized, or an other-than-temporary impairment is recorded. We classify those marketable securities that may be used in operations within one year as short-term investments. Those marketable securities in which we have both the ability to hold until maturity and have a maturity date beyond one year from our most recent consolidated balance sheet date are classified as non-current marketable securities.

For investments carried at fair value, we disclose the level within the fair value hierarchy as prescribed by FASB ASC Topic 820, Fair Value Measurements and Disclosures. We evaluate the types of securities in our investment portfolio to determine the proper classification in the fair value hierarchy based on trading activity and the observability of market inputs. We generally obtain a single quote or price per instrument from independent third parties to help us determine the fair value of securities in Level 1 and Level 2 of the fair value hierarchy.

Inventory.  Inventory costs incurred prior to receiving regulatory approval for a product are expensed. Inventory costs associated with raxibacumab produced subsequent to receiving the follow-on order from the USG are capitalized using the first-in, first-out method.

Leases.  We lease various real properties under operating leases that generally require us to pay taxes, insurance and maintenance. During 2006, we entered into a 20-year lease agreement with BioMed Realty Trust, Inc. (“BioMed”) for our Traville facility. We account for the Traville lease with BioMed as an operating lease.

During 2006 and as described further in Note F, Long-Term Debt, of the Notes to the Consolidated Financial Statements, we sold our large-scale manufacturing (“LSM”) facility and headquarters land to BioMed, and simultaneously agreed to lease such assets back over 20 years. We recorded the sale and leaseback of these assets as a financing transaction and accordingly recorded the allocated sale proceeds as outstanding debt on our balance sheet. We account for lease payments under the related lease agreements as principal and interest payments on this debt.

Impairments of long-lived assets.  Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. Determination of recoverability is based on an estimate of undiscounted cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount the assets, the assets are written down to their estimated fair values. Long-lived assets to be sold are carried at fair value less costs to sell.

Product sales.  Revenue from product sales is recognized when persuasive evidence of an arrangement exists, title to product and associated risk of loss has passed to the customer, the price is fixed or determinable, collection from the customer is reasonably assured, and we have no further performance obligations.

Manufacturing and development services.  We have entered into agreements for manufacturing process development, clinical and commercial supply of certain biopharmaceutical products. Revenue under these agreements is recognized as services are performed or products delivered, depending on the nature of the work contracted, using a proportional performance method of accounting. Performance is assessed using output measures such as units-of-work performed to date as compared to total units-of-work contracted. Advance payments received in excess of amounts earned are classified as deferred revenue until earned.

Research and development collaborative agreements.  Our revenue recognition policies for all non-refundable up-front license fees and milestone arrangements are in accordance with the guidance provided in FASB ASC Topic 605, Revenue Recognition. FASB ASC Topic 605 provides guidance on when an arrangement that involves multiple revenue-generating activities or deliverables should be divided into separate units of accounting for revenue recognition purposes, and if this division is required, how the arrangement consideration should be allocated among the separate units of accounting. If the deliverables in a revenue arrangement constitute separate

38

Critical Accounting Policies and the Use of Estimates (continued)

units of accounting according to FASB ASC Topic 605’s separation criteria, the revenue recognition policy must be determined for each identified unit. If the arrangement is a single unit of accounting, the revenue recognition policy must be determined for the entire arrangement. Under arrangements where the license fees and research and development activities cannot be accounted for as separate units of accounting, non-refundable up-front license fees are deferred and recognized as revenue on a straight-line basis over the expected term of our continued involvement in the research and development process. Revenues from the achievement of research and development milestones, if deemed substantive, are recognized as revenue when the milestones are achieved, and the milestone payments are due and collectible. If not deemed substantive, we would recognize such milestones as revenue on a straight-line basis over the remaining expected term of continued involvement in the research and development process. Milestones are considered substantive if all of the following conditions are met: (1) the milestone is non-refundable; (2) achievement of the milestone was not reasonably assured at the inception of the arrangement; (3) substantive effort is involved to achieve the milestone; and, (4) the amount of the milestone appears reasonable in relation to the effort expended, the other milestones in the arrangement and the related risk associated with the achievement of the milestone and any ongoing research and development or other services are priced at fair value. Payments received in advance of work performed are recorded as deferred revenue.

The up-front license fee received in 2006 from Novartis in connection with ZALBIN is being recognized ratably over an estimated four-year clinical development period ending in 2010. To the extent we achieve the clinical development milestones set forth in the Novartis agreement, the amounts received for these milestones will be recognized ratably over the remaining estimated clinical development period from the date of attainment. Our initial payment from GSK in connection with BENLYSTA is being recognized ratably over the estimated four-year clinical development period ending in 2010. Our up-front license fee with GSK in connection with Syncria is being recognized ratably over the estimated eight-year clinical development period ending in 2012. Our other revenues from research and development collaborative agreements in 2009, 2008 and 2007 have been recognized in full upon receipt, as we have met the criteria for recognition.

Research and Development.  Research and development expenses primarily include related salaries, outside services, materials and supplies and allocated facility costs. Such costs are charged to research and development expense as incurred. Our drug development expenses include accruals for clinical site and clinical research organization (“CRO”) costs. Estimates of the incurred to date but not yet received invoices must be made for clinical site and CRO costs in determining the accrued balance in any accounting period. Reimbursement of research and development expenses received in connection with collaborative cost-sharing agreements is recorded as a reduction of such expenses.

Stock Compensation.  We have a stock incentive plan (the “Incentive Plan”) under which options to purchase shares of our common stock may be granted to employees, consultants and directors at a price no less than the quoted market value on the date of grant. The Incentive Plan also provides for awards in the form of stock appreciation rights, restricted (non-vested) or unrestricted stock awards, stock-equivalent units or performance-based stock awards.

We account for share-based awards to employees and non-employee directors pursuant to FASB guidance that compensation cost resulting from share-based payment transactions be recognized in the financial statements at fair value. The amount of compensation expense recognized using the fair value method requires us to exercise judgment and make assumptions relating to the factors that determine the fair value of our stock option grants. We use the Black-Scholes-Merton model to estimate the fair value of our option grants. The fair value calculated by this model is a function of several factors, including grant price, the risk-free interest rate, the estimated term of the option and the estimated future volatility of the option. The estimated term and estimated future volatility of the options require our judgment.

Exit Accruals.  In 2006, we exited certain facilities, including certain headquarters space (“Wing C”), which required us to make significant estimates in several areas including the realizable values of assets deemed redundant or excess and the ability to generate sublease income. We recorded an initial liability of approximately $9.0 million

39

Critical Accounting Policies and the Use of Estimates (continued)

in lease-related costs with respect to our 2006 exit activities. During the second quarter of 2009, our Wing C subtenant terminated its sublease, which resulted in a charge of approximately $11.4 million. During the fourth quarter of 2009, we decided to resume production activities in Wing C and reversed approximately $10.6 million, representing the portion of the Wing C exit reserve related to the production space. As of December 31, 2009, the exit reserve, which is primarily for the non-production space in Wing C, is approximately $4.2 million.

Income taxes.  Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting basis and the tax basis of assets and liabilities. These deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when such amounts are expected to reverse or be utilized. The realization of total deferred tax assets is contingent upon the generation of future taxable income. A valuation allowance is provided to reduce such deferred tax assets to amounts more likely than not to be ultimately realized.

In determining the effective income tax rate, we analyze various factors, including projections of our annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local and foreign income taxes and our ability to use tax incentives. We file income tax returns in U.S. federal, state and foreign jurisdictions. Our income taxes have not been subject to examination by any tax jurisdictions since its inception. Accordingly, all our filed income tax returns are subject to examination by the taxing jurisdictions.

Results of Operations

Years Ended December 31, 2009 and 2008

Revenues.  We had revenues of $275.7 million and $48.4 million for the years ended December 31, 2009 and 2008, respectively. Revenues for the year ended December 31, 2009 consisted primarily of $154.1 million in raxibacumab product sales, $26.1 million related to raxibacumab development services, $24.4 million from contract manufacturing services and $54.2 million recognized from Novartis related to straight-line recognition of up-front license fees and milestones reached for ZALBIN. Revenue for the year ended December 31, 2008 consisted primarily of $35.4 million recognized from Novartis related to straight-line recognition of up-front license fees and milestones reached for ZALBIN and $6.5 million recognized from GSK related to straight-line recognition of an up-front fee for BENLYSTA. Revenue recognized from Novartis increased in 2009 due to receipt of a $75.0 million milestone which is being recognized over the remaining development period, estimated to end in the fall of 2010.

Cost of sales.  Cost of sales includes both cost of product sales of $15.8 million and cost of manufacturing and development services of $18.2 million for the year ended December 31, 2009. No cost of sales were incurred in 2008 as we had no revenue from product sales or manufacturing and development services. With respect to the initial 2006 order for raxibacumab, we incurred substantially all of the product and service costs prior to 2009, and expensed these costs as incurred. We incurred royalty costs associated with the initial order during 2009, which are included in cost of product sales. In addition, we have recorded as cost of product sales the expenses associated with manufacturing additional raxibacumab incurred prior to receiving the follow-on order in July 2009. Our manufacturing and development service costs include raxibacumab development service costs incurred in 2009 and costs associated with contract manufacturing services. After approval of a product, inventoriable costs are capitalized into inventory and will be expensed as the inventory is sold.

Expenses.  Research and development expenses were $173.7 million for the year ended December 31, 2009 as compared to $243.3 million for the year ended December 31, 2008. Our research and development expenses for the year ended December 31, 2009 are net of $0.9 million and $43.1 million of costs reimbursed by Novartis and GSK, respectively. Our research and development expenses for the year ended December 31, 2008 are net of $36.1 million and $51.8 million of costs reimbursed by Novartis and GSK, respectively.

We track our research and development expenditures by type of cost incurred — research, pharmaceutical sciences, manufacturing and clinical development costs.

40

Results of Operations (continued)

Years Ended December 31, 2009 and 2008 (continued)

Our research costs amounted to $19.0 million for the year ended December 31, 2009 as compared to $25.6 million for the year ended December 31, 2008. This decrease is primarily due to the conclusion of animal studies being conducted for raxibacumab in 2008, and a $5.0 million milestone payment made to Aegera Therapeutics, Inc. (“Aegera”) in 2008. Our research costs for the years ended December 31, 2009 and 2008 are net of $3.2 million and $2.4 million, respectively, of cost reimbursement from Novartis and GSK under cost sharing provisions in our collaboration agreements.

Our pharmaceutical sciences costs, where we focus on improving formulation, process development and production methods, decreased to $31.4 million for the year ended December 31, 2009 from $35.9 million for the year ended December 31, 2008. This decrease is primarily due to decreased activity related to raxibacumab and ZALBIN, partially offset by increased activity related to contract manufacturing services. Pharmaceutical sciences costs for the years ended December 31, 2009 and 2008 are net of $0.5 million and $1.2 million, respectively, of cost reimbursement from Novartis and GSK under cost sharing provisions in our collaboration agreements.

Our manufacturing costs decreased to $49.0 million for the year ended December 31, 2009 from $77.1 million for the year ended December 31, 2008. This decrease is primarily due to capitalizing raxibacumab production costs beginning in 2009 and decreased production of raxibacumab, ZALBIN and BENLYSTA, partially offset by increased manufacturing services activities. Our manufacturing costs for the years ended December 31, 2009 and 2008 are net of $9.7 million and $19.9 million, respectively, of anticipated cost reimbursement from Novartis and GSK under the commercial cost sharing provisions in our collaboration agreements. Our manufacturing costs in 2010 are expected to increase as we produce commercial product in anticipation of launch. These costs are expensed as incurred until regulatory approval of the product is obtained.

Our clinical development costs decreased to $74.3 million for the year ended December 31, 2009 from $104.7 million for the year ended December 31, 2008. This decrease is primarily due to the substantial completion of our ZALBIN Phase 3 clinical trials in late 2008, completion of the first Phase 3 BENLYSTA clinical trial and wind down of the second Phase 3 BENLYSTA clinical trial during 2009 and decreased HGS-ETR1 clinical trial costs. Our clinical development costs for the years ended December 31, 2009 and 2008 are net of $30.5 million and $64.4 million, respectively, of cost reimbursement from Novartis and GSK under cost sharing provisions in our collaboration agreements.

The research and development expenditures noted above are categorized by functional area. We evaluate and prioritize our activities according to functional area, rather than on a per-project basis. For this reason, we do not maintain a formal accounting system that captures or allocates all costs, both direct and indirect, on a per-project basis. Therefore, we do not believe that our available project-by-project information would form a reasonable basis for disclosure to investors.

General and administrative expenses increased to $61.1 million for the year ended December 31, 2009 from $60.9 million for the year ended December 31, 2008. This increase is primarily due to increased pre-commercial launch activities, partially offset by decreased legal expenses associated with our patents. General and administrative expenses in future periods may increase as the level of pre-commercial launch activities rises.

Facility-related exit charges of $0.8 million for the year ended December 31, 2009 relate to an adjustment to our exit reserve for Wing C. Our Wing C subtenant terminated its lease during 2009, which resulted in an exit charge of $11.4 million during the second quarter of 2009. During the fourth quarter of 2009, we decided to resume production activities in most of Wing C and accordingly, reversed $10.6 million of the $11.4 million charge, resulting in a net exit charge of $0.8 million for the full year. During 2008, we did not incur any facility-related exit charges. See Note K, Facility-Related Exit Charges (Credits), of the Notes to the Consolidated Financial Statements for additional discussion.

Investment income decreased to $12.7 million for the year ended December 31, 2009 from $23.5 million for the year ended December 31, 2008. The decrease is primarily due to lower yields in 2009 as compared to 2008, partially offset by higher average investment balances. Investment income also includes realized net losses on our

41

Results of Operations (continued)

Years Ended December 31, 2009 and 2008 (continued)

short-term investments, marketable securities and restricted investments of $0.8 million for the year ended December 31, 2009 as compared to net gains of $0.9 million for the year ended December 31, 2008. The yield on our investments was approximately 2.5% for the year ended December 31, 2009, as compared to approximately 4.6% for the year ended December 31, 2008. Our average investment balance for 2010 will be higher than 2009 due to the proceeds from our two 2009 public offerings of common stock, however our overall yield on investments may be lower as those proceeds are invested in securities with lower interest rates than our maturing investments. A general decline in interest rates may adversely affect the interest earned from our portfolio as securities mature and may be replaced with securities having a lower interest rate.

Interest expense decreased to $58.4 million for the year ended December 31, 2009 compared to $62.9 million for the year ended December 31, 2008. Interest expense includes non-cash interest expense related to amortization of debt discount of $21.9 million and $24.2 million for the year ended December 31, 2009 and 2008, respectively, as a result of the adoption of FASB ASC Topic 470 which requires that the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) be separately accounted for in a manner that reflects an issuer’s non-convertible debt borrowing rate. The decrease in interest expense is primarily due to the February 2009 repurchase of convertible subordinated debt due in 2011 and 2012.

The gain on extinguishment of debt of $38.9 million for the year ended December 31, 2009 relates to the repurchase of convertible subordinated debt due in 2011 and 2012 with a face value of approximately $106.2 million for an aggregate cost of approximately $50.0 million plus accrued interest. The gain on extinguishment of debt is net of write-offs of related debt discount of $16.4 million and deferred financing charges of $0.9 million.

The gain on sale of long-term equity investment for the year ended December 31, 2009 and 2008 of $5.3 million and $32.5 million respectively, relates to the 2008 sale of our investment in CoGenesys, Inc. (“CoGenesys”). We received initial proceeds in 2008 of $47.3 million. Our cost basis in this investment was $14.8 million, resulting in a gain of $32.5 million. The agreement between CoGenesys and Teva Pharmaceutical Industries Ltd. (“Teva”) provided for an escrow of a portion of the purchase price. We received the final payment for our equity investment during 2009 and recorded an additional gain of $5.3 million.

Other expense of $0.2 million for the year ended December 31, 2009 primarily represents unrealized, non-cash foreign currency translation losses related to our investment in Aegera, which is denominated in Canadian dollars. Other expense of $6.3 million for the year ended December 31, 2008 was due to an other-than-temporary impairment of our investment in debt securities issued by Lehman Brothers Holdings, Inc. (“LBHI”). During 2008, LBHI experienced a significant deterioration in its credit worthiness and filed a petition under Chapter 11 of the U.S. Bankruptcy Code.

Income Tax Benefit.  Income tax benefit of $1.3 million represents a credit received in 2009 of $0.5 million for 2008 and an accrued income tax benefit of $0.8 million for 2009. We elected to accelerate recognition of research and development tax credits by electing out of bonus depreciation pursuant to regulations passed in 2008.

Net Income (Loss).  We recorded net income of $5.7 million, or $0.04 per basic and diluted share, for the year ended December 31, 2009, compared to a net loss of $268.9 million, or $1.99 per share, for the year ended December 31, 2008. The improvement to net income from a net loss is primarily due to 2009 activity including revenue from raxibacumab, gain on extinguishment of debt and reduced research and development expenses.

Years Ended December 31, 2008 and 2007

Revenues.  We had revenues of $48.4 million and $41.9 million for the years ended December 31, 2008 and 2007, respectively. Revenues for the year ended December 31, 2008 consisted primarily of revenue recognized from Novartis of $35.4 million for the straight-line recognition of up-front license fees and milestones reached for ZALBIN and $6.5 million from GSK related to straight-line recognition of up-front license fees for BENLYSTA.

42

Results of Operations (continued)

Years Ended December 31, 2008 and 2007 (continued)

The 2007 revenues consisted primarily of $28.0 million in revenue recognized from Novartis for the straight-line recognition of up-front license fees and milestones reached for ZALBIN and $6.5 million from GSK related to straight-line recognition of up-front license fees for BENYLSTA.

Expenses.  Research and development expenses were $243.3 million for the year ended December 31, 2008 as compared to $246.3 million for the year ended December 31, 2007. Research and development expenses for 2007 include $16.9 million paid to Aegera in connection with a collaboration and license agreement. Our research and development expenses for the year ended December 31, 2008 are net of $36.1 million and $51.8 million of costs reimbursed by Novartis and GSK, respectively. Our research and development expenses for the year ended December 31, 2007 are net of $46.5 million and $39.3 million of costs reimbursed by Novartis and GSK respectively.

We track our research and development expenditures by type of cost incurred — research, pharmaceutical sciences, manufacturing and clinical development costs.

Our research costs amounted to $25.6 million for the year ended December 31, 2008 as compared to $34.0 million for the year ended December 31, 2007. This decrease is due to the $16.9 million paid to Aegera in 2007 in connection with our licensing and collaboration agreement and purchase price premium as compared to a $5.0 million milestone paid to Aegera in 2008, partially offset by an increase in activities supporting new target development. Our research costs for the years ended December 31, 2008 and 2007 are net of $2.4 million and $3.0 million, respectively, of cost reimbursement from Novartis and GSK under cost sharing provisions in our collaboration agreements.

Our pharmaceutical sciences costs, where we focus on improving formulation, process development and production methods, increased to $35.9 million for the year ended December 31, 2008 from $30.5 million for the year ended December 31, 2007. This increase is primarily due to less cost reimbursement under the ZALBIN program and greater activity in other projects for which we have no cost sharing provisions. Pharmaceutical sciences costs for the years ended December 31, 2008 and 2007 are net of $1.2 million and $4.8 million, respectively, of cost reimbursement from Novartis and GSK under cost sharing provisions in our collaboration agreements.

Our manufacturing costs increased to $77.1 million for the year ended December 31, 2008 from $73.3 million for the year ended December 31, 2007. This increase is primarily due to increased production activities for raxibacumab and BENLYSTA, partially offset by decreased activities for HGS-ETR2 and ZALBIN. Our manufacturing costs for the years ended December 31, 2008 and 2007 are net of $19.9 million and $15.1 million, respectively, of cost reimbursement from Novartis and GSK under cost sharing provisions in our collaboration agreements.

Our clinical development costs decreased to $104.7 million for the year ended December 31, 2008 from $108.5 million for the year ended December 31, 2007. This decrease is primarily due to reduced Phase 3 ZALBIN clinical trial costs as the trials near completion, partially offset by increased Phase 3 trial costs related to BENLYSTA. Our clinical development costs for the years ended December 31, 2008 and 2007 are net of $64.4 million and $62.9 million, respectively, of cost reimbursement from Novartis and GSK under cost sharing provisions in our collaboration agreements.

The research and development expenditures noted above are categorized by functional area. We evaluate and prioritize our activities according to functional area, rather than on a per-project basis. For this reason, we do not maintain a formal accounting system that captures or allocates all costs, both direct and indirect, on a per-project basis. Therefore, we do not believe that our available project-by-project information would form a reasonable basis for disclosure to investors.

General and administrative expenses increased to $60.9 million for the year ended December 31, 2008 from $55.9 million for the year ended December 31, 2007. This increase is primarily due to increased preparatory

43

Results of Operations (continued)

Years Ended December 31, 2008 and 2007 (continued)

activities for commercialization. General and administrative expenses include approximately $2.2 million related to the settlement of certain patent proceedings, which were offset by a decrease in other legal expenses.

During 2008, we did not incur any facility-related exit charges. Facility-related exit credits in 2007 related to the reversal of a liability and the recording of a gain aggregating $3.7 million in connection with the purchase and sale of a small laboratory and office building. See Note K, Facility-Related Exit Charges (Credits), of the Notes to the Consolidated Financial Statements for additional discussion.

Investment income decreased to $23.5 million for the year ended December 31, 2008 from $33.0 million for the year ended December 31, 2007. The decrease is primarily due to lower average investment balances in 2008 as compared to 2007. Investment income also includes realized net gains on our short-term investments, marketable securities and restricted investments of $0.9 million for the year ended December 31, 2008 as compared to net gains of $0.1 million for the year ended December 31, 2007. The yield on our investments was approximately 4.6% for the year ended December 31, 2008, as compared to approximately 4.8% for the year ended December 31, 2007.

Interest expense increased to $62.9 million for the year ended December 31, 2008 compared to $60.7 million for the year ended December 31, 2007.

Our gain on sale of long-term equity investments for the year ended December 31, 2008 of $32.5 million relates to the sale of our investment in CoGenesys. In 2006, we completed the sale of assets of our CoGenesys division and held a 14% equity interest in CoGenesys, a newly-formed company. In 2008, CoGenesys was acquired by Teva. We received initial proceeds of $47.3 million. Our cost basis in this investment was $14.8 million. We received additional proceeds of approximately $5.3 million in February 2009 related to this transaction. See Note D, Collaborations and U.S. Government Agreement, of the Notes to the Consolidated Financial Statements for additional discussion.

Other expense of $6.3 million for the year ended December 31, 2008 was due to an other-than-temporary impairment of our investment in debt securities issued by LBHI. During 2008, LBHI experienced a significant deterioration in its credit worthiness and filed a petition under Chapter 11 of the U.S. Bankruptcy Code. As a result, we determined that our investment in LBHI debt securities had incurred an other-than-temporary impairment. See Note C, Investments, of the Notes to the Consolidated Financial Statements for additional discussion.

Net Income (Loss).  We recorded a net loss of $268.9 million, or $1.99 per share, for the year ended December 31, 2008, compared to a net loss of $284.4 million, or $2.12 per share, for the year ended December 31, 2007. The decreased loss for 2008 compared to 2007 is primarily due to the gain on sale of our CoGenesys investment of $32.5 million, or $0.24 per share, and increased revenues, partially offset by a decrease in investment income and a charge for impaired investments of $6.3 million, or $0.04 per share.

Liquidity and Capital Resources

We had working capital of $616.6 million at December 31, 2009 compared to a working capital shortfall of $52.5 million at December 31, 2008. The improvement in our working capital is primarily due to the cash provided by our two 2009 public offerings of common stock totaling approximately $812.9 million and our raxibacumab revenue of $180.2 million, net of $50.0 million used in February 2009 to extinguish approximately $106.2 million of our convertible subordinated debt, partially offset by our costs and expenses in 2009.

We expect to continue to incur substantial expenses relating to our research and development efforts, as we focus on clinical trials and manufacturing required for the development of our active product candidates. We will also incur costs related to our pre-commercial launch activities. In the event our working capital needs exceed our available working capital, we can utilize our non-current marketable securities, which are classified as “available-for-sale”. In 2009, the USG agreed to purchase 45,000 additional doses of raxibacumab for the SNS, to be delivered over a three-year period, which began in 2009. We expect to receive a total of approximately $152.0 million from this order as deliveries are completed, $17.7 million of which was recognized in 2009.

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Liquidity and Capital Resources (continued)

We may also receive payments under collaboration agreements, to the extent milestones are met, which would further improve our working capital position. We continue to evaluate our working capital position on an ongoing basis.

To minimize our exposure to credit risk, we invest in securities with strong credit ratings and have established guidelines relative to diversification and maturity with the objectives of maintaining safety of principal and liquidity. We do not invest in derivative financial instruments or auction rate securities, and we generally hold our investments in debt securities until maturity. The deterioration of the credit markets during 2008 had a detrimental effect on our investment portfolio, but as of December 31, 2009 the gross unrealized losses on our available-for-sale securities have decreased to $1.4 million from $9.9 million as of December 31, 2008.

The amounts of expenditures that will be needed to carry out our business plan are subject to numerous uncertainties, which may adversely affect our liquidity and capital resources. We are completing our fourth Phase 3 trial and have several ongoing Phase 1 and Phase 2 trials and expect to initiate additional trials in the future. Completion of these trials may extend several years or more, but the length of time generally varies considerably according to the type, complexity, novelty and intended use of the drug candidate. We estimate that the completion periods for our Phase 1, Phase 2, and Phase 3 trials could span one year, one to two years and two to four years, respectively. Some trials may take considerably longer to complete. The duration and cost of our clinical trials are a function of numerous factors such as the number of patients to be enrolled in the trial, the amount of time it takes to enroll them, the length of time they must be treated and observed, and the number of clinical sites and countries for the trial.

Our clinical development expenses are impacted by the clinical phase of our drug candidates. Our expenses increase as our drug candidates move to later phases of clinical development. The status of our clinical projects is as follows:

		Clinical Trial Status
		as of December 31,(2)
Product Candidate (1)	Indication	2009	2008	2007
ZALBIN	Hepatitis C	Phase 3(3)	Phase 3	Phase 3
BENLYSTA	Systemic Lupus Erythematosus	Phase 3(4)	Phase 3	Phase 3
BENLYSTA	Rheumatoid Arthritis	Phase 2(5)	Phase 2(5)	Phase 2(5)
Raxibacumab	Anthrax	(6)	(6)	(6)
HGS1029	Cancer	Phase 1	Phase 1	(7)
HGS-ETR1	Cancer	Phase 2	Phase 2	Phase 2
HGS-ETR2	Cancer	(8)	Phase 1	Phase 1

(1)	Includes only those candidates for which an Investigational New Drug Application (“IND”) has been filed with the FDA.
(2)	Clinical Trial Status defined as when patients are being dosed.
(3)	Phase 3 results reported; BLA filed in 2009. Phase 2 monthly dosing study underway.
(4)	Results from two Phase 3 clinical trials reported; second of these two concluding in 2010; pre-BLA activities underway.
(5)	Initial Phase 2 trial completed; treatment IND ongoing and further development under review.
(6)	BLA filed in 2009; Complete Response Letter received from FDA; additional work ongoing.
(7)	IND filed in December 2007 with respect to HGS1029 (formerly AEG40826).
(8)	Ongoing Phase 1 trial by National Institutes of Health; further development not anticipated.

We identify our drug candidates by conducting numerous preclinical studies. We may conduct multiple clinical trials to cover a variety of indications for each drug candidate. Based upon the results from our trials, we

45

Liquidity and Capital Resources (continued)

may elect to discontinue clinical trials for certain indications or certain drugs in order to concentrate our resources on more promising drug candidates.

We are advancing a number of drug candidates, including antibodies, an albumin fusion protein and a small molecule, in part to diversify the risks associated with our research and development spending. In addition, our manufacturing plants have been designed to enable multi-product manufacturing capability. Accordingly, we believe our future financial commitments, including those for preclinical, clinical or manufacturing activities, are not substantially dependent on any single drug candidate. Should we be unable to sustain a multi-product drug pipeline, our dependence on the success of a single drug candidate would increase.

We must receive regulatory clearance to advance each of our products into and through each phase of clinical testing. Moreover, we must receive regulatory approval to launch any of our products commercially. In order to receive such approval, the appropriate regulatory agency must conclude that our clinical data establish safety and efficacy and that our products and the manufacturing facilities meet all applicable regulatory requirements. We cannot be certain that we will establish sufficient safety and efficacy data to receive regulatory approval for any of our drugs or that our drugs and the manufacturing facilities will meet all applicable regulatory requirements.

Part of our business plan includes collaborating with others. For example, we entered into a collaboration agreement in 2006 with Novartis to co-develop and co-commercialize ZALBIN. Under this agreement, we will co-commercialize ZALBIN in the United States, and will share U.S. commercialization costs and U.S. profits equally. Novartis will be responsible for commercialization outside the U.S. and will pay us a royalty on those sales. We and Novartis share clinical development costs. Including a non-refundable up-front license fee, we are entitled to payments aggregating approximately $507.5 million upon successful attainment of certain milestones. As of December 31, 2009, we have contractually earned and received milestones aggregating $207.5 million, including $75.0 million received in 2009. In 2006, we entered into a collaboration agreement with GSK with respect to BENLYSTA and received a payment of $24.0 million. We and GSK share Phase 3 and 4 development costs, and will share sales and marketing expenses and profits of any product that is commercialized in accordance with the collaboration agreement. During 2009, we recorded approximately $44.0 million of reimbursement from Novartis and GSK with respect to our cost sharing agreements as a reduction of research and development expenses. We are recognizing the up-front fees and milestones received from Novartis and GSK as revenue ratably over the estimated remaining development periods.

We have collaborators who have sole responsibility for product development. For example, GSK is developing other products under separate agreements as part of our overall relationship with them. We have no control over the progress of GSK’s development plans. We cannot forecast with any degree of certainty whether any of our current or future collaborations will affect our drug development.

Because of the uncertainties discussed above, the costs to advance our research and development projects are difficult to estimate and may vary significantly. We expect that our existing funds, payments received under the raxibacumab contract and other agreements and investment income will be sufficient to fund our operations for at least the next twelve months.

Our future capital requirements and the adequacy of our available funds will depend on many factors, primarily including the scope and costs of our clinical development programs, the scope and costs of our manufacturing and process development activities, the magnitude of our discovery and preclinical development programs and the level of our pre-commercial launch activities. There can be no assurance that any additional financing required in the future will be available on acceptable terms, if at all.

Depending upon market and interest rate conditions, we are exploring, and, from time to time, may take actions to strengthen further our financial position. We may undertake financings and may repurchase or restructure some or all of our outstanding convertible debt instruments in the future depending upon market and other conditions. During 2009 we repurchased approximately $106.2 million of our convertible subordinated debt due in 2011 and 2012 at a cost of approximately $50.0 million plus accrued interest. In August and December 2009 we completed public offerings of our common stock, resulting in net cash proceeds of approximately $812.9 million.

46

Liquidity and Capital Resources (continued)

We have certain contractual obligations which may have a future effect on our financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources that are material to investors. Our operating leases, along with our unconditional purchase obligations, are not recorded on our balance sheets. Debt associated with the sale and accompanying leaseback of our LSM facility to BioMed in 2006 is recorded on our balance sheet as of December 31, 2009 and 2008. We have an option to purchase the Traville facility in 2016 for $303.0 million. This is not reflected in the contractual obligations table below because we are not obligated to exercise this option.

Our contractual obligations as of December 31, 2009 are summarized as follows:

	Payments Due by Period
			One Year		Two to		Four to		After
	Total		or Less		Three Years		Five Years		Five Years
	(dollars in millions)
Contractual Obligations
Long-term debt — convertible notes(1)	$	426.7	$	9.1	$	417.6	$	—	$	—
Long-term lease commitment — BioMed(2)		471.0		24.5		50.5		52.6		343.4
Operating leases(3)		367.1		20.5		42.1		43.6		260.9
Unconditional purchase obligations(4)		1.0		1.0		—		—		—
Raxibacumab milestones and royalties(5)		11.2		3.2		8.0		—		—
Other long-term liabilities reflected on our balance sheets(6)		—		—		—		—		—
Total contractual cash obligations(7)	$	1,277.0	$	58.3	$	518.2	$	96.2	$	604.3

(1)	Contractual interest obligations related to our convertible subordinated notes included above total $22.8 million as of December 31, 2009. Contractual interest obligations of $9.1 million, $13.7 million are due in one year or less and two to three years, respectively.
(2)	Contractual interest obligations related to BioMed are included above and aggregate $418.1 million as of December 31, 2009. Contractual interest obligations of $24.5 million, $50.5 million, $52.6 million and $290.5 million are due in one year or less, two to three years, four to five years and after five years, respectively.
(3)	Includes Traville headquarters operating lease with BioMed with aggregate payments of $343.4 million. Lease payments of $17.9 million, $36.8 million, $38.3 million and $250.4 million are due in one year or less, two to three years, four to five years and after five years, respectively.
(4)	Our unconditional purchase obligations relate to commitments for capital expenditures.
(5)	Includes milestone payments and royalties associated with the delivery of raxibacumab to the U.S. Strategic National Stockpile.
(6)	In the event we reach certain development milestones for ZALBIN, BENLYSTA or raxibacumab such as successful completion of Phase 3 trials or regulatory approval, we would be obligated to make payments of up to $9.0 million over the next five years. In the event we reach certain development milestones related to HGS1029, we would be obligated to pay up to $204.0 million. Our other products are in either Phase 1 or Phase 2 and would also obligate us to make certain milestone payments should they reach Phase 3 or regulatory approval. These other payments could result in aggregate milestone payments of $14.5 million. Because we cannot forecast with any degree of certainty whether any of these products will reach these milestones, we have excluded these amounts and any royalty payments, except for those related to raxibacumab sales under the current order from the USG, from the above table.
(7)	For additional discussion of our debt obligations and lease commitments, see Note F, Long-Term Debt and Note G, Commitments and Other Matters, of the Notes to the Consolidated Financial Statements.

47

Liquidity and Capital Resources (continued)

As of December 31, 2009, we had net operating loss carryforwards (“NOLs”) for federal income tax purposes of approximately $1.6 billion, excluding approximately $0.3 billion of stock-based compensation NOLs, which expire, if unused, through December 31, 2029. We also have available research and development tax credit and other tax credit carryforwards of approximately $35.0 million, the majority of which will expire, if unused, through December 31, 2029.

Our unrestricted and restricted funds may be invested in U.S. Treasury securities, government agency obligations, high grade corporate debt securities and various money market instruments rated “A−” or better. Such investments reflect our policy regarding the investment of liquid assets, which is to seek a reasonable rate of return consistent with an emphasis on safety, liquidity and preservation of capital.

Off-Balance Sheet Arrangements

During 1997 and 1999, we entered into two long-term leases with the Maryland Economic Development Corporation (“MEDCO”) expiring January 1, 2019 for a small-scale manufacturing facility aggregating 127,000 square feet and built to our specifications. We have accounted for these leases as operating leases. The facility was financed primarily through a combination of bonds issued by MEDCO (“MEDCO Bonds”) and loans issued to MEDCO by certain State of Maryland agencies. We have no equity interest in MEDCO.

Rent is based upon MEDCO’s debt service obligations and annual base rent under the leases is currently approximately $2.6 million. The MEDCO Bonds are secured by letters of credit issued for the account of MEDCO which were renewed in December 2009. We are required to have restricted investments of approximately $34.3 million which serve as security for the MEDCO letters of credit reimbursement obligation. Upon default or early lease termination, the MEDCO Bond indenture trustee can draw upon the letters of credit to pay the MEDCO Bonds as they are tendered. In such an event, we could lose part or all of our restricted investments and could record a charge to earnings for a corresponding amount. Alternatively, we have an option through the end of the lease term to purchase this facility for an aggregate amount that declines from approximately $37.0 million in 2010 to approximately $21.0 million in 2019.

48

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Certain statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements are based on our current intent, belief and expectations. These statements are not guarantees of future performance and are subject to certain risks and uncertainties that are difficult to predict. Actual results may differ materially from these forward-looking statements because of our unproven business model, our dependence on new technologies, the uncertainty and timing of clinical trials, our ability to develop and commercialize products, our dependence on collaborators for services and revenue, our substantial indebtedness and lease obligations, our changing requirements and costs associated with facilities, intense competition, the uncertainty of patent and intellectual property protection, our dependence on key management and key suppliers, the uncertainty of regulation of products, the impact of future alliances or transactions and other risks described in this filing and our other filings with the Securities and Exchange Commission. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today’s date. We undertake no obligation to update or revise the information contained in this Annual Report on Form 10-K whether as a result of new information, future events or circumstances or otherwise.

49

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not have operations of a material nature that are subject to risks of foreign currency fluctuations. We do, however, have certain aspects of our global clinical studies that are subject to risks of foreign currency fluctuations. We do not use derivative financial instruments in our operations or investment portfolio. Our investment portfolio may be comprised of low-risk U.S. Treasuries, government-sponsored enterprise securities, high-grade debt having at least an “A−” rating at time of purchase and various money market instruments. The short-term nature of these securities, which currently have an average term of approximately nine months, decreases the risk of a material loss caused by a market change related to interest rates.

We believe that a hypothetical 100 basis point adverse move (increase) in interest rates along the entire interest rate yield curve would adversely affect the fair value of our cash, cash equivalents, short-term investments, marketable securities and restricted investments by approximately $8.8 million, or approximately 0.7% of the aggregate fair value of $1.2 billion, at December 31, 2009. For these reasons, and because these securities are generally held to maturity, we believe we do not have significant exposure to market risks associated with changes in interest rates related to our debt securities held as of December 31, 2009. We believe that any interest rate change related to our investment securities held as of December 31, 2009 is not material to our consolidated financial statements. As of December 31, 2009, the yield on comparable one-year investments was approximately 0.4%, as compared to our current portfolio yield of approximately 1.1%. However, given the short-term nature of these securities, a general decline in interest rates may adversely affect the interest earned from our portfolio as securities mature and may be replaced with securities having a lower interest rate.

To minimize our exposure to credit risk, we invest in securities with strong credit ratings and have established guidelines relative to diversification and maturity with the objectives of maintaining safety of principal and liquidity. We do not invest in derivative financial instruments, auction rate securities, loans held for sale or mortgage-backed securities backed by sub-prime or Alt-A collateral, and we generally hold our investments in debt securities until maturity. However, adverse changes in the credit markets relating to credit risks would adversely affect the fair value of our cash, cash equivalents, short-term investments, marketable securities and restricted investments. During the year ended December 31, 2009, the gross unrealized losses in our portfolio decreased from $9.9 million to $1.4 million. The majority of these unrealized losses related to our holdings of corporate debt securities. At December 31, 2009, the fair value of our corporate debt securities was approximately $379.7 million, or 61% of our total investment portfolio of $624.0 million. The remaining securities in our portfolio are either U.S. Treasury and agency securities or government-sponsored enterprise securities, which we believe are subject to less credit risk. Although there has been improvement in our gross unrealized losses, in the event there is further deterioration in the credit market, the fair value of our corporate debt securities could decline.

The facility leases we entered into during 2006 require us to maintain minimum levels of restricted investments of approximately $46.0 million, or $39.5 million if in the form of cash, as collateral for these facilities. Together with the requirement to maintain approximately $34.3 million in restricted investments with respect to our small-scale manufacturing facility leases, our overall level of restricted investments is currently required to be approximately $80.3 million. Although the market value for these investments may rise or fall as a result of changes in interest rates, we will be required to maintain this level of restricted investments in either a rising or declining interest rate environment.

Our convertible subordinated notes bear interest at fixed rates. As a result, our interest expense on these notes is not affected by changes in interest rates.

During 2002, we established a wholly-owned subsidiary, Human Genome Sciences Europe GmbH (“HGS Europe”) that is assisting in our clinical trials and clinical research collaborations in European countries. Although HGS Europe’s activities are denominated primarily in euros, we believe the foreign currency fluctuation risks to be immaterial to our operations as a whole. During 2005, we established a wholly-owned subsidiary, Human Genome Sciences Pacific Pty Ltd. (“HGS Pacific”) that is sponsoring some of our clinical trials in the Asia/Pacific region. We currently do not anticipate HGS Pacific to have any operational activity and therefore we do not believe we will have any foreign currency fluctuation risks with respect to HGS Pacific.

50

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is set forth on pages F-1 — F-39.

ITEM 9.   CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.   CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, including our principal executive and principal financial officers, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2009. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in this annual report on Form 10-K has been appropriately recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures are effective at the reasonable assurance level.

Changes in Internal Control

Our management, including our principal executive and principal financial officers, has evaluated any changes in our internal control over financial reporting that occurred during the year ended December 31, 2009, and has concluded that there was no change that occurred during the year ended December 31, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management Report on Internal Control over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

•  pertain to the management of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

•  provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

•  provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls

51

ITEM 9A.   CONTROLS AND PROCEDURES (continued)

may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

Based on our assessment, management believes that, as of December 31, 2009, the Company’s internal control over financial reporting is effective based on those criteria.

The Company’s independent auditors have issued an audit report on internal control over financial reporting which follows herein.

ITEM 9B.   OTHER INFORMATION

None.

52

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Board of Directors and Stockholders of

Human Genome Sciences, Inc.

Rockville, Maryland

We have audited Human Genome Sciences Inc.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Human Genome Sciences, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying “Management Report on Internal Control over Financial Reporting.” Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Human Genome Sciences, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Human Genome Sciences, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2009 and our report dated March 2, 2010 expressed an unqualified opinion thereon.

/s/  Ernst & Young LLP

Baltimore, Maryland

March 2, 2010

53

PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

We incorporate herein by reference the information concerning directors, executive officers and corporate governance in our Notice of Annual Stockholders’ Meeting and Proxy Statement to be filed within 120 days after the end of our fiscal year (the “2010 Proxy Statement”).

ITEM 11.   EXECUTIVE COMPENSATION

We incorporate herein by reference the information concerning executive compensation to be contained in the 2010 Proxy Statement.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

We incorporate herein by reference the information concerning security ownership of certain beneficial owners and management to be contained in the 2010 Proxy Statement.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

We incorporate herein by reference the information concerning the CoGenesys transaction set forth in Note M to our consolidated financial statements. We incorporate herein by reference the information concerning certain other relationships and related transactions to be contained in the 2010 Proxy Statement.

ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

We incorporate herein by reference the information concerning principal accounting fees and services to be contained in the 2010 Proxy Statement.

54

PART IV

ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this Annual Report:

(1) Index to Consolidated Financial Statements

	Page
	Number
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets at December 31, 2009 and 2008		F-3
Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007		F-4
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2009, 2008 and 2007		F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007		F-6
Notes to Consolidated Financial Statements		F-8

(2) Financial Statement Schedules

Financial statement schedules are omitted because they are not required.

(3) Exhibits

Exhibit
No.
3.1*	Certificate of Incorporation of the Registrant (Filed as Exhibit 3.1 to the Registrant’s Form 10-K for the fiscal year ended December 31, 1993, Exhibit 3.3 to the Form 10-K for the fiscal year ended December 31, 1997, Exhibit 3.1 to the Form 8-K filed December 16, 1999, Exhibit 3.1 to the Form 10-Q filed July 31, 2001, and Exhibit 3.1 to the Form 8-K filed on May 8, 2008).
3.2*	By-laws of the Registrant (Filed as Exhibit 3.2 to the Registrant’s Form 8-K filed May 8, 2008).
4.1*	Form of Common Stock Certificate (Filed as Exhibit 4.1 to the Registrant’s Form S-3 Registration Statement, as amended (Commission File No. 333-45272), filed September 6, 2000).
4.2*	Indenture dated as of October 4, 2004 between the Registrant and The Bank of New York, as trustee, including the form of 21/4% Convertible Subordinated Notes due 2011 (Filed as Exhibit 4.1 to the Registrant’s Form 8-K filed October 4, 2004).
4.3*	Indenture dated as of August 9, 2005 between the Registrant and The Bank of New York, as trustee, including the form of 21/4% Convertible Subordinated Notes due 2012 (Filed as Exhibit 4.1 to the Registrant’s 8-K filed August 9, 2005).
10.1*	Employment Agreement, dated November 21, 2004, with H. Thomas Watkins (Filed as Exhibit 10.1 to the Registrant’s Form 8-K filed November 23, 2004).
10.2*	First Amendment to the Employment Agreement by and between Human Genome Sciences, Inc. and H. Thomas Watkins (Filed as Exhibit 10.1 to the Registrant’s Form 8-K filed December 20, 2007).
10.3*	Form of Executive Agreement (Filed as Exhibit 10.3 to the Registrant’s Form 8-K filed December 20, 2007).
10.4*	Human Genome Sciences, Inc. Discretionary Bonus Policy (Filed as Exhibit 10.4 to the Registrant’s Form 8-K filed December 20, 2007).
10.5*	Form of Stock Unit Grant Agreement under the Non-Employee Director Equity Compensation Plan (Filed as Exhibit 10.5 to the Registrant’s Form 8-K filed December 20, 2007).
10.6*	Second Amended and Restated Key Executive Severance Plan (Filed as Exhibit 10.2 to the Registrant’s Form 8-K filed December 20, 2007).
10.7*	Human Genome Sciences, Inc. Amended and Restated Stock Incentive Plan (Filed as Annex A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed March 24, 2009).
10.8*	Employee Stock Purchase Plan dated January 1, 2009 (Filed as Exhibit 99.1 to the Registrant’s Registration Statement on Form S-8 filed December 19, 2008).

55

Exhibit
No.
10.9*	Lease Agreement between Maryland Economic Development Corporation and Human Genome Sciences, Inc., dated December 1, 1997 (Filed as Exhibit 10.67 to the Registrant’s Form 10-K for the fiscal year ended December 31, 1997 and amended by Exhibit 10.10 hereto).
10.10	Amendment No. 1 dated December 1, 2009 to Lease Agreement between Maryland Economic Development Corporation and Human Genome Sciences, Inc. dated December 1, 1997.
10.11	Reimbursement Agreement dated December 1, 2009 by and between Human Genome Sciences, Inc. and Manufacturers and Traders Trust Company relating to 1997 Series Revenue Bonds.
10.12	Amended and Restated Lease Agreement between Maryland Economic Development Corporation and Human Genome Sciences, Inc. dated December 1, 2009.
10.13	Reimbursement Agreement dated December 1, 2009 by and between Human Genome Sciences, Inc. and Manufacturers and Traders Trust Company relating to Series 1999 A and B Revenue Bonds.
10.14	Collateral Pledge Agreement dated December 1, 2009 among Human Genome Sciences, Inc., as Pledgor, Manufacturers and Traders Trust Company, as Pledgee, and Manufacturers and Traders Trust Company, as the Collateral Agent.
10.15*	Form of Restricted Stock Agreement (Filed as Exhibit 10.20 to the Registrant’s Form 10-Q filed August 1, 2005).
10.16*	Form of Stock Option Agreement (Filed as Exhibit 10.2 to the Registrant’s Form 8-K filed September 20, 2004).
10.17*†	Asset Purchase Agreement dated December 12, 2005 by and between TriGenesys, Inc and the Registrant (Filed as Exhibit 10.22 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2005).
10.18*†	Co-development and Commercialization Agreement between Novartis International Pharmaceutical Ltd. and Human Genome Sciences, Inc., dated June 5, 2006 (Filed as Exhibit 10.1 to the Registrant’s Form 10-Q filed August 9, 2006).
10.19*	Purchase and Sale Agreement between BioMed Realty, L.P. and Human Genome Sciences, Inc., dated May 2, 2006 (Filed as Exhibit 10.2 to the Registrant’s Form 10-Q filed August 9, 2006).
10.20*	Lease Agreement between BMR-Belward Campus Drive LSM LLC and Human Genome Sciences, Inc., dated May 24, 2006 (Filed as Exhibit 10.3 to the Registrant’s Form 10-Q filed August 9, 2006).
10.21*	Lease Agreement between BMR-Shady Grove Road HQ LLC and Human Genome Sciences, Inc., dated May 24, 2006 (Filed as Exhibit 10.4 to the Registrant’s Form 10-Q filed August 9, 2006).
10.22*†	Solicitation (as amended) and Modification of Contract awarded by the Department of Health and Human Services to Human Genome Sciences, Inc. dated June 24, 2006 (Filed as Exhibit 10.5 to the Registrant’s Amended Form 10-Q filed September 27, 2007).
10.23*†	Amendment of Solicitation/Modification of Contract awarded by the Department of Health and Human Services to Human Genome Sciences, Inc. dated July 17, 2009. (Filed as Exhibit 10.1 to the Registrant’s Form 10-Q filed October 29, 2009).
10.24*†	Co-development and Commercialization Agreement between Glaxo Group Limited and Human Genome Sciences, Inc., dated August 1, 2006 (Filed as Exhibit 10.25 to the Registrant’s Form 10-K filed February 26, 2009).
10.25*	Second Amendment to the Employment Agreement by and between Human Genome Sciences, Inc., and H. Thomas Watkins (Filed as Exhibit 10.26 to the Registrant’s Form 10-K filed February 26, 2009).
10.26*	Form of First Amendment to Executive Agreement (Filed as Exhibit 10.27 to the Registrant’s Form 10-K filed February 26, 2009).
10.27*	Form of First Amendment to the Registrant’s Second Amended and Restated Key Executive Severance Plan (Filed as Exhibit 10.28 to the Registrant’s Form 10-K filed February 26, 2009).
12.1	Ratio of Earnings to Fixed Charges.

56

Exhibit
No.
21.1	Subsidiaries.
23.1	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
31.1	Rule 13a-14(a) Certification of Principal Executive Officer.
31.2	Rule 13a-14(a) Certification of Principal Financial Officer.
32.1	Section 1350 Certification of Chief Executive Officer.
32.2	Section 1350 Certification of Chief Financial Officer.

*	Incorporated by reference.
†	Confidential treatment requested for certain portions of this Exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended, which portions are omitted and filed separately with the Securities and Exchange Commission.

57

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

HUMAN GENOME SCIENCES, INC.

BY: /s/  H. Thomas Watkins

H. Thomas Watkins

President and Chief Executive Officer

Dated: March 2, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and the dates indicated:

Signature	Title	Date
/s/  H. Thomas Watkins H. Thomas Watkins	President, Chief Executive Officer and Director (Principal Executive Officer)	March 2, 2010
/s/  Timothy C. Barabe Timothy C. Barabe	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	March 2, 2010
/s/  Argeris N. Karabelas, Ph.D. Argeris N. Karabelas, Ph.D.	Chairman of the Board	March 2, 2010
/s/  Richard J. Danzig Richard J. Danzig	Director	March 2, 2010
/s/  Jürgen Drews, M.D. Jürgen Drews, M.D.	Director	March 2, 2010
/s/  Maxine Gowen, Ph.D. Maxine Gowen, Ph.D.	Director	March 2, 2010
/s/  Tuan Ha-Ngoc Tuan Ha-Ngoc	Director	March 2, 2010
/s/  John LaMattina, Ph.D. John LaMattina, Ph.D.	Director	March 2, 2010
/s/  Augustine Lawlor Augustine Lawlor	Director	March 2, 2010
/s/  David Southwell David Southwell	Director	March 2, 2010
/s/  Robert C. Young, M.D. Robert C. Young, M.D.	Director	March 2, 2010

58

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
	Number
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets at December 31, 2009 and 2008		F-3
Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007		F-4
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2009, 2008 and 2007		F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007		F-6
Notes to Consolidated Financial Statements		F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders of

Human Genome Sciences, Inc.

Rockville, Maryland

We have audited the accompanying consolidated balance sheets of Human Genome Sciences, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Human Genome Sciences, Inc. at December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Human Genome Sciences, Inc.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 2, 2010 expressed an unqualified opinion thereon.

/s/  Ernst & Young LLP

Baltimore, Maryland

March 2, 2010

F-2

HUMAN GENOME SCIENCES, INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2009			2008
	(in thousands, except share and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	567,667		$	15,248
Short-term investments		151,528			22,691
Collaboration receivables		10,356			22,076
Accounts receivable		23,892			2,871
Inventory		20,149			—
Prepaid expenses and other current assets		7,176			5,280
Total current assets		780,768			68,166
Marketable securities		384,028			265,640
Property, plant and equipment (net of accumulated depreciation)		263,123			274,315
Restricted investments		88,437			69,360
Long-term equity investments		3,016			2,606
Other assets		11,258			6,745
TOTAL ASSETS	$	1,530,630		$	686,832
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses	$	42,369		$	55,434
Accrued payroll and related taxes		30,997			18,574
Accrued exit expenses		2,227			2,952
Deferred revenues		88,565			43,746
Total current liabilities		164,158			120,706
Convertible subordinated debt		349,807			417,597
Lease financing		248,628			246,477
Deferred revenues, net of current portion		1,978			29,563
Accrued exit expenses, net of current portion		1,979			2,075
Deferred rent		8,665			6,718
Total liabilities		775,215			823,136
Stockholders’ equity (deficit):
Preferred stock — $0.01 par value; shares authorized — 20,000,000; no shares issued or outstanding		—			—
Common stock — $0.01 par value; shares authorized — 400,000,000; shares issued and outstanding of 185,254,660 and 135,739,978 at December 31, 2009 and 2008, respectively		1,853			1,357
Additional paid-in capital		2,932,863			2,059,154
Accumulated other comprehensive income (loss)		7,365			(4,490	)
Accumulated deficit		(2,186,666	)		(2,192,325	)
Total stockholders’ equity (deficit)		755,415			(136,304	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	1,530,630		$	686,832

The accompanying Notes to Consolidated Financial Statements are an integral part hereof.

F-3

HUMAN GENOME SCIENCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2009			2008			2007
	(in thousands, except share and per share amounts)
Revenue:
Product sales	$	154,074		$	—		$	—
Manufacturing and development services		50,653			—			—
Research and development collaborative agreements		71,022			48,422			41,851
Total revenue		275,749			48,422			41,851
Costs and expenses:
Cost of product sales		15,805			—			—
Cost of manufacturing and development services		18,215			—			—
Research and development expenses		173,709			243,257			246,293
General and administrative expenses		61,073			60,865			55,874
Facility-related exit charges (credits)		759			—			(3,673	)
Total costs and expenses		269,561			304,122			298,494
Income (loss) from operations		6,188			(255,700	)		(256,643	)
Investment income		12,727			23,487			32,988
Interest expense		(58,424	)		(62,912	)		(60,716	)
Gain on extinguishment of debt		38,873			—			—
Gain on sale of long-term equity investment		5,259			32,518			—
Other expense		(238	)		(6,284	)		—
Income (loss) before taxes		4,385			(268,891	)		(284,371	)
Income tax benefit		1,274			—			—
Net income (loss)	$	5,659		$	(268,891	)	$	(284,371	)
Basic net income (loss) per share	$	0.04		$	(1.99	)	$	(2.12	)
Diluted net income (loss) per share	$	0.04		$	(1.99	)	$	(2.12	)
Weighted average shares outstanding, basic		149,334,426			135,406,642			134,333,418
Weighted average shares outstanding, diluted		155,053,473			135,406,642			134,333,418

The accompanying Notes to Consolidated Financial Statements are an integral part hereof.

F-4

HUMAN GENOME SCIENCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

							Accumulated
					Additional		Other
	Common Stock				Paid-In		Comprehensive			Accumulated
	Shares		Amount		Capital		Income (Loss)			Deficit			Total
	(in thousands, except share amounts)
Balance — December 31, 2006		133,820,053	$	1,338	$	2,006,212	$	(3,594	)	$	(1,639,063	)	$	364,893
Comprehensive income (loss):
Net loss		—		—		—		—			(284,371	)		(284,371	)
Unrealized gain on investments		—		—		—		6,724			—			6,724
Cumulative translation adjustment		—		—		—		22			—			22
Comprehensive loss														(277,625	)
Shares of common stock issued pursuant to stock-based compensation plans		1,116,459		11		8,175		—			—			8,186
Stock-based compensation expense		—		—		21,691		—			—			21,691
Balance — December 31, 2007		134,936,512		1,349		2,036,078		3,152			(1,923,434	)		117,145
Comprehensive income (loss):
Net loss		—		—		—		—			(268,891	)		(268,891	)
Unrealized loss on investments		—		—		—		(7,052	)		—			(7,052	)
Cumulative translation adjustment		—		—		—		(590	)		—			(590	)
Comprehensive loss														(276,533	)
Shares of common stock issued pursuant to stock-based compensation plans		803,466		8		4,589		—			—			4,597
Stock-based compensation expense		—		—		18,487		—			—			18,487
Balance — December 31, 2008		135,739,978		1,357		2,059,154		(4,490	)		(2,192,325	)		(136,304	)
Comprehensive income (loss):
Net income		—		—		—		—			5,659			5,659
Unrealized gain on investments		—		—		—		11,264			—			11,264
Cumulative translation adjustment		—		—		—		591			—			591
Comprehensive income														17,514
Issuance of common stock pursuant to public offerings		44,522,250		446		812,423		—			—			812,869
Shares of common stock issued pursuant to stock-based compensation plans		4,992,432		50		48,762		—			—			48,812
Stock-based compensation expense		—		—		12,524		—			—			12,524
Balance — December 31, 2009		185,254,660	$	1,853	$	2,932,863	$	7,365		$	(2,186,666	)	$	755,415

The accompanying Notes to Consolidated Financial Statements are an integral part hereof.

F-5

HUMAN GENOME SCIENCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2009			2008			2007
	(in thousands)
Cash flows from operating activities:
Net income (loss)	$	5,659		$	(268,891	)	$	(284,371	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock-based compensation expense		12,524			18,593			21,691
Depreciation and amortization		21,255			21,143			21,907
Amortization of debt discount		21,936			24,183			22,130
Gain on extinguishment of debt		(38,873	)		—			—
Gain on sale of building		—			—			(1,704	)
Facility-related exit charges (credits)		759			—			(1,969	)
Gain on sale of long-term equity investment		(5,259	)		(32,518	)		—
Accrued interest on short-term investments, marketable securities and restricted investments		(493	)		581			(4,631	)
Non-cash expenses and other		3,759			8,265			2,995
Changes in operating assets and liabilities:
Collaboration receivables		4,800			13,792			25,807
Accounts receivable		(21,021	)		—			—
Inventory		(20,149	)		—			—
Prepaid expenses and other assets		(1,640	)		2,760			(366	)
Accounts payable and accrued expenses		(13,152	)		(7,247	)		25,770
Accrued payroll and related taxes		12,423			4,126			(930	)
Deferred revenues		17,234			(44,959	)		(633	)
Accrued exit expenses		(1,953	)		(2,083	)		(2,376	)
Deferred rent		1,859			1,992			2,021
Net cash used in operating activities		(332	)		(260,263	)		(174,659	)
Cash flows from investing activities:
Purchase of short-term investments and marketable securities		(625,041	)		(15,065	)		(160,379	)
Proceeds from sale and maturities of short-term investments and marketable securities		388,277			211,722			278,031
Proceeds from sale of long-term equity investment		5,259			47,336			—
Capital expenditures — property, plant, and equipment		(10,019	)		(9,724	)		(3,042	)
Release of restricted investments		3,291			4,877			—
Proceeds from sale of building, net of transaction costs		—			—			14,824
Purchase of building, net of transaction costs		—			—			(13,120	)
Purchase of long-term equity investment		—			—			(3,148	)
Net cash provided by (used in) investing activities		(238,233	)		239,146			113,166
Cash flows from financing activities:
Purchase of restricted investments		(47,002	)		(28,897	)		(26,642	)
Proceeds from sale and maturities of restricted investments		26,426			26,120			17,857
Proceeds from issuance of common stock, net of issuance costs		861,573			4,432			8,151
Extinguishment of long-term debt		(49,998	)		—			—
Purchase of treasury stock		(15	)		(105	)		—
Net cash provided by (used in) financing activities		790,984			1,550			(634	)
Net increase (decrease) in cash and cash equivalents		552,419			(19,567	)		(62,127	)
Cash and cash equivalents — beginning of period		15,248			34,815			96,942
Cash and cash equivalents — end of period	$	567,667		$	15,248		$	34,815

F-6

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION, NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES

	Year Ended December 31,
	2009		2008		2007
	(in thousands)
Cash paid during the period for:
Interest	$	33,609	$	34,729	$	34,319
Income taxes	$	809	$	—	$	—

During the years ended December 31, 2009, 2008 and 2007, the Company recorded non-cash accretion of $1,384, $466 and $653, respectively, related to its exit accrual for certain exited space.

During the years ended December 31, 2009, 2008 and 2007, lease financing increased as a result of non-cash accretion with respect to the Company’s 2006 leases with BioMed Realty Trust, Inc. (“BioMed”) by $2,151, $2,378 and $2,573 respectively. Because the lease payments are less than the amount of calculated interest expense for the first nine years of the leases, the lease balance will increase during this period.

The accompanying Notes to Consolidated Financial Statements are an integral part hereof.

F-7

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE A) — The Company

Human Genome Sciences, Inc. (the “Company”) is a commercially focused biopharmaceutical company advancing toward the market with three products in late-stage development. The Company also has several novel drugs in earlier stages of clinical development in oncology, immunology and infectious disease. Additional products are in clinical development by companies with which the Company is collaborating.

The Company has entered into relationships with a number of leading pharmaceutical and biotechnology companies to leverage its strengths and to gain access to sales and marketing infrastructure as well as complementary technologies. Some of these partnerships provide the Company with licensing or other fees, clinical development cost-sharing, milestone payments and rights to royalty payments as products are developed and commercialized. In some cases, the Company is entitled to certain commercialization, co-promotion, revenue-sharing and other product rights. The Company’s revenues were derived from license fees and milestone payments under collaboration agreements through 2008. In 2009, the Company generated its first product sales when it delivered raxibacumab to the U.S. Strategic National Stockpile (“SNS”). The Company, which operates primarily in the United States, operates in a single business segment.

(NOTE B) — Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates are based on historical experience and on various assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.

Principles of Consolidation

The consolidated financial statements include the accounts of Human Genome Sciences, Inc. and its subsidiaries, all of which are wholly-owned. All significant intercompany accounts and transactions have been eliminated.

Cash Equivalents, Short-term Investments, Marketable Securities, Long-term Equity Investments and Restricted Investments

The Company considers all highly liquid investment instruments purchased with a maturity of three months or less to be cash equivalents.

The Company classifies its short-term investments, marketable securities and long-term equity investments with readily determinable fair values as “available-for-sale.” Investments in securities that are classified as available-for-sale are measured at fair market value in the balance sheets, and unrealized holding gains and losses on investments are reported as a separate component of stockholders’ equity until realized. Investments of less than 20% of privately-held companies are accounted for as cost-method investments. The Company reviews the carrying value of such investments on a periodic basis for indicators of impairment. Additionally, certain of the Company’s investments are held as restricted investments. Restricted investments with maturities less than three months are not classified as cash in the Company’s consolidated balance sheets. See Note C, Investments, for additional information.

F-8

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE B) — Summary of Significant Accounting Policies (continued)

Investment Risk

The Company has invested its cash in obligations of the U.S. Government, government agencies and in high-grade debt securities and various money market instruments. The Company’s investment policy limits investments to certain types of instruments issued by institutions with credit ratings of “A−” or better, and places restrictions on maturities and concentrations in certain industries and by issuer. The Company does not hold auction rate securities, loans held for sale or mortgage-backed securities backed by sub-prime or Alt-A collateral.

Other-Than-Temporary Impairment of Investments

Periodically, the Company evaluates whether any investments have incurred an other-than-temporary impairment, based on the criteria under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“FASB ASC”) Topic 320, Investments — Debt and Equity Securities. This evaluation consists of a review of several factors, including but not limited to the length of time and extent that a security has been in an unrealized loss position, the existence of an event that would impair the issuer’s future repayment potential, the near term prospects for recovery of the market value of a security and the intent of the Company to hold the security until the market value recovers and whether it is not more likely than not that the Company will be required to sell the security. If the Company determines that such impairment exists, the Company will recognize a charge in the consolidated statement of operations equal to the amount of such impairment. See Note C, Investments, for additional discussion.

Inventory

The Company has capitalized inventory costs related to raxibacumab incurred subsequent to receiving a follow-on order from the U.S. Government (“USG”) in July 2009. Inventory includes material, labor and other direct and indirect costs and is valued using the first-in, first-out method. See Note E, Other Financial Information and Cost of product sales discussion within this Note B, for additional information.

Depreciation

Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

Buildings	30 years
Land improvements	lesser of the lease term or the useful life
Production equipment	5 - 10 years
Laboratory equipment	3 - 10 years
Computer equipment and software	3 - 5 years
Furniture and office equipment	3 - 5 years
Leasehold improvements	lesser of the lease term or the useful life

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable based on the criteria for accounting for the impairment or disposal of long-lived assets under FASB ASC Topic 360, Property, Plant and Equipment.

F-9

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE B) — Summary of Significant Accounting Policies (continued)

Product sales

Revenue from product sales is recognized when persuasive evidence of an arrangement exists, title to product and associated risk of loss has passed to the customer, the price is fixed or determinable, collection from the customer is reasonably assured, and the Company has no further performance obligations.

Manufacturing and development services

As part of its raxibacumab contract with the USG and the Biomedical Advanced Research and Development Authority (“BARDA”), the Company performed a variety of drug development services primarily relating to the conduct of animal and human studies. Upon BARDA’s acceptance of the initial raxibacumab delivery, the Company billed the USG for the drug development work previously performed, and recorded this as manufacturing and development services revenue during the year ended December 31, 2009. The Company will record additional development revenue as services are performed. The Company has entered into agreements with certain commercial parties for manufacturing process development, clinical and commercial supply of certain biopharmaceutical products. Revenue under these agreements is recognized as services are performed or products delivered, depending on the nature of the work contracted, using the proportional performance method of accounting. Performance is assessed using output measures such as units-of-work performed to date as compared to total units-of-work contracted. Advance payments received in excess of amounts earned are classified as deferred revenue until earned.

Research and development collaborative agreements

Collaborative research and development agreements can provide for one or more of up-front license fees, research payments and milestone payments. Agreements with multiple components (“deliverables” or “items”) are evaluated to determine if the deliverables can be divided into more than one unit of accounting. An item can generally be considered a separate unit of accounting if all of the following criteria are met: (1) the delivered item(s) has value to the customer on a stand-alone basis; (2) there is objective and reliable evidence of the fair value of the undelivered item(s); and (3) if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in control of the Company. Items that cannot be divided into separate units are combined with other units of accounting, as appropriate. Consideration received is allocated among the separate units based on their respective fair values or based on the residual value method and is recognized in full when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the sales price is fixed or determinable; and (4) collectibility is probable. The Company deems service to have been rendered if no continuing obligation exists on the part of the Company.

Revenue associated with non-refundable up-front license fees under arrangements where the license fees and research and development activities cannot be accounted for as separate units of accounting are deferred and recognized as revenue on a straight-line basis over the expected term of the Company’s continued involvement in the research and development process. Revenues from the achievement of research and development milestones, if deemed substantive, are recognized as revenue when the milestones are achieved, and the milestone payments are due and collectible. If not deemed substantive, the Company would recognize such milestone as revenue on a straight-line basis over the remaining expected term of continued involvement in the research and development process. Milestones are considered substantive if all of the following conditions are met: (1) the milestone is non-refundable; (2) achievement of the milestone was not reasonably assured at the inception of the arrangement; (3) substantive effort is involved to achieve the milestone; and, (4) the amount of the milestone appears reasonable in relation to the effort expended, the other milestones in the arrangement and the related risk associated with the achievement of the milestone and any ongoing research and development or other services are priced at fair value. Payments received in advance of work performed are recorded as deferred revenue.

F-10

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE B) — Summary of Significant Accounting Policies (continued)

Cost of product sales

Except for raxibacumab inventory as described below, the Company does not capitalize inventory costs associated with commercial supplies of drug product until it has received marketing approval from the U.S. Food and Drug Administration (“FDA”). Prior to these approvals, the cost of manufacturing drug product is recognized as research and development expense in the period that the cost is incurred. Therefore, manufacturing costs incurred prior to product approval are not included in cost of product sales when revenue is recognized from the sale of that drug product.

Prior to receiving a follow-on order for raxibacumab from the USG in July 2009, the Company did not capitalize inventory costs related to this product. Although authorization to ship to the SNS was received in January 2009, there continued to be uncertainty around future product orders. Beginning in July 2009, the cost of manufacturing raxibacumab is recognized as a cost of product sales (capitalized and then expensed when revenue is recognized), rather than research and development expenses in the period that the cost is incurred.

Cost of product sales also includes royalties paid or payable to third parties based on the sales levels of certain products.

Cost of manufacturing and development services

Cost of manufacturing and development services represents costs associated with the Company’s contract manufacturing arrangements and other development services. The costs associated with work previously performed to conduct animal and human studies for raxibacumab were recognized as research and development expenses in the period that the costs were incurred. Therefore, these pre-acceptance development costs are not included in cost of manufacturing and development services for the year ended December 31, 2009. The Company is recording additional raxibacumab development services costs as incurred.

Research and Development

Research and development costs are charged to expense as incurred, unless otherwise capitalized pursuant to FASB ASC Topic 730, Research and Development. Research and development costs include salaries and related benefits, outside services, licensing fees or milestones, materials and supplies, building costs and allocations of certain support costs. Research and development direct expenditures were $173,709, $243,257 and $246,293 for 2009, 2008 and 2007, respectively. Reimbursement of research and development expenses received in connection with collaborative cost-sharing agreements is recorded as a reduction of such expenses.

Leases

The Company accounts for its leases under FASB ASC Topic 840, Leases, and other related guidance. The Company has a number of operating leases and has entered into sale-leaseback transactions for land and facilities. See Note G, Commitments and Other Matters, for additional discussion.

Stock-Based Compensation

The Company has a stock incentive plan (the “Incentive Plan”) under which options to purchase shares of the Company’s common stock may be granted to employees, consultants and directors with an exercise price no less than the quoted market value on the date of grant. The Incentive Plan also provides for the issuance of non-vested common stock (restricted stock) and other share-based compensation. The Company recognizes stock-based compensation expense related to employee stock options under FASB ASC Topic 718, Compensation — Stock Compensation. For income tax purposes, the Company follows the “with and without” method of accounting for the tax effect of excess tax benefits generated from stock-based compensation. See Note H, Stockholders’ Equity, for additional discussion.

F-11

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE B) — Summary of Significant Accounting Policies (continued)

Financing Costs Related to Long-term Debt

Costs associated with obtaining long-term debt are deferred and amortized over the term of the related debt on a straight-line basis which approximates the effective interest method.

Patent Application Costs

Patent application costs are charged to expense as incurred.

Net Income (Loss) Per Share

The Company follows the provisions under FASB ASC Topic 260, Earnings Per Share, which requires the Company to present basic and diluted earnings per share. The Company’s basic and diluted income (loss) per share is calculated by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during all periods presented. Shares issuable upon the conversion of the Company’s convertible subordinated debt are excluded from diluted earnings per share calculations for the years ended December 31, 2009, 2008 and 2007 because the effects are anti-dilutive.

Foreign Currency

Assets and liabilities of the Company’s international operations are translated into U.S. dollars at exchange rates that are in effect as of the balance sheet date, and equity accounts are translated at historical rates. Revenue and expenses are translated at average exchange rates that are in effect during the year. Translation adjustments are accumulated in other comprehensive income (loss) as a separate component of stockholders’ equity in the consolidated balance sheet. Transaction gains and losses are included in other expense in the consolidated statement of operations.

Comprehensive Income (Loss)

FASB ASC Topic 220, Comprehensive Income, requires unrealized gains and losses on the Company’s available-for-sale short-term investments, marketable securities and long-term equity investments and the activity for the cumulative translation adjustment to be included in other comprehensive income.

The components of accumulated other comprehensive income (loss) are as follows:

	December 31,
	2009		2008
Net unrealized gains (losses) on:
Short-term investments and marketable securities	$	5,496	$	(4,077	)
Long-term equity investment in VIA Pharmaceuticals		21		38
Restricted investments		1,816		108
Foreign currency translation		32		(559	)
Accumulated other comprehensive income (loss)	$	7,365	$	(4,490	)

Accumulated other comprehensive income (loss) excludes net realized gains included in net income (loss) of $4,504, $33,619 and $55 for the years ended December 31, 2009, 2008 and 2007, respectively. The effect of income taxes on items in other comprehensive income is $0 for all periods presented.

During 2008, the Company recorded an impairment charge relating to its investment in debt securities issued by Lehman Brothers Holdings, Inc. (“LBHI”) of $6,284 due to the significant reduction in the market value of LBHI’s debt securities that the Company believes may not be temporary as a result of LBHI’s bankruptcy. See Note C, Investments, for additional discussion.

F-12

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE B) — Summary of Significant Accounting Policies (continued)

Sources of Supply

The Company is currently able to obtain most of its raw materials, supplies and equipment from various sources, and generally has no dependence upon a single supplier. However, certain materials required for manufacturing are currently available only from single sources. As the Company prepares for commercialization of its products, it intends to identify alternative sources of supply wherever possible.

Recent Accounting Pronouncements

In December 2007, the FASB ratified guidance regarding financial statement presentation and disclosure of collaborative arrangements, as defined, which includes arrangements the Company has entered into regarding development and commercialization of products. The Company adopted this guidance as of January 1, 2009. The adoption of this guidance did not have a material effect on the Company’s consolidated results of operations, financial position or liquidity.

In February 2008, the FASB issued guidance which delayed the effective date of FASB ASC Topic 820, Fair Value Measurements and Disclosures, for most non-financial assets and non-financial liabilities until fiscal years beginning after November 15, 2008. The implementation of FASB ASC Topic 820 for non-financial assets and non-financial liabilities had no material effect on the Company’s consolidated results of operations, financial position or liquidity.

In May 2008, the FASB issued guidance contained in FASB ASC Topic 470, Debt, which requires that the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) be separately accounted for in a manner that reflects an issuer’s non-convertible debt borrowing rate. The resulting debt discount is amortized over the period the convertible debt is expected to be outstanding as non-cash interest expense. FASB ASC Topic 470 was effective for the Company as of January 1, 2009 and retroactive application to all periods presented was required. See Note F, Long-term Debt, for additional information.

In June 2008, the FASB issued authoritative guidance which mandates a two-step process for evaluating whether an equity-linked financial instrument or embedded feature is indexed to the entity’s own stock. The adoption of this guidance as of January 1, 2009 had no material effect on the Company’s consolidated results of operations, financial position or liquidity.

In April 2009, the FASB issued authoritative accounting guidance on how to determine the fair value of assets and liabilities in the current economic environment, which reemphasizes that the objective of a fair value measurement remains an exit price. If the Company were to conclude that there has been a significant decrease in the volume and level of activity of the asset or liability in relation to normal market activities, quoted market values may not be representative of fair value and the Company may conclude that a change in valuation technique or the use of multiple valuation techniques may be appropriate. Additional guidance also issued in April 2009 modifies the requirements for recognizing other-than-temporarily impaired debt securities and revises the existing impairment model for such securities by modifying the current intent and ability indicator in determining whether a debt security is other-than-temporarily impaired. The FASB also issued guidance to enhance the disclosure of financial instruments for both interim and annual periods. The adoption of this guidance during the year ended December 31, 2009 had no material effect on the Company’s consolidated results of operations, financial position or liquidity.

In June 2009, the FASB issued The FASB Accounting Standards Codification^tmand the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 (“FASB ASC” or “Codification”). The Codification, which was released on July 1, 2009, became the single source of authoritative non-governmental U.S. generally accepted accounting principles (“U.S. GAAP”), superseding various existing authoritative accounting pronouncements. The Codification eliminates the U.S. GAAP hierarchy contained in FASB Statement No. 162

F-13

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE B) — Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

and establishes one level of authoritative U.S. GAAP. All other literature is considered non-authoritative. This Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. There has been no change to the Company’s consolidated financial statements due to the implementation of the Codification other than changes in reference to various authoritative accounting pronouncements in the consolidated financial statements.

In October 2009, the FASB issued new revenue recognition standards for arrangements with multiple deliverables. The new standards permit entities to initially use management’s best estimate of selling price to value individual deliverables when those deliverables do not have objective and reliable evidence of fair value. Additionally, these new standards modify the manner in which the transaction consideration is allocated across the separately identified deliverables. These new standards are effective for the Company as of January 1, 2011, however early adoption is permitted. Management is currently evaluating the impact of adopting these new standards on the Company’s consolidated results of operations, financial position and liquidity.

F-14

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE C) — Investments

Available for sale investments, including accrued interest, at December 31, 2009 and 2008 were as follows:

	December 31, 2009
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
U.S. Treasury and agencies	$	7,997	$	32	$	—		$	8,029
Government-sponsored enterprise securities		34,667		672		(29	)		35,310
Corporate debt securities		107,283		1,099		(193	)		108,189
Subtotal — Short-term investments		149,947		1,803		(222	)		151,528
Government-sponsored enterprise securities		172,191		2,009		(673	)		173,527
Corporate debt securities		208,824		2,106		(429	)		210,501
Subtotal — Marketable securities		381,015		4,115		(1,102	)		384,028
Cash and cash equivalents		6,693		—		—			6,693
Government-sponsored enterprise securities		20,316		394		(17	)		20,693
Corporate debt securities		59,612		1,470		(31	)		61,051
Subtotal — Restricted investments		86,621		1,864		(48	)		88,437
Total	$	617,583	$	7,782	$	(1,372	)	$	623,993

	December 31, 2008
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
U.S. Treasury and agencies	$	755	$	27	$	—		$	782
Government-sponsored enterprise securities		10,507		271		(22	)		10,756
Corporate debt securities		11,421		29		(297	)		11,153
Subtotal — Short-term investments		22,683		327		(319	)		22,691
U.S. Treasury and agencies		16,150		368		(455	)		16,063
Government-sponsored enterprise securities		108,877		3,229		(262	)		111,844
Corporate debt securities		145,621		263		(8,151	)		137,733
Subtotal — Marketable securities		270,648		3,860		(8,868	)		265,640
Cash and cash equivalents		5,773		—		—			5,773
U.S. Treasury and agencies		6,044		95		—			6,139
Government-sponsored enterprise securities		18,145		403		(11	)		18,537
Corporate debt securities		39,289		299		(677	)		38,911
Subtotal — Restricted investments		69,251		797		(688	)		69,360
Total	$	362,582	$	4,984	$	(9,875	)	$	357,691

The Company’s restricted investments with respect to its headquarters (“Traville”) and large-scale manufacturing facility (“LSM”) leases will serve as collateral for a security deposit for the duration of the leases, although the Company has the ability to reduce the restricted investments that are in the form of securities for the Traville and LSM facility leases by substituting cash security deposits. For the Traville and LSM leases, the Company is required

F-15

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE C) — Investments (continued)

to maintain restricted investments of at least $46,000, or $39,500 if in the form of cash, in order to satisfy the security deposit requirements of these leases.

In addition, the Company is also required to maintain $34,300 in restricted investments with respect to two leases with the Maryland Economic Development Corporation (“MEDCO”) for its small-scale manufacturing facility. The facility was financed primarily through a combination of bonds issued by MEDCO (“MEDCO Bonds”) and loans issued to MEDCO by certain State of Maryland agencies. The MEDCO Bonds are secured by letters of credit issued for the account of MEDCO which expire in December 2011. The Company is required to maintain restricted investments which serve as security for the MEDCO letters of credit reimbursement obligation.

The Company’s restricted investments were $88,437 and $69,360 as of December 31, 2009 and 2008, respectively.

Short-term investments, Marketable securities and Restricted investments — unrealized losses

The Company’s gross unrealized losses and fair value of investments with unrealized losses were as follows:

	December 31, 2009
	Loss Position					Loss Position
	for Less Than					for Greater Than
	Twelve Months					Twelve Months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Government-sponsored enterprise securities	$	23,026	$	(29	)	$	—	$	—		$	23,026	$	(29	)
Corporate debt securities		24,751		(181	)		4,474		(12	)		29,225		(193	)
Subtotal — Short-term investments		47,777		(210	)		4,474		(12	)		52,251		(222	)
Government-sponsored enterprise securities		154,032		(673	)		—		—			154,032		(673	)
Corporate debt securities		76,595		(405	)		1,231		(24	)		77,826		(429	)
Subtotal — Marketable securities		230,627		(1,078	)		1,231		(24	)		231,858		(1,102	)
Government-sponsored enterprise securities		7,317		(17	)		14		—			7,331		(17	)
Corporate debt securities		6,212		(31	)		—		—			6,212		(31	)
Subtotal — Restricted investments		13,529		(48	)		14		—			13,543		(48	)
Total	$	291,933	$	(1,336	)	$	5,719	$	(36	)	$	297,652	$	(1,372	)

F-16

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE C) — Investments (continued)

Short-term investments, Marketable securities and Restricted investments — unrealized losses (continued)

	December 31, 2008
	Loss Position					Loss Position
	for Less Than					for Greater Than
	Twelve Months					Twelve Months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Government-sponsored enterprise securities	$	—	$	—		$	962	$	(22	)	$	962	$	(22	)
Corporate debt securities		6,543		(284	)		145		(13	)		6,688		(297	)
Subtotal — Short-term investments		6,543		(284	)		1,107		(35	)		7,650		(319	)
U.S. Treasury and agencies		7,540		(455	)		—		—			7,540		(455	)
Government-sponsored enterprise securities		1,714		(4	)		11,259		(258	)		12,973		(262	)
Corporate debt securities		77,637		(4,597	)		39,334		(3,554	)		116,971		(8,151	)
Subtotal — Marketable securities		86,891		(5,056	)		50,593		(3,812	)		137,484		(8,868	)
Government-sponsored enterprise securities		2,975		(5	)		337		(6	)		3,312		(11	)
Corporate debt securities		19,002		(637	)		4,016		(40	)		23,018		(677	)
Subtotal — Restricted investments		21,977		(642	)		4,353		(46	)		26,330		(688	)
Total	$	115,411	$	(5,982	)	$	56,053	$	(3,893	)	$	171,464	$	(9,875	)

The deterioration of the credit markets during 2008 had a detrimental effect on the Company’s investment portfolio. During 2008, LBHI experienced a significant deterioration in its credit worthiness and filed a petition under Chapter 11 of the U.S. Bankruptcy Code. As a result, the Company determined that its investment in LBHI debt securities had incurred an other-than-temporary impairment, and accordingly, recorded an impairment charge of $6,284 which is reflected as other expense in the 2008 consolidated statement of operations. At December 31, 2009, the Company has evaluated its investments and has determined that no other investments have an other-than-temporary impairment, as it has no intent to sell other securities with unrealized losses and it is not more likely than not that the Company will be required to sell any additional securities with unrealized losses, given the Company’s current and anticipated financial position.

The Company owned 162 available-for-sale U.S Treasury obligations, government-sponsored enterprise securities and corporate debt securities at December 31, 2009. Of these 162 securities, 58 had unrealized losses at December 31, 2009.

The Company’s equity investments of less than 20% in privately-held companies are carried at cost. There were no events or circumstances during the year ended December 31, 2009 that would have a significant adverse effect on the carrying value of these investments.

F-17

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE C) — Investments (continued)

Other Information

The following table summarizes maturities of the Company’s short-term investments, marketable securities and restricted investment securities at December 31, 2009:

	Short-term				Marketable				Restricted
	Investments				Securities				Investments
	Amortized		Fair		Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value		Cost		Value
Less than one year	$	149,947	$	151,528	$	—	$	—	$	19,551	$	19,781
Due in year two through year three		—		—		205,558		208,402		52,640		53,819
Due in year four through year five		—		—		75,312		75,450		7,482		7,761
Due after five years		—		—		100,145		100,176		6,948		7,076
Total	$	149,947	$	151,528	$	381,015	$	384,028	$	86,621	$	88,437

The Company’s short-term investments include mortgage-backed securities with an aggregate cost of $22,471 and $6,434 at December 31, 2009 and 2008 respectively, and an aggregate fair value of $23,026 and $6,576 at December 31, 2009 and 2008, respectively. The Company’s marketable securities include mortgage-backed securities with an aggregate cost of $58,534 and $75,321 at December 31, 2009 and 2008, respectively, and an aggregate fair value of $59,981 and $76,983 at December 31, 2009 and 2008, respectively. The Company’s restricted investments include mortgage-backed securities with an aggregate cost of $7,483 and $4,953 at December 31, 2009 and 2008, respectively, and an aggregate fair value of $7,593 and $5,043 at December 31, 2009 and 2008, respectively. These securities have no single maturity date and, accordingly, have been allocated on a pro rata basis to each maturity range based on each maturity range’s percentage of the total value.

The Company’s net proceeds, realized gains and realized losses from its investments are as follows:

	Year Ended December 31,
	2009			2008			2007
Proceeds on sale of investments prior to maturity	$	368,560		$	237,861		$	123,522
Realized gains		7,026			34,113			494
Realized losses		(2,522	)		(494	)		(439	)

Realized gains and losses related to the Company’s short-term investments, marketable securities and restricted investments are included in investment income in the consolidated statements of operations. The cost of the securities sold is based on the specific identification method. Realized gains shown above also include gains related to the sale of long-term equity investments, which are shown separately on the consolidated statements of operations.

During 2009, 2008 and 2007, the Company recognized interest income of $13,506, $22,406 and $32,983 respectively, in investment income.

(NOTE D) — Collaborations and U.S. Government Agreement

Principal Agreements

Agreement with Novartis

During 2006, the Company entered into an agreement with Novartis International Pharmaceutical Ltd. (“Novartis”) for the co-development and commercialization of ZALBIN. Under the agreement, the Company and Novartis will

F-18

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE D) — Collaborations and U.S. Government Agreement (continued)

Principal Agreements (continued)

Agreement with Novartis (continued)

co-commercialize ZALBIN in the United States, and will share U.S. commercialization costs and U.S. profits equally. Novartis will be responsible for commercialization outside the U.S. and will pay the Company a royalty on those sales. The Company will have primary responsibility for the bulk manufacture of ZALBIN, and Novartis will have primary responsibility for commercial manufacturing of the finished drug product. The Company is entitled to payments aggregating up to approximately $507,500, including a non-refundable up-front license fee, upon the successful attainment of certain milestones. The Company and Novartis will share clinical development costs. The Company received an up-front license fee of $45,000 in 2006. As of December 31, 2009, the Company has contractually earned and received payments aggregating $207,500, including $75,000 received during the three months ended December 31, 2009. The Company is recognizing these payments as revenue ratably over the estimated remaining development period, estimated to end in the fall of 2010. The Company recognized revenue of $54,158, $35,408 and $28,039 in 2009, 2008 and 2007, respectively, under this agreement.

Agreements with GlaxoSmithKline

During 2006, the Company entered into a license agreement with GlaxoSmithKline (“GSK”) for the co-development and commercialization of BENLYSTA^tm arising from an option GSK exercised in 2005, relating to an earlier collaboration agreement. The agreement grants GSK a co-development and co-commercialization license, under which both companies will jointly conduct activities related to the development and sale of products in the United States and abroad. The Company and GSK share Phase 3 and 4 development costs, and will share sales and marketing expenses and profits of any product commercialized under the agreement. The Company will have primary responsibility for bulk manufacturing and for commercial manufacturing of the finished drug product. During 2009, the Company completed one Phase 3 clinical trial and the primary phase of a second Phase 3 clinical trial. In partial consideration of the rights granted to GSK in this agreement, the Company received a non-refundable payment of $24,000 during 2006 and is recognizing this payment as revenue over the remaining clinical development period, estimated to end in the fall of 2010. The Company recognized revenue of $4,737, $6,545 and $6,545 in 2009, 2008 and 2007, respectively, relating to this payment.

The BENLYSTA agreement arises from a 1993 agreement, as amended, in which the Company entered into a collaboration agreement providing GSK a first right to develop and market products in human and animal health care (“GSK Products”), based upon human genes identified by the Company. In June 1996, this agreement was substantially amended (the “1996 GSK Agreement”).

With respect to the Company’s rights under the 1996 GSK Agreement, the Company is entitled to (1) royalties on the net sales of certain GSK Products developed pursuant to the agreement, (2) product development milestones and (3) the option to co-promote up to 20% of any product developed by GSK under the collaboration agreement. If the Company were to exercise its option to co-promote any GSK Products, it would be entitled to receive additional amounts from GSK in proportion to its level of co-promotion. The Company has been informed that GSK is pursuing research programs involving specific genes for the creation of small molecule, protein and antibody drugs. The Company cannot provide any assurance that any of these programs will be continued or result in any approved drugs.

During 2005, GSK exercised its option under an earlier collaboration agreement to develop and commercialize HGS-ETR1 jointly with the Company. During 2008, the Company reacquired GSK’s rights to TRAIL Receptor antibodies (including rights to HGS-ETR1 and HGS-ETR2) from GSK, in exchange for a reduction in potential future royalties due to the Company for a product currently being developed by GSK. The Company determined the fair value of the rights reacquired by estimating a probability-weighted net present value of the future cash stream of

F-19

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE D) — Collaborations and U.S. Government Agreement (continued)

Principal Agreements (continued)

Agreements with GlaxoSmithKline (continued)

such rights. The transaction was accounted for in accordance with FASB ASC Topic 845, Nonmonetary Transactions. Both the rights reacquired and the royalty concessions related to in-process research and development projects. Therefore, no assets or liabilities were recorded as part of this transaction and no gain or loss was recorded.

In 2004, the Company entered into an agreement with GSK under which GSK acquired exclusive worldwide rights to develop and commercialize Syncria^®, a drug that had been in late-stage preclinical development by the Company for potential use in the treatment of diabetes. In 2004, the Company received an up-front fee of $6,000 and is recognizing this revenue ratably over the clinical development period, which is now estimated to be eight years. With respect to this fee, the Company recognized $741 as revenue each year in the three year period ended December 31, 2009. As of December 31, 2009, the Company has also received and recognized development milestones aggregating $27,000 under the agreement, including $9,000 received and recognized in 2009.

License Agreement and Manufacturing Services Agreement with Teva Biopharmaceuticals USA, Inc. (formerly CoGenesys)

In 2008, Teva Pharmaceuticals Industries, Ltd. (“Teva”) acquired all of the outstanding stock of CoGenesys and CoGenesys became a wholly-owned subsidiary of Teva called Teva Biopharmaceuticals USA, Inc. (“Teva Bio”). The Company had sold its CoGenesys division in 2006 and entered into a license agreement, as amended that is now with Teva Bio, and acquired an equity investment in CoGenesys valued at $14,818. Under the license agreement, as amended, the Company is entitled to various milestone and royalty rights on certain products, if they are developed and commercialized. Teva Bio can obtain additional product rights by extending the initial seven-year research term upon the payment of additional consideration. In addition, the Company entered into a three-year manufacturing services agreement, as amended, which ended during 2009. The Company allocated, based on estimated fair values, $7,575 of its consideration received to the product license and manufacturing services agreement, which was recognized ratably over the term of the manufacturing services agreement, as amended. The Company recognized license revenue of $1,052, $2,525 and $2,525 during the years ended December 31, 2009, 2008 and 2007, respectively, and manufacturing services revenue of $1,035, $367 and $278 during the years ended December 31, 2009, 2008 and 2007, respectively, relating to these agreements, which represents related party revenue in 2007. See Note M, Teva Biopharmaceuticals USA, Inc. (formerly CoGenesys), for additional discussion.

Collaboration reimbursements with respect to Novartis and GSK

The Company’s research and development expenses in 2009 of $173,709 are net of $851 and $43,069 of costs reimbursed by Novartis and GSK, respectively. Research and development expenses of $243,257 in 2008 were net of $36,104 and $51,783 of costs reimbursed by Novartis and GSK, respectively. Research and development expenses of $246,293 in 2007 were net of $46,508 and $39,301 reimbursed by Novartis and GSK, respectively. The Company shares certain research and development costs including personnel costs, outside services, manufacturing, and overhead with Novartis and GSK under cost sharing provisions in the collaboration agreements.

U.S. Government Agreement

During 2006, the USG exercised its option under the second phase of a 2005 contract to purchase 20,001 doses of raxibacumab for its SNS. Under this two-phase contract, the Company has supplied raxibacumab, a human monoclonal antibody developed for use in the treatment of anthrax disease, to the USG. Along with the cost to manufacture the 20,001 doses, the Company has incurred the cost to conduct several animal and human studies as part of this contract. During 2009, the Company received authorization from BARDA to ship raxibacumab to the

F-20

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE D) — Collaborations and U.S. Government Agreement (continued)

Principal Agreements (continued)

U.S. Government Agreement (continued)

SNS and delivered all of the 20,001 doses. During the year ended December 31, 2009, the Company recognized $136,381 in product revenue related to this order and $26,146 in manufacturing and development services revenue related to the work to conduct the animal and human studies and other raxibacumab activities. The Company expects to receive approximately $10,000 from this first order if the Company obtains licensure by the FDA.

In July 2009, the USG agreed to purchase 45,000 additional doses of raxibacumab for the SNS, to be delivered over a three-year period, beginning in 2009. The Company expects to receive approximately $142,000 from this order as deliveries are completed, including $17,693 earned and recognized in 2009 and an additional $10,000 from this order if the Company obtains licensure by the FDA.

Other Collaborative and License Agreements

During 2007, the Company entered into a collaboration and license agreement with Aegera Therapeutics, Inc. (“Aegera”) of Montreal, Canada under which the Company acquired exclusive worldwide rights (excluding Japan) to develop and commercialize certain oncology molecules and related backup compounds to be chosen during a three-year research period. Under the agreement, the Company paid Aegera an aggregate of $20,000 for the license and for an equity investment in Aegera. The Company allocated $16,852 to the license fee and $3,148 to the investment. The value per share assigned to this investment was equal to the value per share obtained by Aegera through external financing earlier in 2007. Aegera will be entitled to receive up to $295,000 in future development and commercial milestone payments, including a $5,000 milestone payment made by the Company during 2008. Aegera will receive royalties on net sales in the Company’s territory. In North America, Aegera will have the option to co-promote with the Company, under which Aegera will share certain expenses and profits in lieu of its royalties. The Company incurred and expensed research costs of $2,321 and $2,249 related to the Aegera agreement during 2009 and 2008, respectively.

At December 31, 2009, the Company values its cost basis investment in Aegera at $2,994, based on year-end exchange rates, which is included in long-term equity investments on the consolidated balance sheets.

In 1999, the Company entered into a collaborative agreement with Cambridge Antibody Technology (“CAT”) of Melbourn, United Kingdom (now “MedImmune”) to jointly pursue the development of fully human monoclonal antibody therapeutics. MedImmune will receive milestone payments from the Company in connection with the development of any such antibodies as well as royalty payments on the Company’s net sales of such licensed product following regulatory approval. In the event of the achievement of other milestones or successful product launch, the Company would be obligated to pay MedImmune additional compensation. Since 1999, the Company has exercised one option and made certain payments. In 2006, the Company incurred and subsequently paid a milestone obligation to MedImmune of $1,500 pursuant to the development of one product.

In 2000, the Company entered into a second agreement with CAT. The 2000 agreement provides the Company with rights to use MedImmune technology to develop and sell an unlimited number of fully human antibodies for therapeutic and diagnostic purposes. The Company will pay MedImmune clinical development milestones and royalties based on product sales. Under this same agreement, the Company paid MedImmune $12,000 for research support and made an equity investment in CAT, which was subsequently sold. Since 2000, the Company has exercised several options and made certain payments. During 2009, the Company incurred milestone and royalty expenses to MedImmune of approximately $8,600 associated with the sale of raxibacumab to the USG, which is included in cost of product sales on the consolidated statements of operations. No option or milestone expenses were incurred in 2008 or 2007.

F-21

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE E) — Other Financial Information

Collaboration Receivables

Collaboration receivables of $10,356 includes $9,461 in unbilled receivables from GSK in connection with the Company’s cost-sharing agreements, and other billed and unbilled receivables. The $9,461 in unbilled receivables relates to net cost reimbursements due for the three months ended December 31, 2009. In addition, the Company has non-current collaboration receivables due from Novartis and GSK. See Other Assets discussion within this Note E.

Within the December 31, 2008 consolidated balance sheet, $2,804 has been reclassified from collaboration receivables to accounts receivable and $67 has been reclassified from prepaid and other assets to accounts receivable to conform to current year presentation. Accounts receivable was deemed immaterial in 2008 for separate disclosure. Due to the Company’s product sales and manufacturing and development services revenue in 2009, accounts receivable has become material and therefore is separately disclosed. The effect of the reclassifications is not material to the consolidated financial statements.

Inventory

Inventories consist of the following, which are all related to raxibacumab:

	December 31,
	2009		2008
Raw materials	$	4,293	$	—
Work-in-process		9,512		—
Finished goods		6,344		—
	$	20,149	$	—

Property, Plant and Equipment

Property, plant and equipment are stated at cost and are summarized as follows:

	December 31,
	2009			2008
Building (LSM)	$	204,151		$	204,151
Laboratory and production equipment		94,644			88,226
Computer equipment and software		38,793			36,249
Land and improvements		30,521			30,521
Leasehold improvements		25,046			23,932
Furniture and office equipment		6,629			6,007
Construction-in-progress		3,469			3,793
		403,253			392,879
Less: accumulated depreciation		(140,130	)		(118,564	)
	$	263,123		$	274,315

Depreciation expense was $19,960, $19,584 and $20,347 for the years ended December 31, 2009, 2008 and 2007, respectively.

F-22

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE E) — Other Financial Information (continued)

Other Assets

Other assets are comprised of the following:

	December 31,
	2009		2008
Collaboration receivables, non-current	$	6,920	$	—
Deferred financing costs, net of accumulated amortization of $6,846 and $5,663, as of December 31, 2009 and 2008, respectively		2,442		4,481
Other assets		1,896		2,264
	$	11,258	$	6,745

Non-current collaboration receivables relate to amounts due to the Company by Novartis and GSK for manufacturing costs incurred to produce pre-launch commercial product. Deferred financing costs were incurred in connection with the Company’s convertible subordinated debt offerings during 2005 and 2004. Debt issuance costs for the face value $403,850 of convertible subordinated debt outstanding as of December 31, 2009 amounted to approximately $9,288, representing primarily underwriting fees of approximately 3% of the gross amount of the convertible subordinated debt, and are being amortized on a straight-line basis to interest expense which approximates the effective interest method over the life of the convertible subordinated debt. See Note F, Long-Term Debt, for additional discussion of the Company’s convertible subordinated debt.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses are comprised of the following:

	December 31,
	2009		2008
Clinical trial costs	$	23,641	$	40,212
Accrued expenses and fixed asset purchases		5,736		6,091
Professional fees		6,324		5,878
Accrued interest		2,668		3,253
Collaboration payable		4,000		—
	$	42,369	$	55,434

Accrued clinical trial costs consist primarily of investigator fees, contract research organization services and laboratory costs, primarily associated with the Company’s Phase 3 studies. Collaboration payable represents cost reimbursements due to Novartis for the six months ended December 31, 2009.

F-23

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE F) — Long-Term Debt

The components of long-term debt are as follows:

						December 31,
Debt	Interest Rate			Maturities		2009		2008
21/4% Convertible Subordinated Notes due 2011		2.25	%		October 2011	$	178,104	$	239,247
21/4% Convertible Subordinated Notes due 2012		2.25	%		August 2012		171,703		178,350
							349,807		417,597
BioMed lease financing		11.0	%		May 2026		248,628		246,477
							598,435		664,074
Less current portion							—		—
						$	598,435	$	664,074

Annual maturities of all long-term debt (representing cash to be paid) are as follows:

2010	$	—
2011		197,100
2012		206,750
2013		—
2014		—
2015 and thereafter		52,961
	$	456,811

The difference between the long-term debt of $598,435 and annual maturities of $456,811 is due to the accounting for the sale-leaseback of the LSM facility as a financing transaction and the debt discount relating to the convertible subordinated notes. During 2006, the Company entered into a purchase and sale agreement with BioMed in connection with the Company’s Traville headquarters and LSM facilities. The Company accounted for the sale-leaseback of certain facilities as a financing transaction. Payments due for the BioMed debt resulting from this financing are based upon an allocation of fair value of the properties included in the transaction. Aggregate lease financing payments, including interest, over the remaining sixteen year period are approximately $471,050 including an annual lease escalation of 2%. Interest expense associated with this debt is being calculated at approximately 11%, which approximated the Company’s incremental borrowing rate at the time of the agreement. For the first nine years of the leases, the payments are less than the amount of calculated interest expense, which results in an increase in the debt balance during this period, reaching $254,699 in 2015. Accordingly, the Company has classified the full amount of the debt outstanding as of December 31, 2009 as long-term. Beginning in 2015, the payments begin to reduce the debt balance and are reflected in the annual maturities shown herein. At the end of the twenty-year leases, the remaining debt will be approximately $201,737.

During 2004, the Company completed the private placement of $280,000 of 21/4% Convertible Subordinated Notes due 2011 (“21/4% Notes due 2011”), convertible into common stock at approximately $15.55 per share. Under FASB ASC Topic 470, $191,804 of the proceeds from the 21/4% Notes due 2011 was allocated to long-term debt and $88,196 was allocated to equity based on the Company’s non-convertible borrowing rate in effect at the time the notes were issued. Debt issuance costs for the $191,804 of 21/4% Notes due 2011 amounted to approximately $5,924, which are being amortized on a straight-line basis, which approximates the effective interest method, over the life of the 21/4% Notes due 2011. During 2009, the Company repurchased 21/4% Notes due 2011 with a face value of $82,900 (as discussed below), and wrote off the related unamortized debt issuance costs and debt discount. Accumulated amortization of the debt issuance costs for the 21/4% Notes due 2011 is approximately $4,245 and

F-24

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE F) — Long-Term Debt (continued)

$3,596 as of December 31, 2009 and 2008, respectively. The 21/4% Notes due 2011 also contain a provision for a “make-whole” premium to be paid by the Company to holders of the 21/4% Notes due 2011 in the event of certain changes in control that could occur during the life of the 21/4% Notes due 2011. The premium is payable in the form of cash, the Company’s common stock, or the same form of consideration used to pay for the shares of the Company’s common stock in connection with the transaction constituting the change in control. The premium declines over time and is based upon the price of the Company’s stock as of the effective date of the change in control. As of December 31, 2009, the maximum premium possible is approximately $33,753, or approximately 17% of the aggregate face value of 21/4% Notes due 2011 outstanding, in the event a qualified change in control occurs with a stock price of $16.00 per share at such date. If the stock price on the effective date of a change in control is less than $11.105 per share or greater than $55.00 per share, no premium will be paid.

During 2005, the Company completed the private placement of $230,000 of 21/4% Convertible Subordinated Notes due 2012 (“21/4% Notes due 2012”), convertible into common stock at approximately $17.78 per share. Under FASB ASC Topic 470, $143,266 of the proceeds from the 21/4% Notes due 2012 was allocated to long-term debt and $86,734 was allocated to equity based on the Company’s non-convertible borrowing rate in effect at the time the notes were issued. Debt issuance costs for the $143,266 of 21/4% Notes due 2012 amounted to approximately $4,220, which are being amortized on a straight-line basis, which approximates the effective interest method, over the life of the 21/4% Notes due 2012. During 2009, the Company repurchased 21/4% Notes due 2012 with a face value of $23,250 (as discussed below), and wrote off the related unamortized debt issuance costs and debt discount. Accumulated amortization of the debt issuance costs for the 21/4% Notes due 2012 is approximately $2,601 and $2,060 as of December 31, 2009 and 2008, respectively. The 21/4% Notes due 2012 also contain a provision for a “make-whole” premium to be paid by the Company to holders of the 21/4% Notes due 2012 in the event of certain changes in control that could occur during the life of the 21/4% Notes due 2012. The premium is payable in the form of the Company’s common stock by increasing the conversion rate to the holders of the notes who convert their notes. The premium, which is expressed as additional shares of common stock per one thousand dollars principal amount of notes, is based upon the price of the Company’s stock as of the effective date of the change in control. The maximum premium possible is approximately $34,458, or approximately 17% of the aggregate face value of 21/4% Notes due 2012 outstanding, in the event a qualified change in control occurs with a stock price of $14.82 per share at such date. If the stock price on the effective date of a change in control is less than $14.82 per share or greater than $100.00 per share, no premium will be paid.

During 2009, the Company repurchased 21/4% Notes due 2011 with a face value of $82,900 and 21/4% Notes due 2012 with a face value of $23,250 for an aggregate cost of approximately $50,000 plus accrued interest. The repurchase resulted in a gain on extinguishment of debt of $38,873, net of the related debt discount of $16,424 and deferred financing charges of $855.

The carrying amount and fair value of the Company’s long-term debt are as follows:

	December 31,
	2009				2008
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
21/4% Convertible Subordinated Notes due 2011	$	178,104	$	402,084	$	239,247	$	86,800
21/4% Convertible Subordinated Notes due 2012		171,703		372,150		178,350		57,500
BioMed lease financing		248,628		265,293		246,477		306,446
	$	598,435	$	1,039,527	$	664,074	$	450,746

F-25

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE F) — Long-Term Debt (continued)

The components of the convertible subordinated debt are as follows:

	December 31, 2009
			Unamortized			Carrying
	Face Value		Debt Discount			Amount
21/4% Convertible Subordinated Notes due 2011	$	197,100	$	(18,996	)	$	178,104
21/4% Convertible Subordinated Notes due 2012		206,750		(35,047	)		171,703
	$	403,850	$	(54,043	)	$	349,807

	December 31, 2008
			Unamortized			Carrying
	Face Value		Debt Discount			Amount
21/4% Convertible Subordinated Notes due 2011	$	280,000	$	(40,753	)	$	239,247
21/4% Convertible Subordinated Notes due 2012		230,000		(51,650	)		178,350
	$	510,000	$	(92,403	)	$	417,597

With respect to the Company’s convertible subordinated notes (the “Notes”), the Notes are unsecured obligations of the Company and rank junior in right of payment to the Company’s existing and future senior indebtedness. The Notes are not redeemable prior to maturity, but can be repurchased by the Company on the open market.

The indentures under which the Notes have been issued contain no financial covenants or any restriction on the payments of dividends, the incurrence of senior indebtedness, or other indebtedness, or the Company’s issuance or repurchase of securities. There are no sinking fund requirements with respect to the Notes.

The fair value of the BioMed lease financing is determined using a discounted cash flow analysis and current rates for corporate debt having similar characteristics and companies with similar credit worthiness. The Company concluded that its incremental borrowing rate as of December 31, 2009 as compared to December 31, 2008 has decreased, resulting in a decrease in the fair value of the debt to $265,293.

(NOTE G) — Commitments and Other Matters

Leases

The Company leases office and laboratory premises and equipment pursuant to operating leases expiring at various dates through 2026. Certain leases contain renewal options. Minimum annual rentals are as follows:

Year Ending December 31,
2010	$	20,537
2011		20,886
2012		21,246
2013		21,613
2014		21,993
2015 and thereafter		260,876
	$	367,151

The operating lease commitment of $367,151 includes lease payments associated with the Company’s lease with BioMed for its Traville headquarters. During 2006 the Company entered into a lease with BioMed for its Traville headquarters following the termination of the Company’s Traville lease with its former lessor. Based upon an

F-26

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE G) — Commitments and Other Matters (continued)

Leases (continued)

allocation of fair value, the initial annual rent for Traville was approximately $16,653. The aggregate rental payments over the remaining lease term are approximately $343,358, including an annual escalation of 2% which is accounted for on a straight-line basis over the lease term. The Company has an option to purchase the Traville facility in 2016 for $303,000. There are no financial covenants with respect to the BioMed lease.

As part of its agreement with BioMed, the Company committed to exercise purchase options with respect to certain equipment currently used at the Traville facility at the end of the applicable equipment lease terms. The equipment was subject to several operating leases with an unrelated party. During 2008, the Company exercised the purchase option with regard to certain leases at a cost of approximately $4,200, and exercised the purchase option related to the remaining leases in 2009 at a cost of approximately $5,300. The Company will transfer ownership of this facility-related equipment to BioMed at the earlier of the end of the Traville lease term or at certain other pre-specified events.

The Company has entered into two long-term leases, as amended, with MEDCO expiring January 1, 2019 for a small-scale manufacturing facility aggregating 127,000 square feet and built to the Company’s specifications. The Company has accounted for these leases as operating leases. The facility was financed primarily through a combination of MEDCO Bonds and loans issued to MEDCO by certain State of Maryland agencies. The Company has no equity interest in MEDCO.

Rent is based upon MEDCO’s debt service obligations. Annual base rent under the leases is currently approximately $2,640. The MEDCO Bonds are secured by letters of credit issued for the account of MEDCO which were renewed for a two year period in December 2009. The Company has restricted investments of approximately $34,500 and $15,700 as of December 31, 2009 and 2008, respectively, associated with these leases which serve as security for the MEDCO letters of credit reimbursement obligation. Upon default or early lease termination, the MEDCO Bond indenture trustee can draw upon the letters of credit to pay the MEDCO Bonds as they are tendered. In such an event, the Company could lose part or all of its restricted investments and could record a charge to earnings for a corresponding amount. Alternatively, the Company has an option during or at the end of the lease term to purchase this facility for an aggregate amount that declines from approximately $37,000 in 2010 to approximately $21,000 in 2019. The amended leases contain no debt covenants with respect to the Company’s financial condition.

See Note C, Investments, for additional discussion of the Company’s restricted investments.

The Company’s leases for office and laboratory space provide for certain rent escalations on each anniversary of the lease commencement date. For financial reporting purposes, rent expense is charged to operations on a straight-line basis over the term of the lease, resulting in a liability for deferred rent of $8,664 and $6,718 at December 31, 2009 and 2008, respectively.

The Company had entered into various sale-leaseback transactions resulting in equipment leases with rental and buy-out payments, with initial terms ranging from five to seven years. The Company accounted for these leases as operating leases. Under the leases, the Company was required to maintain minimum levels of unrestricted cash, cash equivalents and marketable securities. During 2009 and 2008, the Company exercised its remaining purchase options at the end of the initial lease terms and released the related restricted investments.

Rent expense aggregated $22,357, $27,588 and $29,461 for the years ended December 31, 2009, 2008 and 2007, respectively. The decrease in rent expense in 2009 is due to the expiration of certain equipment leases.

Purchase Commitments

At December 31, 2009 the Company had commitments for capital expenditures, consisting primarily of manufacturing and laboratory equipment, of approximately $1,025.

F-27

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE G) — Commitments and Other Matters (continued)

401(k) Plan

The Company has a 401(k) pension plan available to eligible full-time employees. Participating employees may contribute up to 100% of their total eligible compensation to the plan, subject to Internal Revenue Service limitations. The Company currently matches a portion of the employee contributions. The Company’s contribution was $1,645, $1,945 and $1,740 for the years ended December 31, 2009, 2008 and 2007, respectively.

Contingent Liabilities

The Company is party to various claims and legal proceedings from time to time. The Company is not aware of any legal proceedings that it believes could have, individually or in the aggregate, a material adverse effect on its results of operations, financial condition or liquidity.

(NOTE H) — Stockholders’ Equity

Public Offerings of Common Stock

During 2009, the Company completed two public offerings of its common stock. The Company issued 26,697,250 shares in August 2009 at a price of $14.00 per share, resulting in net proceeds of approximately $356,500. The Company also issued 17,825,000 shares in December 2009 at a price of $26.75 per share, resulting in net proceeds of approximately $456,400.

Stock-based Compensation Plans

The Company has two stock-based compensation plans as described below. The following is a summary of the stock-based compensation expense that has been recorded in the consolidated statements of operations for the years indicated:

	Year Ended December 31,
	2009		2008		2007
Employee stock option and employee stock purchases plan compensation expense	$	11,935	$	17,630	$	20,691
Restricted stock units		589		647		470
Restricted stock awards		—		316		530
Total	$	12,524	$	18,593	$	21,691

No income tax benefit was recognized in the consolidated statements of operations for stock-based compensation for the years presented as realization of such benefits was not more likely than not.

Stock Incentive Plan

Stock Options

The Company has an Incentive Plan under which options to purchase new shares of the Company’s common stock may be granted to employees, consultants and directors at an exercise price no less than the quoted market value on the date of grant. The Incentive Plan also provides for awards in the form of stock appreciation rights, restricted (non-vested) or unrestricted stock awards, stock-equivalent units or performance-based stock awards. The Company issues both qualified and non-qualified options under the Incentive Plan. The vesting period of the options is determined by the Board of Directors and is generally four years. Upon acquisition by a person, or group of persons, of more than 50% of the Company’s outstanding common stock, outstanding options shall immediately vest in full and be exercisable. The Company recognizes compensation expense for an award with only service conditions that

F-28

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE H) — Stockholders’ Equity (continued)

Stock-based Compensation Plans (continued)

Stock Incentive Plan (continued)

has a graded vesting schedule on a straight-line basis over the requisite service period for the entire award. All options expire after ten years or earlier from the date of grant.

At December 31, 2009, the total authorized number of shares under the Incentive Plan, including prior plans, was 54,778,056. Options available for future grant were 7,781,289 as of December 31, 2009.

A summary of stock option activity for the year ended December 31, 2009 is as follows:

						Weighted-Average
						Remaining
				Weighted-Average		Contractual Term		Aggregate Intrinsic
	Shares			Exercise Price		(years)		Value(1)
Outstanding at January 1, 2009		28,373,151		$	15.40		5.71
Granted		4,352,003			2.27
Exercised		(4,584,767	)		10.50			$	51,205
Forfeited		(691,887	)		5.83
Expired		(2,847,326	)		20.90
Outstanding at December 31, 2009		24,601,174			13.62		5.85		476,728
Vested and expected to vest at December 31, 2009		23,555,132			14.01		4.10		448,954
Exercisable at December 31, 2009		17,387,092			17.18		4.74		292,384

(1) Aggregate intrinsic value represents only the value for those options in which the exercise price of the option is less than the market value of the Company’s stock on December 31, 2009, or for exercised options, the exercise date.

The following table summarizes information about stock options outstanding at December 31, 2009:

	Options Outstanding						Options Exercisable
			Weighted-
			Average
			Remaining		Weighted-Average
	Number		Contractual		Exercise		Number		Weighted-Average
Range of Exercise Price	Outstanding		Life (In Years)		Price		Exercisable		Exercise Price
$0.52 to $10.00		8,665,356		8.18	$	3.89		2,998,103	$	5.84
$10.01 to $12.50		8,522,924		5.94		10.97		7,314,130		11.02
$12.51 to $15.00		3,850,937		3.99		12.79		3,807,981		12.79
$15.01 to $35.00		975,496		4.72		21.21		680,417		20.45
$35.01 to $86.19		2,586,461		0.92		53.38		2,586,461		53.38
		24,601,174		5.85		13.62		17,387,092		17.18

During the years ended December 31, 2009, 2008 and 2007, the Company issued 4,584,767, 364,236 and 968,501 shares of common stock, respectively, in conjunction with stock option exercises. The Company received cash proceeds from the exercise of these stock options of approximately $48,147, $3,443 and $7,149, respectively, for the years ended December 31, 2009, 2008 and 2007.

F-29

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE H) — Stockholders’ Equity (continued)

Stock-based Compensation Plans (continued)

Stock Incentive Plan (continued)

As of December 31, 2009, total unrecognized compensation cost related to stock options amounted to $15,445, which is expected to be recognized over a weighted-average period of 2.3 years as the options vest. There were non-vested stock options outstanding for 7,214,082 shares at December 31, 2009.

The total intrinsic value of stock options exercised during the years ended December 31, 2009, 2008 and 2007 was approximately $51,205, $720 and $3,244, respectively. The total fair value of stock options which vested during the years ended December 31, 2009, 2008 and 2007 was approximately $12,353, $17,078 and $21,420, respectively. The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2009, 2008 and 2007 was $0.91, $2.25 and $4.55 per share, respectively.

The fair values of employee stock options granted during the years ended December 31, 2009, 2008 and 2007 were determined based on the Black-Scholes-Merton option-pricing model using the following range of assumptions:

	Year Ended December 31,
	2009	2008	2007
Expected life:
Stock options	5.5 years	5.4 years	5.0 years
Employee stock purchase plan rights	1.0 years	1.0 years	1.0 years
Interest rate	1.4% - 2.8%	1.2% - 3.6%	3.4% - 4.9%
Volatility	53.0% - 83.5%	41.9% - 57.3%	40.3% - 48.0%
Dividend yield	0%	0%	0%

An explanation of the above assumptions is as follows:

Expected Life of Stock-based Awards  — The expected life of stock-based awards is the period of time for which the stock-based award is expected to be outstanding. This estimate is based on historical exercise data.

Interest Rate — The risk-free rate over the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

Volatility — Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (implied volatility) during a period. The Company uses the implied volatility of its traded convertible notes as the sole basis for its expected volatility. The weighted average volatility used was 55.9%, 43.7% and 43.9% for 2009, 2008 and 2007, respectively.

Dividend Yield — The Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

Restricted Stock

Under the Incentive Plan, the Company has granted both restricted stock awards and restricted stock units (“RSUs”). Beginning in 2007, employees of the Company could elect to receive RSUs in lieu of a portion of their stock option grants. RSUs have service conditions and vest ratably on an annual basis over a four-year period. During 2009, the Company awarded 65,587 RSUs at a weighted-average grant date fair value of $0.52 per share. During 2008, 36,500 previously granted restricted stock awards vested and the remaining 48,000 were cancelled. The Company incurred $589, $963 and $1,000 of compensation expense for the years ended December 31, 2009, 2008 and 2007, respectively, related to both RSUs and restricted stock awards.

F-30

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE H) — Stockholders’ Equity (continued)

Stock-based Compensation Plans (continued)

Stock Incentive Plan (continued)

A summary of the status of the Company’s restricted stock as of December 31, 2009 and changes during the year ended December 31, 2009, is presented below:

				Weighted-Average
				Grant-Date Fair
	Shares			Value
Restricted stock at January 1, 2009		237,976		$	8.87
Granted		65,587			0.52
Vested		(73,066	)		9.20
Forfeited		(24,760	)		6.38
Restricted stock at December 31, 2009		205,737			6.39
Expected to vest at December 31, 2009		174,876			6.39

Stock-based compensation expense under FASB ASC Topic 718, Compensation — Stock Compensation, for the years ended December 31, 2009, 2008 and 2007 is not necessarily representative of the level of stock-based compensation expense in future years due to, among other things, (1) the vesting period of the stock-based compensation and (2) the number and fair value of additional stock-based grants in future years.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan (the “Purchase Plan”), as amended, registering 2,000,000 shares of $0.01 par value common stock for issuance under this plan. Under the Purchase Plan, eligible employees may purchase shares of common stock on certain dates and at certain prices as set forth in the plan. The common stock is purchased under the Purchase Plan at a discounted rate, currently at 15%, which results in this plan qualifying as compensatory. The first purchase period for the Purchase Plan began January 1, 2001. During 2009, the Company issued 308,112 shares of common stock pursuant to the Purchase Plan and recorded compensation cost of approximately $163. The weighted-average fair value of the employee stock purchase plan rights granted during 2009, 2008 and 2007 was $0.53, $0.84 and $2.19 per share, respectively. Common stock reserved for future employee purchase under the Purchase Plan aggregated 736,447 shares as of December 31, 2009. There are no other investment options for participants.

(NOTE I) — Preferred Share Purchase Rights

On May 20, 1998, the Company adopted a Shareholder Rights Plan, which provided for the issuance of rights to purchase shares of Junior Participating Preferred Stock, par value $0.01 per share (the “Preferred Shares”), of the Company. Under the Shareholder Rights Plan, the Company distributed one preferred share purchase right (a “Right”) for each outstanding share of common stock, par value $0.01 (the “Common Shares”), of the Company. The Rights were distributed on June 26, 1998 to stockholders of record on May 27, 1998. The Rights expired on May 20, 2008.

F-31

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE J) — Income Taxes

The Company provides for income taxes using the liability method. The difference between the tax provision and the amount that would be computed by applying the statutory Federal income tax rate to income before taxes is attributable to the following:

	Year Ended December 31,
	2009			2008			2007
Federal income tax provision (benefit) at 34%	$	1,491		$	(91,416	)	$	(96,693	)
Change in state income tax rate		—			—			(14,798	)
State taxes, net of federal tax benefit		185			(14,161	)		(12,652	)
Tax credits, principally for research and development		(1,813	)		(3,500	)		(2,911	)
Research and development credit refunds		(1,274	)		—			—
Other		(3,303	)		3,447			3,585
Increase in valuation allowance on deferred tax asset		3,440			105,630			123,469
	$	(1,274	)	$	—		$	—

The change in valuation allowance as reported above excludes the change in valuation allowance associated with the net deferred tax asset recorded in connection with the net unrealized (gains) losses on investments, as such amounts are recorded as a component of other comprehensive income (loss).

Temporary differences and carryforwards that give rise to a significant portion of deferred tax assets and liabilities are as follows:

	Current			Long-Term
	Asset			Asset (Liability)
December 31, 2009
Net operating loss carryforward	$	—		$	739,900
Research and development and other tax credit carryforwards		—			35,282
Deferred revenue		34,935			781
Facility exit charge		—			3,957
Net unrealized gains on investments		—			(2,885	)
Intangible assets		394			4,602
Equity-based compensation		—			11,561
Depreciation		—			14,154
Unamortized debt discount		—			(21,317	)
Reserves and accruals		11,687			10,068
Other		—			726
		47,016			796,829
Less valuation allowance		(47,016	)		(796,829	)
	$	—		$	—

F-32

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE J) — Income Taxes (continued)

	Current			Long-Term
	Asset			Asset (Liability)
December 31, 2008
Net operating loss carryforward	$	—		$	768,037
Research and development and other tax credit carryforwards		—			33,469
Capital loss carryforward		—			289
Deferred revenue		17,256			11,661
Facility exit charge		—			4,518
Net unrealized losses on investments		—			1,805
Intangible assets		394			4,996
Equity-based compensation		—			11,864
Depreciation		—			8,352
Unamortized debt discount		—			(36,448	)
Reserves and accruals		7,964			10,555
Other		—			296
		25,614			819,394
Less valuation allowance		(25,614	)		(819,394	)
	$	—		$	—

The Company recognized a valuation allowance to the full extent of its deferred tax assets since the likelihood of realization of the benefit cannot be determined. The valuation allowance decreased by $1,163 during 2009 to $843,845 at December 31, 2009. The decrease is primarily related to the reversal of valuation allowance against net operating loss carryforwards that were utilized in the current year.

Provision for income taxes is comprised of the following:

	Year Ended December 31,
	2009			2008		2007
Current:
Federal	$	(1,274	)	$	—	$	—
State		—			—		—
Foreign taxes		—			—		—
Deferred		—			—		—
	$	(1,274	)	$	—	$	—

Income tax benefit of $1,274 represents a credit received in 2009 for 2008 of approximately $491 and an accrued income tax benefit of approximately $783 for 2009. The Company elected to accelerate recognition of research and development tax credits by electing out of bonus depreciation pursuant to regulations passed in 2008.

The Company has available tax credit carryforwards of approximately $35,044 which expire, if unused, from the year 2010 through the year 2029. The Company has net operating loss (“NOL”) carryforwards for federal income tax purposes of approximately $1,632,941, excluding stock-based compensation NOLs, which expire, if unused, from the year 2010 through the year 2029. The Company’s ability to utilize these NOLs may be limited under Internal Revenue Code Section 382 (“Section 382”). In connection with the adoption of stock-based compensation guidance in 2006, the Company elected to follow the with-and-without approach to determine the sequence in

F-33

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE J) — Income Taxes (continued)

which deductions and NOL carryforwards are utilized. Accordingly, no tax benefit related to stock options was recognized in the current year as a result of the utilization of approximately $26,500 of NOL carryforwards. At December 31, 2009, the Company has approximately $287,053 of NOL carryforwards that relate to stock-based compensation for which future tax benefits will be credited to equity.

Section 382 imposes annual limitations on the utilization of NOL carryfowards and other tax attributes upon an ownership change. In general terms, an ownership change may result from transactions that increase the aggregate ownership of certain stockholders in the Company’s stock by more than 50 percentage points over a testing period (generally three years).

The Company completed a Section 382 analysis during 2009. Based on this analysis, the Company’s NOLs and other tax attributes should not be limited under Section 382. The Company’s future utilization of all of the Company’s NOLs and other tax attributes is dependent upon the Company’s ability to generate sufficient income during the carryforward periods and no future significant changes in ownership. When tax attributes are used, NOLs are used before tax credits and this will likely result in expiration of the tax credits.

The Company adopted the uncertain tax positions guidance of FASB ASC Topic 740, Income Taxes, on January 1, 2007. The Company had no unrecognized tax benefits as of January 1, 2007 and provides a full valuation allowance on the net deferred tax asset recognized in the consolidated financial statements. As a result, the adoption of FASB ASC Topic 740 effective January 1, 2007 had no effect on the Company’s financial position as of such date, or on net operating losses available to offset future taxable income.

The Company recognizes interest and penalties related to uncertain tax positions, if any, in income tax expense. As of December 31, 2009 and 2008, the Company did not accrue any interest related to uncertain tax positions. The Company’s income taxes have not been subject to examination by any tax jurisdictions since its inception. Due to NOL and tax credit carryforwards, all income tax returns filed by the Company are subject to examination by the taxing jurisdictions.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

	2009			2008			2007
Balance as of January 1	$	30,282		$	29,611		$	28,641
Gross increases related to prior year tax positions		—			62			—
Gross decreases related to prior year tax positions		(1,108	)		(558	)		—
Gross increases related to current year tax positions		848			1,167			970
Balance as of December 31	$	30,022		$	30,282		$	29,611

The Company believes that any of its uncertain tax positions would not result in adjustments to its effective income tax rate because likely corresponding adjustments to deferred tax assets would be offset by adjustments to recorded valuation allowances.

(NOTE K) — Facility-Related Exit Charges (Credits)

During 2006, the Company exited certain headquarters space (“Wing C”) and recorded a charge of $9,156, net of estimated sublease income, pursuant to FASB ASC Topic 420, Exit or Disposal Cost Obligations. The charge of $9,156 represented the present value of the excess of future payments for Wing C over estimated sublease income and an impairment charge on certain fixed assets and leasehold improvements. The impairment charge was based on the net book value, which approximated fair value, of the assets and leasehold improvements at the time the Company exited the space. During 2007, the Company entered into an agreement to sublease a portion of Wing C to MedImmune, Inc. Upon execution of the sublease, no adjustment to the 2006 estimates of facility-related exit

F-34

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE K) — Facility-Related Exit Charges (Credits) (continued)

charges was required as the sublease income approximated the initial estimated sublease income. During the second quarter of 2009, MedImmune, Inc. terminated its sublease, which resulted in an exit charge of approximately $11,400, comprised of an increase of $10,585 in accrued exit expenses and $850 in additional fixed asset impairments. During the fourth quarter of 2009, the Company decided to resume production activities in Wing C in order to support increased contract manufacturing services and increased early-stage clinical development and reversed approximately $10,675 of the exit reserve, representing the portion of the Wing C exit reserve related to the production space. The Company’s exit reserve is approximately $4,206 at December 31, 2009.

In 2006, the Company consolidated certain of its operations from a laboratory building to its Traville headquarters space and the LSM and subleased the laboratory building. In conjunction with this exit, the Company recorded a charge of $3,514 relating to the estimated sublease loss and an impairment charge on certain fixed assets and leasehold improvements relating to this space. The impairment charge was based on the net book value, which approximated fair value, of the assets and leasehold improvements at the time the Company exited the space. During 2007, the Company purchased the building from the landlord and subsequently sold it to BioMed. In conjunction with this purchase and sale, the Company reversed the remaining accrual related to its exit from the building of $1,969 and recognized a net gain on the purchase and sale of $1,704. The total gain of $3,673 is reflected as Facility-related exit charges (credits) in the consolidated statement of operations.

The following table summarizes the activity related to the reserve for exit charges for the year ended December 31, 2009, all of which is facilities-related:

Balance as of January 1, 2009	$	5,027
Accretion recorded		1,384
Subtotal		6,411
Cash items		(2,115	)
Accrual adjustment, net		(90	)
Balance as of December 31, 2009		4,206
Less current portion		(2,227	)
	$	1,979

(NOTE L) — Fair Value Measurements

The FASB guidance regarding the fair value of all assets and liabilities defines fair value, provides guidance for measuring fair value and requires certain disclosures. This guidance does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments.

The FASB Codification discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to

F-35

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE L) — Fair Value Measurements (continued)

valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1:	Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:	Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3:	Unobservable inputs that reflect the reporting entity’s own assumptions.

Active markets are those in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Inactive markets are those in which there are few transactions for the asset, prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. With regard to the Company’s financial assets subject to fair value measurements, the Company believes that all of the assets it holds are actively traded because there is sufficient frequency and volume to obtain pricing information on an ongoing basis.

The Company’s assets and liabilities subject to fair value measurements on a recurring basis and the related fair value hierarchy are as follows:

	Fair Value		Fair Value Measurements as of
	as of		December 31, 2009
	December 31,		Using Fair Value Hierarchy
Description	2009		Level 1		Level 2		Level 3
Cash and cash equivalents	$	567,667	$	567,667	$	—	$	—
Short-term investments		151,528		8,029		143,499		—
Marketable securities		384,028		—		384,028		—
Long-term equity investment		21		21		—		—
Restricted investments		88,437		6,693		81,744		—
Total	$	1,191,681	$	582,410	$	609,271	$	—

The Company evaluates the types of securities in its investment portfolios to determine the proper classification in the fair value hierarchy based on trading activity and the observability of market inputs. The Company’s Level 1 assets include cash, money market instruments and U.S. Treasury securities. Level 2 assets include government-sponsored enterprise securities, commercial paper, corporate bonds, asset-backed securities, and mortgage-backed securities. The Company’s privately-held equity investment is carried at cost and is not included in the table above, and is reviewed for impairment at each reporting date.

The Company generally obtains a single quote or price per instrument from independent third parties to help it determine the fair value of securities in Level 1 and Level 2 of the fair value hierarchy. The Company’s Level 1 cash and money market instruments are valued based on quoted prices from third parties, and the Company’s Level 1 U.S. Treasury securities are valued based on broker quotes. The Company’s Level 2 assets are valued using a multi-dimensional pricing model that includes a variety of inputs including actual trade data, benchmark yield data, non-binding broker/dealer quotes, issuer spread data, monthly payment information, collateral performance and other reference information. These are all observable inputs. The Company reviews the values generated by the multi-dimensional pricing model for reasonableness, which could include reviewing other publicly available information.

The Company does not hold auction rate securities, loans held for sale, mortgage-backed securities backed by sub-prime or Alt-A collateral or any other investments which require the Company to determine fair value using a

F-36

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE L) — Fair Value Measurements (continued)

discounted cash flow approach. Therefore, the Company does not need to adjust its analysis or change its assumptions specifically to factor illiquidity in the markets into its fair values.

The fair value of the Company’s collaboration receivables, other assets, accounts payable, accrued expenses and collaboration payable approximate their carrying amount due to the relatively short maturity of these items. The fair value of the Company’s convertible subordinated debt is based on quoted market prices. The quoted market price of the Company’s convertible subordinated debt was approximately $774,234 as of December 31, 2009. With respect to its lease financing, the Company evaluated its incremental borrowing rate as of December 31, 2009, based on the current interest rate environment and the Company’s credit risk. The fair value of the BioMed lease financing was approximately $265,293 as of December 31, 2009 based on a discounted cash flow analysis, and current rates for corporate debt having similar characteristics and companies with similar creditworthiness.

(NOTE M) — Teva Biopharmaceuticals USA, Inc. (formerly CoGenesys)

In 2008, Teva acquired all of the outstanding stock of CoGenesys, which became Teva Bio. CoGenesys had been a division of the Company until 2006, when the Company completed the sale of assets and concurrently entered into a license agreement and manufacturing services agreement.

As consideration for the assets conveyed, liabilities assumed and intellectual property licensed, the Company obtained a 14% equity interest in CoGenesys. As part of this transaction, $7,575 was allocated to the intellectual property license and manufacturing services agreement and was recognized ratably over the term of the manufacturing services agreement, as amended, which ended in 2009.

Under the license agreement, as amended, the Company is entitled to various milestone and royalty rights on certain products, if they are developed and commercialized. Teva Bio can obtain additional product rights by extending the initial seven-year research term upon the payment of additional consideration.

As a result of Teva’s acquisition of CoGenesys in 2008, the Company received $47,336 as partial payment for its equity investment in CoGenesys and recorded a gain on sale of long-term equity investment of $32,518 in 2008. The terms of the agreement between Teva and CoGenesys required an escrow account be established for 10% of the purchase price as security for CoGenesys’ representations, warranties, and covenants. Because the Company had no information concerning the likelihood of the terms of the escrow agreement being satisfied, the Company did not include any potential proceeds from escrow in the calculation of the gain on the sale of its investment in 2008. During 2009, the Company received the final payment for its equity investment in CoGenesys and recorded a gain of $5,259.

F-37

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE N) — Earnings Per Share

Diluted net income (loss) per share was determined as follows:

	December 31,
	2009		2008			2007
Numerator:
Net income used for diluted net income (loss) per share	$	5,659	$	(268,891	)	$	(284,371	)
Denominator:
Weighted average shares outstanding		149,334,426		135,406,642			134,333,418
Effect of dilutive securities:
Employee stock options and restricted stock units		5,719,047		—			—
Weighted average shares used for diluted net income (loss) per share		155,053,473		135,406,642			134,333,418
Diluted net income (loss) per share	$	0.04	$	(1.99	)	$	(2.12	)

Common stock issued in connection with the Company’s Purchase Plan and through exercised options granted pursuant to the Incentive Plan are included in the Company’s weighted average share balance based upon the issuance date of the related shares. As of December 31, 2009, 2008 and 2007, the Company had 24,601,174, 28,373,151 and 28,121,529, respectively, stock options outstanding. As of December 31, 2009, the Company had 24,303,304 shares issuable upon the conversion of the Company’s convertible subordinated debt. As of December 31, 2008 and 2007 the Company had 30,942,877 shares issuable upon the conversion of the Company’s convertible subordinated debt. The shares issuable upon the conversion of the Company’s convertible subordinated debt are excluded from the weighted average shares as they are anti-dilutive.

(NOTE O) — Related Parties

Prior to the sale of the Company’s equity investment in CoGenesys, CoGenesys was a related party of the Company. For the year ended December 31, 2007 the Company recognized revenue of $2,803, under the 2006 license agreement and manufacturing services agreement with CoGenesys. Effective February 2008, CoGenesys is no longer a related party of the Company, as a result of the Teva acquisition of all the outstanding shares of CoGenesys.

The Company owns approximately one percent of VIA Pharmaceuticals, Inc. (“VIA”). During 2007, the Company and VIA mutually terminated a 1997 License Agreement between the parties. Accordingly, the Company no longer deems VIA to be a related party.

F-38

HUMAN GENOME SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(NOTE P) — Quarterly Financial Information (unaudited)

Quarterly financial information for 2009 and 2008 is presented in the following table:

	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
2009
Revenue	$	177,277		$	26,681		$	18,834		$	52,957
Income (loss) from operations		97,795			(53,414	)		(37,964	)		(229	)
Net income (loss)		129,813			(65,411	)		(49,003	)		(9,740	)
Net income (loss) per share, basic		0.96			(0.48	)		(0.32	)		(0.06	)
Net income (loss) per share, diluted		0.85			(0.48	)		(0.32	)		(0.06	)
2008
Revenue	$	12,275		$	11,567		$	11,674		$	12,906
Income (loss) from operations		(76,427	)		(70,357	)		(58,310	)		(50,606	)
Net income (loss)		(52,719	)		(80,107	)		(74,181	)		(61,884	)
Net income (loss) per share, basic and diluted		(0.39	)		(0.59	)		(0.55	)		(0.46	)

The Company’s results for the first quarter of 2009 include a gain on extinguishment of debt of $38,873, or $0.29 per basic share and $0.24 per diluted share and a gain on the sale of an equity investment of $5,259, or $0.04 per basic share and $0.03 per diluted share.

The Company’s results for the first quarter of 2008 include a gain on the sale of an equity investment of $32,518, or $0.24 per basic and diluted share.

The Company’s results for the third quarter of 2008 include a charge for impaired investments of $6,049, or $0.04 per basic and diluted share.

F-39

EX-10.10

Exhibit 10.10

AMENDMENT NO. 1 TO LEASE AGREEMENT

     THIS AMENDMENT NO. 1 TO LEASE AGREEMENT (this “Amendment”) is made as of December 1, 2009, by and between MARYLAND ECONOMIC DEVELOPMENT CORPORATION, a body politic and corporate and a public instrumentality of the State of Maryland (“Landlord”) and HUMAN GENOME SCIENCES, INC., a Delaware corporation (“Tenant”).

RECITALS

     A. Landlord and Tenant are parties to that certain Lease Agreement dated as of December 1, 1997 (the “Facility Lease”), pursuant to which Landlord leased the Leased Premises (as defined in the Facility Lease) to Tenant, and Tenant leased the Leased Premises from Landlord.

     B. Landlord and Tenant have agreed to enter into this Amendment for the purpose of amending the Facility Lease as hereinafter provided.

AGREEMENTS

     NOW, THEREFORE, for and in consideration of the terms of this Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:

     1. Capitalized Terms. Capitalized terms used herein but not otherwise defined herein shall have the meanings assigned thereto in the Facility Lease.

     2. Deletion of References to MIDFA and MIDFA Insurance Agreement. All references in the Facility Lease to “MIDFA” and “MIDFA Insurance Agreement” are hereby deleted

     3. Amendments to Paragraph 2 of the Facility Lease.

     (a) The following defined terms in Paragraph 2 of the Facility Lease are amended and restated in their entirety as follows:

          “Bank means Manufacturers and Traders Trust Company, a New York banking corporation, its successors and assigns.”

          “Collateral Pledge Agreement means that certain Collateral Pledge Agreement dated as of December 1, 2009, between Tenant, as Pledgor, and Bank, as Pledgee, together with all amendments thereto and modifications thereof.”

          “Letter of Credit Agreement means that certain Amended and Restated Letter of Credit Agreement between the Bank and Landlord dated as of December 1, 2009, as the same may from time to time be modified, amended, supplemented, renewed or replaced.”

1

          “Trustee means Manufacturers and Traders Trust Company, acting in its capacity as Trustee, its successors and assigns.”

     (b) The following defined terms are hereby added to Paragraph 2 of the Facility Lease:

          “Operative Documents means this Lease, the Bond Documents, the Credit Facility Agreement, the Credit Facility Documents, the Collateral Pledge Agreement, the Letter of Credit, the Letter of Credit Agreement, the Letter of Credit Documents, the Hedge Documents, if applicable, and the Bond Deed of Trust.”

          “Tenant Collateral means all of Tenant’s right, title and interest in and to (i) the Leased Premises, (ii) contracts, contract rights and general intangibles relating to the maintenance of the Improvements and/or to the Subject Leases (as hereinafter defined) and (iii) proceeds of any of the foregoing.

     4. Basic Rent Adjustment. Commencing on December 1, 2009 and continuing for the remainder of the Term, subject to further adjustment as provided for in Paragraph 7(c), Basic Rent shall be adjusted to an amount equal to $140,000 per month.

     5. Amendment to Paragraph 6(b) of Facility Lease. The fifth paragraph of Paragraph 6(b) of the Facility Lease is hereby amended and restated in its entirety as follows:

     ” In addition, at the closing of such purchase option, Tenant shall (1) pay or cause to be paid to Montgomery County, Maryland one-half of all transfer and recordation taxes required or necessary to be paid in connection with the transfer of the Leased Premises from Landlord to Tenant (it being the intent of the parties that, but for Landlord’s exemption from payment of transfer and recordation taxes, one-half of any such transfer and recordation taxes would be attributable to Landlord), and (2) pay to Landlord, in immediately available funds, the sum of the following:

     (A) all Basic Rent and Additional Rent through the date of the closing of such purchase option, plus

     (B) all actual third party costs and expenses (including reasonable attorneys fees and expenses) of the Credit Facility Provider, Landlord and the State (excluding Landlord’s internal overhead) incurred in connection with such purchase, including (without limitation) any costs incurred by Landlord in connection with “unwinding” the Hedge, but deducting any benefits accruing to Landlord in connection with “unwinding” the Hedge, plus

     (C) all brokerage fees, if any, and other costs and expenses required or necessary to be paid in connection with the transfer of the Leased Premises from Landlord to Tenant.

2

     Notwithstanding the foregoing, in the event Montgomery County, Maryland or any other entity denies applicability of Landlord’s exemption from such transfer and recordation taxes and, accordingly, or for any other reason, requires payment of Landlord’s one-half of such transfer or recordation taxes, Tenant agrees to advance the full amount of such transfer and recordation taxes on behalf of Landlord, reserving the right on behalf of Tenant and Landlord to appeal such imposition, and in such case, Landlord agrees to cooperate with Tenant in any effort by Tenant to appeal the imposition of any such transfer and/or recordation taxes upon Landlord, provided such appeal is made at Tenant’s sole cost and expense. Any transfer and/or recordation taxes refunded to Landlord as a result of any such appeal shall be delivered by Landlord to Tenant.”

     6. Amendment to Paragraph 7(c) of Facility Lease. Paragraph 7(c) of the Facility Lease is hereby amended and restated in its entirety as follows:

     “(c) Landlord and Tenant acknowledge and agree that the Basic Rent has been determined based upon a number of factors, which include the amount of debt service payable by Landlord with respect to the Bonds and the State Loans and other costs which may fluctuate from time to time. Basic Rent shall be adjusted from time to time by Landlord and Tenant to reflect, among other things, (i) any redemption of the Bonds prior to maturity, and (ii) the expiration of the Hedge or any default by the Hedge Counterparty in the performance of its obligations under the Hedge Documents. Accordingly, within thirty (30) days of each calendar quarter-end, Landlord shall provide Tenant with a reconciliation of the amounts and costs incurred by Landlord which have been paid by Landlord from Basic Rent received from Tenant, together with a projection of funds needed by Landlord over the ensuing twelve (12) months to pay timely such costs and amounts which have customarily been paid by Landlord from Basic Rent payments; and effective with the Basic Rent payment due sixty (60) days after the end of each quarter-end, Basic Rent shall be adjusted upward or downward as such projections warrant.”

     7. Amendment to Paragraph 25(g) of Facility Lease. Paragraph 25(g) of the Facility Lease is hereby amended and restated in its entirety as follows:

     “(g) Place of Business of Tenant. Tenant’s principal place of business is 14200 Shady Grove Road, Rockville, Maryland 20850.”

     8. Amendment to Paragraph 26(a) of Facility Lease. Paragraph 26(a) of the Facility Lease is hereby amended and restated in its entirety as follows:

     “(a) Financial Statements. Furnish or cause to be furnished to Landlord:

          (i) as soon as available but in no event more than 45 days after filing with the Securities and Exchange Commission (the “SEC”), a copy of the 10Q Report of Tenant filed with the SEC accompanied by a certificate of the chief financial officer of Tenant stating whether any event has occurred which constitutes an Event of Default, or which would constitute such an Event of Default with the giving of notice or the lapse of time or both, and, if so, stating the facts with respect thereto; and

3

          (ii) as soon as available but in no event more than 120 days after the close of each fiscal year of Tenant, a copy of the 10K Report of Tenant filed with the SEC and a copy of the annual audited financial statements relating to Tenant prepared in accordance with GAAP, which financial statements shall include a balance sheet of Tenant as at the end of such fiscal year and a statement of earnings and changes in stockholder’s equity of Tenant for such fiscal year; and

          (iii) as soon as available but in no event more than 90 days after the close of each fiscal year of Tenant, a certificate of the chief financial officer of Tenant stating whether any event which constitutes an Event of Default under this Lease has occurred, or any event which would constitute such an Event of Default with the giving of notice or the lapse of time or both has occurred, and, if so, stating the facts with respect thereto; and

          (iv) promptly upon transmission thereof, copies of any financial statements, proxy statements, reports and the like which Tenant sends to its shareholders and copies of all registration statements (with exhibits); and

          (v) with reasonable promptness, such budgets, cash flow projections, financial forecasts and other additional information, reports or statements as Landlord or the Credit Facility Provider may from time to time reasonably request.”

     9. Deletion of Paragraph 26(j) of the Facility Lease. Paragraph 26 of the Facility Lease is hereby amended to delete subparagraph (j).

     10. Deletion of Paragraph 27(b) of the Facility Lease. Paragraph 27 of the Facility Lease is hereby amended to delete subparagraph (b).

     11. Addition of Paragraphs 36 and 37 to Facility Lease. The Facility Lease is hereby amended to add the following new Paragraphs 36 and 37:

     “36. Nature of Transaction. With respect to the Leased Premises, it is the intent of Tenant and the Credit Facility Provider that, for federal, state and local tax purposes and for bankruptcy, commercial and regulatory law and all other purposes, this Lease and the transactions contemplated by the Operative Documents shall be treated as the repayment and security provisions of a loan by Landlord and the Credit Facility Provider to Tenant, that Tenant shall be treated as the legal and beneficial owner entitled to any and all benefits of ownership of such Leased Premises and that all payments of Basic Rent during the Term shall be treated as payments of interest and, if applicable, principal.

4

     37. Grant of Lien and Future Assurances.

          (a) Intent of the Parties. It is the intent of the parties hereto that this Lease grants a security interest and deed of trust lien, as the case may be, on the Leased Premises and the other Tenant Collateral to and for the benefit of Landlord (for the benefit of Landlord and the Credit Facility Provider) to secure Tenant’s performance under and payment of all amounts under this Lease and the other Operative Documents.

          (b) Transactions to be Regarded as Loans. Specifically, without limiting the generality of Paragraph 36, Landlord and Tenant intend and agree that in the event of any insolvency or receivership proceedings or a petition under the United States bankruptcy laws or any other applicable insolvency laws or statute of the United States of America or any State or Commonwealth thereof affecting Tenant, Landlord, the Credit Facility Provider or any collection actions, the transactions evidenced by the Operative Documents shall be regarded as loans made by Landlord and the Credit Facility Provider as unrelated third party lenders to or for the benefit of Tenant secured by the Leased Premises and the other Tenant Collateral.

          (c) Mortgage Lien. Specifically, without limiting the generality of Paragraph 36, Tenant has mortgaged, granted, bargained, sold, conveyed and confirmed, and does hereby mortgage, grant, bargain, sell, convey and confirm, a lien on the Leased Premises and the other Tenant Collateral to secure to Landlord (for the benefit of Landlord and the Credit Facility Provider) (i) all amounts advanced by Landlord and the Credit Facility Provider pursuant to the terms of the Operative Documents, together with interest thereon, and all other amounts payable under the Operative Documents in connection therewith and (ii) all other obligations of Tenant under the Operative Documents, effective on the date hereof.

          (d) Security Agreement. Specifically, but without limiting the generality of Paragraph 36, Landlord and Tenant further intend and agree that, for the purpose of securing the payment of the above-described amounts and to further secure all other obligations of Tenant under the Operative Documents, (i) this Lease shall also be deemed to be a security agreement and financing statement within the meaning of Article 9 of the Maryland Uniform Commercial Code (it being understood that Tenant hereby conveys and warrants and grants a security interest in the Leased Premises and the other Tenant Collateral to Landlord (for the benefit of Landlord and the Credit Facility Provider) to secure all amounts advanced by Landlord and the Credit Facility Provider pursuant to the terms of the Operative Documents, together with interest thereon, and all other amounts payable under the Operative Documents and all other obligations of Tenant under the Operative Documents); (ii) the possession by Landlord or any of its agents of notes and such other items of property as constitute instruments, money, negotiable documents or chattel paper shall be deemed to be “possession by the secured party” for purposes of perfecting the security interest pursuant to Section 9-313 of the Maryland Uniform Commercial Code; and (iii) notifications to Persons holding such property, and acknowledgments, receipts or confirmations from financial intermediaries, bankers or agents (as applicable) of Tenant shall be deemed to have been given for the purpose of perfecting such security interest under any Law. Landlord and Tenant shall, to the extent consistent with this Lease, take such actions and execute, deliver, file and record such other documents, financing statements and mortgages as may be necessary to ensure that, if the Lease was deemed to create a security interest in the Leased Premises and the other Tenant Collateral in accordance with this

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Paragraph 37, such security interest would be deemed to be a first priority perfected security interest (subject only to the Deeds of Trust) and will be maintained as such throughout the Term.

          (e) Deed of Trust. Specifically, but without limiting the foregoing or the generality of Paragraph 36, Tenant hereby grants, bargains, sells, warrants, conveys, aliens, remises, releases, assigns, sets over and confirms to Sean V. Timms and Arthur L. Perraud (collectively, the “Deed of Trust Trustees”) all of Tenant’s right, title, and interest in and to the following (collectively, the “Mortgaged Property”): (i) the Leased Premises and all appurtenances relating thereto and all proceeds, both cash and noncash thereof; (ii) all easements, rights-of-way, strips and gores of land, vaults, streets, ways, alleys, passages, sewer rights, waters, water courses, water rights, minerals, flowers, shrubs, crops, trees, timber and other emblements, and all estates, rights, titles, interests, tenements, hereditaments and appurtenances, reversions and remainders whatsoever, in any way belonging, relating or appertaining to the Leased Premises or any part thereof, whether now owned or hereafter acquired by Tenant; (iii) all right, title and interest of Tenant in any and all leases, rental agreements and arrangements of any sort now or hereafter affecting the Leased Premises or any portion thereof and providing for or resulting in the payment of money to Tenant for the use of the Leased Premises or any portion thereof, irrespective of whether such leases, rental agreements and arrangements be oral or written, and including any and all extensions, renewals and modifications thereof (the “Subject Leases”) and guaranties of the performance or obligations of any lessees thereunder, together with all income, rents, issues, profits and revenues from the Subject Leases (including all lessee security deposits and all other lessee deposits, whether held by Tenant or in a trust account, and all other deposits and escrow funds relating to any Subject Leases), and all the estate, right, title, interest, property, possession, claim and demand whatsoever at law, as well as in equity, of Tenant of, in and to the same; provided, however, that although this Lease contains (and it is hereby agreed that this Lease contains) a present, current, unconditional and absolute assignment of all of said income, rents, issues, profits and revenues, Tenant shall collect and apply such rental payments and revenues as provided in this Lease and the other Operative Documents; (iv) all right, title and interest of Tenant in, to and under all franchise agreements, management contracts, consents, authorizations, certificates and other rights of every kind and character of any of the Leased Premises, to the extent the same are transferable, service contracts, utility contracts, leases of equipment, and all other contracts, licenses and permits now or hereafter affecting the Leased Premises or any part thereof and all guaranties and warranties with respect to any of the foregoing (the “Subject Contracts”); (v) all right, title and interest of Tenant in any insurance policies or binders now or hereafter relating to the Leased Premises, including any unearned premiums thereon, as further provided in this Lease; (vi) all right, title and interest of Tenant in any and all awards, payments, proceeds and the right to receive the same, either before or after any foreclosure hereunder, as a result of any temporary or permanent injury or damage to, taking of or decrease in the value of the Leased Premises by reason of casualty, condemnation or otherwise as further provided in this Lease; (vii) all right, title and interest of Tenant in all utility, escrow and all other deposits (and all letters of credit, certificates of deposit, negotiable instruments and other rights and evidence of rights to cash) now or hereafter relating to the Leased Premises or the purchase, construction or operation thereof; (viii) all claims and causes of action arising from or otherwise related to any of the foregoing, and all rights and judgments related to any legal actions in connection with such claims or causes of action; (ix) all Alterations, extensions, additions, improvements, betterments, renewals and replacements,

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substitutions, or proceeds of any of the foregoing acquired with proceeds of any of the property described hereinabove; all of which foregoing items are hereby declared and shall be deemed to be a portion of the security for the indebtedness and obligations herein described, a portion of the above described collateral being located upon the Land; and (x) all of the other Tenant Collateral, IN TRUST, HOWEVER, WITH POWER OF SALE, to secure (i) all amounts advanced by Landlord and the Credit Facility Provider pursuant to the terms of the Operative Documents, together with interest thereon, and all other amounts payable under the Operative Documents in connection therewith and (ii) all other obligations of Tenant under the Operative Documents, effective on the date hereof.

          (f) Power of Sale Remedies. Without limiting any other remedies set forth herein, in the event that a court of competent jurisdiction rules that this Lease constitutes a deed of trust or other secured financing with respect to the Leased Premises as is the intent of the parties pursuant to this Paragraph 37, then Landlord and Tenant agree that, upon the occurrence and during the continuance of any Event of Default, the Deed of Trust Trustees may, and are hereby irrevocably empowered to, with or without entry, and to the extent permitted by applicable law, sell or cause the sale of the Leased Premises or any part or parts thereof at one or more public auctions as an entirety or in parcels as Landlord may elect free from any equity of redemption for cash, on credit, or for other property, for immediate or future delivery, and on such terms as the Deed of Trust Trustees shall deem advantageous and proper, such sale or sales to be made in such manner and upon such notice and advertisement as may be required by applicable law, or in the absence of any such requirements, as Landlord may deem appropriate, and to make conveyance to the purchase or purchasers. Notwithstanding the foregoing, upon the occurrence of an Event of Default, Landlord may, at its option, proceed to foreclose on the Leased Premises by judicial foreclosure.

Waiver. Tenant Acknowledges and agrees that if it defaults, a non-judicial foreclosure sale of the Leased Premises, if permitted by law, may be conducted without a hearing of any kind and without notice beyond the publication and posting of the notice of sale as required by law. tenant hereby waives to the extent permitted by law any rights it may have to any such hearing and notice.

          (g) UCC Remedies. In addition to any other remedies granted in this Lease to Landlord (including specifically, but not limited to, the right to proceed against the Leased Premises in accordance with the rights and remedies in respect to those portions of the Leased Premises which are real property pursuant to Section 9-604(a) of the Maryland Uniform Commercial Code), Landlord may proceed under the Maryland Uniform Commercial Code as to all or any part of the personal property (tangible or intangible) and fixtures included with the Leased Premises (such portion of the Leased Premises being referred to herein as the “Personalty”) and shall have and may exercise with respect to the Personalty all the rights, remedies, and powers of a secured party under the Maryland Uniform Commercial Code, including, without limitation, the right and power to sell, at one or more public or private sales, or otherwise dispose of, lease, or utilize the Personalty and any part or parts thereof in any manner authorized or permitted under the Maryland Uniform Commercial Code after default by a debtor, and to apply the proceeds thereof toward payment of any costs and expenses and attorney’s fees and legal expenses thereby incurred by Landlord, and toward payment of the indebtedness hereby secured in such order or manner as provided herein. Any requirement of the

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Maryland Uniform Commercial Code for reasonable notification shall be met by mailing written notice to Tenant at its address set forth in Exhibit E hereto at least ten (10) days prior to the sale or other event for which such notice is required.

          (h) Judicial Remedies. Landlord may proceed to protect and enforce its rights by a suit or suits in equity or at law, or for the specific performance of any covenant or agreement contained herein or in the Operative Documents, or in aid of the execution of any power herein or therein granted, or for the foreclosure of the mortgage lien created by this Lease, or for the enforcement of any other appropriate legal or equitable remedy and in aid thereof Tenant hereby assents to the passage of a decree by the equity court having jurisdiction. Upon the bringing of any suit to foreclose the mortgage lien created by this Lease or to enforce any other remedy available hereunder, Landlord shall be entitled as a matter of right, without notice and without giving bond to Tenant or anyone claiming under, by or through it, and without regard to the solvency or insolvency of Tenant or the then value of the premises, to have a receiver appointed of all the Leased Premises and of the earnings, income, rents, issues, profits and proceeds thereof, with such power as the court making such appointment shall confer, and Tenant does hereby irrevocably consent to such appointment.

          (i) Acceleration of Payments under the Letter of Credit Agreement and Other Operative Documents. In case of any sale of the Leased Premises, or of any part thereof, pursuant to any judgment or decree of any court or otherwise in connection with the enforcement of any of the terms of this Lease, all outstanding amounts due and owing under the Letter of Credit Agreement and the other Operative Documents, if not previously due, and the interest accrued thereon, if any, shall at once become and be immediately due and payable; also in the case of any such sale, Landlord may bid and become the purchaser, and the purchaser or purchasers, for the purpose of making settlement for or payment of the purchase price, shall be entitled to turn in and use all outstanding amounts due and owing under the Letter of Credit Agreement and the other Operative Documents, and any claims for interest due and unpaid thereon, in order that there may be credited as paid on the purchase price the sum apportion able and applicable to all outstanding amounts due and owing under the Letter of Credit Agreement and the other Operative Documents, including principal and interest thereon, out of the net proceeds of such sale after allowing for the proportion of the total purchase price required to be paid in actual cash. If at any foreclosure proceeding the Leased Premises shall be sold for a sum less than the total amount of indebtedness for which judgment is therein given, the judgment creditor shall be entitled to the entry of a deficiency decree against Tenant and against the property of Tenant for the amount of such deficiency.

          (j) Attorney-in-Fact. Tenant hereby irrevocably appoints Landlord as Tenant’s attorney-in-fact, with full authority in the place and stead of Tenant and in the name of Tenant or otherwise, from time to time in Landlord’s discretion, to execute any instrument which Landlord may deem necessary or advisable to accomplish the purposes of this Lease (subject to any limitations set forth in the Operative Documents), and to take any action (including any action that Tenant is entitled to take), including, without limitation:

     (i) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for money due and to become due under or in connection with all or any portion of the Leased Premises and the other Tenant Collateral;

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     (ii) to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with the foregoing clause (a);

     (iii) to file any claim or take any action or institute any proceedings which Landlord may deem to be necessary or advisable for the collection thereof or to enforce compliance with the terms and conditions of this Lease; and

     (iv) to perform any affirmative obligations of Tenant hereunder, including the execution of mortgages, financing statements and other documents.

     Tenant hereby acknowledges, consents and agrees that the power of attorney granted pursuant to this subparagraph (j) is irrevocable and coupled with an interest. Notwithstanding anything contained herein to the contrary, the rights and powers presently granted Landlord by this subparagraph (j) may be exercised by Landlord only upon the occurrence and during the continuance of an Event of Default.”

     12. Amendments to Exhibit E of the Facility Lease. Exhibit E to the Facility Lease is hereby amended to change the addresses for Landlord, Tenant and the Bank as follows:

“If to Landlord:
Notices:	Maryland Economic Development Corporation
	100 N. Charles Street, Suite 630
	Baltimore, Maryland 21201
	Attention: Executive Director
	with a copy to:
	Teri M. Guarnaccia, Esquire
	Ballard Spahr LLP
	300 East Lombard Street, 18th Floor
	Baltimore, Maryland 21202
Payments:	Basic Rent
	By Mail:
	MEDCO
	100 N. Charles Street, Suite 630
	Baltimore, Maryland 21201
	Attention: Executive Director
If to Tenant:
Notices:	Human Genome Sciences, Inc. 14200 Shady Grove Road

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	Rockville, Maryland 20850
	Attention:       James H. Davis, Executive Vice President, General Counsel and Secretary
If to Bank:
Notices:	If by mail:
	Manufacturers and Traders Trust Company
	1 Research Court, Suite 400
	Rockville, Maryland 20850
	Attention: Arthur L. Perraud
	Manufacturers and Traders Trust Company
	25 South Charles Street, 11th Floor
	Baltimore, Maryland 21201
	Attention: Letter of Credit Department
	Otherwise:
	Manufacturers and Traders Trust Company
	1 Research Court, Suite 400
	Rockville, Maryland 20850
	Attention: Arthur L. Perraud
	Manufacturers and Traders Trust Company
	25 South Charles Street, 11th Floor
	Baltimore, Maryland 21201
	Attention: Letter of Credit Department
	with a copy to:
	Nancy R. Little, Esquire
	McGuireWoods LLP
	One James Center
	901 East Cary Street
	Richmond, Virginia 23219
If to State:
Notices:	Department of Business and Economic Development
	217 East Redwood Street, 22nd Floor
	Baltimore, Maryland 21202
	Attention:       Director of Community Financing Group Programs”

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     13. No Default or Event of Default. Tenant represents and warrants to Landlord that, as of the date hereof, no Default or Event of Default has occurred and is continuing, or will occur as a result of, or after giving effect to, this Amendment.

     14. Ratification of Facility Lease. Except as expressly amended by this Amendment, the Facility Lease is hereby ratified and reaffirmed and shall continue in full force and effect.

     15. Applicable Law. This Amendment shall be governed by the laws of the State of Maryland.

     16. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original for all purposes, and all counterparts shall together constitute one and the same instrument.

     17. Joinder by Bank, State and MIDFA. Pursuant to Paragraph 31 of the Facility Lease, the Bank, the State and MIDFA join herein for the sole purpose of consenting to this Amendment.

[SIGNATURE PAGES ATTACHED]

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     IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be signed on their behalf, under seal, by their respective signatories thereunto duly organized as of the date first above written.

LANDLORD: MARYLAND ECONOMIC DEVELOPMENT CORPORATION
By:	/s/ Robert C. Brennan
	Name:	Robert C. Brennan
	Title:	Executive Director
TENANT: HUMAN GENOME SCIENCES, INC.
By:	/s/ H. Thomas Watkins
	Name:	H. Thomas Watkins
	Title:	President and Chief Executive Officer

JOINDER

     Pursuant to Paragraph 31 of the Facility Lease, the Bank, the State and MIDFA are joining in this Amendment for the sole purpose of evidencing their consent hereto.

BANK: MANUFACTURERS AND TRADERS TRUST COMPANY
By:	/s/ Arthur L. Perraud
	Name:	Arthur L. Perraud
	Title:	Vice President
STATE: MARYLAND DEPARTMENT OF BUSINESS AND ECONOMIC DEVELOPMENT
By:	/s/ James L. Henry
	Name:	James L. Henry
	Title:	Program Director, Office of Finance Programs
MIDFA: MARYLAND INDUSTRIAL DEVELOPMENT FINANCING AUTHORITY
By:	/s/ D. Gregory Cole
	Name:	D. Gregory Cole
	Title:	Executive Director

EX-10.11

Exhibit 10.11

HUMAN GENOME SCIENCES, INC.,
as Lessee

and

MANUFACTURERS AND TRADERS TRUST COMPANY,
as Bank

REIMBURSEMENT AGREEMENT

$23,000,000
Maryland Economic Development Corporation
Taxable Variable Rate Demand/Fixed Rate Revenue Bonds
(Human Genome Sciences, Inc. Facility)
1997 Series

Dated as of December 1, 2009

TABLE OF CONTENTS

     (This Table of Contents is not a part of the Reimbursement Agreement and is only for convenience of reference.)

SECTION	PAGE
RECITALS		1
AGREEMENTS		1

ARTICLE I
DEFINITIONS

Section 1.1	Definitions	2
Section 1.2	Rules of Construction	8

ARTICLE II
EFFECTIVE DATE OF REIMBURSEMENT
AGREEMENT; DURATION OF TERM

Section 2.1 Effective Date of Reimbursement Agreement; Duration of Term 8

ARTICLE III
PAYMENT PROVISIONS

Section 3.1	Reimbursement and Other Payments	9
Section 3.2	Payments due Upon Expiration of Letter of Credit	11
Section 3.3	Late Payments	11
Section 3.4	Increased Costs Due to Change in Law	12
Section 3.5	Computation	13
Section 3.6	Payment Procedure	13
Section 3.7	Business Days	13

ARTICLE IV
UNCONDITIONAL OBLIGATIONS

Section 4.1 Obligations Absolute 13

ARTICLE V
REPRESENTATIONS AND WARRANTIES

Section 5.1 Representations, Warranties and Undertakings 14

ARTICLE VI
AFFIRMATIVE COVENANTS OF LESSEE

Section 6.1 Affirmative Covenants of Lessee 15

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ARTICLE VII
INDEMNIFICATION

Section 7.1	Indemnification of Bank	16
Section 7.2	Indemnification Under Letter of Credit and Letter of Credit Agreement	17

ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES

Section 8.1	Events of Default Defined	17
Section 8.2	Remedies on Default	19
Section 8.3	No Remedy Exclusive	20
Section 8.4	Agreement to Pay Attorneys’ Fees and Expenses	21
Section 8.5	Waiver of Event of Default; No Additional Waiver Implied by One Waiver	21

ARTICLE IX
MISCELLANEOUS

Section 9.1	Notices	21
Section 9.2	[Intentionally Omitted]	22
Section 9.3	[Intentionally Omitted]	22
Section 9.4	Binding Effect	22
Section 9.5	Illegality; Severability	22
Section 9.6	Assignment	22
Section 9.7	Consent to Jurisdiction; Service of Process; Waiver of Jury Trial	23
Section 9.8	Further Assurances and Corrective Instruments	23
Section 9.9	Right to Perform; Advances by Bank	23
Section 9.10	Amendments, Changes and Modifications	24
Section 9.11	Execution of Counterparts	24
Section 9.12	Law Governing Construction of Agreement	24
Section 9.13	Effective Date	24
Section 9.14	Conflicting Agreements	24
Section 9.15	Set-off	24

-ii-

REIMBURSEMENT AGREEMENT

     THIS REIMBURSEMENT AGREEMENT is dated as of December 1, 2009 and is made by and between HUMAN GENOME SCIENCES, INC., a Delaware corporation (the “Lessee”), and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation (the “Bank”).

RECITALS

     Certain of the terms and words used in these Recitals are defined in Section 1.1 of this Reimbursement Agreement.

     Pursuant to and in accordance with the Act, the Issuer has previously issued and sold Bonds in the original aggregate principal amount of $23,000,000 for the sole and exclusive purpose of financing the acquisition and construction by the Issuer of the Facility. The Issuer leases the Facility to the Lessee pursuant to the Facility Lease.

     The Bonds were issued pursuant to the Indenture.

     In order to enhance the marketability of the Bonds, at the request of the Issuer and the Lessee, Allfirst Bank, a Maryland state-chartered commercial bank (“Allfirst”), predecessor in interest to the Bank, issued to the Trustee the Letter of Credit to provide payment for, and to secure the payment of the principal of, and interest on, and the purchase price of the Bonds. Allfirst issued the Letter of Credit pursuant to a Letter of Credit Agreement dated as of December 1, 1997, by and between Allfirst and the Issuer (the “Allfirst Letter of Credit Agreement”).

     The Letter of Credit expires on December 15, 2009.

     At the request of the Issuer and the Lessee, the Bank, as successor in interest to Allfirst, has agreed to extend the Letter of Credit, and, in connection therewith, the Issuer and the Bank have entered into the Letter of Credit Agreement, which amends and restates the Allfirst Letter of Credit Agreement in its entirety.

     As a condition to the Bank’s extension of the Letter of Credit, the Bank has required that the Lessee enter into this Reimbursement Agreement for the benefit of the Bank.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises, the respective representations, covenants and agreements hereinafter contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

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ARTICLE I

DEFINITIONS

     Section 1.1 Definitions. Certain terms used in this Reimbursement Agreement are defined in this Section or are defined by reference to one of the Bond Documents or one of the other Letter of Credit Documents; and, when and if used herein, such terms shall have the meanings given to them by the language employed in this Section defining such terms or by the language employed in such Bond Document or other Letter of Credit Document defining such terms, unless the context clearly indicates otherwise.

     “Acceleration Drawing” has the meaning given to that term in the Letter of Credit.

     “Act” means Section 10-101, et. seq. of the Economic Development Article of the Annotated Code of Maryland, as amended, and all future laws supplemental thereto or amendatory thereof.

     “Act of Bankruptcy” means the filing of a petition in bankruptcy under the Bankruptcy Code, or the commencement of a proceeding under any other applicable law concerning insolvency, reorganization or bankruptcy.

     “Administration Expenses” means compensation, indemnities and reimbursement of fees, expenses and advances payable to the Issuer, the Trustee, the Remarketing Agent, the Paying Agent and the Registrar, all as described in Section 7.10 of the Indenture.

     “Assignment of Leases” means the Assignment, Subordination and Non-Disturbance Agreement dated as of December 1, 1997, by and among the Issuer, the Bank and the Lessee, together with any and all Supplements thereto.

     “Bank” means Manufacturers and Traders Trust Company, a New York banking corporation, its successors and assigns.

     “Bankruptcy Code” means the United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq., and all future acts supplemental thereto or amendatory thereof.

     “Bond Documents” means and includes (without limitation) the Bonds, the Indenture, the Placement and Remarketing Agreement and any and all other documents which the Issuer or any other party or parties or their representatives, have executed and delivered, or may hereafter execute and deliver, to evidence or secure the Issuer’s Bond Obligations or any part thereof, or in connection therewith, together with any and all Supplements thereto.

     “Bond Fund” means the Bond Fund created in Section 5.1 of the Indenture.

     “Bond Payment Date” means any Interest Payment Date or any Sinking Fund Installment Date and any other date on which the principal of, premium (if any) on or interest on the Bonds is to be paid to the Owners thereof (whether at maturity thereof, or by acceleration of maturity or after notice of redemption or prepayment or otherwise).

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     “Bond Purchase Drawing” means a Bond Purchase Interest Drawing or a Bond Purchase Principal Drawing.

     “Bond Purchase Interest Drawing” and “Bond Purchase Principal Drawing” each has the meaning given to that term by the Letter of Credit.

     “Bonds” means the Issuer’s $23,000,000 Taxable Variable Rate Demand/Fixed Rate Revenue Bonds (Human Genome Sciences, Inc. Facility), 1997 Issue, issued pursuant to the Indenture.

     “Bonds Tendered or Deemed Tendered for Purchase” has the meaning given to that term in the Letter of Credit.

     “Building” means the approximately 80,000-square-foot process development and manufacturing plant located on the Land.

     “Business Day” or “business day” means a day on which (a) banks located in any of the cities in which the Principal Office of the Trustee, the Bank, the Paying Agent and the Remarketing Agent is located are not required or authorized by law or executive order to close for business, and (b) The New York Stock Exchange is not closed.

     “Collateral Pledge Agreement” means the Collateral Pledge Agreement of even date herewith by and among the Lessee, as Pledgor, the Bank, as Pledgee, and Manufacturers and Traders Trust Company, acting in its capacity as Collateral Agent, together with any and all Supplements thereto.

     “Condemnation Award” has the meaning given to that term in the granting clauses of the Deed of Trust.

     “Deed of Trust” means the Deed of Trust dated as of December 1, 1997, between the Issuer and the Individual Trustees, together with any and all Supplements thereto.

     “Downgrade” shall mean a withdrawal or a downgrading of one full grade from the long term debt ratings of the Bank as of the date hereof.

     “Eligible Lease Payments” means all payments made by the Lessee under the Facility Lease except (a) the amounts to be paid pursuant to the State Loan Documents, (b) any common area maintenance fee or rent or similar charge under the Facility Lease and (b) $3,125 per month.

     “Event of Default” and “Events of Default” shall have the meanings given to such terms in Section 8.1 hereof.

     “Facility” means the Land and the Building.

     “Facility Lease” means the Lease Agreement dated as of December 1, 1997, between the Issuer and the Lessee, pursuant to which the Issuer leases the Facility to the Lessee, together with any and all Supplements thereto.

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     “Fixed Rate”, “Fixed Rate Date” and “Fixed Rate Period” each has the meaning given to that term by the Indenture.

     “Government Acts” shall have the meaning given to such term in Section 7.2 hereof.

     “Improvements” has the meaning given to that term in the granting clauses of the Deed of Trust.

     “Indenture” means the Trust Indenture dated as of December 1, 1997, between the Issuer and the Trustee, together with any and all Supplements thereto.

     “Individual Trustees” means the individual trustees acting as trustees under the Deed of Trust, or their successors in trust who may be acting under and pursuant to the Deed of Trust from time to time.

     “Interest Drawing” has the meaning given to that term by the Letter of Credit.

     “Interest Payment Date” has the meaning given to that term by the Indenture.

     “Issuer” means Maryland Economic Development Corporation, a body politic and corporate and a public instrumentality of the State, its successors and assigns.

     “Issuer’s Bond Obligations” means the limited obligations of the Issuer under the Bond Documents to (a) pay solely from the Trust Estate the principal of, premium (if any) and interest on, and purchase price of, the Bonds as required by Section 7.2 of the Indenture, when and as the same become due and payable (whether at the stated maturity thereof, or by acceleration of maturity or after notice of redemption or prepayment or otherwise), (b) pay from the sources described in Section 4.4 of the Indenture the purchase price of Bonds Tendered or Deemed Tendered for Purchase, (c) pay solely from Eligible Lease Payments all other payments required by the Bond Documents to be paid by the Issuer to the Trustee or to others, when and as the same shall become due and payable, and (d) timely perform, observe and comply with all of the terms, covenants, conditions, stipulations, and agreements, express or implied, which the Issuer is required by the Bond Documents to perform or observe.

     “Issuer’s Letter of Credit Obligations” means the limited obligations of the Issuer under the Letter of Credit Documents to pay all payments required by the Letter of Credit Documents, when and as the same become due and payable, and timely perform, observe and comply with all terms, covenants, conditions, stipulations and agreements, express or implied, which the Issuer is required by the Letter of Credit Documents to observe or perform. The “Issuer’s Letter of Credit Obligations” constitute “Issuer’s Credit Facility Obligations” (as defined in the Indenture).

     “Land” means the 10-acre (approximate) tract of land located in Montgomery County, Maryland, and more particularly described in Exhibit A attached to the Deed of Trust and made a part thereof, together with any and all improvements thereon.

     “Lessee” means Human Genome Sciences, Inc., a Delaware corporation, its successors and assigns.

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     “Letter of Credit” means the Irrevocable Transferable Letter of Credit No. SB-901483-0101 issued by the Bank’s predecessor in interest, Allfirst, to secure the Bonds and dated December 31, 1997. Any extension, amendment or renewal of or substitution issued by the Bank for Letter of Credit No. SB-901483-0101 shall, without any action on the part of the Issuer, the Trustee or the Bank, be deemed an amendment to Exhibit A to the Letter of Credit Agreement and shall be deemed a part of Letter of Credit No. SB-901483-0101 as herein described.

     “Letter of Credit Agreement” means the Amended and Restated Letter of Credit Agreement of even date herewith between the Issuer and the Bank, together with any and all Supplements thereto.

     “Letter of Credit Documents” means the Letter of Credit, the Letter of Credit Agreement, the Deed of Trust, the Pledge and Security Agreement, the Pledged Bonds Custody Agreement, the Facility Lease, the Assignment of Leases, the Swap Agreement, the Standstill Agreement, and any and all other documents which the Issuer or any other party or parties or their representatives, have executed and delivered, or may hereafter execute and deliver, to evidence or secure the Issuer’s Letter of Credit Obligations, or any part thereof, or in connection therewith, together with any and all Supplements thereto. The “Letter of Credit Documents” constitute “Credit Facility Documents” (as defined in the Indenture).

     “LIBOR Rate” means the fluctuating annual rate of interest which shall at all times equal the interest rate which the Bank announces and declares from time to time to be its one (1) month London Interbank Offered Rate, adjusted for any Federal Reserve Board requirements imposed on the Bank from time to time. All interest at the LIBOR Rate or computed thereon shall be calculated on the basis of a 360 day-year factor applied to actual days elapsed and shall be adjusted on any date on which a change occurs in the LIBOR Rate.

     “Mandatory Tender Date” and “Mandatory Tender Notice” each has the meaning given to that term by the Indenture.

     “Outstanding”, “outstanding” or “Bonds Outstanding” has the meaning given to that term by the Indenture.

     “Owner” or “Owners” or “Owner of Bonds” or “Owners of Bonds” means the person or persons in whose name any Bond is registered on the books of the Issuer maintained by the Registrar.

     “Paying Agent” means the Trustee, or any successor Paying Agent appointed under the Indenture.

     “Penalty Rate” means the fluctuating rate per annum which is at all times equal to the Reimbursement Rate plus 2% per annum.

     “Permitted Encumbrances” has the meaning given to that term by the Deed of Trust.

     “Person” or “person” means any natural person, firm, association, corporation, company, trust, partnership, public body or other entity.

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     “Placement and Remarketing Agreement” means (a) the Placement and Remarketing Agreement dated as of December 1, 1997, by and between the Remarketing Agent and the Issuer, together with any and all Supplements thereto, and (b) any other Remarketing Agreement or similar agreement by and between the Remarketing Agent and the Issuer, pursuant to which the Remarketing Agent agrees to use its best efforts to remarket and sell Bonds Tendered or Deemed Tendered for Purchase, together with any and all Supplements thereto.

     “Pledge and Security Agreement” means (a) the Pledge and Security Agreement dated as of December 1, 1997, by and between the Issuer and the Bank, together with any and all Supplements thereto, and (b) any other pledge and security agreement or similar agreement between the Issuer and the Credit Facility Provider pursuant to which Pledged Bonds are pledged as security for the Issuer’s Credit Facility Obligations, together with any and all Supplements thereto.

     “Pledged Bonds” means Bonds that, subsequent to a Bond Purchase Principal Drawing, are delivered to and held by the Pledged Bonds Custodian as security for the Issuer’s Letter of Credit Obligations and registered as directed by the Bank.

     “Pledged Bonds Custodian” means Manufacturers and Traders Trust Company, as agent for the Bank under the Pledged Bonds Custody Agreement, or any successor custodian of the Pledged Bonds acting as the Bank’s agent.

     “Pledged Bonds Custody Agreement” means the Pledged Bonds Custody Agreement dated as of December 1, 1997, by and between the Bank and the Pledged Bonds Custodian, together with any and all Supplements thereto.

     “Principal Drawing” has the meaning given to that term by the Letter of Credit.

     “Principal Office” means, with respect to the Trustee, the Registrar, the Paying Agent, the Remarketing Agent, or the Bank, the office designated as such, from time to time, by the respective party in writing to the Issuer, the Trustee, the Paying Agent, the Registrar, the Remarketing Agent, and the Bank.

     “Property” means the Land, the Improvements, and all other items of property included in the term “Property” as used and defined in the granting clauses of the Deed of Trust.

     “Registrar” or “Bond Registrar” means the Trustee, or any successor Registrar appointed under the Indenture.

     “Reimbursement Rate” means the fluctuating rate of interest which is at all times equal to the LIBOR Rate plus 1% per annum.

     “Remarketing Agent” means Manufacturers and Traders Trust Company, or any successor Remarketing Agent appointed under the Indenture.

     “Sinking Fund Installment” and “Sinking Fund Installment Date” each has the meaning given to that term by the Indenture.

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     “Standstill Agreement” means the Amended and Restated Standstill and Subordination Agreement of even date herewith among the Bank and the Maryland Department of Business and Economic Development, together with any and all Supplements thereto.

     “State” means the State of Maryland.

     “Supplement” or “Supplements” means any and all extensions, renewals, modifications, amendments, supplements and substitutions.

     “Swap Agreement” means, collectively, any ISDA Master Agreement and attached Schedules executed and delivered at any time and from time to time whether before or on or after the date hereof by the Issuer and the Bank, and any and all other documents relating to such Master Agreement, and any and all replacements of or substitutions for such Master Agreement or such other documents, as any such Master Agreement and other documents with attached Schedules or any such replacement or substitution thereof may at any time or from time to time be amended, restated, supplemented or otherwise modified.

     “Swap Obligations” means and includes all present and future indebtedness, obligations and liabilities of the Issuer to the Bank of any nature whatsoever under or in connection with the Swap Agreement, whether such indebtedness, obligations and liabilities are direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due, or now existing or hereafter arising. The Swap Obligations constitute part of the Issuer’s Letter of Credit Obligations.

     “Taxes” means all taxes, water rents, sewer rents, assessments and other governmental or municipal or public or private dues, charges and levies and any prior liens (including federal tax liens) for the Taxes which are or may be levied, imposed or assessed upon the Property or any part thereof, or any leases pertaining thereto, or upon the rents, issues, income or profits thereof, whether any or all of the aforementioned be levied directly or indirectly or as excise taxes or as income taxes.

     “Trust Estate” has the meaning given to that term by the Indenture.

     “Trustee” means Manufacturers and Traders Trust Company, a New York banking corporation having its Principal Office in Baltimore, Maryland, and its successor or successors in the trust created by the Indenture.

     “Variable Rate” has the meaning given to that term by the Indenture.

     “1999 Bond Documents” means the Bond Documents as defined in the 1999 Indenture, together with any and all Supplements thereto.

     “1999 Bonds” means, collectively, (a) the $4,375,000 Maryland Economic Development Corporation Taxable Variable Rate Demand/Fixed Rate Revenue Bonds (Human Genome Sciences, Inc. Facility), Series 1999 A and (b) the $13,125,000 Maryland Economic Development Corporation Taxable Variable Rate Demand/Fixed Rate Revenue Bonds (Human Genome Sciences, Inc. Facility, Series 1999 B.

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     “1999 Indenture” means the Amended and Restated Trust Indenture of even date herewith between the Issuer and the Trustee, together with any and all Supplements.

     “1999 Letter of Credit Documents” means the Letter of Credit Documents as defined in the 1999 Indenture, together with any and all Supplements thereto.

ACCOUNTING TERMS

     Unless specifically provided otherwise, all accounting terms have the definitions given them in accordance with generally accepted accounting principles as applied to the applicable person on a consistent basis by its accountants in the preparation of its previous annual financial statements.

     Section 1.2 Rules of Construction. The words “hereof”, “herein”, “hereunder”, “hereto”, and other words of similar import refer to this Reimbursement Agreement in its entirety.

     The terms “agree” and “agreements” contained herein are intended to include and mean “covenant” and “covenants”.

     References to Articles, Sections, and other subdivisions of this Reimbursement Agreement are to the designated Articles, Sections, and other subdivisions of this Reimbursement Agreement as originally executed.

     The headings of this Reimbursement Agreement are for convenience only and shall not define or limit the provisions hereof.

     All references made (a) in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, and (b) in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well.

ARTICLE II

EFFECTIVE DATE OF REIMBURSEMENT AGREEMENT;
DURATION OF TERM

     Section 2.1 Effective Date of Reimbursement Agreement; Duration of Term. This Reimbursement Agreement shall become effective on the date hereof and shall continue in full force and effect until (a) the Letter of Credit has expired as therein provided, and (b) all of the Lessee’s obligations under this Reimbursement Agreement have been fully performed and satisfied.

     In the event that an Act of Bankruptcy has occurred on or prior to the satisfaction of the conditions specified in the immediately preceding paragraph, then this Reimbursement Agreement shall continue in full force and effect, and shall not expire, until (a) the Letter of Credit has expired in accordance with its terms, (b) all of the Lessee’s obligations hereunder have been fully performed and satisfied, and (c) either (i) a final order has been issued, holding that the Bank is not required to return any funds it has received from the Issuer or the Lessee, or

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(ii) all statutes of limitation for all causes of action under Chapter 5 of the Bankruptcy Code have expired.

ARTICLE III

PAYMENT PROVISIONS

     Section 3.1 Reimbursement and Other Payments. In consideration for the Bank’s agreement to extend the Letter of Credit, the Lessee hereby unconditionally acknowledges and agrees, for the benefit of the Bank, to pay and perform all of the Issuer’s Letter of Credit Obligations, including, without limitation, the Issuer’s obligation to reimburse the Bank for all amounts drawn under the Letter of Credit and all other amounts advanced or paid by the Bank, plus all expenses, indemnities and other amounts payable to or for the benefit of the Bank under the Letter of Credit Agreement, as and when the same shall become due and payable, provided however, that all such obligations shall be payable by the Lessee on a full recourse basis without regard to Section 14.15 of the Letter of Credit Agreement, and all of the obligations of the Lessee under this Reimbursement Agreement, and such obligations of the Lessee shall include, without limitation, the Lessee’s unconditional promise to pay to the Bank:

          (a) immediately on demand by the Bank, a sum equal to (i) any amount drawn under, or paid by the Bank in good faith under, the Letter of Credit pursuant to a Bond Purchase Principal Drawing, plus (ii) interest on such amount as provided in paragraph (j) below;

          (b) immediately and no later than 5:00 p.m. (without the necessity of any demand by or notice from the Bank) on each date that the Bank pays any amount drawn under, or paid by the Bank in good faith under, the Letter of Credit pursuant to a Principal Drawing or an Interest Drawing or an Acceleration Drawing, a sum equal to (i) such amount so drawn under, or paid by the Bank in good faith under, the Letter of Credit pursuant to a Principal Drawing or an Interest Drawing or an Acceleration Drawing, plus (ii) interest on such amount as provided in paragraph (j) below;

          (c) immediately on demand by the Bank, any amount drawn under, or paid by the Bank in good faith under, the Letter of Credit pursuant to a Bond Purchase Interest Drawing, a sum equal to (i) such amount so drawn under, or paid by the Bank in good faith under, the Letter of Credit pursuant to a Bond Purchase Interest Drawing, plus (ii) interest on such amount as provided in paragraph (j) below

          (d) immediately on demand by the Bank, a sum equal to (i) any and all reasonable charges and expenses (excluding the Bank’s internal overhead) which the Bank may pay or incur relative to the payment of any draft drawn under, or paid by the Bank in good faith under, the Letter of Credit or in connection with any amendment or extension of or substitution for or renewal of the Letter of Credit, plus (ii) interest thereon as provided in paragraph (j) below;

          (e) immediately on demand by the Bank, a sum equal to (i) the amount advanced or paid by the Bank pursuant to the provisions of Section 4.7 or Section 14.9 of the Letter of Credit Agreement, plus (ii) interest on such amount as provided in paragraph (j) below,

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plus (iii) any and all reasonable charges and expenses which the Bank may pay or incur relative to such payment;

          (f) immediately (without the necessity of any demand by or notice from the Bank) as and when due and payable, the Letter of Credit Fee and the Negotiation Fee as set forth in Section 4.1 of the Letter of Credit Agreement (including any additional amounts required by Section 5.4 of the Letter of Credit Agreement), plus interest thereon as provided in paragraph (j) below;

          (g) immediately on demand by the Bank, any and all expenses incurred by the Bank in enforcing any rights under the Letter of Credit Agreement or this Reimbursement Agreement plus interest thereon as provided in paragraph (j) below;

          (h) immediately on demand by the Bank, all other costs and expenses of the Bank, as set forth in the Letter of Credit Agreement (including, without limitation, all costs and expenses payable pursuant to Section 4.6 of the Letter of Credit Agreement) plus interest thereon as provided in paragraph (j) below;

          (i) immediately on demand by the Bank upon any transfer of the Letter of Credit, the transfer charge payable to the Bank pursuant to the Letter of Credit ($750) plus interest thereon as provided in paragraph (j) below (a “transfer” of the Letter of Credit means the designation of a new beneficiary thereunder as a substitute Trustee under the Indenture); and

          (j) immediately on demand by the Bank, interest on any and all amounts and sums payable by the Lessee under this Reimbursement Agreement at any time (including, without limitation, any and all amounts or sums described or referred to in paragraphs (a) through (i) above), such interest being payable from the date such amounts and sums become due until the Bank actually receives payment thereof in full, at the Reimbursement Rate. Interest on any amounts advanced or paid by the Bank or any costs, charges and expenses incurred by the Bank shall be due and payable from the date such amounts are advanced or costs are incurred or paid by the Bank until the Bank actually receives payment thereof in full at the Reimbursement Rate; provided, however, notwithstanding the foregoing provisions of this paragraph, interest on the amounts due pursuant to paragraphs (d), (f) and (h) shall not be due and payable until 15 days after notice to the Lessee of the amounts due.

     The Bank and the Lessee contemplate that pursuant to the Indenture, the amounts paid by the Bank under the Letter of Credit pursuant to a Principal Drawing or an Interest Drawing or a Bond Purchase Interest Drawing, will, in the ordinary course, be repaid directly to the Bank by the Trustee from certain payments made to the Issuer by the Lessee pursuant to the Facility Lease, which payments are to be deposited by the Trustee in the Bond Fund. The Lessee shall not, however, be relieved of liability for repaying any such amounts (plus interest thereon, at the Reimbursement Rate, from the date such amounts are paid by the Bank under the Letter of Credit) to the Bank by reason of any action or inaction on the part of the Trustee or any other person which results in a failure by the Bank to actually receive such amounts from the Trustee pursuant to the Indenture or results in any delay in the receipt by the Bank of such amount from the Trustee pursuant to the Indenture.

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     All amounts paid by the Bank under the Letter of Credit shall bear interest from the date such amounts are paid by the Bank until such time as such amounts are actually repaid to the Bank.

     In connection with the foregoing, the Lessee acknowledges and agrees as follows: (a) the Issuer shall apply any and all amounts which it receives in respect to the principal of and interest on the Pledged Bonds to the repayment of amounts from time to time owing to the Bank under the Letter of Credit Agreement; and (b) notwithstanding any other terms and provisions of any of the Letter of Credit Documents, the amounts set forth hereinabove shall be due and payable in full by the Lessee at the time indicated, regardless of whether or not the Bank (or the Pledged Bonds Custodian, for the account of the Bank) is then holding any Pledged Bonds as a result of any Bond Purchase Principal Drawing and regardless of whether or not the Bank (in its sole discretion) has theretofore extended the time for payment of any amounts payable by the Lessee hereunder.

     Notwithstanding anything to the contrary set forth in this Section, following the date on which the Bank honors a Bond Purchase Principal Drawing, the Bank will not make demand for the payment of the amounts payable under paragraph (a) above in connection with such Bond Purchase Principal Drawing, so long as (1) within 48 hours after the Bank honors such Bond Purchase Principal Drawing (or such longer period of time not to exceed five Business Days if the Trustee advises the Bank that the delay is caused by administrative difficulties), the Pledged Bonds Custodian receives an aggregate principal amount of Bonds equal to the amount of such Bond Purchase Principal Drawing, registered by the Trustee in the Issuer’s name, as owner, and in the Bank’s name, as pledgee, (2) the Bank actually receives all payments of the principal of and interest on such Bonds, when due, (3) no Event of Default shall have occurred and be continuing, and (4) the Letter of Credit shall not have expired. On the date of the expiration of the Letter of Credit, all amounts payable under paragraph (a) above in connection with such Bond Purchase Principal Drawing which shall not have been repaid, together with all accrued and unpaid interest thereon, shall become immediately due and payable, without the necessity of any demand by or notice from the Bank; provided, however, if such Bond Purchase Principal Drawing is the result of a Downgrade, all amounts payable in connection with such Bond Purchase Principal Drawing which shall not have been repaid, together with all accrued and unpaid interest thereon, shall become immediately due and payable, without demand or notice from the Bank, on the day which is 180 days following the date on which the Bank honors such Bond Purchase Principal Drawing.

     Section 3.2 Payments due Upon Expiration of Letter of Credit. On the date on which the Letter of Credit expires, all amounts described in Section 3.1 above, and all other amounts owed to the Bank hereunder, together with all accrued and unpaid interest thereon, shall become immediately due and payable, without the necessity of any demand or notice from the Bank.

     Section 3.3 Late Payments. In the event any payment required to be made by the Lessee in accordance with the provisions of Section 3.1 or Section 3.2 hereof or in accordance with any other provision of this Reimbursement Agreement is not paid within 15 days from the date on which the same is due and payable, such payment in default shall continue as an obligation of the Lessee, and such payment in default and the entire unpaid balance of all amounts owing hereunder shall bear interest, from the date on which the payment was due until

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such payment in default is paid in full, at the fluctuating rate which is at all times equal to the Penalty Rate. In addition, the Lessee shall pay (a) a late charge in an amount equal to 2% of the amount of any payment which is made more than 15 days after the date on which the same is due and payable (except for any payment with respect to a Bond Purchase Principal Drawing), and (b) all costs of collection, including reasonable attorneys’ fees, if this Reimbursement Agreement is referred to an attorney for collection after default by the Issuer.

     Section 3.4 Increased Costs Due to Change in Law. If any change in any law, regulation or official directive of any international, federal, state or local governmental authority (whether or not having the force of law) or in the interpretation thereof by any court or administrative agency or compliance by the Bank with any lawful request, law, regulation or directive from any applicable fiscal or monetary authority (whether or not having the force of law) shall either:

          (a) impose, modify or render applicable any reserve, special deposit or similar requirement against letters of credit issued by the Bank or require the inclusion of such letters of credit in any analysis of minimum capital requirements or capital adequacy; or

          (b) subject the Bank to any tax with respect to such letters of credit or any amount payable under the Letter of Credit Agreement (other than a tax on the overall net income of the Bank) imposed by the United States of America or the State; or

          (c) impose on the Bank any other condition regarding the Letter of Credit Agreement or the Letter of Credit, and the result of any such event shall be:

          (i) to increase the cost to the Bank of issuing or maintaining the Letter of Credit or any renewal thereof or of making, funding or maintaining the whole or any part of any unpaid drawing under the Letter of Credit (which increase in cost shall be determined by the Bank’s reasonable allocation of the aggregate of such cost increases resulting from such events); or

          (ii) to reduce the amount of any sum received or receivable by the Bank under the Letter of Credit Agreement or to require the Bank to make any payment or forego any interest; or

          (iii) to reduce the rate of return on the Bank’s capital as a result of issuing or maintaining the Letter of Credit and/or any renewals thereof (which reduction shall be determined by the Bank taking into consideration the Bank’s policies concerning capital adequacy),

then and in each such case, within five (5) days following the Lessee’s receipt of demand therefor from the Bank, the Lessee shall pay to the Bank, from time to time as specified by the Bank, additional amounts which shall be sufficient to compensate the Bank for such increased cost, reduction, payment or foregone interest, together with interest on each such amount from the date demanded until payment in full thereof at the Reimbursement Rate. A certificate as to each such increased cost, reduction, payment or foregone interest as a result of any such event, submitted in good faith by the Bank to the Lessee, shall be conclusive evidence of such

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additional amounts to be paid by the Lessee and the basis therefor, absent manifest error as to the amount thereof.

     Section 3.5 Computation. All payments of interest and other charges under this Reimbursement Agreement shall be computed on the basis of a 360-day year factor applied to the actual number of days elapsed. The rate of interest shall be adjusted on any day on which a change occurs in the LIBOR Rate.

     Section 3.6 Payment Procedure. All payments made by the Lessee under this Reimbursement Agreement shall be made to the Bank in lawful money of the United States of America at the time of payment and in immediately available funds at the Bank’s offices at 25 South Charles Street, Baltimore, Maryland 21201, before 12:00 noon, prevailing Baltimore, Maryland time on the date when due.

     Section 3.7 Business Days. If the date for any payment hereunder is a day which is not a Business Day, then for all purposes of this Reimbursement Agreement the payment then due shall be made on the next following Business Day, and such extension of time shall in each case be included in any computation of payments of interest.

ARTICLE IV

UNCONDITIONAL OBLIGATIONS

     Section 4.1 Obligations Absolute. The obligations of the Lessee under this Reimbursement Agreement shall be paid strictly in accordance with the terms of this Reimbursement Agreement, under any and all circumstances whatsoever; including, without limitation, the following circumstances: (a) any invalidity or unenforceability of the Letter of Credit, the Letter of Credit Agreement or any other agreement or instrument related thereto; (b) any amendment or waiver of, or any consent to or departure from, the terms of the Letter of Credit, the Letter of Credit Agreement or any other agreement or instrument related thereto; (c) the existence of any claim, set-off, defense or other right which the Lessee may have at any time against any beneficiary or any transferee of the Letter of Credit (or any person for whom the Lessee, any such beneficiary or any such transferee may be acting), the Bank or any other Person, whether in connection with this Reimbursement Agreement or any unrelated transaction; (d) any statement or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect, or any statement therein being untrue or inaccurate in any respect whatsoever; (e) payment by the Bank under the Letter of Credit against presentation of a sight draft or certificate which substantially complies with the terms of the Letter of Credit; (f) the surrender or impairment of any security for the performance or observance of any of the agreements or terms of the Letter of Credit Agreement or this Reimbursement Agreement; or (g) any other circumstance, happening or omission whatsoever, whether or not similar to any of the foregoing. The Lessee understands and agrees that no payment under any other agreement will release it from liability hereunder unless the Bank has been indefeasibly paid in full.

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ARTICLE V

REPRESENTATIONS AND WARRANTIES

     Section 5.1 Representations, Warranties and Undertakings. The Lessee makes the following representations and warranties to induce the Bank to enter into this Reimbursement Agreement, to enter into the Letter of Credit Agreement and to extend the Letter of Credit:

          (a) Authority. The Lessee is a corporation duly organized and validly existing under the laws of the State of Delaware. The Lessee has the power to enter into this Reimbursement Agreement and the transactions contemplated hereunder and to carry out its obligations hereunder. By proper action, the Lessee has duly authorized the execution and delivery of this Reimbursement Agreement.

          (b) Binding Agreements. This Reimbursement Agreement and the Letter of Credit Documents to which the Lessee is a party have been duly and properly authorized, executed, sealed and delivered by the Lessee, constitutes valid and legally binding obligations of the Lessee, and is fully enforceable against the Lessee in accordance with their respective terms; provided, however, that the enforceability and binding nature of this Reimbursement Agreement and the Letter of Credit Documents to which the Lessee is a party are subject to bankruptcy, insolvency, reorganization and other state and federal laws affecting the enforcement of creditors’ rights generally, and, to the extent that certain remedies under such instruments require, or may require, enforcement by a court of equity, such principles of equity as the court having jurisdiction may impose.

          (c) Litigation. There are no proceedings pending or, to the knowledge of the Lessee, threatened in writing before any court or administrative agency which may affect the authority of the Lessee to enter into this Reimbursement Agreement or the Letter of Credit Documents to which the Lessee is a party.

          (d) No Conflicting Agreements, Laws, etc. The execution, delivery and performance by the Lessee of this Reimbursement Agreement and the Letter of Credit Documents to which the Lessee is a party, or any other document required to be delivered hereby by the Lessee, do not constitute a violation or breach of or a default under the Bylaws of the Lessee or any existing mortgage, indenture, contract, instrument or agreement binding on the Lessee or affecting its property, or any provision of law or order of any court binding upon the Lessee.

          (e) Liens or Security Interests. Except for liens being granted to the Bank, there exist no liens or security interests on or with respect to the Property (other than Permitted Encumbrances) or with respect to any security provided by the Lessee to the Bank for the Lessee’s obligations under this Reimbursement Agreement.

          (f) Full Disclosure. All information heretofore furnished by the Lessee to the Bank in writing for purposes of or in connection with this Reimbursement Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Lessee to

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the Bank will be, true and accurate in all material respects on the date as of which such information is stated or certified.

ARTICLE VI

AFFIRMATIVE COVENANTS OF LESSEE

     Section 6.1 Affirmative Covenants of Lessee. Until the termination of this Reimbursement Agreement, unless the prior written consent to do otherwise is obtained from the Bank, the Lessee will:

          (a) Financial Statements. Furnish or cause to be furnished to the Bank the following:

     (i) as soon as available but in no event more than forty-five (45) days after filing with the Securities and Exchange Commission (the “SEC”), a copy of the 10Q Report of the Lessee filed with the SEC accompanied by a certificate of the chief financial officer of the Lessee stating whether any event has occurred which constitutes an Event of Default, or which would constitute such an Event of Default with the giving of notice or the lapse of time or both, and, if so, stating the facts with respect thereto; and

     (ii) as soon as available but in no event more that one hundred twenty (120) days after the close of each fiscal year of the Lessee, a copy of the 10K Report of the Lessee filed with the SEC and a copy of the annual audited financial statements relating to the Lessee prepared in accordance with GAAP, which financial statements shall include a balance sheet of the Lessee as at the end of such fiscal year and a statement of earnings and changes in stockholder’s equity of the Lessee for such fiscal year; and

     (iii) promptly upon transmission thereof, copies of any financial statements, proxy statements, reports and the like which the Lessee sends to its shareholders and copies of all registration statements (with exhibits); and

     (iv) with reasonable promptness, such budgets, cash flow projections, financial forecasts and other additional information, reports or statements as the Bank may from time to time reasonably request concerning the Lessee, the Property or any other matter related to the transactions that are the subject of this Reimbursement Agreement.

          (b) Taxes and Claims. Pay and discharge or cause to be paid and discharged all Taxes imposed upon the Property or any income derived therefrom prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might become a lien or charge upon the property. The Lessee shall have the right to contest the validity of any such tax, assessment, charge, levy or claim, by timely and appropriate proceedings, provided that the Lessee shall (a) give the Bank written notice of its intention to contest, (b) diligently prosecute such contest, (c) at all times effectively stay or prevent any official or judicial sale of the Property or any part thereof by reason of nonpayment of any such taxes, and (d) establish reasonable reserves for such liabilities being contested if the Bank reasonably determines such reserves to be necessary.

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          (c) Compliance with Laws. Comply with all applicable federal, State and local laws, rules and regulations, subject to the Lessee’s right to contest the validity or applicability of any of the foregoing, at its sole cost and expense, in good faith and by appropriate and diligent proceedings.

          (d) Books and Records. Maintain appropriate books and records with respect to the Property and permit access by the Bank and its authorized representatives and employees to the books and records of the Lessee at the offices of the Lessee during normal business hours.

ARTICLE VII

INDEMNIFICATION

     Section 7.1 Indemnification of Bank. To the extent permitted by law, in addition to all amounts payable hereunder, the Lessee shall protect, indemnify, and save harmless the Bank and its officers, employees and agents against and from any and all liabilities, suits, actions, claims, demands, losses, expenses and costs of every kind and nature incurred by, or asserted or imposed against, the Bank and its officers, employees or agents, by reason of (a) any accident, injury (including death) or damage to any person or property, however caused (other than the gross negligence or willful misconduct of the Bank), resulting from, connected with or growing out of any act of commission or omission of the Lessee, or any officers, employees, agents, assignees, contractors or subcontractors of the Lessee or any use, non-use, possession, occupation, condition, operation, service, design, construction, acquisition, maintenance or management of, or on, or in connection with, the Property, or any part thereof; (b) federal and state securities laws, including, without limitation, any failure to register the Bonds, the Letter of Credit or any other “separate security” under federal or state securities laws; (c) solely with respect to information about the Lessee provided by the Lessee, any untrue statement of a material fact or any omission to state a material fact necessary in order to make any statements made, in light of the circumstances under which they were made, not misleading in connection with the sale of the Bonds (other than as a result of the gross negligence or willful misconduct of the Bank); and, in any such case, regardless of whether such liabilities, suits, actions, claims, demands, damages, losses, expenses and costs be against, or be suffered or sustained by, the Bank or its officers, agents or employees, or be against, or be suffered or sustained by, legal entities, officers, agents, or other persons to whom the Bank or its officers, agents or employees, become liable therefor. The Lessee may, and if so requested by the Bank shall, undertake to defend, at its sole cost and expense, any and all suits, actions and proceedings brought against the Bank or its officers, agents or employees in connection with any of the matters indemnified against in this Section. The Bank agrees to give the Lessee timely notice of and shall forward to the Lessee every demand, notice, summons or other process received with respect to any claim or legal proceedings within the purview hereof, but the failure of the Bank to give such notice shall not affect its right to indemnification hereunder, unless such failure shall have deprived the Lessee of a reasonable opportunity to contest any such claim or legal proceeding.

     If the indemnification provided for herein is held by a court to be unavailable or is insufficient to hold the Bank harmless in respect of any losses, claims, damages or liabilities (or actions in respect thereof), then the Lessee shall contribute to the amount paid or payable by the Bank as a result of the losses, claims, damages or liabilities (or actions in respect thereof) (except

16

those caused by the gross negligence or willful misconduct of the Bank) in such proportion as is appropriate to reflect the relative fault of the Lessee on the one hand and the Bank on the other hand, as well as any other relevant equitable considerations.

     Section 7.2 Indemnification Under Letter of Credit and Letter of Credit Agreement. In addition to all amounts payable hereunder and to the extent permitted by law, the Lessee hereby protects, indemnifies and holds harmless the Bank from and against, and hereby agrees to defend the Bank against, any and all claims, damages, losses, liabilities, costs or expenses whatsoever which the Bank may, at any time, sustain or incur by reason of or in consequence of or arising out of the issuance of the Letter of Credit; it being the intention of the parties that this Reimbursement Agreement shall be construed and applied to protect and indemnify the Bank against any and all risks involved in the issuance of the Letter of Credit all of which risks are hereby assumed by the Lessee, including, without limitation, any and all risks of the acts or omissions, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions, herein called “Government Acts”). Notwithstanding anything to the contrary herein contained, the Lessee shall have no obligation to indemnify the Bank from and against any liability incurred by the Bank arising solely out of the gross negligence or willful misconduct of the Bank. The Bank shall not, in any way, be liable for any failure by the Bank or anyone else to pay any drawing under the Letter of Credit as a result of any Government Acts or any other cause beyond the control of the Bank. Nothing in this Section 7.2 is intended to limit the Issuer’s reimbursement obligations contained in Article V hereof.

     The provisions of this Article shall survive the expiration of the Letter of Credit and the termination of the Bond Documents and the Letter of Credit Documents.

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

     Section 8.1 Events of Default Defined. The following shall be “Events of Default” under this Reimbursement Agreement, and the term “Event of Default” shall mean, whenever it is used in this Reimbursement Agreement, any one or more of the following events:

          (a) Any representation or warranty made herein or any statement or representation made in any certificate, report or opinion (including legal opinions), financial statement or other instrument furnished by the Lessee in connection with this Reimbursement Agreement, the Letter of Credit or the Letter of Credit Agreement, proves to have been incorrect, false or misleading in any material respect when made; or

          (b) The Lessee fails to pay, on the date on which the same is due and payable as herein provided, (i) any payment required by Article III hereof, or (ii) any other payment whatsoever required by this Reimbursement Agreement to be paid by the Lessee; and any such failure is not cured within 5 days after notice from the Bank to the Lessee; or

          (c) The Lessee fails to duly and promptly perform, comply with or observe any other term, covenant, condition or agreement contained in this Reimbursement Agreement,

17

which failure remains unremedied for 30 days after written notice thereof shall have been given to the Lessee by the Bank; provided, however, if such failure be such that it cannot be corrected within 30 days, it shall not be an Event of Default if, in the reasonable opinion of the Bank, the Lessee is taking appropriate corrective action to cure the failure and if such failure will not impair the ability of the Lessee to pay or perform the Lessee’s obligations under this Reimbursement Agreement; or

          (d) An Act of Bankruptcy occurs with respect to the Lessee or the Lessee becomes generally unable to pay its debts as they become due; provided, however, if a proceeding with respect to an Act of Bankruptcy is filed or commenced against the Lessee, the same shall not constitute an Event of Default if such proceeding is dismissed within 60 days from the date of such Act of Bankruptcy; or

          (e) An “event of default” or “Event of Default” occurs under the Collateral Pledge Agreement, any of the Bond Documents, any of the other Letter of Credit Documents, any of the 1999 Bond Documents or any of the 1999 Letter of Credit Documents; or

          (f) Any execution or attachment is levied against the Lessee’s interest in the Property, or any part thereof, and such execution or attachment is not set aside, discharged, bonded against, or stayed within 30 days after the same is levied; or

          (g) Any change in any zoning ordinance or any other public restriction is enacted, limiting or defining the uses which may be made of the Property or a part thereof, such that the existing use of the Property, as specified in the Letter of Credit Documents, would not be permitted after such restriction or zoning change; or

          (h) The Lessee fails to comply with any requirement of any governmental authority having jurisdiction over the Property within the time required by such governmental authority; or any proceeding is commenced or action taken to enforce any remedy for a violation of any requirement of a governmental authority or any restrictive covenant affecting the Property or any part thereof; provided, however, such failure shall not be an Event of Default if the Lessee is diligently contesting such requirement in good faith; or

          (i) Any amendment to any of the Bond Documents or the Letter of Credit Documents shall have been made without the prior written consent of the Bank; or

          (j) Notwithstanding the provisions of Section 9.5 hereof, if any material provision of this Reimbursement Agreement at any time for any reason ceases to be valid and binding on the Lessee, or is declared to be null and void, or the validity or enforceability thereof is contested by the Lessee or any governmental agency or authority, or the Lessee denies that it has any or further liability or obligation under this Reimbursement Agreement or any of the Bond Documents or the Letter of Credit Documents; or

          (k) Within 48 hours following a Bond Purchase Principal Drawing (or such longer period of time, not to exceed five Business Days, if the Trustee advises the Bank that the delay is caused by administrative difficulties), the Trustee does not deliver, or cause to be delivered to the Pledged Bonds Custodian an aggregate principal amount of Bonds equal to the

18

amount of the Bond Purchase Principal Drawing, registered in the name of the Bank, as pledgee; or

          (l) Any mechanics’ liens are established against the Property and are not caused to be discharged or bonded against by the Lessee within 30 days after it receives notice of the establishment thereof; or

          (m) The Facility Lease is terminated for any reason prior to the expiration or termination of the Letter of Credit or the full payment and performance of all of the Lessee’s obligations under this Reimbursement Agreement; provided, however, such termination shall not constitute an Event of Default if it is as a result of the Lessee’s exercise of its option to purchase the Property pursuant to the Facility Lease; or

          (n) The Deed of Trust, after delivery thereof, except to the extent permitted by the terms thereof, ceases to create a valid and perfected lien or security interest, as appropriate, of the priority required thereby, on any of the property purported to be covered thereby, or the Issuer or any other person liable for the Issuer’s Letter of Credit Obligations so states in writing.

     Section 8.2 Remedies on Default. Whenever any Event of Default referred to in Section 8.1 hereof occurs, the Bank may take any one or more of the following remedial steps:

          (a) The Bank, at its option, may (i) demand that the Trustee exercise its remedies under the Indenture and accelerate the maturity of the Bonds (in which event the Trustee is required to immediately draw under the Letter of Credit pursuant to Section 9.2(a) of the Indenture), and (ii) declare all amounts payable under Article III hereof (including amounts payable as a result of a drawing under the Letter of Credit as described in clause (i) above), together with all other moneys payable hereunder, to be immediately due and payable, whereupon the same shall become immediately due and payable, by written notice to that effect given to the Lessee, without protest, presentment, or further notice or demand, all of which are expressly waived by the Lessee. Upon such declaration by the Bank, payment of all amounts due under Article III hereof (including amounts payable as a result of a drawing under the Letter of Credit as described in clause (i) above) shall be made immediately by the Lessee, and the Lessee hereby promises to pay such amount immediately, to the Bank. Upon payment in full of all of the Lessee’s obligations under this Reimbursement Agreement, whether contingent or otherwise, but only upon the expiration of this Reimbursement Agreement, any remaining surplus of such funds held by the Bank as a result of payment pursuant to this Section 8.2(a) shall be applied first to pay any unpaid Administration Expenses and any remainder shall be returned to the Lessee, unless otherwise agreed by the Lessee and the Bank.

          (b) The Bank may take whatever action at law or in equity may appear necessary or desirable to collect the payments and other amounts then due and thereafter to become due or to enforce performance and observance of all of the Lessee’s obligations under this Reimbursement Agreement.

          (c) The Bank, with or without resort to judicial process, may take such steps as the Bank deems appropriate to protect the Property from depredation or injury, including (without limitation) employment of watchmen or other protective services, and any expenses

19

incurred by the Bank in taking such steps shall be paid by the Lessee to the Bank as provided in Section 9.9 hereof.

          (d) The Bank may proceed under the Maryland Uniform Commercial Code (or under the Uniform Commercial Code of any other jurisdiction in which any security for the Issuer’s Letter of Credit Obligations may be located from time to time) as to all or any part of the security for the Issuer’s Letter of Credit Obligations, and in conjunction therewith exercise all of the rights, remedies and powers of a secured party under the Maryland Uniform Commercial Code (or under the Uniform Commercial Code of any other jurisdiction in which any security for the Issuer’s Letter of Credit Obligations may be located from time to time), including, without limitation, taking possession of any security for the Lessee’s obligations under this Reimbursement Agreement without judicial process pursuant to Section 9-609 of the Maryland Uniform Commercial Code. Upon the occurrence of any Event of Default hereunder, the Lessee shall assemble all of the security for the Lessee’s obligations under this Reimbursement Agreement, and make the same available to the Bank. Any notification required by Section 9-611 of the Maryland Uniform Commercial Code shall be deemed reasonably and properly given if mailed certified mail, return receipt requested, postage prepaid, by the Bank to the Lessee at the address specified in Section 9.1 hereof at least 10 days before any sale or other disposition of the security for the Lessee’s obligations under this Reimbursement Agreement, or any portion thereof. Disposition of the security for the Lessee’s obligations under this Reimbursement Agreement, or any portion thereof, shall be deemed commercially reasonable if made pursuant to a public offering advertised at least twice in a newspaper of general circulation in the community in which the Property is located.

          (e) The Bank may exercise any and all remedies available to it under the Collateral Pledge Agreement, any of the Bond Documents and any of the Letter of Credit Documents.

     No action taken pursuant to this Section shall relieve the Lessee from any of the Lessee’s obligations under this Reimbursement Agreement, all of which shall survive any such action, and the Bank may take whatever action at law or in equity as may appear necessary and desirable to collect the payments and other amounts then due and thereafter to become due or to enforce the performance and observance of the Lessee’s obligations under this Reimbursement Agreement.

     Any amounts collected pursuant to action taken under this Section shall be paid over to the Bank and applied to the Lessee’s obligations under this Reimbursement Agreement.

     Section 8.3 No Remedy Exclusive. No remedy herein conferred upon or reserved to the Bank is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Reimbursement Agreement, the Collateral Pledge Agreement or any of the Letter of Credit Documents or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Bank to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required.

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     Section 8.4 Agreement to Pay Attorneys’ Fees and Expenses. In the event the Lessee defaults under any of the provisions of this Reimbursement Agreement, and the Bank employs attorneys or incurs other expenses for the collection of amounts due hereunder or the enforcement of performance or observance of any obligation or agreement on the part of the Lessee herein contained, the Lessee agrees that it will on demand therefor pay to the Bank the fees of such attorneys and such other expenses so incurred by the Bank.

     Section 8.5 Waiver of Event of Default; No Additional Waiver Implied by One Waiver. The Bank in its sole discretion may waive an Event of Default, provided that either (a) notice of the occurrence of an Event of Default has not yet been given to the Trustee, or (b) following such Event of Default, a drawing under the Letter of Credit is not required to be made by the Trustee in accordance with Section 9.2 of the Indenture.

     In the event any agreement contained in this Reimbursement Agreement is breached by the Lessee and thereafter waived (expressly or impliedly) by the Bank, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. Any forbearance (expressly or impliedly) by the Bank to demand payment for any amounts payable hereunder shall be limited to the particular payment for which the Bank forebears demand for payment and will not be deemed a forbearance to demand any other amount payable hereunder.

ARTICLE IX

MISCELLANEOUS

     Section 9.1 Notices. Except as otherwise provided in this Reimbursement Agreement, all notices, demands, requests, consents, approvals, certificates or other communications required under this Reimbursement Agreement to be in writing shall be sufficiently given and shall be deemed to have been properly given (i) if delivered by hand, when written confirmation of delivery is received by the sender, (ii) three days after the same is mailed by certified mail, postage prepaid, return receipt requested, or (iii) if sent by overnight courier, 24 hours after delivery to such overnight courier, addressed to the person to whom any such notice, demand, request, approval, certificate or other communication is to be given, at the appropriate address for the Principal Office of such person designated below:

Bank:	Manufacturers and Traders Trust Company
	25 South Charles Street, 11th Floor
	Baltimore, Maryland 21201
	Attention: Letter of Credit Department
	and
	Manufacturers and Traders Trust Company
	1 Research Court, Suite 400
	Rockville, Maryland 20850
	Attention: Arthur L. Perraud

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	with a copy to:
	Nancy R. Little, Esquire
	McGuireWoods LLP
	One James Center
	901 East Cary Street
	Richmond, Virginia 23219
Lessee:	Human Genome Sciences, Inc.
	14200 Shady Grove Road
	Rockville, Maryland 20850
	Attention: James H. Davis, Executive Vice President, General
	Counsel and Secretary

Any person listed above may, by notice given hereunder, designate any further or different addresses to which subsequent communications shall be sent. During any period in which the Registrar and the Paying Agent are the same and have the same address, any notice required to be given to either the Registrar or the Paying Agent, or both, may be given by one notice to the address for the Registrar and Paying Agent set forth above.

     Section 9.2 [INTENTIONALLY OMITTED].

     Section 9.3 [INTENTIONALLY OMITTED].

     Section 9.4 Binding Effect. This Reimbursement Agreement shall inure to the benefit of and shall be binding upon the Bank, the Lessee and their respective successors and assigns.

     Section 9.5 Illegality; Severability. If fulfillment of any provision hereof or any transaction related hereto or to the Letter of Credit Documents, at the time performance of such provisions shall be due, shall involve transcending the limit of validity prescribed by law, then ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity; and if any clause or provisions herein contained, operates or would prospectively operate to invalidate this Reimbursement Agreement in whole or in part, then such clause or provision only shall be void, as though not herein contained, and the remainder of this Reimbursement Agreement shall remain operative and in full force and effect.

     Section 9.6 Assignment. None of the Letter of Credit Documents to which the Lessee is a party may be assigned by the Lessee unless otherwise expressly permitted by the terms thereof. The Bank may at any time sell or grant participations to any other Person (a “participant”) in the Issuer’s Letter of Credit Obligations and the Letter of Credit Documents; provided, however, except as provided in the immediately following sentence, the Lessee shall continue to deal solely and directly with the Bank in connection with the Bank’s rights and remedies under this Reimbursement Agreement. The Lessee hereby authorizes the Bank and each such participant, in case of an Event of Default hereunder, to proceed directly, by right of setoff, banker’s lien or otherwise, against any assets of the Lessee which may at the time of such default be in the hands of the Bank or in the hands of such participant.

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     Section 9.7 Consent to Jurisdiction; Service of Process; Waiver of Jury Trial.

          (a) The Lessee hereby agrees and consents that any action or proceeding arising out of or brought to enforce the provisions of this Reimbursement Agreement may be brought in any appropriate court in Montgomery County, Maryland or Baltimore City, Maryland, all at the sole election of the Bank, and by the execution of this Reimbursement Agreement the Lessee irrevocably consents to the jurisdiction of each such court.

          (b) If for any reason the Lessee should become not qualified to do business in the State, the Lessee hereby agrees to designate and appoint, without power of revocation, an agent for service of process within the State, as the agent for the Lessee upon whom may be served all process, pleadings, notice or other papers which may be served upon the Lessee as a result of any of the Lessee’s obligations under this Reimbursement Agreement.

          (c) The Lessee covenants that throughout the period during which any of the Lessee’s obligations under this Reimbursement Agreement remain outstanding, if a new agent for service of process within the State is designated pursuant to the terms of subsection (b) of this Section, the Lessee will immediately file with the Bank the name and address of such new agent and the date on which such appointment is to become effective.

          (d) The Lessee and the Bank hereby jointly waive trial by jury in any action or proceeding to which the Lessee and the Bank may be parties, arising out of or in any way pertaining to this Reimbursement Agreement or any of the Letter of Credit Documents. It is agreed and understood that this waiver constitutes a waiver of trial by jury of all claims against all parties to such actions or proceedings who are parties to the Letter of Credit Documents and the Bond Documents.

     This waiver is knowingly, willingly and voluntarily made by the Lessee, and the Lessee hereby represents that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. The Lessee further represents that it has been represented in the signing of this Reimbursement Agreement and in the making of this waiver by independent legal counsel, selected of its own free will, and that it has had the opportunity to discuss this waiver with counsel.

     Section 9.8 Further Assurances and Corrective Instruments. The Bank and the Lessee agree that they will, from time to time, execute and deliver or cause to be executed and delivered, such supplements hereto and such further instruments as may reasonably be required for carrying out the intention of the parties to, or facilitating the performance of, this Reimbursement Agreement.

     Section 9.9 Right to Perform; Advances by Bank. If the Lessee fails to make or cause to be made any payment, or fails to perform, observe or comply with any of the Lessee’s obligations under this Reimbursement Agreement, the Bank, without notice to the Lessee and without waiving any default or releasing the Lessee from any of the Lessee’s obligations under this Reimbursement Agreement, and without being under any obligation to do so, may make such payment or perform any of the Lessee’s obligations under this Reimbursement Agreement for the account of the Lessee, and may enter upon the Property or any part thereof for that

23

purpose and take all such action thereon as the Bank may consider necessary or appropriate for such purpose. All amounts so paid by the Bank and all costs, fees and expenses incurred by the Bank in connection with such payment or performance (including, without limitation, attorneys’ fees and expenses) shall be immediately due and payable by the Lessee as additional payments, together with interest thereon from the date the same are paid or incurred at the Penalty Rate until the same are paid in full by the Lessee.

     Section 9.10 Amendments, Changes and Modifications. This Reimbursement Agreement may not be amended, changed, modified, altered or terminated except by a written instrument executed by the Bank and the Lessee.

     Section 9.11 Execution of Counterparts. This Reimbursement Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

     Section 9.12 Law Governing Construction of Agreement. This Reimbursement Agreement is prepared and entered into with the intention that the law of the State shall govern its construction.

     Section 9.13 Effective Date. This Reimbursement Agreement has been dated as of the date above written solely for the purpose of convenience of reference and shall become effective upon its execution and delivery, on the date hereof, by the parties hereto. All representations and warranties set forth herein shall be deemed to have been made on the date hereof.

     Section 9.14 Conflicting Agreements. In the event of any conflict between the provisions of the Letter of Credit Documents and this Reimbursement Agreement regarding the payment and performance obligations of the Lessee, the provisions of this Reimbursement Agreement shall control as between the Bank and the Lessee.

     Section 9.15 Set-off. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, during the continuance of any Event of Default hereunder, the Bank is hereby authorized at any time and from time to time, without notice to the Lessee or to any other person or entity, any such notice being hereby expressly waived, to set-off and to appropriate and apply any and all deposits and any other indebtedness at any time held or owing by the Bank to or for the credit or the account of the Lessee against and on account of the obligations and liabilities of the Lessee to the Bank under this Reimbursement Agreement, irrespective of whether or not the Bank shall have made any demand hereunder.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

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     IN WITNESS WHEREOF, the Lessee has caused this Reimbursement Agreement to be executed under seal in its name and on its behalf by its duly authorized officer; and the Bank has caused this Reimbursement Agreement to be executed under seal by its duly authorized officer, all being done as of the day and year first above written.

WITNESS:	HUMAN GENOME SCIENCES, INC., as Lessee
	By:	/s/ H. Thomas Watkins		(SEAL)
		Name:	H. Thomas Watkins
		Title:	President and Chief Executive Officer
WITNESS:	MANUFACTURERS AND TRADERS TRUST COMPANY, as Bank
	By:	/s/ Arthur L. Perraud		(SEAL)
		Name:	Arthur L. Perraud
		Title:	Vice President

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EX-10.12

Exhibit 10.12

AMENDED AND RESTATED LEASE AGREEMENT

BETWEEN

MARYLAND ECONOMIC DEVELOPMENT CORPORATION

AND

HUMAN GENOME SCIENCES, INC.

Dated December 1, 2009

TABLE OF CONTENTS

	Page
1. Demise of Leased Premises	1
2. Certain Definitions	1
3. Title	9
4. [Intentionally Omitted]	10
5. Use of Leased Premises	10
6. Term; Purchase Option	10
7. Rent	14
8. Net Lease; Non-Terminability	16
9. Payment of Impositions; Compliance with Law and Restrictive Covenants	17
10. Liens; Recording and Title; Easements	18
11. Indemnification	18
12. Tenant’s Equipment; Building Equipment; Maintenance and Repair	19
13. Alterations	20
14. Condemnation	21
15. Insurance	23
16. Casualty and Restoration	25
17. Assignment and Subletting	27
18. Permitted Contests	28
19. Default Provisions	29
20. Additional Rights of Landlord	33
21. Inspection	34
22. Notices, Demands and Other Instruments	34
23. Estoppel Certificates	34
24. No Merger	35
25. Representations and Warranties of Tenant	35
26. Affirmative Covenants of Tenant	36
27. Negative Covenants of Tenant	39
28. Non-Recourse	40
29. Separability	41
30. Subordination	41

-i-

TABLE OF CONTENTS
(continued)

	Page
31. Binding Effect	42
32. Headings	42
33. Environmental Matters	42
34. Quiet Enjoyment	46
35. Dealings With Credit Facility Provider	46
36. Nature of Transaction	46
37. Grant of Lien and Future Assurances	47
38. Miscellaneous	51

LIST OF EXHIBITS

EXHIBIT A	Description of Land
EXHIBIT B	[Intentionally Omitted]
EXHIBIT C	List of Tenant’s Equipment
EXHIBIT D	Schedule of Option Purchase Prices
EXHIBIT E	Notice and Payment Addresses

-ii-

AMENDED AND RESTATED LEASE AGREEMENT

     THIS AMENDED AND RESTATED LEASE AGREEMENT (this “Lease”) is made as of December 1, 2009, by and between MARYLAND ECONOMIC DEVELOPMENT CORPORATION, a body politic and corporate and an instrumentality of the State of Maryland (“Landlord”) and HUMAN GENOME SCIENCES, INC., a Delaware corporation (“Tenant”).

RECITALS

     A. Landlord, at the request of Tenant, has previously acquired from Montgomery County, Maryland a certain parcel of land located at the Johns Hopkins Belward Research Campus in Montgomery County, Maryland, more particularly described on Exhibit A attached hereto and made a part hereof (the “Land”) (as further defined in Paragraph 2 hereof).

     B. Landlord acquired the Land at the request of Tenant for the sole purposes of

     (a) constructing on the Land, a process development and manufacturing plant consisting of approximately 84,000 square feet in accordance with plans and specifications approved by Landlord and Tenant,

     (b) leasing to Tenant, pursuant to that certain Lease Agreement dated as of December 1, 1997 between Landlord and Tenant, the 1997 Leased Premises (as that term is defined in Paragraph 2 hereof),

     (c) constructing on the Land, an addition to such process development and manufacturing plant consisting of approximately 43,000 square feet in accordance with plans and specifications approved by Landlord and Tenant, and

     (d) leasing to Tenant, pursuant to that certain Lease Agreement dated as of December 1, 1999 between Landlord and Tenant (the “1999 Lease”), the Leased Premises (as that term is defined in Paragraph 2 hereof).

     C. The parties desire to enter into this Lease for the purpose of amending and restating the 1999 Lease in its entirety.

AGREEMENTS

     NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby covenant and agree as follows:

     1. Demise of Leased Premises. In consideration of the rents and covenants herein stipulated to be paid and performed, Landlord hereby demises and lets to Tenant, and Tenant hereby demises and lets from Landlord, the Leased Premises.

     2. Certain Definitions. The following terms shall have the definitions provided below. Unless specifically provided otherwise, all accounting terms have the definitions given

them in accordance with GAAP (hereinafter defined) as applied to the applicable Person on a consistent basis by its accountants in the preparation of its previous annual financial statements.

     Act of Bankruptcy means with respect to any Person, the filing of a petition in bankruptcy under the Bankruptcy Code, or the commencement of a proceeding under any other applicable law concerning insolvency, reorganization or bankruptcy, by or against such Person as debtor.

     Accumulated Funding Deficiency means an “accumulated funding deficiency” as defined in Section 302 of ERISA or Section 412 (a) of the Code..

     Additional Improvements means the buildings, structures and other improvements, including “fit-outs”, previously constructed on the Land and constituting an addition to the Improvements, consisting of approximately 43,000 square feet.

     Additional Rent means Additional Rent as defined in Paragraph 7.

     Affiliate means: (a) any Person in which Tenant legally or beneficially owns or holds, directly or indirectly, any capital stock or other equity interest; (b) any Person that is a partnership in which Tenant is a partner, or a joint venturer in which Tenant is a joint venturer or a limited liability company of which Tenant is a managing member; (c) any Person that is a director, officer, employee, stockholder (legally or beneficially) or other affiliate of any of the foregoing or of Tenant; and (d) any Person that directly or indirectly controls, is under the control of, or is under common control with, Tenant, including, without limitation, any Person that directly or indirectly has the right or power to direct the management or policies of Tenant and any Person whose management or policies Tenant directly or indirectly has the right or power to direct.

     Alterations means all changes, additions (including additional Improvements on the Land), improvements or repairs to, all alterations, reconstructions, renewals or removals of and all substitutions or replacements for any of the Improvements, both interior and exterior, structural and non-structural, and ordinary and extraordinary.

     Assignment means the Assignment, Subordination and Non-Disturbance Agreement by and among Landlord, Tenant and the Bank, dated as of December 1, 2009, together with all amendments thereto and modifications thereof.

     Bankruptcy Code means Title 11 of the United States Code, as amended, and all rules and regulations promulgated pursuant thereto.

     Bank means Manufacturers and Traders Trust Company, a New York banking corporation, its successors and assigns.

     Basic Rent means Basic Rent as defined in Paragraph 7.

     Basic Rent Payment Date means any date on which an installment of Basic Rent is due pursuant to Paragraph 7.

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     Beneficiary means, collectively, the Bank and any other Credit Facility Provider, as Beneficiary under the Deed of Trust.

     Bond Documents has the meaning given to such term in the Indenture.

     Bond Purchase Drawing has the meaning given to such term in the Indenture.

     Bonds means, collectively, the Series A Bonds and the Series B Bonds.

     Building Equipment means the equipment and fixtures installed in the Additional Improvements which are integral to the occupancy of the Leased Premises as a “tenantable shell” (e.g., all elevators, escalators, shades, awnings, floor coverings, screens, landscaping and security systems and building code required plumbing, heating, electrical, ventilation and fire-extinguishing equipment) and financed with proceeds of the Bonds, but excluding therefrom the Tenant’s Equipment.

     Code means the Internal Revenue Code of 1986, or any applicable predecessor statutory provision. Each reference to a section of the Code herein shall be deemed to include the United States Treasury Regulations in effect or proposed from time to time with respect thereto.

     Collateral Pledge Agreement means the Collateral Pledge Agreement dated as of December 1, 2009, between Tenant, as Pledgor, and the Bank, as Pledgee, together with all amendments thereto and modifications thereof.

     Commonly Controlled Entity means any trade or business (whether or not incorporated) which is a member of a “controlled group of corporations” (as such phrase is used and defined in Section 414(b) of the Code) or which is under “common control” (as such phrase is used and defined in Section 414 (c) of the Code), and of which Tenant or any Subsidiary of Tenant is a part.

     Credit Facilities has the meaning given to such term in the Indenture. The initial Credit Facilities are the Letters of Credit.

     Credit Facility Agreements has the meaning given to such term in the Indenture. The initial Credit Facility Agreements are the Letter of Credit Agreements.

     Credit Facility Documents has the meaning given to such term in the Indenture. The initial Credit Facility Documents are the Letter of Credit Documents.

     Credit Facility Provider has the meaning given to such term in the Indenture. The initial Credit Facility Provider is the Bank.

     Deed of Trust means the Amended and Restated Deed of Trust dated as of December 1, 2009, encumbering the Land, the Improvements and the Leased Premises, from Landlord to certain individual trustees for the benefit of the Beneficiary, together with all amendments thereto and modifications thereof.

     Default Rate means the Default Rate as defined in Paragraph 7(e).

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     Encumbrances means Encumbrances as defined in Paragraph 30.

     ERISA means the Employee Retirement Income Security Act of 1974, as amended, and all Laws promulgated pursuant thereto or in connection therewith.

     Event of Default means an Event of Default as defined in Paragraph 19.

     Exchange Act means the Securities Exchange Act of 1934, as amended.

     GAAP means generally accepted accounting principles in the United States of America in effect from time to time, consistently applied. In the event of a change in GAAP affecting the covenants contained in Paragraphs 26 or 27 of this Lease or definitions contained in Paragraph 2 of this Lease relating to such covenants, such covenants and definitions shall continue to be applied as though such change in GAAP had not occurred unless and until Landlord, the Credit Facility Provider, and Tenant shall agree in writing to amend or adjust such covenants or definitions as deemed necessary as a result of such change in GAAP.

     Hedge means any interest rate swap or similar hedge arrangement in existence at any time or from time to time between Landlord and any Hedge Counterparty.

     Hedge Agreement means any agreement between Landlord and any Hedge Counterparty in existence at any time or from time to time, executed in connection with any Hedge, including (without limitation) the Swap Agreement (as defined in the Letter of Credit Agreements), together with all amendments thereto and modifications thereof.

     Hedge Counterparty means any Person, in its capacity as counterparty to any Hedge Agreement, with which Landlord has entered into any Hedge or may hereafter at any time or from time to time enter into any Hedge, including (without limitation) the Bank and any other Credit Facility Provider.

     Hedge Documents means, collectively, any Hedge Agreement and all other documents in existence at any time or from time to time, executed and delivered to evidence, secure, or in connection with, any Hedge.

     Impositions means all taxes, including, without limitation, sales and use taxes (but excluding, except as hereinafter provided, income, franchise, profits and gross receipt taxes), assessments (including, without limitation, all assessments for public improvements or benefits), water and sewer rents, rates and charges, excises, levies, license fees, permit fees, inspection fees and other authorization fees and other charges or costs of any nature whatsoever, in each case whether general or special, ordinary or extraordinary, foreseen or unforeseen, of every character (including all interest and penalties thereon), which at any time during or in respect of the term hereof may be assessed against, levied upon, confirmed or imposed on, or in respect of, or be a lien upon (a) the Leased Premises or any part thereof or any estate, right or interest therein, (b) any occupancy, use or possession of, or activity conducted on, the Leased Premises or any part thereof, (c) any Basic Rent or Additional Rent or other sum reserved or payable by Tenant hereunder, or (d) this Lease or Landlord. Notwithstanding the foregoing provisions, the term “Impositions” shall exclude (i) franchise, capital stock or similar taxes, if any, of Landlord and assessments, levies and liens arising therefrom; (ii) transfer, income, profits or other taxes, if

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any, of Landlord, determined on the basis of its net income or net revenues, and assessments, levies and liens arising therefrom; (iii) excise, gross receipts or gross income taxes imposed upon or measured by Basic Rent, Additional Rent or other sums payable by Tenant pursuant to this Lease, unless the taxes referred to in clauses (i) and (ii) above are in lieu of or a substitute for any other tax or assessment upon or with respect to the Leased Premises or any increases therein which, if such other tax or assessment were in effect, would be payable by Tenant.

     Improvements means the buildings, structures and other improvements, constituting a process, development and manufacturing plant consisting of approximately 84,000 square feet previously constructed on the Land in accordance with plans and specifications approved by Landlord and Tenant.

     Indenture means the Amended and Restated Trust Indenture dated as of December 1, 2009 between Landlord and the Trustee, together with all amendments thereto and modifications thereof.

     Insurance and Award Trustee has the meaning given to that term in Paragraph 15.

     Land means that parcel of land described in Exhibit A attached hereto, together with the easements, rights and appurtenances thereunto belonging or appertaining.

     Landlord means Maryland Economic Development Corporation, a body politic and corporate and a public instrumentality of the State of Maryland.

     Landlord’s Bond Obligations means the “Issuer’s Bond Obligations,” as such term is defined in the Indenture.

     Landlord’s Credit Facility Obligations means the “Issuer’s Credit Facility Obligations”, as such term is defined in the Indenture.

     Law means the Constitution of the United States and of the State of Maryland and any statute or rule of law of the United States and of the State of Maryland.

     Lease Documents has the meaning given to such term in Paragraph 25.

     Leased Premises means the Additional Improvements and the Building Equipment.

     Legal Requirements means all laws, statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations, directions, requirements and agreements with all governments, departments, commissions, boards, courts, authorities, agencies, officials and officers, foreseen or unforeseen, ordinary or extraordinary, which now or at any time hereafter may be applicable to the use, occupancy, possession, maintenance, alteration, repair or reconstruction of any of the Leased Premises.

     Letters of Credit means, collectively, the Series A Bonds Letter of Credit and the Series B Bonds Letter of Credit.

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     Letter of Credit Agreements means, collectively, the Series A Bonds Letter of Credit Agreement and the Series B Bonds Letter of Credit Agreement.

     Letter of Credit Documents has the meaning given to such term in the Letter of Credit Agreements.

     LIBOR Rate means the fluctuating annual rate of interest which shall at all times equal the interest rate which Bank announces and declares from time to time to be its one month London Interbank Offered Rate, adjusted for any Federal Reserve Board requirements imposed on Bank from time to time. All interest at the LIBOR Rate or computed thereon shall be calculated on the basis of a 360-day year factor applied to actual days elapsed and shall be adjusted on any date on which a change occurs in the LIBOR Rate.

     Multiemployer Plan means a multiemployer plan (as defined in ERISA) to which Tenant, or any Commonly Controlled Entity, as appropriate, has or had an obligation to contribute.

     Net Award has the meaning given to such term in Paragraph 14.

     Net Proceeds has the meaning given to such term in Paragraph 15.

     Operative Documents means this Lease, the Bond Documents and the Credit Facility Agreements, the Credit Facility Documents, the Collateral Pledge Agreement, the Letters of Credit, the Letter of Credit Agreements, the Letter of Credit Documents, the Hedge Documents, if applicable, and the Deed of Trust.

     Paying Agent has the meaning given to such term in the Indenture.

     Permitted Equipment Lien means any encumbrance or other lien upon, or security interest in, or any equipment lease of, any Tenant’s Equipment, or interest therein, provided that the acquisition to which any such encumbrance, lien, security interest or lease relates shall not result in a default under any other provisions of this Lease.

     Permitted Use means the Permitted Use as defined in Paragraph 5.

     Person means any natural person, firm, association, corporation, company, trust, partnership, public body or other entity.

     Plan means any pension, profit sharing, savings, stock bonus or other deferred compensation plan which is intended to qualify under Code §401 and is subject to the requirements of ERISA, together with any related trusts.

     Prohibited Transaction means a “prohibited transaction” as defined in Section 406 of ERISA or Section 4975 of the Code.

     Rating Agency means any rating agency which at any time or from time to times provides or furnishes a rating with respect to the Bonds.

     Registrar has the meaning given to such term in the Indenture.

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     Remarketing Agent has the meaning given to such term in the Indenture.

     Remarketing Agreement means the “Placement and Remarketing Agreement” as such term is defined in the Indenture.

     Rent Commencement Date means the Rent Commencement Date as defined in Paragraph 7(a).

     Reportable Event means a “reportable event” as defined by Title IV of ERISA.

     Restrictive Covenants means the covenants and restrictions set forth in (a) the Declaration of Covenants, Easements and Restrictions (Protective Covenants) made the 24th day of September, 1997, by The Johns Hopkins University, and recorded among the Land Records of Montgomery County, Maryland, in Liber 15181 at folio 074, and (b) The Johns Hopkins University Belward Research Campus Declaration of Covenants, Conditions, Easements and Restrictions made the 24th day of September, 1997, by The Johns Hopkins University, and recorded among the Land Records of Montgomery County, Maryland, in Liber 15181 at folio 084.

     Series A Bonds means the $4,375,000 Taxable Variable Rate Demand/Fixed Rate Revenue Bonds (Human Genome Sciences, Inc. Facility), Series 1999A, previously issued by the Landlord to finance a portion of the costs of the acquisition, construction and equipping of the Leased Premises.

     Series A Bonds Letter of Credit means that certain Letter of Credit issued by the Bank (or its predecessor, Allfirst Bank) in the original stated amount of $4,446,918 for the account of Landlord as security for the Series A Bonds, as the same may from time to time be modified, amended, supplemented, renewed or replaced.

     Series A Bonds Letter of Credit Agreement means that certain Amended and Restated Letter of Credit Agreement between the Bank and Landlord dated as of December 1, 2009, as the same may from time to time be modified, amended, supplemented, renewed or replaced.

     Series B Bonds means the $13,125,000 Taxable Variable Rate Demand/Fixed Rate Revenue Bonds (Human Genome Sciences, Inc. Facility), Series 1999B, previously issued by the Landlord to finance a portion of the costs of the acquisition, construction and equipping of the Leased Premises.

     Series B Bonds Letter of Credit means that certain Letter of Credit issued by the Bank in the original stated amount of $11,353,617 for the account of Landlord as security for the Series B Bonds, as the same may from time to time be modified, amended, supplemented, renewed or replaced.

     Series B Bonds Letter of Credit Agreement means that certain Letter of Credit Agreement between the Bank and Landlord dated as of December 1, 2009, as the same may from time to time be modified, amended, supplemented, renewed or replaced.

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     State means the State of Maryland, acting through the Maryland Department of Business and Economic Development and any other department or agency of the State of Maryland which makes any of the State Loans to Landlord.

     State Loans means, collectively, the following loans made by the State to Landlord for the purpose of financing a portion of the costs of the acquisition and construction of the 1997 Leased Premises:

(a)	Loan in the principal amount of $2,000,000, from the Maryland Department of Business and Economic Development under the Maryland Industrial Land Act;
(b)	Loan in the principal amount of $3,000,000, made by the Maryland Department of Business and Economic Development from the Maryland Industrial and Commercial Redevelopment Fund; and
(c)	Loan in the principal amount of $2,000,000, made by the Maryland Department of Business and Economic Development from the Maryland Economic Development Opportunities Program Fund.

     State Loan Assignment means the Assignment, Subordination and Non-Disturbance Agreement by and among Landlord, the Tenant and the State, dated December 31, 1997, together with all amendments thereto and modifications thereof.

     State Loan Beneficiary means the Beneficiary as such term is defined in the State Loan Deed of Trust.

     State Loan Deed of Trust means the Second Deed of Trust dated December 1, 1997, encumbering the 1997 Leased Premises, from Landlord to certain individual trustees for the benefit of the State Loan Beneficiary, together with all amendments thereto and modifications thereof.

     State Loan Documents means, collectively, any and all documents executed and delivered by Landlord as evidence of, as security for, or in connection with, the State Loans, including (without limitation) the State Loan Deed of Trust and the State Loan Assignment.

     Subsidiary or Subsidiaries means, with respect to any Person (including Tenant), any present or future Person at least a majority of whose outstanding Voting Stock shall at the time be owned by such Person (including Tenant) or by one or more Subsidiaries of such Person, or by such Person (including Tenant) and one or more Subsidiaries of such Person (including Tenant).

     Tenant Collateral means all of Tenant’s right, title and interest in and to (i) the Leased Premises, (ii) contracts, contract rights and general intangibles relating to the maintenance of the Improvements and/or to the Subject Leases (as hereinafter defined) and (iii) proceeds of any of the foregoing.

     Tenant’s Equipment means that certain equipment described on Exhibit C attached hereto (as such Exhibit C may from time to time be updated by the Tenant to include equipment to be

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used for the Permitted Use), together with all replacements thereof. It is anticipated that some or all of Tenant’s Equipment will be leased by Tenant.

     Term means the Term as defined in Paragraph 6.

     Trustee means Manufacturers and Traders Trust Company, successor in interest to Allfirst Trust Company, National Association, its successors and assigns.

     Voting Stock means the shares of any class of capital stock of a Person having ordinary voting power to elect the directors, managers or trustees thereof (irrespective of whether or not at the time stock of any class or classes of such Person shall have or might have voting power by reason of the happening of any contingencies).

     1997 Bond Beneficiary means, collectively, the Bank and any other Credit Facility Provider (as defined in the 1997 Lease), as Beneficiary under the 1997 Bond Deed of Trust.

     1997 Bond Deed of Trust means the Deed of Trust dated as of December 1, 1997, encumbering the 1997 Leased Premises, from Landlord to certain individual trustees for the benefit of the 1997 Bond Beneficiary, together with all amendments thereto and modifications thereof.

     1997 Deeds of Trust means, collectively, the 1997 Bond Deed of Trust and the State Loan Deed of Trust.

     1997 Lease means the Lease Agreement dated as of December 1, 1997, between Landlord and Tenant, together with all amendments thereto and modifications thereof

     1997 Leased Premises means the Land, the Improvements and the Building Equipment (as defined in the 1997 Lease).

     3. Title.

          (a) The Leased Premises are demised and let subject to (i) the Deed of Trust and the 1997 Deeds of Trust and any Encumbrances executed in connection therewith and all of the terms and provisions thereof, including but not limited to the provisions governing disbursement of insurance proceeds and condemnation awards, (ii) the existing state of the title of the Land as of the date hereof and any other exceptions or encumbrances of record as of the date hereof and any other restrictions, exceptions and Encumbrances entered into subsequent to the date hereof with Tenant’s knowledge and written consent, which consent shall not be unreasonably withheld or delayed provided Tenant’s rights hereunder are not adversely affected in a material manner (including Tenant’s option to purchase the Leased Premises, together with the Land and the Improvements pursuant to the 1997 Lease, as hereinafter provided), (iii) any state of facts which an accurate survey or physical inspection of the Leased Premises might show, and (iv) the condition of the Leased Premises, as of the Rent Commencement Date, without representation or warranty by Landlord, and without liability or obligation of Landlord for patent or latent defects.

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          (b) Tenant has made its own investigation as to the existing state of the title of the Land and has made arrangements for its own survey.

     4. [Intentionally Omitted]

     5. Use of Leased Premises.

          Tenant shall occupy and use the Leased Premises only as a biological research, product development and manufacturing and related administrative use facility (the “Permitted Use”), or for such other lawful purpose as may be approved by Landlord, the Credit Facility Provider and the State in their sole discretion (except that Landlord, the Credit Facility Provider and the State will not unreasonably withhold consent to additional uses which are related to the Permitted Use), subject, in addition, to the terms and provisions of any covenants, easements, conditions or restrictions of record now or hereafter recorded with the written consent of Tenant, including but not limited to the Deed of Trust and the 1997 Deeds of Trust and the Restrictive Covenants, and for no other purpose. Tenant shall not abandon the Leased Premises. Tenant shall not permit any unlawful occupation, business or trade to be conducted on any of the Leased Premises or any use to be made thereof contrary to applicable Legal Requirements. Tenant shall not use or occupy or permit any of the Leased Premises to be used or occupied, nor do or permit anything to be done in or on any of the Leased Premises, in a manner which would or might (i) make void or voidable any insurance then in force with respect to any of the Leased Premises, (ii) make it difficult or impossible to obtain fire or other insurance which Tenant is required to furnish hereunder, (iii) cause structural injury to any of the Improvements or the Additional Improvements, or (iv) constitute a public or private nuisance or waste.

     6. Term; Purchase Option.

          (a) Subject to the terms, covenants, agreements and conditions contained herein, Tenant shall have and hold the Leased Premises for a term (the “Term”) commencing on December 1, 2009 and ending at midnight on January 1, 2019.

          Landlord shall have the right during the last twelve months of the Term of this Lease to (i) advertise the availability of the Leased Premises for sale or for reletting and to erect upon the Leased Premises signs indicating such availability (provided that such signs do not unreasonably interfere with the use of the Leased Premises by Tenant), and (ii) show the Leased Premises to prospective purchasers or tenants at such reasonable times and on reasonable prior notice during normal business hours as Landlord may select, subject to Tenant’s customary access restrictions.

          (b) Provided that, at the time of exercise of the following purchase option and at the time of closing of the purchase of the Leased Premises pursuant to such option, (i) no Event of Default or event which, with the giving of notice or the lapse of time, or both, would constitute an Event of Default which would entitle Landlord to terminate this Lease or the 1997 Lease or evict Tenant from possession of the Leased Premises or of the Land or the Improvements, shall exist, (ii) all payments of Basic Rent and Additional Rent under this Lease and all payments of Basic Rent (as defined in the 1997 Lease) and Additional Rent (as defined in the 1997 Lease) under the 1997 Lease shall have been paid through the date of the exercise of

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such purchase option, and (iii) this Lease and the 1997 Lease shall be in full force and effect (unless this Lease or the 1997 Lease is not in full force and effect due to Landlord’s default), then Tenant shall have the right and option, by giving notice as set forth below, to acquire the Leased Premises from Landlord as provided below. Tenant may not exercise such purchase option unless it simultaneously exercises its option to purchase the Leased Premises (as defined in the 1997 Lease) under the 1997 Lease, and Tenant may not exercise its option to purchase the Leased Premises (as defined in the 1997 Lease) under the 1997 Lease unless it simultaneously exercises the purchase option described in this subparagraph 6(b). Tenant may not exercise such purchase option during any period in which the Bonds are not subject to redemption pursuant to Section 3.1(c) or Section 3.1(e) of the Indenture, unless the Bonds are to remain outstanding after the closing of such purchase option.

          Tenant may exercise such purchase option by written notice to Landlord, with a copy of such written notice to the Credit Facility Provider; provided that, in the event that Landlord is in default under the provisions of the Bond Documents or the Credit Facility Documents and such default is not the result of an Event of Default under this Lease, Tenant may also exercise such purchase option prior to such date by written notice to Landlord, with a copy of such written notice to the Credit Facility Provider. If Tenant exercises such purchase option by giving such written notice, and (i) the Bonds have been previously redeemed, the closing of such purchase option shall occur no later than the 90th day following such notice (or the next business day if such 90th day is not a business day), or (ii) the Bonds then bear interest at a variable rate, the closing of such purchase option shall occur no later than the 180th day following such notice (or the next business day if the 180th day is not a business day), or (iii) the Bonds then bear interest at a fixed rate, the closing of such purchase option shall occur no later than the later of (A) the first day on which the Bonds may be redeemed pursuant to Section 3.1(e) of the Indenture, and (B) the 180th day following such notice (or the next business day if the 180th day is not a business day), PROVIDED THAT, in the case of (ii) or (iii) above, unless the Bonds are to remain outstanding after the closing of such purchase option, the closing of such purchase option shall not take place unless all Bonds shall have been redeemed on or before the date of the closing of such purchase option.

          Not later than 50 days prior to the date of the closing of such purchase option, Tenant shall pay to Landlord, in immediately available funds, the sum of the following (the “Basic Purchase Price”), which sum shall be held, in trust, by Landlord and used by Landlord solely for the purposes hereinafter set forth:

          (A) the applicable option purchase price set forth on the Schedule of Option Purchase Prices attached hereto as Exhibit D and made a part hereof, plus

          (B) if Tenant exercises such purchase option during a period in which the Bonds bear interest at a fixed rate, an amount of money equal to any redemption premium payable upon redemption of the Bonds on the next optional redemption date as set forth in Section 3.1(e) of the Indenture, unless the Bonds are to remain outstanding after the closing of such purchase option.

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Any portion of the Basic Purchase Price which is not paid to the Trustee, as provided below, will be held by Landlord, in trust, upon terms and conditions mutually acceptable to Landlord and Tenant, in an interest bearing account at a commercial bank mutually acceptable to Landlord and Tenant, pending the closing of such purchase option.

          Upon receipt by Landlord of the Basic Purchase Price, Landlord shall pay to the Trustee from the Basic Purchase Price, to be held in an irrevocable escrow for the redemption of the Bonds, in immediately available funds, an amount sufficient, when added to moneys then held by the Trustee and available for the redemption of Bonds, to redeem all of the Bonds in full on the next date on which the Bonds may be redeemed pursuant to Section 3.1(c) or 3.1(e) of the Indenture, unless the Bonds are to remain outstanding after the closing of such purchase option.

          In addition, at the closing of such purchase option, Tenant shall (1) pay or cause to be paid to Montgomery County, Maryland one-half of all transfer and recordation taxes required or necessary to be paid in connection with the transfer of the Leased Premises from Landlord to Tenant (it being the intent of the parties that, but for Landlord’s exemption from payment of transfer and recordation taxes, one-half of any such transfer and recordation taxes would be attributable to Landlord), and (2) pay to Landlord, in immediately available funds, the sum of the following:

          (A) all Basic Rent and Additional Rent through the date of the closing of such purchase option, plus

          (B) all actual third party costs and expenses (including reasonable attorneys fees and expenses) of the Credit Facility Provider and the State (excluding Landlord’s internal overhead) incurred in connection with such purchase, including (without limitation) any costs incurred by Landlord in connection with “unwinding” any Hedge, but deducting any benefits accruing to Landlord in connection with “unwinding” any Hedge, plus

          (C) all brokerage fees, if any, and other costs and expenses required or necessary to be paid in connection with the transfer of the Leased Premises from Landlord to Tenant.

          Notwithstanding the foregoing, in the event Montgomery County, Maryland or any other entity denies applicability of Landlord’s exemption from such transfer and recordation taxes and, accordingly, or for any other reason, requires payment of Landlord’s one-half of such transfer or recordation taxes, Tenant agrees to advance the full amount of such transfer and recordation taxes on behalf of Landlord, reserving the right on behalf of Tenant and Landlord to appeal such imposition, and in such case, Landlord agrees to cooperate with Tenant in any effort by Tenant to appeal the imposition of any such transfer and/or recordation taxes upon Landlord, provided such appeal is made at Tenant’s sole cost and expense. Any transfer and/or recordation taxes refunded to Landlord as a result of any such appeal shall be delivered by Landlord to Tenant.

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          If, at the time Tenant exercises such purchase option, any of the Bonds shall have been redeemed or paid prior to maturity, the Basic Purchase Price shall be reduced by an amount equal to the total amount of Bonds so redeemed or paid.

          If, at the time Tenant exercises such purchase option, there shall be on deposit with the Trustee any moneys which are available for the redemption of the Bonds upon the closing of such purchase option, and the outstanding Bonds are to be redeemed upon the closing of such purchase option, the Basic Purchase Price shall be reduced by an amount equal to the amount of moneys so on deposit with the Trustee.

          Upon Tenant’s exercise of such purchase option, Tenant may advise Landlord that Tenant will purchase the Leased Premises pursuant to such purchase option, subject to the Bond Documents and the Credit Facility Documents, and that Tenant either will assume all of the obligations of Landlord under the Bond Documents and the Credit Facility Documents or, in the alternative, pay the portion of the Basic Purchase Price attributable to the outstanding Bonds by the delivery of a loan agreement, or similar document, evidencing Tenant’s agreement to pay Landlord amounts which are sufficient to enable Landlord to pay its monetary obligations under the Bond Documents and the Credit Facility Documents, in which event (i) the Basic Purchase Price will be reduced by the principal amount of the Bonds which would have been redeemed upon the closing of such purchase option, (ii) at or prior to the closing of such purchase option, Tenant and Landlord will execute and deliver such documents, and take such actions, as Landlord and the Credit Facility Provider may require, in their sole discretion, to provide for the assumption by Tenant of Landlord’s obligations under the Bond Documents and the Credit Facility Documents, and (iii) the Bonds will not be redeemed but will remain outstanding after the closing of such purchase option.

          At the closing of such purchase option, Landlord shall pay, from the moneys paid to Landlord by Tenant as set forth above, (1) to the Trustee, the Paying Agent, the Registrar, the Remarketing Agent, the Rating Agency, the Credit Facility Provider and any Hedge Counterparty, all accrued fees, costs and expenses then payable to the Trustee, the Paying Agent, the Registrar, the Remarketing Agent, the Rating Agency, the Credit Facility Provider and any Hedge Counterparty, (2) to the Credit Facility Provider, all actual third party costs and expenses (including reasonable attorneys’ fees and expenses) incurred by them in connection with such purchase of the Leased Premises by Tenant and, if applicable, in connection with the assumption by Tenant of the obligations of Landlord under the Bond Documents and the Credit Facility Documents.

          In consideration of the payment by Tenant to Landlord of the Basic Purchase Price and the other amounts of money set forth above, Landlord, by special warranty deed, will transfer its interest in the Leased Premises, as well as incidental personal property relating to the Leased Premises, to Tenant as of the date of the closing of such purchase option, free of all Encumbrances, other than (1) Encumbrances in existence on the date of this Lease, (2) Encumbrances assumed by Tenant, (3) Encumbrances approved by Tenant, and (4) the Bond Documents and the Credit Facility Documents in the event that in connection with the purchase of the Leased Premises by Tenant pursuant to such purchase option Tenant assumes all of Landlord’s obligations under the Bond Documents and the Credit Facility Documents; and Landlord will assign to Tenant all contracts and warranties (to the extent assignable) relating to

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the Leased Premises and/or incidental to any and all personal property relating to the Leased Premises.

          Notwithstanding any other provision of this Lease, Landlord will not accept the Basic Purchase Price and the other amounts of money set forth above, and will not close such purchase option, unless the amount of the Basic Purchase Price is sufficient to enable Landlord to redeem all of the Bonds at the then applicable redemption price, and to pay all of Landlord’s Bond Obligations and Landlord’s Credit Facility Obligations in connection therewith, unless, in connection with the purchase of the Leased Premises by Tenant pursuant to such purchase option, Tenant assumes all of the obligations of Landlord under the Bond Documents and the Credit Facility Documents, or, in the alternative, delivers a loan agreement, or similar document, in payment of a portion of the Basic Purchase Price as set forth above.

          Concurrently with the closing of such purchase option, Landlord shall cause the Deed of Trust (if not previously satisfied) to be released upon the payment by Landlord to the Trustee of the amounts set forth above, unless Tenant shall have assumed all of the obligations of Landlord under the Bond Documents and the Credit Facility Documents as set forth above, in which event the Deed of Trust will not be so released.

          Upon the closing of such purchase option and the payment of all amounts set forth above, Tenant shall be released of all of its obligations under this Lease; provided, however that any and all obligations and liabilities of Tenant under this Lease that survive the Term of this Lease (such as indemnification obligations) shall survive the closing of such purchase option.

          (c) In the event Tenant exercises its option to purchase the Leased Premises from Landlord as set forth above, but fails to close as and when required as set forth above, such failure shall constitute an Event of Default under this Lease.

     7. Rent.

          (a) As used herein, the term “Rent Commencement Date” means December 1, 2009.

          (b) Tenant covenants to pay to Landlord, on the first day of each and every calendar month, beginning on the Rent Commencement Date, basic rent in the amount of $80,000 per month, subject to adjustment as set forth in subparagraph (c) below (such basic rent, as so adjusted from time to time, is hereinafter referred to as “Basic Rent”). Basic Rent shall be payable to Landlord by separate check or wire transfer at Landlord’s payment addresses set forth in Exhibit E attached hereto and made a part hereof or at such other place or bank account within the continental United States or to such other Person as Landlord from time to time may designate to Tenant in writing, in lawful money of the United States of America.

          (c) Landlord and Tenant acknowledge and agree that the Basic Rent has been determined based upon a number of factors, which include the amount of debt service payable by Landlord with respect to the Bonds and the State Loans and other costs which may fluctuate from time to time. Basic Rent shall be adjusted from time to time by Landlord and Tenant to reflect, among other things, (i) any redemption of the Bonds prior to maturity, and (ii) the expiration of any Hedge or any default by any Hedge Counterparty in the performance of its

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obligations under any Hedge Documents. Accordingly, within thirty (30) days of each calendar quarter-end, Landlord shall provide Tenant with a reconciliation of the amounts and costs incurred by Landlord which have been paid by Landlord from Basic Rent received from Tenant, together with a projection of funds needed by Landlord over the ensuing twelve (12) months to pay timely such costs and amounts which have customarily been paid by Landlord from Basic Rent payments; and effective with the Basic Rent payment due sixty (60) days after the end of each quarter-end, Basic Rent shall be adjusted upward or downward as such projections warrant.

          (d) Tenant covenants to pay and discharge, as additional rent, the following (collectively, the “Additional Rent”):

          (i) the amount of any cost or expense required to be paid by Landlord with respect to or in connection with the acquisition, construction and financing of the Additional Improvements and the ownership of the Leased Premises and the leasing of the Leased Premises to Tenant, including (without limitation), consultants’ fees, accounting fees, legal fees and other expenses relating to any litigation involving the Leased Premises (except to the extent that Landlord is otherwise indemnified therefor pursuant to another provision of this Lease), costs of maintenance, upkeep and repair of the Leased Premises paid for by Landlord, costs of permits, charges by governmental authorities, and amounts paid pursuant to any declaration or covenants including the Restrictive Covenants, and all indemnification obligations of Landlord to any Person or Persons resulting from or growing out of such acquisition, construction, financing, ownership and leasing, and any sales taxes, plus

          (ii) all fees and amounts payable by Landlord to any Person or Persons in connection with the acquisition, construction and financing of the Additional Improvements, to the extent not otherwise payable pursuant to the 1997 Lease, including (without limitation) all credit facility fees, remarketing fees, common area maintenance fees or rents or other similar charges relating to the maintenance of the Leased Premises or any roads or other improvements related thereto, monthly deposits on account of Impositions and insurance premiums, in the event that Landlord is required to make such monthly deposits on account of Impositions and insurance premiums, and amounts representing increases in fees payable to the Rating Agency or to the Trustee or the Registrar or the Paying Agent pursuant to the Indenture or increases in the negotiation fees payable to the Credit Facility Provider, and amounts representing changes in costs resulting from any conversion of the interest rate payable on the Bonds from a variable rate to one or more fixed rates or from one or more fixed rates to one or more other fixed rates or to a variable rate, plus

          (iii) the amounts determined by Landlord to be sufficient to enable Landlord to make payments of all other monetary obligations of Landlord under the Bond Documents, the Credit Facility Documents, and any Hedge Documents.

Landlord, as promptly as practicable after obtaining knowledge that any Additional Rent will be payable under this Lease, will advise Tenant, by written notice, of the amount of any Additional Rent payable hereunder and the date on which any Additional Rent is due and payable by Tenant in order for Landlord to meet its obligations with respect to payments by Landlord to other

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Persons. Additional Rent shall be paid to Landlord’s payment addresses set forth in Exhibit E attached hereto. In the event of any failure by Tenant to pay or discharge any Additional Rent, Landlord shall have all rights, powers and remedies provided herein or by Law in the case of non-payment of Basic Rent. Unless otherwise provided herein, all payments of Additional Rent shall be due on the date specified by Landlord in such written notice as the date on which such Additional Rent is due and payable.

          (e) In the event that any payment of Basic Rent or Additional Rent is not made within 15 days after the date on which the same is due and payable, any such payment in default and the entire unpaid balance of all amounts owing to Landlord shall bear interest, from the date on which the payment was due until such payment in default is paid in full, at the fluctuating rate which is at all times equal to the LIBOR Rate plus 3% per annum (the “Default Rate”). In addition, Tenant shall pay (i) a late charge equal to 2% of the payment in default as set forth above (except for any payment with respect to a Bond Purchase Principal Drawing, as defined in the Indenture) which is made more than 15 days after the date on which the same is due and payable, and (ii) all costs of collection, including attorneys’ fees, if collection of amounts due to Landlord is referred to an attorney after default by Tenant.

     8. Net Lease; Non-Terminability.

          (a) This Lease is a net lease, and Basic Rent, Additional Rent and all other sums payable by Tenant shall be paid without notice (except as specifically provided herein) or demand.

          (b) Except as expressly provided in this Lease, Tenant shall not be entitled to any set-off, counterclaim, recoupment, abatement, suspension, deferment, diminution, deduction, reduction or defense of or to Basic Rent or Additional Rent or any other sums payable hereunder and the obligations of Tenant under this Lease shall not be affected, for any reason, including the following: (i) any damage to or the destruction of all or any part of the Leased Premises from whatever cause, (ii) the taking of the Leased Premises or any portion thereof or interest therein by condemnation, requisition or otherwise for any reason, (iii) the prohibition, limitation or restriction of Tenant’s use of all or any part of the Leased Premises, or any interference with such use, (iv) any title defect or encumbrance, or any eviction from the Leased Premises by paramount title or otherwise, (v) Tenant’s acquisition or ownership of any interest in all or any part of the Leased Premises otherwise than pursuant to an express provision of this Lease, (vi) any failure on the part of Landlord to observe any provision of this Lease, or any default by Landlord under any other agreement to which Landlord and Tenant may be parties, (vii) any claim which Tenant has or might have against Landlord, or (viii) any other cause whether similar or dissimilar to the foregoing, any present or future Law to the contrary notwithstanding except by agreement by and among Landlord, Tenant, and the Credit Facility Provider. It is the intention of the parties hereto that the obligations of Tenant hereunder shall be separate and independent covenants and agreements, that Basic Rent, Additional Rent and all other sums payable by Tenant hereunder shall continue to and be payable in all events, and that the obligations of Tenant hereunder shall continue unaffected, unless the requirement to pay or perform the same shall have been terminated pursuant to an express provision of this Lease.

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          (c) Tenant agrees that it will remain obligated under this Lease in accordance with its terms, and that it will not take any action to terminate, rescind or avoid this Lease or abate the rent required hereby, notwithstanding (i) the bankruptcy, insolvency, reorganization, composition, readjustment, liquidation, dissolution, winding-up or other proceeding affecting Landlord or any assignee of Landlord in any such proceeding or/and (ii) any other action (including rejection) with respect to this Lease which may be taken by any trustee or receiver of Landlord or of any assignee of Landlord in any such proceeding or by any court in any such proceeding; and, in any such event, so long as Tenant pays and performs its obligations under this Lease and does not take any action to terminate, rescind or avoid this Lease or abate the rent required hereby, Tenant shall be entitled to the benefits of Tenant set forth in this Lease.

          (d) Except as otherwise provided in this Lease, Tenant waives all rights which may now or hereafter be conferred by law (i) to quit, terminate or surrender this Lease or (ii) to any abatement, suspension, deferment or reduction of Basic Rent, Additional Rent or any other sums payable under this Lease, except as expressly approved by the Credit Facility Provider or as otherwise expressly provided herein.

          (e) Subject to Paragraph 38(f), Tenant and Landlord agree that the Credit Facility Provider is and shall be a third-party beneficiary of this Lease and that, as such, the Credit Facility Provider shall have the right to pursue any right, remedy or performance to which Landlord shall be entitled pursuant hereto notwithstanding that but for the provisions of this subparagraph (e), the Credit Facility Provider may not have had the right to pursue any such right, remedy or performance.

     9. Payment of Impositions; Compliance with Law and Restrictive Covenants.

          (a) Subject to the provisions of Paragraph 18 relating to contests, Tenant shall pay all Impositions before any fine, penalty, interest or cost may be added for non-payment. Tenant agrees to furnish to Landlord, within 30 days after written demand therefor, proof of the payment of all Impositions payable by Tenant as provided in this Paragraph 9. In the event that any Imposition becomes due and payable during the Term and may be legally paid in installments, Tenant shall have the option to pay such Imposition in installments; and in such event, Tenant shall be liable only for those installments which become due and payable during the Term, with appropriate proration in the case of fractional years. Any Impositions which are attributable in part to the Term and in part to a period preceding or following the Term, as the case may be, shall be equitably apportioned between Landlord and Tenant. If Landlord is required pursuant to the Bond Documents or the Credit Facility Documents or the State Loan Documents to make monthly deposits on account of Impositions and insurance premiums, and Landlord informs Tenant in writing thereof specifying the amount of such deposits, Tenant shall pay such monthly deposits to Landlord, as Additional Rent hereunder as provided in Paragraph 7(d).

          (b) Tenant shall promptly comply with and conform to all Legal Requirements concerning the use, occupancy and conditions of the Leased Premises and all machinery, equipment, furnishings, fixtures and improvements therein. If any such Legal Requirement requires an occupancy or use permit, license, special exception, or other local, state or federal agency certification, then Tenant shall promptly obtain and keep current the same.

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          (c) Tenant shall comply with all of the Restrictive Covenants.

     10. Liens; Recording and Title; Easements.

          (a) Tenant will not, directly or indirectly, create or permit to remain, and will promptly discharge, at its expense, any mortgage, lien, encumbrance or charge on, pledge of, or conditional sale or other title retention agreement with respect to, the Leased Premises or any part thereof or Tenant’s interest therein or Basic Rent, Additional Rent or other sums payable by Tenant under this Lease, other than Permitted Equipment Liens. The existence of any mechanic’s, laborer’s, materialman’s, supplier’s or vendor’s lien, or any right in respect thereof, shall not constitute a violation of this Paragraph 10 if payment is not yet due upon the contract or for the goods or services in respect of which any such lien has arisen so long as such payment is made or bonded off within 30 days after the later to occur of the completion of the work which gave rise to the imposition of said liens or the rendering of the invoice, statement or demand for such payment. Nothing contained in this Lease shall be construed as constituting the consent or request of Landlord, expressed or implied, of any contractor, subcontractor, laborer, materialman or vendor to or for the performance of any labor or services or other furnishing of any materials for any construction, alteration, addition, repair or demolition of or to the Leased Premises or any part thereof.

          (b) At Tenant’s request and at Tenant’s sole cost and expense, Landlord and Tenant will execute and deliver a memorandum evidencing Tenant’s option to purchase set forth in Paragraph 6, and shall cause such memorandum to be recorded, filed or registered in such manner and in such places as may be required by any present or future Law in order to publish notices and protect the validity of such option to purchase.

          (c) Subject to the terms and conditions of Paragraph 30, Landlord shall have the right to encumber the Leased Premises, provided that any such encumbrance (except for the Deed of Trust and other Credit Facility Documents) shall be made expressly subject to Tenant’s rights under this Lease including the purchase option.

     11. Indemnification. Tenant shall pay, protect, indemnify and save harmless Landlord from and against any and all liabilities, losses, damages, costs, expenses (including all reasonable attorneys’ fees and expenses), penalties, causes of action, suits, claims, demands or judgments of any nature whatsoever arising from (i) any injury to, or the death of, any person or any damage to property on the Leased Premises or upon adjoining sidewalks, streets or ways, if caused by the negligence of Tenant or its agents or employees, or in any manner growing out of or connected with the use, failure of use, condition or occupancy of the Leased Premises or any part thereof or resulting from the condition thereof, (ii) any violation by Tenant of any covenant, agreement or condition of this Lease, and (iii) any violation by Tenant of the terms of any contract or agreement to which Tenant is a party and which affects the Leased Premises; provided, however, that if any such liability, loss, damage, penalty, cost or expense, cause of action, suit, claim, demand or judgment results from the negligence of Landlord, its agents or employees, or if any such act or omission is determined to be a failure by Landlord to observe any provision of this Lease (if observance is required of Landlord), the foregoing indemnity by Tenant shall apply with respect to Landlord only to the extent of the insurance coverage maintained (or required to be maintained, if greater) by Tenant pursuant to the provisions of

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Paragraph 15 of this Lease. In case any action or proceeding is brought against Landlord by reason of any such claim, Tenant covenants, upon notice from Landlord, to resist or defend such action or proceeding by counsel reasonably satisfactory to Landlord, and, at the expense of Tenant, Landlord will cooperate and assist in the defense of such action or proceeding if reasonably requested so to do by Tenant.

     Tenant also shall pay, protect, indemnify and save harmless Landlord for all amounts, liabilities, indemnities and obligations which Tenant assumes or agrees to pay or discharge pursuant to this Lease, as well as any payments or indemnification made or required to be made by Landlord under the Credit Facility Documents, the Bond Documents, the State Loan Documents or any Hedge Documents as a result of Tenant’s default hereunder, together with every fine, penalty, interest and cost which may be added for nonpayment or late payment thereof.

     The obligation of Tenant under this Paragraph 11 shall survive any termination of this Lease as to any right of indemnity which shall have accrued prior to such termination.

     12. Tenant’s Equipment; Building Equipment; Maintenance and Repair.

          (a) Tenant, at its expense, shall install all specialized machinery, apparatus and equipment which Tenant, in its sole and absolute discretion, deems necessary to permit the Leased Premises to be used for the Permitted Use including, without limitation, the Tenant’s Equipment described on Exhibit C attached hereto. All Tenant’s Equipment shall remain the property of the lessor thereof or the property of the Tenant, as applicable, notwithstanding its attachment to the Leased Premises. At the expiration of the Term, all of Tenant’s Equipment shall remain the property of the lessor thereof or the property of the Tenant (as applicable) and shall be removed by Tenant or such lessor in accordance with subparagraph (c) below.

          (b) Tenant, at its sole cost and expense, will keep and maintain the Leased Premises, including any altered, rebuilt, additional or substituted buildings, structures and parts of the Additional Improvements, in good repair and appearance, except for ordinary wear and tear, and will with reasonable promptness make all structural and nonstructural, foreseen and unforeseen, and ordinary and extraordinary changes and repairs of every kind and nature which may be required to be made upon or in connection with the Leased Premises, the Building Equipment, or any part thereof; in order to keep and maintain the Leased Premises and the Building Equipment in such good repair and appearance. All repairs, replacements and renewals shall be at least equal in quality to the original work and all replacements shall have a value and useful life at least equal to the value and remaining estimated useful life of the item being replaced, and be suitable for a use which is the same or similar to that of the item being replaced. Landlord shall not be required to maintain, repair or rebuild, or to make any Alteration to the Leased Premises, the Building Equipment, or Tenant’s Equipment, or any part thereof, whether ordinary or extraordinary, structural or non-structural, foreseen or unforeseen, or to maintain the Leased Premises, the Building Equipment, or Tenant’s Equipment, or any part thereof, in any way, and Tenant hereby expressly waives the right to make repairs at the expense of Landlord, notwithstanding the fact that such right may be provided for in any Law in effect at the time of the execution and delivery of this Lease or which may thereafter be enacted.

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          (c) Upon the expiration or earlier termination of this Lease, Tenant shall surrender the Leased Premises in good condition, reasonable wear and tear and damage by casualty excepted, with all Building Equipment in good working condition, and all Tenant’s Equipment removed. Any Tenant’s Equipment required to be removed but not removed by Tenant within 30 days after the expiration or earlier termination of this Lease shall be considered abandoned by Tenant and may be appropriated, sold, destroyed or otherwise disposed of by Landlord without first giving notice thereof and without obligation to account therefor to either Tenant or any lessor of such Tenant’s Equipment. Tenant agrees to pay all costs and expenses incurred in removing, storing and disposing of Tenant’s Equipment required to be removed but not removed. Tenant shall repair (i.e., replace, restore or repair to a sightly and usable condition), at its expense, any damage to the Leased Premises caused by removal of Tenant’s Equipment, whether effected by Landlord, Tenant, or Tenant’s lessor or any of their agents or employees. Landlord shall not be responsible for any loss or damage to Tenant’s Equipment under any circumstances. The provisions of this subparagraph (c) are not applicable in the event that Tenant purchases the Leased Premises as provided in Paragraph 6.

          (d) Landlord shall, from time to time upon Tenant’s written request, execute appropriate documents for the benefit of Tenant’s lenders or equipment lessors confirming the provisions of this Paragraph 12 and containing such further undertakings of Landlord concerning the right of any such lender or lessor to enter the Leased Premises following termination of this Lease for the purpose of exercising its rights with respect to the collateral of such lender or lessor, including removing the same, provided such further undertakings are on commercially reasonable terms and conditions and require such lender or lessor to repair any damage to the Leased Premises caused by the removal of Tenant’s Equipment.

          (e) Notwithstanding anything herein to the contrary, Tenant shall not be required to replace any Building Equipment during the last 3 years of the Term, but Tenant, at Tenant’s expense, shall keep all Building Equipment in good working condition throughout the Term.

     13. Alterations.

          (a) So long as no Event of Default or event which, with the giving of notice, the lapse of time, or both, would constitute an Event of Default shall have occurred and be continuing, Tenant may, at its expense, make Alterations, subject to the advance written consent of Landlord and subject to the Deed of Trust and the 1997 Deeds of Trust provided that the consent of Landlord shall not be required for non-structural Alterations which do not involve the exterior of the building or changes in utilities, electrical, mechanical or other existing systems and which in each separate Alteration do not exceed $500,000 in cost. Landlord agrees not to withhold, delay or condition its consent provided that (i) all such Alterations, construction and installations shall be performed in a good and workmanlike manner; (ii) all such Alterations, construction and installations shall be expeditiously completed in compliance with all Legal Requirements; (iii) all work done in connection with any such Alterations, construction or installation shall comply with the requirements of any insurance policy required to be maintained by Tenant hereunder; (iv) Tenant shall promptly pay all costs and expenses of any such Alteration, construction or installation and shall discharge all liens filed against any of the Leased Premises arising, out of the same; (v) Tenant shall procure and pay for all permits and

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licenses required in connection with any such Alteration, construction or installation; (vi) all such Alterations, construction and installations (except as provided in subparagraph 13(c) below) shall be the property of Landlord and shall be subject to this Lease; (vii) the design of any Alterations visible from the exterior of the Leased Premises shall comply with the terms of the Restrictive Covenants (including obtaining any consents required thereunder); (viii) the contractor performing such alterations shall be reputable, licensed and insured and shall, if required by Landlord, be required to obtain performance and payment bonds; and (ix) Landlord shall incur no expense or cost whatsoever in connection with such Alterations, including without limitation, costs for reviewing and approving plans, additional common area maintenance fees, tap fees or other utility fees, and costs incurred by Landlord in obtaining the approval of the Credit Facility Provider and the State. Landlord may require, as a condition to its consent to any Alterations, reasonable appropriate payments, assurances and undertakings from Tenant to ensure that all such conditions are satisfied. Notwithstanding the foregoing, it shall not be unreasonable for Landlord to withhold its consent, or to condition its consent, if either of the Beneficiaries withholds its consent to any of the foregoing, or requires that certain conditions or requirements be satisfied or observed.

          (b) In the event that any Alterations shall encroach upon any property, street or right-of-way adjoining or adjacent to the Leased Premises, or shall violate the agreements or conditions contained in any restrictive covenant affecting the Leased Premises or any part thereof, or shall hinder or obstruct any easement or right-of-way to which the Leased Premises are subject or shall impair the rights of others under any such easement or right-of-way, then promptly after written request of Landlord or of any Person affected by any such encroachment, violation, hindrance, obstruction or impairment, Tenant shall, at its expense, either (i) obtain valid and effective waivers or settlements of all claims, liabilities and damages resulting from each such encroachment, violation, hindrance, obstruction or impairment, whether the same shall affect Landlord, Tenant or both, or (ii) take such other action as shall be necessary to remove such encroachments, hindrances or obstructions and to end such violations or impairments.

          (c) All Tenant improvements that can be removed without damage to the structural integrity of the Leased Premises or the normal functions of the Leased Premises or that are not necessary for the normal use of a building as a tenantable shell building, and which were not financed with the proceeds of the Bonds or the State Loans, shall, on termination of this Lease, become the property of the Tenant.

     14. Condemnation.

          (a) Tenant, immediately upon obtaining knowledge of the institution of any proceeding for any condemnation of the Leased Premises or the Land or the Improvements, shall notify Landlord thereof and Landlord shall be entitled to participate with Tenant in any condemnation proceeding at Tenant’s expense. Tenant hereby irrevocably assigns to Landlord any condemnation award or condemnation payment to which Tenant may be or become entitled (except as set forth in subparagraph (b) below) by reason of any taking of the Leased Premises or any part thereof, in or by condemnation or other eminent domain proceedings pursuant to any Law, or by reason of the temporary requisition of the use or occupancy of the Leased Premises, or the Land or the Improvements or any part thereof, by any governmental authority, civil or military, whether the same shall be paid or payable in respect of Tenant’s leasehold interest

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hereunder or otherwise. The proceeds of the condemnation award shall be made available for restoration if permitted by the Deed of Trust and the 1997 Deeds of Trust and if this Lease is not terminated. As used herein, the term “Net Award” means any condemnation award received by Landlord, less Landlord’s expenses and Tenant’s expenses, if any, in collecting same.

          (b) The foregoing notwithstanding, nothing in this Lease shall impair Tenant’s right to any award or payment on account of Tenant’s trade fixtures, Tenant’s Equipment, and other tangible property, moving expenses, loss of business and the like, if available, to the extent Tenant shall have a right to make a separate claim therefor against the appropriate governmental authority, but in no event shall any such separate claim be based upon the value of Tenant’s leasehold interest in the Leased Premises or result in a reduction of the award or payment which would have been payable to Landlord absent such separate claim by Tenant.

          (c) If there shall be taken by condemnation or other eminent domain proceedings pursuant to any Law, general or special, (i) the entire Leased Premises or (ii) any substantial portion of the Leased Premises which is sufficient to render the remaining portion thereof, in the reasonable judgment of Landlord or Tenant, unsuitable for restoration for the continued use and occupancy of Tenant’s business, or (iii) if the Credit Facility Provider or the State shall retain any Net Award pursuant to the Deed of Trust and the 1997 Deeds of Trust (it being recognized that as a result thereof, either of the Beneficiaries may refuse to allow the award to be disbursed for restoration under certain circumstances, as provided in the Deed of Trust and the 1997 Deeds of Trust), then Landlord and Tenant may each, not later than 90 days after any such taking, give notice to the other of its intention to terminate this Lease on any Basic Rent Payment Date specified in such notice, which date shall not be prior to the date of the vesting of title to the Leased Premises or portion thereof in the condemning authority. In the event Landlord elects to terminate this Lease in the case of (ii) or (iii) above, if Tenant elects to provide funds which, together with the Net Award, are sufficient to restore the Leased Premises and pay Basic Rent and Additional Rent during such restoration and provides evidence satisfactory to Landlord, the State and the Credit Facility Provider (in the Credit Facility Provider’s and the State’s sole and absolute subjective judgment) of its ability to do so within 30 days of Landlord’s election, Landlord’s election to terminate shall be rescinded, this Lease shall continue in full force and effect pursuant to subsection (d) below, and restoration of the Leased Premises shall proceed in accordance with Paragraph 16(b). In the event either Landlord or Tenant elects to terminate this Lease under the provisions of this Paragraph 14(c), Landlord shall be entitled to recover from Tenant, and Tenant will pay to Landlord, on or prior to the effective date of termination, an amount equal to the Basic Rent, Additional Rent and other sums which are then due and payable to the effective date of termination; provided that in the event of such termination, Tenant may exercise its purchase option under Paragraph 6(b) within 20 days after notice of termination.

          (d) If a portion of the Leased Premises shall be taken in or by condemnation or other eminent domain proceedings pursuant to any Law, general or special, which does not result in a termination of this Lease, then this Lease shall continue in full force and effect, and there shall be no abatement or reduction of rent payable hereunder, except to the extent that any portion of the Net Award is used to redeem Bonds or to prepay the State Loans prior to maturity. Unless Tenant immediately elects to exercise its purchase option under Paragraph 6 above, subject to the provisions of the Deed of Trust and the 1997 Deeds of Trust, the Net Award of

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such condemnation shall be paid to Landlord and, promptly after such condemnation and payment to Landlord of the Net Award, Landlord shall make the Net Award available to Tenant for restoration, in accordance with Paragraph 16.

          (e) For the purposes of this Lease, all amounts payable pursuant to any agreement with any condemning authority which has been made in settlement of or under threat of any condemnation or other eminent domain proceeding affecting the Leased Premises shall be deemed to constitute an award made in such proceeding.

          (f) The terms and provisions of this Paragraph 14 are subject to the terms and provisions of the Deed of Trust, the 1997 Deeds of Trust, the 1997 Lease and the State Loan Documents.

     15. Insurance.

          (a) Tenant will maintain at its expense (i) such fire, casualty, extended coverage and all risk insurance on the Improvements, the Additional Improvements, the Building Equipment (as defined in the 1997 Lease) and Building Equipment as is required to be maintained by Landlord, as Grantor under the Deed of Trust and the 1997 Deeds of Trust, provided that the amount of any casualty insurance shall be in no event less than the actual replacement value of the Additional Improvements and Building Equipment, less footings, foundations and other non-insurable portions, (ii) commercial general public liability insurance with a single limit of not less than $10,000,000, including contractual liability coverage insuring the obligations assumed by Tenant under this Lease, premises and operations coverage, broad form property damage coverage and independent contractors coverage, (iii) worker’s compensation insurance as required by Law, (iv) business interruption insurance in the amount of $6,000,000, and (v) employer’s liability insurance in an amount not less than $2,000,000 for each accident, $2,000,000 disease-policy limit and $2,000,000 disease-each employee.

          (b) The insurance referred to in Paragraph 15(a) shall be written by companies of recognized financial standing which are authorized to conduct an insurance business in the State of Maryland and which are reasonably acceptable to Landlord, the Credit Facility Provider and the State. All commercial public liability insurance shall name as the insured parties thereunder Landlord, Tenant, the State and the Credit Facility Provider, as their interests may appear. Landlord shall not be required to prosecute any claim against, or to contest any settlement proposed by, any insurer, provided that Tenant may, at its expense, prosecute any such claim or contest any such settlement. In such event, Tenant may bring such prosecution or contest in the name of Landlord, Tenant, or both, and Landlord will join therein at Tenant’s written request upon the receipt by Landlord of a satisfactory indemnity from Tenant against all costs, liabilities and expenses in connection with such prosecution or contest.

          (c) So long as no Event of Default exists hereunder, insurance claims by reason of damage to or destruction of any portion of the Leased Premises shall be adjusted by Tenant, but Landlord, the State and the Credit Facility Provider shall have the right to join with Tenant in adjusting any such loss. In furtherance of Tenant’s right to adjust, collect and compromise, in its discretion, all claims under any of the insurance policies required by this

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Paragraph 15, Tenant is authorized to execute and deliver all necessary proofs of loss, receipts, vouchers and releases required by the insurers.

          (d) Every fire, casualty, extended coverage or all risk insurance policy required above (other than on Tenant’s Equipment) shall contain a non-contributory mortgagee endorsement in favor of Landlord, the Credit Facility Provider and the State. Every policy which Tenant is obligated to carry under the terms of Paragraph 15(a) shall contain an agreement by the insurer that it will not cancel such policy except after 30 days’ prior written notice to Landlord, the Credit Facility Provider and the State, and that any loss otherwise payable thereunder shall be payable notwithstanding any act or negligence of Landlord or Tenant which might, absent such agreement, result in a forfeiture of all or a part of such insurance payment and notwithstanding any foreclosure or other action or proceeding taken by either of the Beneficiaries pursuant to any provision of the Deed of Trust or the 1997 Deeds of Trust upon the happening of an Event of Default, as defined therein, or any change in title or ownership of the Leased Premises.

          (e) Any and all insurance which Tenant is obligated to carry pursuant to Paragraph 15(a) may be carried under a “blanket” policy or policies covering other properties or liabilities of Tenant and may be effected by a combination of basic and excess or umbrella policies, provided, that such “blanket” policy or policies otherwise comply with the provisions of this Paragraph 15. The amount of total insurance allocated to the Leased Premises, which amount shall not be less than the amounts required pursuant to this Paragraph 15, shall be specified either (i) in each such “blanket” policy or (ii) in a written statement, which Tenant shall deliver to Landlord from the insurer thereunder.

          (f) Tenant shall promptly comply with and conform to (i) all provisions of each insurance policy and (ii) all requirements of the insurers thereunder, applicable to Landlord, the Credit Facility Provider, the State, Tenant or the Leased Premises or to the use, manner of use, occupancy, possession, operation, maintenance, alteration or repair of the Leased Premises, even if such compliance necessitates structural changes or improvements or results in interference with the use or enjoyment of any of the Leased Premises. Tenant shall not use the Leased Premises in any manner which would permit the insurer to cancel any insurance policy unless Tenant obtains, prior to such cancellation, substitute insurance in accordance with the provisions of this Paragraph 15 which permits such use of the Leased Premises.

          (g) Any loss under any policy of casualty insurance required to be carried by Landlord or Tenant hereunder (other than on Tenant’s Equipment) shall be made payable to the Credit Facility Provider or, if references to the Credit Facility Provider shall be ineffective as provided in Paragraph 38(f), to the State as long as the State Loans are outstanding, and then to such other party as the Landlord may designate (in any such case, the “Insurance and Award Trustee”) and each casualty insurer shall be authorized and directed to make payment under said policies directly to the Insurance and Award Trustee for disbursement in accordance with the provisions of first, the Deed of Trust, second, the 1997 Deeds of Trust (in the order of priority set forth in the 1997 Lease), and third, this Lease. As used herein, the term “Net Proceeds” means any casualty insurance proceeds received by Landlord, less Landlord’s expenses and Tenant’s expenses, if any, in collecting same. The term “Net Proceeds” shall not include proceeds of insurance on Tenant’s Equipment, which proceeds shall be paid directly to Tenant or the lessor of such Tenant’s Equipment.

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          (h) Tenant shall not carry separate insurance concurrent in form or continuing in the event of loss with that required in this Paragraph 15 unless (i) Landlord, the State and the Credit Facility Provider are included therein as named insureds, with lender’s loss payable endorsements as provided herein, and (ii) such separate insurance complies with the other provisions of this Paragraph 15. Tenant shall immediately notify Landlord, the State and the Credit Facility Provider of such separate insurance and shall deliver to Landlord, the State and the Credit Facility Provider duplicate original policies therefor. Notwithstanding the foregoing, Tenant may maintain insurance to compensate Tenant for loss of use of the Additional Improvements.

          (i) The terms and provisions of this Paragraph 15 are subject to the terms and provisions of the Deed of Trust, the 1997 Deeds of Trust, the 1997 Lease and the State Loan Documents.

     16. Casualty and Restoration.

          (a) In the event of any casualty resulting in damage to the Leased Premises, including any casualty which renders the entire Leased Premises or a substantial portion thereof unsuitable for continued use, this Lease shall continue in full force and effect and there shall be no abatement or reduction of rent payable hereunder.

          (b) Until such time as the Deed of Trust and the 1997 Deeds of Trust shall have been released and discharged, any Net Proceeds and any Net Award shall be applied either to the restoration or replacement of the property that was lost or to the redemption of Bonds and payment of the State Loans, as provided in the Deed of Trust and the 1997 Deeds of Trust.

          (c) Unless there shall have occurred and be continuing an Event of Default hereunder pursuant to which Landlord is taking action to take possession of the Leased Premises or to terminate this Lease, or the Net Proceeds or the Net Award are to be used as directed by the Beneficiary as provided in the Deed of Trust or either of the Beneficiaries as provided in the 1997 Deeds of Trust, Landlord shall cause the Net Proceeds or Net Award to be held by the Insurance and Award Trustee in a restoration fund which shall be disbursed as follows:

          (i) If the estimated cost of restoration is less than $100,000, and if prior to commencement of restoration, no Event of Default or event which would constitute an Event of Default pursuant to which Landlord is taking action to take possession of the Leased Premises or to terminate this Lease shall exist and no mechanics’ or materialmen’s liens shall have been filed and remain undischarged, and if the architects, contracts, contractors, plans and specifications for the restoration shall have been approved by Landlord (which approval shall not be unreasonably withheld or delayed), and Landlord shall be provided with reasonable assurance against mechanics’ liens, accrued or incurred, as Landlord may reasonably require, and acceptable performance and payment bonds reasonably acceptable to Landlord in an amount and form having a surety reasonably acceptable to Landlord, and naming Landlord, the Credit Facility Provider and the State each as additional obligees; then such proceeds shall be payable to Landlord and made available to Tenant for application to pay the costs of restoration incurred by Tenant and Tenant shall promptly complete such restoration.

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          (ii) If the estimated cost of restoration is equal to or exceeds $100,000, and if the conditions set forth in subparagraph (i) above shall have been satisfied, and if Tenant provides evidence satisfactory to Landlord, the Credit Facility Provider and the State that sufficient funds are available to restore the Leased Premises, disbursements shall be made from time to time in an amount not exceeding the cost of the work completed since the date covered by the last disbursement, upon receipt of (A) satisfactory evidence, including architect’s certificates, of the stage of completion, of the estimated cost of completion and of performance of the work to date in a good and workmanlike manner in accordance with the contracts, plans and specifications, (B) waivers of liens, (C) contractors’ and subcontractors’ sworn statements, (D) a satisfactory bring-to-date of title insurance, and (E) other evidence of cost and payment so that Landlord can verify that the amounts disbursed from time to time are represented by work that is completed, in place and free and clear of mechanics’ lien claims.

          (iii) Each request for disbursement shall be accompanied by a certificate of Tenant, signed by the President or any Vice President of Tenant, describing the work for which payment is requested, stating the cost incurred in connection therewith and stating that Tenant has not previously received payment for such work; the certificate to be delivered by Tenant upon completion of the work shall, in addition, state that the work has been completed and complies with the applicable requirements of this Lease.

          (iv) Landlord may retain 10% of each requisition against the restoration fund until the restoration is fully completed subject to reduction of the retained amount upon approval by the Credit Facility Provider in accordance with local custom;

          (v) The restoration fund shall be invested in an interest bearing account of the Insurance and Award Trustee;

          (vi) At all times the undisbursed balance of the restoration fund shall be not less than the cost of completing the restoration work free and clear of all liens; and

          (vii) Landlord may impose other reasonable conditions provided the same are consistent with those imposed upon such disbursements by the Beneficiary under the Deed of Trust or either of the Beneficiaries under the 1997 Deeds of Trust. In addition, prior to commencement of restoration and at any time during restoration, if the estimated cost of restoration, as determined by the evaluation of an independent engineer acceptable to Landlord, exceeds the amount of the Net Proceeds or the Net Award available for such restoration, Tenant will provide evidence satisfactory to Landlord that the amount of such excess will be available to restore the Leased Premises. Any sum which remains in the restoration fund upon completion of restoration shall be refunded to Tenant up to the amount of Tenant’s deposits pursuant to the immediately preceding sentence. If no such refund is required or any sum remains in the restoration fund after such refund, such sum remaining in the restoration fund (including the residue of any Net Award in a condemnation remaining after restoration) upon completion of restoration shall be applied (x) during any period in which either of the Credit Facilities is in effect,

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to the Landlord’s reimbursement obligations to the Credit Facility Provider to the extent of any drawings honored by the Credit Facility Provider to pay the redemption price of Bonds redeemed in accordance with Section 3.1(b) of the Indenture or to pay the purchase price of Bonds purchased pursuant to Section 4.4 of the Indenture or (y) during any period in which any Bonds are outstanding, to the redemption of Bonds in accordance with Section 3.1(b) of the Indenture or to the purchase of Bonds as set forth in Section 4.4 of the Indenture. During any period in which any Bonds are outstanding, any sums remaining in an amount less than the minimum Authorized Denomination (as defined in the Indenture) shall be deposited in the Principal Account (as defined in the Indenture). If no Bonds are outstanding, and either of the Credit Facility Agreements is still in effect, such remaining sum shall be applied to the Landlord’s Credit Facility Obligations under the Credit Facility Documents. If no Bonds are outstanding and neither of the Credit Facility Agreements is in effect, such remaining sum shall be distributed to the State for repayment of the State Loans and then to Landlord and Tenant in proportion to the value of each party’s interest in the Leased Premises as determined by mutual agreement.

          (d) Tenant shall be solely responsible for the replacement and/or repair of any of Tenant’s Equipment damaged by casualty.

          (e) The terms and provisions of this Paragraph 16 are subject to the terms and provisions of the Deed of Trust, the 1997 Deeds of Trust, the 1997 Lease and the State Loan Documents.

     17. Assignment and Subletting.

          (a) Provided no Event of Default or event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default, shall have occurred and be continuing, with prior notice to Landlord, Tenant may sublet all or any part of the Leased Premises to an Affiliate, or assign this Lease to an Affiliate, which Affiliate will use the Leased Premises for the Permitted Use. Provided no Event of Default or event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default, shall have occurred and be continuing, with the consent of Landlord (which consent shall not be unreasonably withheld), Tenant may sublet all or any part of the Leased Premises to a Person which is not an Affiliate, or assign this Lease to a Person which is not a Affiliate, which Person will use the Leased Premises for the Permitted Use. Notwithstanding the foregoing, in any instance in which Landlord may not unreasonably withhold its consent, it shall not be unreasonable for Landlord to withhold its consent, or to condition its consent, if the Credit Facility Provider or the State withholds its consent to any assignment or subletting, or requires that certain conditions or requirements be satisfied or observed. Tenant shall give Landlord at least 30 days’ advance written notice of its intention to enter into any transaction governed by this Paragraph 17, together with such information as Landlord, the Credit Facility Provider or the State may reasonably request concerning the business and financial background of the proposed subtenant or assignee. Within 10 days after the execution and delivery of any assignment or sublease permitted pursuant to this Paragraph 17, Tenant shall deliver a conformed copy thereof to Landlord, and within 10 days after the execution and delivery of any permitted sublease, Tenant shall give notice to Landlord of the existence and term thereof, and of the name and address of the sublessee thereunder.

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          (b) If Tenant assigns all its rights and interests under this Lease, the assignee under such assignment shall expressly assume all the obligations of Tenant hereunder in a written instrument delivered to Landlord at the time of such assignment. No assignment or sublease shall affect or reduce any of the obligations of Tenant hereunder, and all such obligations shall continue in full effect as obligations of a principal and not as obligations of a guarantor or surety, to the same extent as though no assignment or subletting had been made. No assignment or sublease shall impose any obligations on Landlord beyond those of Landlord under this Lease or otherwise affect any of the rights of Landlord under this Lease. Any assignment or subletting, Landlord’s consent thereto, or Landlord’s collection or acceptance of rent from any assignee or subtenant shall not be construed either as waiving or releasing Tenant from any of its liabilities or obligations under this Lease, or as relieving Tenant or any assignee or subtenant from the obligation of obtaining Landlord’s prior written consent to any subsequent assignment or subletting.

          (c) Upon the occurrence of an Event of Default under this Lease, Landlord shall have the right to collect and enjoy all rents and other sums of money payable under any sublease of any of the Leased Premises, and Tenant hereby irrevocably and unconditionally assigns such rents and money to Landlord, which assignment may be exercised upon and after (but not before) the occurrence of an Event of Default. From and after the date, if any, that such Event of Default is cured, such rents shall again become payable to Tenant and the excess, if any, of the sublease rents collected by Landlord over the amount thereof applied toward Tenant’s obligations under this Lease shall be paid to Tenant.

          (d) All restrictions and obligations imposed pursuant to this Lease on Tenant shall be deemed to extend to any subtenant or assignee, and Tenant shall cause such Person to comply with such restrictions and obligations. Each sublease is subject to the condition that if the Term is terminated or Landlord succeeds to Tenant’s interest in the Leased Premises by voluntary surrender or otherwise, at Landlord’s option the subtenant shall be bound to Landlord for the balance of the term of such sublease and shall attorn to and recognize Landlord as its landlord under the then executory terms of such sublease.

     18. Permitted Contests. Notwithstanding any other provision of this Lease to the contrary, Tenant shall not be required to (i) pay any Imposition, or (ii) discharge or remove any lien, encumbrance or charge referred to in Paragraph 10 or 12, so long as Tenant shall contest, in good faith and at its expense, the existence, the amount or the validity thereof, the amount of the damages caused thereby, or the extent of its liability therefor, by appropriate proceedings, provided that such contest shall operate at all times during the pendency thereof to prevent (i) the collection of, or other realization upon, the sums payable to satisfy any Imposition or lien, encumbrance or other charge so contested, (ii) the sale, forfeiture or loss of the Leased Premises, or any part thereof, or any interest therein or Basic Rent or any Additional Rent, or any portion thereof, (iii) any interference with the use or occupancy of the Leased Premises or any part thereof, (iv) any interference with the payment of Basic Rent or any Additional Rent, or any portion thereof, (v) the cancellation of any fire or other insurance policy, unless such policy is replaced prior to its cancellation by another policy complying with the provisions of this Lease, and (vi) the imposition of any civil or criminal liability upon Landlord. While any such proceedings are pending, Landlord shall not have the right to pay, remove or cause to be discharged the tax, assessment, levy, fee, rent or charge or lien, encumbrance or charge thereby

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being contested, provided that Landlord shall have the right to require Tenant to establish reasonable reserves for such liabilities being contested if the Landlord reasonably determines such reserves to be necessary. Tenant further agrees to give Landlord prompt notice of Tenant’s intention to contest any Imposition and that each such contest shall be promptly prosecuted to a final conclusion. Tenant will pay, and save Landlord harmless against, any and all losses, judgments, decrees and costs (including all reasonable attorneys’ fees and expenses) in connection with any such contest and will, promptly after the final settlement, compromise or determination of such contest, fully pay and discharge the amounts which shall be levied, assessed, charged or imposed or be determined to be payable therein or in connection therewith, together with all penalties, fines, interests, costs and expenses thereof or in connection therewith, and perform all acts the performance of which shall be ordered or decreed as a result thereof.

     19. Default Provisions.

          (a) Any of the following occurrences or acts shall constitute an Event of Default under this Lease:

          (i) Tenant fails to pay, within 5 days after notice from Landlord or any of its assignees to Tenant, any installment of Basic Rent.

          (ii) Tenant fails to pay any payment of Additional Rent, or any other payment required to be paid by Tenant hereunder, including, without limitation, payment of Impositions and insurance premiums, and such failure continues for 30 days after written notice thereof shall have been given to Tenant by Landlord.

          (iii) Tenant fails to observe or perform any other provision hereof for 30 days (or such shorter period of time as Landlord may reasonably determine if such default endangers life or property) after Landlord shall have delivered to Tenant written notice (except in the case of an emergency) of such failure (provided that, in the case of any default referred to in this clause (iii) which does not endanger life or property and which cannot with diligence be cured within such 30 day period, if Tenant shall proceed promptly to cure the same and thereafter shall prosecute the curing of such default with diligence, then upon receipt by Landlord of a certificate from an authorized officer of Tenant stating the reason that such default cannot be cured within 30 days and stating that Tenant is proceeding with diligence to cure such default, the time within which such failure may be cured shall be extended for such additional period as may be necessary to complete the curing of the same with diligence.

          (iv) An Act of Bankruptcy occurs with respect to Tenant, or Tenant becomes generally unable to pay its debts as they become due; provided, however, if a proceeding with respect to an Act of Bankruptcy is filed or commenced against Tenant, the same shall not constitute an Event of Default if such proceeding is dismissed within 90 days from the date of such Act of Bankruptcy.

          (v) Default is made (A) with respect to any evidence of indebtedness of liability for borrowed money of Tenant to the Credit Facility Provider, or (B) with respect to any evidence of indebtedness or liability of Tenant to any other Person for

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borrowed money or pursuant to a lease obligation, if the effect of such default described in clause (A) or (B) above is to accelerate the maturity of such evidence of indebtedness or liability prior to its stated maturity (whether automatically, following an election by the holder or obligee thereof to accelerate, or otherwise) or any such indebtedness is not paid as and when due and payable; provided, however, that it shall not constitute an Event of Default if the outstanding principal balance of such indebtedness or liability of Tenant to any Person other than the Credit Facility Provider or the State is not in excess of $1,000,000 or Tenant certifies to the Credit Facility Provider and the State that it is contesting such default in good faith and by appropriate and diligent proceedings.

          (vi) Any amendment to this Lease shall have been made without the prior written consent of the Credit Facility Provider and the State, which consent shall not be unreasonably withheld, conditioned or delayed, and, except for material changes which would require the consent or approval of the State Board of Public Works or the State Legislative Policy Committee, which consent shall be deemed given by the Credit Facility Provider or the State if the Credit Facility Provider or the State does not object to any proposed amendment within 15 business days after the receipt thereof by the Credit Facility Provider or the State.

          (vii) Tenant abandons the Leased Premises.

          (viii) The interest of Tenant in the Leased Premises or any part thereof shall be assigned or subleased in violation of Paragraph 17, or shall be levied upon or attached in any proceeding involving a claim in excess of $1,000,000 and such proceeding is not vacated, discharged or bonded against to the reasonable satisfaction of Landlord, the Credit Facility Provider and the State within 30 days thereafter.

          (ix) Any representation or warranty made by Tenant or its representatives in this Lease or any of the Lease Documents executed and delivered by Tenant or any statement or representation made by Tenant or its representatives in any certificate, report or opinion (including legal opinions) financial statement or other instrument furnished in connection with this Lease or any of the Lease Documents executed and delivered by Tenant proves to have been incorrect, false or misleading in any material respect when made.

          (x) Any judgment against Tenant or any attachment or other levy against the property of Tenant with respect to a claim for an amount in excess of $1,000,000 remains unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period of 60 days.

          (xi) Tenant fails to comply with any material requirement of any governmental authority having jurisdiction over the Leased Premises within the time required by such governmental authority; or any proceeding is commenced or action taken to enforce any remedy for a violation of any material requirement of a governmental authority or any restrictive covenant affecting the Leased Premises or any part thereof; provided, however, it shall not constitute an Event of Default if Tenant is

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contesting the validity or applicability of any such requirement or covenant, at its sole cost and expense, in good faith and by appropriate and diligent proceedings.

          (xii) If any material provision of this Lease at any time for any reason ceases to be valid and binding on Tenant, or is declared to be null and void, or the validity or enforceability thereof is contested by Tenant or any governmental agency or authority, or Tenant denies that it has any further liability or obligation under this Lease or any of the Lease Documents executed and delivered by Tenant.

          (xiii) Landlord, the Credit Facility Provider or the State, or any of their respective representatives are not permitted, at all reasonable times (after at least 48 hours prior written notice to Tenant, unless an Event of Default shall have occurred and be continuing in which event notice will not be required), to enter upon the Leased Premises, to inspect the Leased Premises and all materials, equipment, fixtures and other items used or to be used in the construction thereof, and to examine all detailed plans, shop drawings and specifications which relate to or the appurtenances thereto or to be used in the operation thereof, provided, however, any person conducting such inspection shall comply with Tenant’s safety and operating policies and procedures.

          (xiv) An Event of Default (as defined in the 1997 Lease) occurs under the 1997 Lease.

          (b) If an Event of Default shall have happened and be continuing, Landlord shall have the right at its election, then or at any time thereafter while such Event of Default shall continue, to give Tenant written notice of Landlord’s intention to terminate this Lease on a date specified in such notice (such termination being hereinafter referred to as a “Default Termination” and such notice being hereinafter referred to as a “Default Termination Notice”). Upon giving a Default Termination Notice, the Term and the estate hereby granted shall terminate on the date specified in the Default Termination Notice as fully and completely and with the same effect as if such date were the date hereinbefore fixed for the expiration of the Term, and all rights of Tenant hereunder shall terminate, but Tenant shall remain liable as hereinafter provided. Notwithstanding the foregoing, no Default Termination Notice shall be effective unless it is also executed by the Credit Facility Provider.

          (c) If an Event of Default shall have happened and be continuing, Landlord shall have the immediate right, whether or not the Term shall have been terminated pursuant to Paragraph 19(b), to re-enter and repossess the Leased Premises or any part thereof by force (if legally permitted in the State of Maryland), summary proceedings, ejectment or otherwise and the right (subject to the rights and interests of equipment lessors) to remove all Persons and property therefrom. Landlord shall be under no liability for or by reason of any such entry, repossession or removal. No such re-entry or taking of possession of the Leased Premises by Landlord shall be construed as an election on Landlord’s part to terminate this Lease unless a Default Termination Notice shall have been given to Tenant, or unless the termination of this Lease be finally decreed by a court of competent jurisdiction.

          (d) At any time or from time to time after the repossession of the Leased Premises or any part thereof pursuant to Paragraph 19(c), whether or not this Lease shall have

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been terminated pursuant to Paragraph 19(b), Landlord shall use reasonable efforts to relet the Leased Premises or any part thereof for the account of Tenant or Landlord or otherwise, without notice to Tenant, for such term or terms and on such conditions (which may include concessions of free rent) and for such uses as Landlord, in its absolute discretion, may determine, and Landlord may collect and receive any rents payable by reason of such reletting. Landlord shall not be responsible or liable for any failure to relet the Leased Premises or any part thereof or for any failure to collect any rent due upon any such reletting.

          (e) In the event of the termination of this Lease upon an Event of Default or repossession of the Leased Premises or any part thereof pursuant to Paragraph 19(c) or otherwise, or the reletting of the Leased Premises or any part thereof pursuant to Paragraph 19(d), Tenant shall remain liable as hereinafter provided.

          (f) In the event of any Default Termination or repossession of the Leased Premises or any part thereof by reason of the occurrence of an Event of Default, Tenant will pay to Landlord Basic Rent, Additional Rent and other sums required to be paid by Tenant to and including the date of such termination or repossession (including, without limitation, the amount of all sums which have become due and payable by Landlord under the Credit Facility Documents and the Bond Documents and the State Loan Documents); and, thereafter, Tenant shall, until the end of what would have been the Term in the absence of such termination or repossession, and whether or not the Leased Premises or any part thereof shall have been relet, be liable to Landlord for, and shall pay to Landlord, as liquidated and agreed current damages on each Basic Rent Payment Date and on any other date when due and payable: (i) Basic Rent, Additional Rent and other sums which would be payable under this Lease by Tenant in the absence of such termination or repossession, less (ii) the net proceeds, if any, of any reletting effected for the account of Tenant pursuant to Paragraph 19(d), after deducting from such proceeds all Landlord’s expenses in connection with such reletting (including, without limitation, all repossession costs, brokerage commissions, legal expenses, attorneys’ fees, employees’ expenses, alteration costs and expenses of preparation for such reletting). Tenant will pay such current damages on the days on which Basic Rent would have been payable under this Lease in the absence of such termination or repossession, and Landlord shall be entitled to recover the same from Tenant on each such day.

          (g) At any time after a Default Termination, Landlord shall be entitled to recover from Tenant, and Tenant will pay to Landlord within 120 days of demand therefor, an amount equal to Basic Rent, Additional Rent and other sums which would be payable under this Lease, from the date to which Tenant shall have satisfied in full its obligations under Paragraph 19(f) to pay current damages, to the end of the remaining Term of this Lease in the absence of such termination (assuming, in computing the amount of Basic Rent that would have been due under Paragraph 7, an interest rate which is equal to the rate applicable to such obligations on the date the Default Termination Notice is issued “the “Assumed Rate”), discounted at the Assumed Rate, or such lower rate as shall be necessary to provide that the sum payable by Tenant hereunder shall satisfy in full the sum of (I) all “Landlord’s Credit Facility Obligations” and “Landlord’s Bond Obligations” accrued through the date of the payment due under this Paragraph 19(g), including without limitation, all accrued fees, costs and expenses payable to the Trustee, the Remarketing Agent, the Rating Agency and the Credit Facility Provider, plus (II) all

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costs and expenses (including reasonable attorneys’ fees and expenses) of the Credit Facility Provider and Landlord in connection with such Default Termination.

          (h) The words “enter”, “re-enter” or “re-entry”, as used in this Paragraph 19, are not restricted to their technical meaning.

          (i) An Event of Default (as defined in this Lease) under this Lease shall constitute an Event of Default (as defined in the 1997 Lease) under the 1997 Lease; and an Event of Default (as defined in the 1997 Lease) under the 1997 Lease shall constitute an Event of Default (as defined in this Lease) under this Lease.

     20. Additional Rights of Landlord.

          (a) No right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy given hereunder or now or hereafter existing at Law or in equity. The failure of either party to insist at any time upon the strict performance of any covenant or agreement or to exercise any option, right, power or remedy contained in this Lease shall not be construed as a waiver or a relinquishment thereof for the future. A receipt by Landlord of any Basic Rent, Additional Rent or any other sum payable hereunder with knowledge of the breach of any covenant or agreement contained in this Lease shall not be deemed a waiver of such breach, and no waiver of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by the waiving party. In addition to other remedies provided in this Lease, Landlord shall be entitled, to the extent permitted by applicable law, to injunctive relief in case of the violation, or attempted or threatened violation, of any of the covenants, agreements, conditions or provisions of this Lease, or to a decree compelling performance of any of the covenants, agreements, conditions or provisions of this Lease, or to any other remedy allowed to Landlord at Law or in equity.

          (b) Tenant hereby waives and surrenders, to the extent not prohibited by Law, for itself and all those claiming under it, including creditors of all kinds, (i) any right and privilege which it or any of them may have under any present or future Law to redeem the Leased Premises or to have a continuance of this Lease for the Term after termination of Tenant’s right of occupancy by order or judgment of any court or by any legal process or writ, or under the terms of this Lease, or after the termination of the Term as herein provided, and (ii) the benefits of any present or future law which exempts property from liability for debt or for distress for rent.

          (c) In the event Tenant shall be in default in the performance of any of its obligations under this Lease, and an action shall be brought for the enforcement thereof in which it shall be determined that Tenant was in default, Tenant shall pay to Landlord all the expenses incurred in connection therewith including reasonable attorney’s fees. In the event Landlord shall, without fault on its part, be made a party to any litigation commenced against Tenant, and if Tenant, at its expense, shall fail to provide Landlord with counsel reasonably approved by Landlord, Tenant shall pay all costs and reasonable attorney’s fees incurred or paid by Landlord in connection with such litigation.

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          (d) If an Event of Default has happened and is continuing, Landlord may, but shall not be obligated to, make any payment or perform any act required hereunder to be made or performed by Tenant which has not been performed within the time period specified herein for such performance, with the same effect as if made or performed by Tenant, provided that no entry by Landlord upon the Leased Premises for such purpose shall create any liability to Tenant on the part of Landlord or shall constitute or shall be deemed to be an eviction of Tenant, and no such entry shall waive or release Tenant from any obligation or default hereunder. All sums so paid by Landlord and all costs and expenses (including reasonable attorney’s fees and expenses) incurred by Landlord in connection with the performance of any such act, together with interest at the Default Rate, shall constitute Additional Rent payable by Tenant hereunder.

     21. Inspection. Tenant shall permit Landlord, the Credit Facility Provider, the State, and the holder of any Encumbrance, and its and their representatives and agents to enter the Leased Premises, with notice to Tenant and with an escort provided by Tenant, unless (i) an Event of Default shall have occurred and be continuing, or (ii) an emergency threatening life or property exists, in either of which cases, no advance notice shall be required, without charge therefor and without diminution of the rent payable by Tenant, in order to examine, inspect and protect the Leased Premises, or, during the last year of the Term, to exhibit the same to brokers, prospective tenants, lenders, purchasers and others. In connection with any such entry, Landlord shall endeavor to minimize the disruption to Tenant’s normal business operations in the Leased Premises.

     22. Notices, Demands and Other Instruments. All notices, demands, requests, consents, approvals, certificates or other communications required under this Lease shall be in writing, and shall be sufficiently given and shall be deemed to have been properly given (i) if delivered by hand, when written confirmation of delivery is received by the sender, (ii) three days after the same is mailed by certified mail, postage prepaid, return receipt requested, or (iii) if sent by overnight courier, 24 hours (plus 24 hours for any intervening day that is not a business day) after delivery to such overnight courier addressed to the Person to whom any such notice, demand, request, consent, approval, certificate or other communication is to be given, at .the appropriate address designated on Exhibit E attached hereto. Any party listed on Exhibit E shall each have the right from time to time to specify as its address for purposes of this Lease any other address in the United States of America upon giving 15 days’ written notice hereunder.

     23. Estoppel Certificates. Landlord or Tenant, as the case may be, shall, at any time and from time to time, upon not less than 20 days’ prior written notice by the other (but neither shall be required to do so more than twice in any calendar year), execute, acknowledge and deliver to the requesting party a statement in writing, executed by an authorized representative of Landlord or by the President or a Vice President of Tenant, as the case may be, certifying (i) that this Lease is unmodified and in full effect (or, if there have been modifications, that this Lease is in full effect as modified, and setting forth such modifications), (ii) the dates to which Basic Rent, Additional Rent and all other sums payable hereunder have been paid, (iii) that to the knowledge of the signer of such certificate no default by either Landlord or Tenant exists hereunder or specifying each such default of which the signer may have knowledge; and (iv) that, in the case of any statement being given by Tenant, to the knowledge of the signer of such certificate, there are no proceedings pending or threatened against Tenant before or by any court or administrative agency which, if adversely decided, would materially and adversely affect the

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financial condition and operations of Tenant or Tenant’s ability to perform or fulfill its obligations under this Lease, or if any such proceedings are pending or threatened to said signer’s knowledge, specifying and describing the same. It is intended that any such statements may be relied upon by the Credit Facility Provider, the State, Landlord or their assignees or by any prospective purchaser of the Leased Premises or by any transferee or assignee of Tenant’s interest in the Lease or a sublessee of Tenant or by any party providing financing to Tenant. Any certificate required under this Paragraph 23 shall (i) state briefly the nature and scope of the examination or investigation upon which the statements contained in such certificate are based, (ii) state that in the opinion of each Person signing such certificate he has made such examination or investigation as is necessary to enable him to express an informed opinion as to the subject matter of such certificate, and (iii) certify to the correctness of the statements contained therein.

     24. No Merger. There shall be no merger of this Lease or of the leasehold estate hereby created with any other estate or interest in the Leased Premises or any part thereof by reason of the fact that the same Person may acquire or hold, directly or indirectly, (a) any interest in this Lease or the leasehold estate hereby created or (b) any such other estate or interest in the Leased Premises or any part.

     25. Representations and Warranties of Tenant. Tenant makes the following representations and warranties to Landlord:

          (a) Good Standing. Tenant (i) is a corporation duly organized and existing, in good standing, under the laws of the State of Delaware, (ii) has the corporate power and all material governmental licenses, authorizations, consents and approvals required to own its property and to carry on its business as now being conducted, and (iii) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned by it therein or in which the transaction of its business makes such qualification necessary, including, but not limited to, the State of Maryland.

          (b) Authority. Tenant has full corporate power and authority to enter into and execute and deliver this Lease and each of the other documents executed and delivered by Tenant in connection herewith (collectively, the “Lease Documents”), and to incur and perform the obligations provided for therein and herein, all of which have been duly authorized by all proper and necessary corporate action by Tenant. No consent or approval of stockholders or of any other Person or public authority or regulatory body is required as a condition to the validity or enforceability of this Lease or any of the other Lease Documents, or if required the same has been duly obtained.

          (c) Binding Agreements. This Lease and each of the other Lease Documents have been duly and properly executed by Tenant, constitute the valid and legally binding obligations of the Tenant, and are fully enforceable against Tenant in accordance with their respective terms; except to the extent that enforceability may be affected by any bankruptcy or insolvency proceeding filed by or against the Tenant and subject to the exercise of judicial discretion in accordance with general principles of equity.

          (d) Litigation. There is no litigation or proceeding pending or, so far as Tenant knows, threatened, before any court or administrative agency which, in the opinion of

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Tenant, will materially adversely affect the financial condition or operations of Tenant, Tenant’s ability to perform and fulfill its obligations under this Lease, or the authority of Tenant to enter into, or the validity or enforceability of, this Lease or any of the other Lease Documents.

          (e) No Conflicting Agreements, Laws, etc. There is (i) no charter, by-law or preference stock provision of the Tenant and no provision of any existing mortgage, indenture, contract or agreement binding on the Tenant or affecting Tenant’s property, and (ii) to the knowledge of Tenant, no provision of Law or order of court binding on the Tenant or affecting any of Tenant’s property, which would conflict with or in any way prevent the execution, delivery, or performance of the terms of this Lease or any of the other Lease Documents, or which would be in default or violated as a result of such execution, delivery or performance, or for which adequate consents or waivers have not been obtained.

          (f) Tax Returns. Tenant has filed all required federal, state and local tax returns and has paid all taxes as shown on such returns as they have become due. No claims have been assessed and are unpaid with respect to such taxes, and Tenant has established reserves which it believes to be adequate for the payment of additional taxes for years which have not been audited by the respective tax authorities.

          (g) Place of Business of Tenant. Tenant’s principal place of business is located at 14200 Shady Grove Road, Rockville, Maryland 20850.

          (h) Brokers. To the best of Tenant’s knowledge (other than Scheer Partners Inc.), no Person has, or as a result of any action of or by Tenant in connection with the transactions contemplated hereby and by the Lease will have, any right, interest or valid claim against or on the Landlord for any commission, fee or other compensation as a broker or finder, or in any similar capacity. Tenant shall indemnify the Landlord against any claimed fee, commission or other compensation arising from or in connection with the transactions contemplated hereby or by the Lease Documents.

          (i) ERISA. (i) Any Plan established and maintained by the Tenant or any Commonly Controlled Entity is a qualifying plan under the applicable requirements of Section 401 of the Code and there is no current matter which would materially adversely affect the qualified tax-exempt status of any Plan; (ii) neither the Tenant nor any Commonly Controlled Entity has engaged in or is engaging in any Prohibited Transaction or has incurred any Accumulated Funding Deficiency in connection with any such Plan, whether or not waived, and no Reportable Event has occurred with respect to any Plan subject to the minimum funding requirements of Section 412 of the Code; (iii) no Multiemployer Plan has “terminated”, as that term is defined in ERISA; (iv) neither the Tenant nor any Commonly Controlled Entity has “withdrawn” or “partially withdrawn” from any Multiemployer Plan; and (v) no Multiemployer Plan is in “reorganization” nor has notice been received from the administrator of any Multiemployer Plan that any such Plan will be placed in “reorganization”.

     26. Affirmative Covenants of Tenant. Tenant shall:

          (a) Reporting Requirements. Furnish or cause to be furnished to Landlord:

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          (i) as soon as available but in no event more than 45 days after the filing with the Securities and Exchange Commission (the “SEC”), a copy of the 10Q Report of Tenant filed with the SEC accompanied by a certificate of the chief financial officer of Tenant stating whether any event has occurred which constitutes an Event of Default, or which would constitute such an Event of Default with the giving of notice or the lapse of time or both, and, if so, stating the facts with respect thereto; and

          (ii) as soon as available but in no event more than 120 days after the close of each fiscal year of Tenant, a copy of the 10K Report of Tenant filed with the SEC and a copy of the annual audited financial statements relating to Tenant prepared in accordance with GAAP, which financial statements shall include a balance sheet of Tenant as at the end of such fiscal year and a statement of earnings and changes in stockholder’s equity of Tenant for such fiscal year; and

          (iii) as soon as available but in no event more than 90 days after the close of each fiscal year of Tenant, a certificate of the chief financial officer of Tenant stating whether any event which constitutes an Event of Default under this Lease has occurred, or any event which would constitute such an Event of Default with the giving of notice or the lapse of time or both has occurred, and, if so, stating the facts with respect thereto; and

          (iv) promptly upon transmission thereof, copies of any financial statements, proxy statements, reports and the like which Tenant sends to its shareholders and copies of all registration statements (with exhibits); and

          (v) [INTENTIONALLY OMITTED]

          (vi) [INTENTIONALLY OMITTED]

          (vii) [INTENTIONALLY OMITTED]

          (viii) with reasonable promptness, such budgets, cash flow projections, financial forecasts and other additional information, reports or statements as Landlord or the Credit Facility Provider may from time to time reasonably request.

          (b) Taxes and Claims. Pay and discharge or cause to be paid and discharged all taxes imposed upon it or its income or properties prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might become a lien or charge upon any of its properties. Tenant shall have the right to contest the validity of any such tax, assessment, charge, levy or claim, by timely and appropriate proceedings, provided that Tenant shall (1) give Landlord written notice of its intention to contest, (2) diligently prosecute such contest, (3) at all times effectively stay or prevent any official or judicial sale of the Leased Premises or Building Equipment or any part thereof by reason of nonpayment of any such taxes, and (4) establish reasonable reserves for such liabilities being contested if Landlord reasonably determines such reserves to be necessary.

          (c) Insurance. In addition to the insurance required by Paragraph 15 of this Lease, maintain insurance with responsible insurance companies on such of its properties, in

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such amounts and against such risks as is customarily maintained by similar businesses operating in the same vicinity. Tenant shall file with Landlord, upon its request, a detailed list of the insurance then in effect covering Tenant and Tenant’s properties, stating the names of the insurance companies, the amounts and rates of the insurance, dates of the expiration thereof and the properties and risks covered thereby; and, within 30 days after notice in writing from the Landlord, obtain such additional insurance as the Landlord may reasonably request.

     (d) Corporate Existence. Maintain its existence in good standing as a Delaware corporation, qualified to transact business in the State of Maryland.

     (e) Compliance with Laws. Comply with all Legal Requirements, subject to Tenant’s right to contest the validity or applicability of any of the foregoing, at its sole cost and expense, in good faith and by appropriate and diligent proceedings, in accordance with Paragraph 18 hereof.

     (f) Books and Records. Maintain appropriate books and records with respect to the Leased Premises and permit access by Landlord, the Credit Facility Provider and the State and their respective authorized representatives and employees to the books and records of Tenant at the offices of Tenant during normal business hours.

     (g) Employment Count. Within 30 days after the Rent Commencement Date and on each anniversary date thereafter, and upon subsequent request of Landlord or the State, Tenant shall supply Landlord and the State with the employment count at the Leased Premises.

     (h) Equal Employment. Tenant shall prohibit discrimination on the basis of (i) political or religious opinion or affiliation, marital status, race, color, creed, or national origin, or (ii) sex or age, except when sex or age constitutes a bona fide occupational qualification, or (iii) the physical or mental disability of a qualified individual with a disability; and shall, upon the request of the State Department of Business and Economic Development (the “Department”), submit information relating to its employment practices and operations with regard to the above on a form to be prescribed by the Department.

     (i) Drug and Alcohol Free Workplace. Tenant shall make a good faith effort to eliminate illegal drug use and alcohol and drug abuse from its workplace during the Term and specifically, shall:

          (i) prohibit the unlawful manufacture, distribution, dispensation, possession, or use of drugs in its workplace;

          (ii) prohibit its employees from working under the influence of alcohol or drugs;

          (iii) not hire or assign to work on an activity funded in whole or part with State of Maryland funds, anyone whom it knows, or in the exercise of due diligence should know, currently abuses alcohol or drugs and is not actively engaged in a bona fide rehabilitation program;

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          (iv) promptly inform the appropriate law enforcement agency of every drug related crime that occurs in its workplace if it or its employee has observed the violation or otherwise has reliable information that a violation has occurred; and

          (v) notify employees that drug and alcohol abuse is banned in the workplace, impose sanctions on employees who abuse drugs and alcohol in the workplace, and institute steps to maintain a drug and alcohol free workplace.

          (j) [INTENTIONALLY OMITTED]

          (k) Cooperate in connection with any appraisal of the Leased Premises conducted by or at the request of Landlord, the Credit Facility Provider or the State.

     27. Negative Covenants of Tenant. Until all of Tenant’s obligations under this Lease have been paid and performed in full (other than any indemnities which survive the termination of this Lease), without the prior written consent of Landlord, Tenant shall not, directly or indirectly:

          (a) Declare any dividends (other than dividends payable in capital stock of Tenant) on any shares of any class of its capital stock (other than preferred stock outstanding as of December 1, 1999) or apply any of its property or assets to the purchase, redemption or other retirement of, or set apart any sum for the payment of any dividends on, or for the purchase, redemption or other retirement of, or make any other distribution by reduction of capital or otherwise in respect of, any shares of any class of capital stock of Tenant unless (i) there is no Event of Default which has occurred and is continuing, and (ii) the amount of the dividend does not exceed Tenant’s accumulated earnings at that time.

          (b) [INTENTIONALLY OMITTED].

          (c) (i) Restate or amend any Plan established and maintained by Tenant or any Commonly Controlled Entity and subject to the requirements of ERISA, in a manner designed to disqualify such Plan and its related trusts under the applicable requirements of the Code; (ii) permit any officers of Tenant or any Commonly Controlled Entity to materially adversely affect the qualified tax-exempt status of any Plan or related trusts of Tenant or any Commonly Controlled Facility under the Code; (iii) engage in or permit any Commonly Controlled Entity to engage in any Prohibited Transaction; (iv) incur or permit any Commonly Controlled Entity to incur any Accumulated Funding Deficiency, whether or not waived, in connection with any Plan; (v) take or permit any Commonly Controlled Entity to take any action or fail to take any action which causes a termination of any Plan in a manner which could result in the imposition of a lien on the property of Tenant or any Commonly Controlled Entity pursuant to Section 4068 of ERISA; (vi) fail to notify the Credit Facility Provider that notice has been received of a “termination” (as defined in ERISA) of any Multiemployer Plan to which Tenant or any Commonly Controlled Entity has an obligation to contribute; (vii) incur or permit any Commonly Controlled Entity to incur a “complete withdrawal” or “partial withdrawal” (as defined in ERISA) from any Multiemployer Plan to which Tenant or any Commonly Controlled Entity has an obligation to contribute; or (viii) fail to notify the Credit Facility Provider that notice has been received from the administrator of any Multiemployer Plan to which Tenant or

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any Commonly Controlled Entity has an obligation to contribute that any such Plan will be placed in “reorganization” (as defined in ERISA).

     28. Non-Recourse. Anything contained herein to the contrary notwithstanding, any claim based on or in respect of any liability of Landlord under this Lease shall be enforced only against Landlord’s interest in the Leased Premises (subject to the lien of the Deed of Trust and the 1997 Deeds of Trust) and not against any other assets, properties or funds of Landlord or against any assets, properties or funds of (i) any employee or agent of Landlord (or any director, officer, legal representative, successor, or assign of any thereof), or (ii) any other Person affiliated with any of the foregoing, including without limitation, the State of Maryland or any department, agency or instrumentality thereof.

     Notwithstanding any other provision set forth in this Lease or in any other agreement or document executed in connection with or relating to this Lease:

          (a) No provision of this Lease or of any other agreement or document executed in connection with or relating to this Lease shall be construed so as to give rise to any monetary or pecuniary liability of Landlord or of the State of Maryland, or any political subdivision or agency thereof, or to give rise to a charge upon the general credit of Landlord or of the State of Maryland, or any political subdivision or agency thereof, and any claim based on or in respect of any liability of Landlord under this Lease shall be enforced only as set forth above in this Paragraph 28.

          (b) Neither this Lease nor any other agreement or document executed in connection with or relating to this Lease nor any claim hereunder or thereunder shall (i) constitute a debt of Landlord or of the State of Maryland, or any political subdivision or agency thereof, or a pledge of the full faith and credit or taxing power of the State of Maryland, or any political subdivision or agency thereof, or (ii) create any monetary liability on, or obligate Landlord or the State of Maryland, or any political subdivision or agency thereof, to make any appropriation for payment. Landlord has no taxing power.

          (c) The liability of Landlord under this Lease and under any other agreement or document executed in connection with or relating to this Lease shall be non-recourse to Landlord, limited as set forth above in this Paragraph 28; and the lien of any judgment shall be restricted to only Landlord’s interest in the Leased Premises (subject to the lien of the Deed of Trust and the 1997 Deeds of Trust), and not against any other assets, properties or funds of Landlord or against any assets, properties or funds of (i) any employee or agent of Landlord (or any director, officer, legal representative, successor, or assign of any thereof), or (ii) any other Person affiliated with any of the foregoing, including without limitation, the State of Maryland or any department, agency or instrumentality thereof; and Landlord shall have no other liability, legal, moral or otherwise, to Tenant, or any other person, in connection with the Land, the Improvements, the Leased Premises, this Lease, or any other agreement or document executed in connection with or relating to this Lease. In no event shall Landlord be required to pay any claim under this Lease or under any other agreement or document executed in connection with or related to this Lease from any of its own funds.

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          (d) Landlord shall not be required to do any act whatsoever or exercise any diligence whatsoever, other than to perform its limited obligations under the Lease Documents, the Bond Documents and the Credit Facility Documents, to mitigate any damages of Tenant or any other person, if any Event of Default shall occur under this Lease or any other agreement or document executed in connection with or relating to this Lease.

     29. Separability. Each and every covenant and agreement contained in this Lease is, and shall be construed to be, a separate and independent covenant and agreement, and the breach of any such covenant or agreement by Landlord shall not discharge or relieve Tenant from any of its obligations under this Lease. If any term or provision of this Lease or the application thereof to any Person or circumstances shall to any extent be invalid and unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and shall be enforced to the extent permitted by Law.

     30. Subordination.

          (a) This Lease is subject and subordinate to the lien, provisions, operation and effect of the Deed of Trust and 1997 Deeds of Trust or other security instruments which may now or hereafter encumber the Improvements or the Land or any interest therein (collectively, “Encumbrances”), to all funds and indebtedness intended to be secured thereby, and to all renewals, extensions, modifications, recastings or refinancings thereof. The holder of any Encumbrance to which this Lease is subordinate shall have the right (subject to any required approval of the holders of any superior Encumbrance) at any time to declare this Lease to be superior to the lien, provisions, operation and effect of such Encumbrance, and Tenant shall execute, acknowledge and deliver all documents required by such holder in confirmation thereof. Prior hereto, Landlord, Tenant and the State have executed the State Loan Assignment, and simultaneous with the execution hereof, Landlord, Tenant and the Bank shall execute the Assignment. In the event that the Additional Improvements and/or the Land become subject to an Encumbrance after the date hereof, Landlord agrees to obtain a non-disturbance agreement from the holder of such Encumbrance, in such holder’s standard form, provided that Tenant shall pay or reimburse Landlord for any costs associated with such efforts and agrees to execute such agreement in order to confirm the subordination of this Lease to the Encumbrance, if requested by the holder of such Encumbrance.

          (b) Tenant shall at Landlord’s request promptly execute any requisite or appropriate document confirming such subordination. Tenant waives the provisions of any Law now or hereinafter in effect which may give or purport to give Tenant any right to terminate or otherwise adversely affect this Lease and Tenant’s obligations hereunder in the event any foreclosure proceeding is prosecuted or completed or in the event the Additional Improvements, the Land or Landlord’s interest therein is transferred by foreclosure, by deed in lieu of foreclosure or otherwise. At the request of such transferee, Tenant shall attorn to such transferee and shall recognize such transferee as the Landlord under this Lease. Tenant agrees that upon any such attornment, such transferee shall not be (i) bound by any payment of Basic Rent or Additional Rent more than one month in advance, except prepayments in the nature of security for the performance by Tenant of its obligations under this Lease, but only to the extent such prepayments have been delivered to such transferee, (ii) bound by any amendment of this Lease

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made without the consent of the holder of each Encumbrance existing as of the date of such amendment, (iii) liable for damages for any breach, act or omission of any prior landlord, or (iv) subject to any offsets or defenses which Tenant might have against any prior landlord; provided, however, that after succeeding to Landlord’s interest under this Lease, such transferee shall agree to perform in accordance with the terms of this Lease all obligations of Landlord arising after the date of transfer. Within five days after the request of such transferee, Tenant shall execute, acknowledge and deliver any requisite or appropriate document submitted to Tenant confirming such attornment.

          (c) If any prospective or current holder of an Encumbrance requires that modifications to this Lease be obtained, and provided that such modifications (i) are reasonable, (ii) do not adversely affect in a material manner Tenant’s use of the Leased Premises for the Permitted Use, (iii) do not increase the rent and other sums to be paid by Tenant, (iv) do not change Tenant’s affirmative or negative covenants set forth herein, or (v) affect Tenant’s option to purchase the Leased Premises as provided in Paragraph 6(b), then Landlord may submit to Tenant an amendment to this Lease incorporating such required modifications, and Tenant shall execute, acknowledge and deliver such amendment to Landlord within five days after Tenant’s receipt thereof.

     31. Binding Effect. All of the covenants, conditions and obligations contained in this Lease shall be binding upon and inure to the benefit of the respective successors and assigns of Landlord and Tenant to the same extent as if each successor and assign were in each case named as a party to this Lease. This Lease may not be changed, modified or discharged except by a writing signed by Landlord and Tenant and consented to by the Credit Facility Provider and the State.

     32. Headings. The headings to the various paragraphs of this Lease have been inserted for convenient reference only and shall not to any extent have the effect of modifying, amending or changing the expressed terms and provisions of this Lease.

     33. Environmental Matters.

          (a) As used in this Paragraph 33, the following items shall have meanings set forth below:

          (i) “CAA” — shall mean the Clean Air Act, codified at 42 U.S.C. §§ 7401, et seq., as amended.

          (ii) “CERCLA” — shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, codified at 42 U.S.C. §§ 9601, et seq., as amended.

          (iii) “CWA” — shall mean the Clean Water Act, codified at 33 U.S.C. 1251; et seq., as amended.

          (iv) “Environmental Laws” — shall mean CERCLA, HMTA, RCRA, CAA, CWA, TSCA, RHA and the Right-to-Know Act and all other federal, local and municipal laws, statutes, ordinances and codes, guidelines and standards relating to

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health, safety, sanitation, and the protection of the environment or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Materials, including, without limitation, laws and regulations regarding the discharge of water or other materials or fluids into waterways, and the rules, regulations, guidelines, decisions, orders and directives of federal, local and municipal governmental agencies, authorities and courts with respect thereto presently in effect or hereafter enacted, promulgated or implemented.

          (v) “Environmental Permits” — shall mean all permits, licenses, approvals, authorizations, consents or registrations required by any applicable Environmental Laws, on either an individual or group basis, in connection with the construction, ownership, use or operation of the Land or the Improvements, or the storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Materials related to the Land.

          (vi) “Hazardous Materials” — shall mean, without limitation, flammables, explosives, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum or petroleum based or related substances, hydrocarbons or like substances and their additives or constituents, and any substances now or hereafter defined as “hazardous substances,” “extremely hazardous substances,” “hazardous wastes” or “toxic chemicals” in CERCLA, HMTA, RCRA, CAA, CWA, TSCA, RHA, the Right-To-Know Act, or any so-called “superfund” or “superlien” law or the regulations promulgated pursuant thereto, or any other applicable federal, state or local law, common law, code, rule, regulation, order, or ordinance, presently in effect or hereafter enacted, promulgated or implemented.

          (vii) “HMTA” — shall mean the Hazardous Materials Transportation Act, codified at 49 U.S.C. §§ 1801, et seq., as amended.

          (viii) “RCRA” — shall mean the Resource Conservation and Recovery Act of 1976, codified at 42 U.S.C. §§ 6901, et seq., as amended.

          (ix) “Release” — shall have the same meaning as given to that term in CERCLA, as amended, and the regulations promulgated thereunder.

          (x) “RHA” shall mean the Rivers and Harbors Appropriation Act, codified at 33 U.S.C. §§ 401, et seq., as amended.

          (xi) “Right-To-Know Act” — shall mean the Emergency Planning and Community Right-To-Know Act, codified at 42 U.S.C. §§ 11001, et seq., as amended.

          (xii) “TSCA” — shall mean the Toxic Substances Control Act, codified at 15 U.S.C. §§ 2601, et seq., as amended.

          (b) Tenant shall comply at all times and in all respects with the provisions of all Environmental Laws and Environmental Permits, and shall not commit any actions or omissions that result in the incurrence of any liability under such Environmental Laws or Environmental Permits. Tenant will not allow, cause or permit any Hazardous Materials to be

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deposited on or under the Land, or otherwise Released or threatened to be Released from or on the Land, or otherwise Released or threatened to be Released from or on the Land or the Improvements or the Additional Improvements, by any Person whatsoever except as normally and properly used in the construction and operation of the Improvements and the Additional Improvements in compliance with all Environmental Laws. Tenant shall conduct all of its activities on the Land and the Improvements and the Additional Improvements, including, without limitation, the off-site disposal of any Hazardous Materials originating on or from the Land or the Improvements or the Additional Improvements, in compliance with all Environmental Laws. Tenant shall obtain, whenever necessary and in its own name, appropriate Environmental Permits for its operations and shall comply in all respects with the requirements of such Environmental Permits.

          (c) Tenant hereby agrees to indemnify, hold harmless and defend Landlord, the Trustee, the Credit Facility Provider and the State, and their partners, officers, directors, lenders, agents and employees from and against any and all claims, losses, damages, liabilities, penalties, costs, assessments, expenses, demands, fines or liabilities of whatever kind or nature, including, without limitation, costs, expenses (including expense of posting a bond) and liabilities imposed upon Landlord pursuant to any indenture or other document, in any way relating to or arising out of:

          (i) The Release or threat of Release of any Hazardous Materials in, on, above, from or under the Land or Improvements or the Additional Improvements during the Term hereof;

          (ii) Any activity by any party on, off or within the Land or the Improvements or the Additional Improvements in connection with the use, handling, treatment, monitoring, removal, storage, decontamination, clean up, testing, transportation or disposal of any Hazardous Materials located at any time on, within or under the Land or the Improvements or the Additional Improvements and introduced onto the Land or the Improvements or the Additional Improvements at any time on or after the commencement of the Term and prior to the expiration or other termination of this Lease;

          (iii) The use, handling, treatment, monitoring, removal, storage, decontamination, clean-up, testing, transportation or disposal of any Hazardous Materials on, under or within the Land or the Improvements or the Additional Improvements which were introduced onto the Land or into the Improvements or the Additional Improvements at any time on or after the commencement of the Term and prior to the expiration or other termination of this Lease;

          (iv) The performance by Tenant or any other Person acting on behalf of Tenant during the Term of any inspection, investigation, audit, study, sampling, testing, removal, containment or other remedial action or other clean-up related to Hazardous Materials on, above, within, related to, or affected by, the Land or the Improvements;

          (v) The imposition, recording or filing of any lien (including, without limitation, a so-called “superlien”) against the Land or the Improvements or the Additional Improvements as a result of the incurrence by any party of any claims,

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expenses, demands, losses, costs, fines or liabilities of whatever kind or nature with respect to any actual, suspected or threatened Release of Hazardous Materials or environmental condition, on, above, within, related to, or affected by, the Land or the Improvements or the Additional Improvements at any time after the Lease Commencement Date and prior to the expiration or other termination of this Lease; or

          (vi) The violation by Tenant of any applicable Environmental Laws or Environmental Permits with respect to the Land or the Improvements or the Additional Improvements. The provisions of this subparagraph (c) shall survive the expiration or any other termination of this Lease.

          (d) Landlord has delivered to Tenant an undated “Phase I” environmental report referred to as “Phase I Environmental Assessment Results Belward Research Campus, Parcel A, Montgomery County, MD”, prepared in June/July 1997 by ManTech Environmental Corporation, as supplemented by the reliance letter from ManTech Environmental Corporation dated as of December 23, 1997 and the letter from Apex Environmental, Inc. dated as of December 23, 1997, and as further supplemented by the letter from ManTech Environmental Corporation dated as of December 21, 1999, indicating any presence of any Hazardous Materials on, above or below the Land, or of the Release or threat of Release of any Hazardous Materials existing prior to the commencement of the Term.

          (e) Unless Tenant purchases the Leased Premises as provided in Paragraph 6(b), no less than nine months prior to the expiration of the Term hereof, Tenant shall cause to be prepared, by an environmental consultant reasonably acceptable to Landlord, an environmental assessment of the Land and the Improvements and the Additional Improvements (the “Assessment”), which shall identify the presence or probable presence of any Hazardous Materials on, above or below the Land or the Improvements or the Additional Improvements, or the Release or threat of Release of any Hazardous Materials or any violation of any Environmental Laws with respect to the Land and the Improvements and the Additional Improvements or Tenant’s operations thereon or therein. To the extent that the Assessment identifies any such Hazardous Materials, Releases or threatened Releases or violations, Tenant shall take all such measures, including, without limitation, any and all such measures as shall be recommended by such environmental consultant, to remove, remedy and/or cure such condition, so that, by the end of the Term hereof, no Hazardous Materials shall be present on, above, within or under the Land or the Improvements or the Additional Improvements, no Release or threat of Release of Hazardous Materials exists, and no violation of Environmental Laws shall exist with respect to the Land or the Improvements or the Additional Improvements or Tenant’s operations thereon or therein. Any such response actions undertaken by Tenant shall comply fully with all applicable Environmental Laws. If Tenant fails to provide the Assessment to Landlord by the date that is nine months prior to the expiration of the Term, or fails to take such recommended measures and to remove any Hazardous Materials and comply with all Environmental Laws as aforesaid, Landlord may, but shall not be obligated to, have such Assessment prepared and such removal and/or remedial measures undertaken at the expense of Tenant, the costs of which shall be considered Additional Rent hereunder. The foregoing provisions of this subparagraph (e) shall survive the expiration or any other termination of this Lease and shall not be construed to relieve Tenant in any way of its continuing obligations throughout the Term to comply with the provisions of subparagraph (b) above.

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          (f) Unless Tenant purchases the Leased Premises as provided in Paragraph 6(b), as a condition of any termination of this Lease, Tenant shall cause to be prepared, by an environmental consultant reasonably acceptable to Landlord, an Assessment which shall identify the presence or probable presence of any Hazardous Materials on, above or below the Land or the Improvements or the Additional Improvements, or the Release or threat of Release of any Hazardous Materials or any violation of any Environmental Laws with respect to the Land and the Improvements and the Additional Improvements or Tenant’s operations thereon or therein. To the extent that the Assessment identifies any such Hazardous Materials, Releases or threatened Releases or violations, Tenant shall take all such measures, including, without limitation, any and all such measures as shall be recommended by such environmental consultant, to remove, remedy and/or cure such condition, so that, as soon as practicable after the termination of this Lease, no Hazardous Materials shall be present on, above, within or under the Land or the Improvements or the Additional Improvements, no Release or threat of Release of Hazardous Materials exists, and no violation of Environmental Laws shall exist with respect to the Land or the Improvements or the Additional Improvements or Tenant’s operations thereon or therein. Any such response actions undertaken by Tenant shall comply fully with all applicable Environmental Laws. If Tenant fails to engage an environmental consultant to provide the Assessment to Landlord within fifteen (15) days of the event which causes or permits termination of this Lease, or fails to take such recommended measures and to remove any Hazardous Materials and comply with all Environmental Laws as aforesaid, Landlord may, but shall not be obligated to, have such Assessment prepared and such removal and/or remedial measures undertaken at the expense of Tenant, the costs of which shall be considered Additional Rent hereunder. The foregoing provisions of this subparagraph (f) shall survive the expiration or any other termination of this Lease and shall not be construed to relieve Tenant in any way of its continuing obligations throughout the Term to comply with the provisions of subparagraph (b) above.

     34. Quiet Enjoyment. So long as no Event of Default exists hereunder, and subject to the terms of this Lease, the Deed of Trust, the 1997 Deeds of Trust, any Encumbrance, and any other matters of record, Landlord warrants peaceful and quiet occupation and enjoyment of the Leased Premises by Tenant, free of hindrance by Landlord or anyone claiming by or through Landlord.

     35. Dealings With Credit Facility Provider. Notwithstanding any other provision of this Lease, the Bond Documents and the Credit Facility Documents, as between Tenant and the Credit Facility Provider, Tenant shall deal solely and directly with the Credit Facility Provider in connection with all matters relating to the transactions contemplated by this Lease, the Bond Documents and the Credit Facility Documents, and Tenant shall be entitled to rely upon any consents, waivers or approvals given by the Credit Facility Provider.

     36. Nature of Transaction. With respect to the Leased Premises, it is the intent of Tenant and the Credit Facility Provider that, for federal, state and local tax purposes and for bankruptcy, commercial and regulatory law and all other purposes, this Lease and the transactions contemplated by the Operative Documents shall be treated as the repayment and security provisions of a loan by Landlord and the Credit Facility Provider to Tenant, that Tenant shall be treated as the legal and beneficial owner entitled to any and all benefits of ownership of

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such Leased Premises and that all payments of Basic Rent during the Term shall be treated as payments of interest and, if applicable, principal.

     37. Grant of Lien and Future Assurances.

          (a) Intent of the Parties. It is the intent of the parties hereto that this Lease grants a security interest and deed of trust lien, as the case may be, on the Leased Premises and the other Tenant Collateral to and for the benefit of Landlord (for the benefit of Landlord and the Credit Facility Provider) to secure Tenant’s performance under and payment of all amounts under this Lease and the other Operative Documents.

          (b) Transactions to be Regarded as Loans. Specifically, without limiting the generality of Paragraph 36, Landlord and Tenant intend and agree that in the event of any insolvency or receivership proceedings or a petition under the United States bankruptcy laws or any other applicable insolvency laws or statute of the United States of America or any State or Commonwealth thereof affecting Tenant, Landlord, the Credit Facility Provider or any collection actions, the transactions evidenced by the Operative Documents shall be regarded as loans made by Landlord and the Credit Facility Provider as unrelated third party lenders to or for the benefit of Tenant secured by the Leased Premises and the other Tenant Collateral.

          (c) Mortgage Lien. Specifically, without limiting the generality of Paragraph 36, Tenant has mortgaged, granted, bargained, sold, conveyed and confirmed, and does hereby mortgage, grant, bargain, sell, convey and confirm, a lien on the Leased Premises and the other Tenant Collateral to secure to Landlord (for the benefit of Landlord and the Credit Facility Provider) (i) all amounts advanced by Landlord and the Credit Facility Provider pursuant to the terms of the Operative Documents, together with interest thereon, and all other amounts payable under the Operative Documents in connection therewith and (ii) all other obligations of Tenant under the Operative Documents, effective on the date hereof.

          (d) Security Agreement. Specifically, but without limiting the generality of Paragraph 36, Landlord and Tenant further intend and agree that, for the purpose of securing the payment of the above-described amounts and to further secure all other obligations of Tenant under the Operative Documents, (i) this Lease shall also be deemed to be a security agreement and financing statement within the meaning of Article 9 of the Maryland Uniform Commercial Code (it being understood that Tenant hereby conveys and warrants and grants a security interest in the Leased Premises and the other Tenant Collateral to Landlord (for the benefit of Landlord and the Credit Facility Provider) to secure all amounts advanced by Landlord and the Credit Facility Provider pursuant to the terms of the Operative Documents, together with interest thereon, and all other amounts payable under the Operative Documents and all other obligations of Tenant under the Operative Documents); (ii) the possession by Landlord or any of its agents of notes and such other items of property as constitute instruments, money, negotiable documents or chattel paper shall be deemed to be “possession by the secured party” for purposes of perfecting the security interest pursuant to Section 9-313 of the Maryland Uniform Commercial Code; and (iii) notifications to Persons holding such property, and acknowledgments, receipts or confirmations from financial intermediaries, bankers or agents (as applicable) of Tenant shall be deemed to have been given for the purpose of perfecting such security interest under any Law. Landlord and Tenant shall, to the extent consistent with this

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Lease, take such actions and execute, deliver, file and record such other documents, financing statements and mortgages as may be necessary to ensure that, if the Lease was deemed to create a security interest in the Leased Premises and the other Tenant Collateral in accordance with this Paragraph 37, such security interest would be deemed to be a first priority perfected security interest (subject only to the Deed of Trust and the 1997 Deeds of Trust) and will be maintained as such throughout the Term.

          (e) Deed of Trust. Specifically, but without limiting the foregoing or the generality of Paragraph 36, Tenant hereby grants, bargains, sells, warrants, conveys, aliens, remises, releases, assigns, sets over and confirms to Sean V. Timms and Arthur L. Perraud (collectively, the “Deed of Trust Trustees”) all of Tenant’s right, title, and interest in and to the following (collectively, the “Mortgaged Property”): (i) the Leased Premises and all appurtenances relating thereto and all proceeds, both cash and noncash thereof; (ii) all easements, rights-of-way, strips and gores of land, vaults, streets, ways, alleys, passages, sewer rights, waters, water courses, water rights, minerals, flowers, shrubs, crops, trees, timber and other emblements, and all estates, rights, titles, interests, tenements, hereditaments and appurtenances, reversions and remainders whatsoever, in any way belonging, relating or appertaining to the Leased Premises or any part thereof, whether now owned or hereafter acquired by Tenant; (iii) all right, title and interest of Tenant in any and all leases, rental agreements and arrangements of any sort now or hereafter affecting the Leased Premises or any portion thereof and providing for or resulting in the payment of money to Tenant for the use of the Leased Premises or any portion thereof, irrespective of whether such leases, rental agreements and arrangements be oral or written, and including any and all extensions, renewals and modifications thereof (the “Subject Leases”) and guaranties of the performance or obligations of any lessees thereunder, together with all income, rents, issues, profits and revenues from the Subject Leases (including all lessee security deposits and all other lessee deposits, whether held by Tenant or in a trust account, and all other deposits and escrow funds relating to any Subject Leases), and all the estate, right, title, interest, property, possession, claim and demand whatsoever at law, as well as in equity, of Tenant of, in and to the same; provided, however, that although this Lease contains (and it is hereby agreed that this Lease contains) a present, current, unconditional and absolute assignment of all of said income, rents, issues, profits and revenues, Tenant shall collect and apply such rental payments and revenues as provided in this Lease and the other Operative Documents; (iv) all right, title and interest of Tenant in, to and under all franchise agreements, management contracts, consents, authorizations, certificates and other rights of every kind and character of any of the Leased Premises, to the extent the same are transferable, service contracts, utility contracts, leases of equipment, and all other contracts, licenses and permits now or hereafter affecting the Leased Premises or any part thereof and all guaranties and warranties with respect to any of the foregoing (the “Subject Contracts”); (v) all right, title and interest of Tenant in any insurance policies or binders now or hereafter relating to the Leased Premises, including any unearned premiums thereon, as further provided in this Lease; (vi) all right, title and interest of Tenant in any and all awards, payments, proceeds and the right to receive the same, either before or after any foreclosure hereunder, as a result of any temporary or permanent injury or damage to, taking of or decrease in the value of the Leased Premises by reason of casualty, condemnation or otherwise as further provided in this Lease; (vii) all right, title and interest of Tenant in all utility, escrow and all other deposits (and all letters of credit, certificates of deposit, negotiable instruments and other rights and evidence of rights to cash) now or hereafter relating to the

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Leased Premises or the purchase, construction or operation thereof; (viii) all claims and causes of action arising from or otherwise related to any of the foregoing, and all rights and judgments related to any legal actions in connection with such claims or causes of action; (ix) all Alterations, extensions, additions, improvements, betterments, renewals and replacements, substitutions, or proceeds of any of the foregoing acquired with proceeds of any of the property described hereinabove; all of which foregoing items are hereby declared and shall be deemed to be a portion of the security for the indebtedness and obligations herein described, a portion of the above described collateral being located upon the Land; and (x) all of the other Tenant Collateral, IN TRUST, HOWEVER, WITH POWER OF SALE, to secure (i) all amounts advanced by Landlord and the Credit Facility Provider pursuant to the terms of the Operative Documents, together with interest thereon, and all other amounts payable under the Operative Documents in connection therewith and (ii) all other obligations of Tenant under the Operative Documents, effective on the date hereof.

          (f) Power of Sale Remedies. Without limiting any other remedies set forth herein, in the event that a court of competent jurisdiction rules that this Lease constitutes a deed of trust or other secured financing with respect to the Leased Premises as is the intent of the parties pursuant to this Paragraph 37, then Landlord and Tenant agree that, upon the occurrence and during the continuance of any Event of Default, the Deed of Trust Trustees may, and are hereby irrevocably empowered to, with or without entry, and to the extent permitted by applicable law, sell or cause the sale of the Leased Premises or any part or parts thereof at one or more public auctions as an entirety or in parcels as Landlord may elect free from any equity of redemption for cash, on credit, or for other property, for immediate or future delivery, and on such terms as the Deed of Trust Trustees shall deem advantageous and proper, such sale or sales to be made in such manner and upon such notice and advertisement as may be required by applicable law, or in the absence of any such requirements, as Landlord may deem appropriate, and to make conveyance to the purchase or purchasers. Notwithstanding the foregoing, upon the occurrence of an Event of Default, Landlord may, at its option, proceed to foreclose on the Leased Premises by judicial foreclosure.

Waiver. Tenant Acknowledges and agrees that if it defaults, a non-judicial foreclosure sale of the Leased Premises, if permitted by law, may be conducted without a hearing of any kind and without notice beyond the publication and posting of the notice of sale as required by law. tenant hereby waives to the extent permitted by law any rights it may have to any such hearing and notice.

          (g) UCC Remedies. In addition to any other remedies granted in this Lease to Landlord (including specifically, but not limited to, the right to proceed against the Leased Premises in accordance with the rights and remedies in respect to those portions of the Leased Premises which are real property pursuant to Section 9-604(a) of the Maryland Uniform Commercial Code), Landlord may proceed under the Maryland Uniform Commercial Code as to all or any part of the personal property (tangible or intangible) and fixtures included with the Leased Premises (such portion of the Leased Premises being referred to herein as the “Personalty”) and shall have and may exercise with respect to the Personalty all the rights, remedies, and powers of a secured party under the Maryland Uniform Commercial Code, including, without limitation, the right and power to sell, at one or more public or private sales, or otherwise dispose of, lease, or utilize the Personalty and any part or parts thereof in any

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manner authorized or permitted under the Maryland Uniform Commercial Code after default by a debtor, and to apply the proceeds thereof toward payment of any costs and expenses and attorney’s fees and legal expenses thereby incurred by Landlord, and toward payment of the indebtedness hereby secured in such order or manner as provided herein. Any requirement of the Maryland Uniform Commercial Code for reasonable notification shall be met by mailing written notice to Tenant at its address set forth in Exhibit E hereto at least ten (10) days prior to the sale or other event for which such notice is required.

          (h) Judicial Remedies. Landlord may proceed to protect and enforce its rights by a suit or suits in equity or at law, or for the specific performance of any covenant or agreement contained herein or in the Operative Documents, or in aid of the execution of any power herein or therein granted, or for the foreclosure of the mortgage lien created by this Lease, or for the enforcement of any other appropriate legal or equitable remedy and in aid thereof Tenant hereby assents to the passage of a decree by the equity court having jurisdiction. Upon the bringing of any suit to foreclose the mortgage lien created by this Lease or to enforce any other remedy available hereunder, Landlord shall be entitled as a matter of right, without notice and without giving bond to Tenant or anyone claiming under, by or through it, and without regard to the solvency or insolvency of Tenant or the then value of the premises, to have a receiver appointed of all the Leased Premises and of the earnings, income, rents, issues, profits and proceeds thereof, with such power as the court making such appointment shall confer, and Tenant does hereby irrevocably consent to such appointment.

          (i) Acceleration of Payments under the Letter of Credit Agreements and Other Operative Documents. In case of any sale of the Leased Premises, or of any part thereof, pursuant to any judgment or decree of any court or otherwise in connection with the enforcement of any of the terms of this Lease, all outstanding amounts due and owing under the Letter of Credit Agreements and the other Operative Documents, if not previously due, and the interest accrued thereon, if any, shall at once become and be immediately due and payable; also in the case of any such sale, Landlord may bid and become the purchaser, and the purchaser or purchasers, for the purpose of making settlement for or payment of the purchase price, shall be entitled to turn in and use all outstanding amounts due and owing under the Letter of Credit Agreements and the other Operative Documents, and any claims for interest due and unpaid thereon, in order that there may be credited as paid on the purchase price the sum apportionable and applicable to all outstanding amounts due and owing under the Letter of Credit Agreements and the other Operative Documents, including principal and interest thereon, out of the net proceeds of such sale after allowing for the proportion of the total purchase price required to be paid in actual cash. If at any foreclosure proceeding the Leased Premises shall be sold for a sum less than the total amount of indebtedness for which judgment is therein given, the judgment creditor shall be entitled to the entry of a deficiency decree against Tenant and against the property of Tenant for the amount of such deficiency.

          (j) Attorney-in-Fact. Tenant hereby irrevocably appoints Landlord as Tenant’s attorney-in-fact, with full authority in the place and stead of Tenant and in the name of Tenant or otherwise, from time to time in Landlord’s discretion, to execute any instrument which Landlord may deem necessary or advisable to accomplish the purposes of this Lease (subject to any limitations set forth in the Operative Documents), and to take any action (including any action that Tenant is entitled to take), including, without limitation:

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          (i) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for money due and to become due under or in connection with all or any portion of the Leased Premises and the other Tenant Collateral;

          (ii) to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with the foregoing clause (a);

          (iii) to file any claim or take any action or institute any proceedings which Landlord may deem to be necessary or advisable for the collection thereof or to enforce compliance with the terms and conditions of this Lease; and

          (iv) to perform any affirmative obligations of Tenant hereunder, including the execution of mortgages, financing statements and other documents.

     Tenant hereby acknowledges, consents and agrees that the power of attorney granted pursuant to this subparagraph (j) is irrevocable and coupled with an interest. Notwithstanding anything contained herein to the contrary, the rights and powers presently granted Landlord by this subparagraph (j) may be exercised by Landlord only upon the occurrence and during the continuance of an Event of Default.

     38. Miscellaneous.

          (a) This Lease may be executed in any number of counterparts, each of which shall be an original, but all of which shall together constitute one and the same instrument.

          (b) References to the masculine shall include the feminine and neuter and the plural shall include the singular, as the context may require.

          (c) This Lease shall be construed and enforced in accordance with the Law of the State of Maryland.

          (d) Time is of the essence with respect to each and every provision of this Lease.

          (e) With respect to any provision of this Lease which requires Landlord to not unreasonably withhold its consent or approval, if in connection therewith Landlord is obligated under the Deed of Trust, the 1997 Deeds of Trust, the Credit Facility Documents, the Bond Documents, the State Loan Documents or applicable Law to obtain the consent or approval of the Trustee, the Credit Facility Provider, the State or any other third party, then Landlord’s failure to provide consent or failure to otherwise act in a reasonable manner because of its inability to obtain the consent or approval of the Trustee, the Credit Facility Provider, the State or other third party shall not be deemed unreasonable, so long as Landlord has made a good faith effort to obtain such consent.

          (f) Upon the satisfaction of the Deed of Trust and the 1997 Deeds of Trust, references in this Lease to the Credit Facility Provider, the Trustee, the State, the Credit Facilities, the Credit Facility Agreement, the Deed of Trust, the 1997 Deeds of Trust and the

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Credit Facility Documents shall be ineffective, and Tenant shall no longer be obligated to comply with the covenants contained in Paragraphs 26(g), (h), (i) or (j) and in Paragraph 27.

          (g) The parties hereto acknowledge that the provisions of this Lease have been tailored to specific financing accommodations provided by Landlord, the Credit Facility Provider and the State, including the Bonds and the Credit Facilities pursuant to the terms of the Bond Documents and the Credit Facility Documents. In the event it becomes necessary to replace all or any portion of these accommodations, Landlord shall exert good faith efforts to obtain financing on the best terms available. Landlord and Tenant agree to negotiate in good faith to amend this Lease to re-tailor this Lease to suit such replacement financing, upon terms mutually agreeable to Landlord, Tenant and the financial institution providing or participating in such financing and it is acknowledged and agreed that Tenant’s rental obligations hereunder will be restructured to provide for the payment of all interest and all related expenses of such replacement financing in the event such interest and related expenses under the replacement financing are not identical to those payable under the Bonds and the Credit Facility Documents and the State Loan Documents. The parties hereto also acknowledge that in the event it becomes necessary to obtain replacement financing for any reason other than (i) Landlord’s misappropriation of funds or (ii) a default by Landlord hereunder or under the Bond Documents or the Credit Facility Documents not caused directly or indirectly by the act or omission of Tenant, all expenses incurred by Landlord in connection with such replacement financing shall be paid by Tenant as Additional Rent.

          (h) Landlord and Tenant hereby agree and consent that any action or proceeding arising out of or brought to enforce the provisions of this Lease may be brought in any appropriate court in Montgomery County, Maryland or Baltimore City, Maryland, and by the execution of this Lease Landlord and Tenant irrevocably consent to the jurisdiction of each such court.

          (i) If for any reason Landlord or Tenant should become not qualified to do business in the State, Landlord and Tenant hereby agree to designate and appoint, without power of revocation, an agent for service of process within the State, as the agent for Landlord or Tenant, as applicable, upon whom may be served all process, pleadings, notice or other papers which may be served upon Landlord or Tenant, as applicable, as a result of any of Landlord’s or Tenant’s, as applicable, obligations under this Lease.

          (j) Landlord and Tenant covenant that throughout the Term, if a new agent for service of process within the State is designated pursuant to the terms of subparagraph (i) above, Landlord or Tenant, as applicable, will immediately file with the other party hereto the name and address of such new agent and the date on which such appointment is to become effective.

          (k) Landlord and Tenant hereby jointly waive trial by jury in any action or proceeding to which Landlord and Tenant may be parties, arising out of or in any way pertaining to this Lease. This waiver is knowingly, willingly and voluntarily made by Landlord and Tenant, each of which hereby represents that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. Each of Landlord and Tenant further represents that it has been represented in the signing of this

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Lease and in the making of this waiver by independent legal counsel, selected of its own free will, and that it has had the opportunity to discuss this waiver with counsel.

          (l) Landlord has issued the Bonds to, inter alia, fund the costs of the construction and equipping (but excluding the Tenant’s Equipment) of the Additional Improvements. With respect to the Bonds, Landlord agrees that Landlord, upon Tenant’s request, shall agree to procure substitute Credit Facilities upon terms and conditions mutually satisfactory to Landlord and Tenant.

          (m) Landlord and Tenant acknowledge and agree that this Lease amends and restates the 1999 Lease in its entirety.

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     IN WITNESS WHEREOF, Landlord and Tenant have caused this Amended and Restated Lease Agreement to be signed on their behalf, under seal, by their respective signatories thereunto duly organized as of the date first above written.

WITNESS/ATTEST:	MARYLAND ECONOMIC DEVELOPMENT CORPORATION, Landlord
	By:	/s/ Robert C. Brennan	(SEAL)
		Robert C. Brennan
		Executive Director
	HUMAN GENOME SCIENCES, INC., Tenant
	By:	/s/ H. Thomas Watkins	(SEAL)
		H. Thomas Watkins
		President and Chief Executive Officer

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EXHIBIT A

DESCRIPTION OF LAND

     Lot 3, Block “A” as delineated on a Subdivision Record Plat entitled “Lots 3 & 4 Block “A,” The Johns Hopkins Belward Research Campus” and recorded among the Land Records of Montgomery County as Plat Number 21627.

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EXHIBIT B

[INTENTIONALLY OMITTED]

EXHIBIT C

Human Genome Sciences, Inc.
Pilot Plant Expansion
Excluded Equipment List

Equipment platforms

Casework

Telephone system

Furniture

Bench top lab equipment

75 KVA UPS systems

600 KVA emergency generator

Instruments — Attachment A

PLC hardware & software — Attachment B

Boiler, 2 chillers, tower, RO water system

HVAC — Attachment C

Fume hoods — Attachment D

Process equipment — Attachment D

Mechanical process equipment — Attachment D

Process equipment — Attachment D

Cold rooms — Attachment E

computer, furniture and bench top lab equipment

EXHIBIT D

SCHEDULE OF OPTION PURCHASE PRICES

[SEE ATTACHED]

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EXHIBIT E

NOTICE AND PAYMENT ADDRESSES

If to Landlord:
Notices:	Maryland Economic Development Corporation
	100 N. Charles Street, Suite 630
	Baltimore, Maryland 21201
	Attention: Executive Director
	with a copy to:
	Teri M. Guarnaccia, Esquire
	Ballard Spahr LLP
	300 East Lombard Street, 18th Floor
	Baltimore, Maryland 21202
Payments:	Basic Rent
	By Electronic Transfer:
	Manufacturers and Traders Trust Company
	Baltimore, Maryland 21201
	By Mail:
	MEDCO
	100 N. Charles Street, Suite 630
	Baltimore, Maryland 21201
	Attention: Executive Director
If to Tenant:
Notices:	Human Genome Sciences, Inc.
	14200 Shady Grove Road
	Rockville, Maryland 20850
	Attention: James H. Davis
	Executive Vice President, General Counsel
	and Secretary

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If to Bank:
Notices:	Manufacturers and Traders Trust Company
	1 Research Court, Suite 400
	Rockville, Maryland 20850
	Attention: Arthur L. Perraud
	Manufacturers and Traders Trust Company
	25 South Charles Street, 11th Floor
	Baltimore, Maryland 21201
	Attention: Letter of Credit Department
	with a copy to:
	Nancy R. Little, Esquire
	McGuireWoods LLP
	One James Center
	901 East Cary Street
	Richmond, Virginia 23219
If to State:
Notices:	Department of Business and Economic Development
	217 East Redwood Street, 22nd Floor
	Baltimore, Maryland 21202
	Attention: Director of Community Financing Group
	Programs

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EX-10.13

Exhibit 10.13

HUMAN GENOME SCIENCES, INC.,
as Lessee

and

MANUFACTURERS AND TRADERS TRUST COMPANY,
as Bank

REIMBURSEMENT AGREEMENT

$17,500,000
Maryland Economic Development Corporation
Taxable Variable Rate Demand/Fixed Rate Revenue Bonds

(Human Genome Sciences, Inc. Facility)
Series 1999 A and B

Dated as of December 1, 2009

TABLE OF CONTENTS

     (This Table of Contents is not a part of the Reimbursement Agreement and is only for convenience of reference.)

SECTION	PAGE
RECITALS		1
AGREEMENTS		2

ARTICLE I
DEFINITIONS

Section 1.1 Definitions	2
Section 1.2 Rules of Construction	9

ARTICLE II
EFFECTIVE DATE OF REIMBURSEMENT
AGREEMENT; DURATION OF TERM

Section 2.1 Effective Date of Reimbursement Agreement; Duration of Term 9

ARTICLE III
PAYMENT PROVISIONS

Section 3.1 Reimbursement and Other Payments	10
Section 3.2 Payments due Upon Expiration of Letter of Credit	12
Section 3.3 Late Payments	13
Section 3.4 Increased Costs Due to Change in Law	13
Section 3.5 Computation	14
Section 3.6 Payment Procedure	14
Section 3.7 Business Days	14

ARTICLE IV
UNCONDITIONAL OBLIGATIONS

Section 4.1 Obligations Absolute 14

ARTICLE V
REPRESENTATIONS AND WARRANTIES

Section 5.1 Representations, Warranties and Undertakings 15

ARTICLE VI
AFFIRMATIVE COVENANTS OF LESSEE

Section 6.1 Affirmative Covenants of Lessee 16

-i-

ARTICLE VII
INDEMNIFICATION

Section 7.1 Indemnification of Bank	17
Section 7.2 Indemnification Under Letters of Credit and Letter of Credit Agreements	18

ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES

Section 8.1 Events of Default Defined	18
Section 8.2 Remedies on Default	20
Section 8.3 No Remedy Exclusive	21
Section 8.4 Agreement to Pay Attorneys’ Fees and Expenses	22
Section 8.5 Waiver of Event of Default; No Additional Waiver Implied by One Waiver	22

ARTICLE IX
MISCELLANEOUS

Section 9.1 Notices	22
Section 9.2 [Intentionally Omitted]	23
Section 9.3 [Intentionally Omitted]	23
Section 9.4 Binding Effect	23
Section 9.5 Illegality; Severability	23
Section 9.6 Assignment	24
Section 9.7 Consent to Jurisdiction; Service of Process; Waiver of Jury Trial	24
Section 9.8 Further Assurances and Corrective Instruments	24
Section 9.9 Right to Perform; Advances by Bank	25
Section 9.10 Amendments, Changes and Modifications	25
Section 9.11 Execution of Counterparts	25
Section 9.12 Law Governing Construction of Agreement	25
Section 9.13 Effective Date	25
Section 9.14 Conflicting Agreements	25
Section 9.15 Set-off	25

-ii-

REIMBURSEMENT AGREEMENT

     THIS REIMBURSEMENT AGREEMENT is dated as of December 1, 2009 and is made by and between HUMAN GENOME SCIENCES, INC., a Delaware corporation (the “Lessee”), and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation (the “Bank”).

RECITALS

     Certain of the terms and words used in these Recitals are defined in Section 1.1 of this Reimbursement Agreement.

     Pursuant to and in accordance with the Act, the Issuer has previously issued and sold Bonds in the original aggregate principal amount of $17,500,000 for the sole and exclusive purpose of financing a portion of the costs of the Facility. The Issuer leases the Facility to the Lessee pursuant to the Facility Lease.

     The Bonds were issued pursuant to the Indenture.

     In order to enhance the marketability of the Series A Bonds, at the request of the Issuer and the Lessee, Allfirst Bank, a Maryland state-chartered commercial bank (“Allfirst”), predecessor in interest to the Bank, issued to the Trustee the Series A Bonds Letter of Credit to provide payment for, and to secure the payment of the principal of, and interest on, and the purchase price of the Series A Bonds. Allfirst issued the Series A Bonds Letter of Credit pursuant to a Letter of Credit Agreement dated as of December 1, 1999, by and between Allfirst and the Issuer (the “Allfirst Letter of Credit Agreement”).

     In order to enhance the marketability of the Series B Bonds, at the request of the Issuer and the Lessee, First Union National Bank (“First Union”) issued to the Trustee First Union’s irrevocable, transferable direct-pay letter of credit (the “First Union Letter of Credit”) to provide payment for, and to secure the payment of the principal of, and interest on, and the purchase price of the Series B Bonds. First Union issued the First Union Letter of Credit pursuant to a Letter of Credit Agreement dated as of December 1, 1999, by and between First Union and the Issuer.

     The Series A Bonds Letter of Credit and the First Union Letter of Credit each expire on December 15, 2009.

     At the request of the Issuer and the Lessee, the Bank, as successor in interest to Allfirst, has agreed to extend the Series A Bonds Letter of Credit, and, in connection therewith, the Issuer and the Bank have entered into the Series A Bonds Letter of Credit Agreement, which amends and restates the Allfirst Letter of Credit Agreement in its entirety.

     In addition, in substitution for the First Union Letter of Credit, at the request of the Issuer and the Lessee, the Bank has agreed to issue the Series B Bonds Letter of Credit to provide payment for, and to secure the payment of the principal of, and interest on, and the purchase price of the Series B Bonds, and, in connection therewith, the Issuer and the Bank have entered into the Series B Bonds Letter of Credit Agreement.

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     As a condition to the Bank’s extension of the Series A Bonds Letter of Credit and issuance of the Series B Bonds Letter of Credit, the Bank has required that the Lessee enter into this Reimbursement Agreement for the benefit of the Bank.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises, the respective representations, covenants and agreements hereinafter contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

     Section 1.1 Definitions. Certain terms used in this Reimbursement Agreement are defined in this Section or are defined by reference to one of the Bond Documents or one of the other Letter of Credit Documents; and, when and if used herein, such terms shall have the meanings given to them by the language employed in this Section defining such terms or by the language employed in such Bond Document or other Letter of Credit Document defining such terms, unless the context clearly indicates otherwise.

     “Acceleration Drawing” has the meaning given to that term in the Letters of Credit.

     “Act” means Section 10-101, et. seq. of the Economic Development Article of the Annotated Code of Maryland, as amended, and all future laws supplemental thereto or amendatory thereof.

     “Act of Bankruptcy” means the filing of a petition in bankruptcy under the Bankruptcy Code, or the commencement of a proceeding under any other applicable law concerning insolvency, reorganization or bankruptcy.

     “Additional Improvements” means the 43,000 square-foot (approximate) addition to the process development and manufacturing plant located on the Land.

     “Administration Expenses” means compensation, indemnities and reimbursement of fees, expenses and advances payable to the Issuer, the Trustee, the Remarketing Agent, the Paying Agent and the Registrar, all as described in Section 7.10 of the Indenture.

     “Assignment of Leases” means the Assignment, Subordination and Non-Disturbance Agreement of even date herewith executed by and among the Issuer, the Bank and the Lessee, together with any and all Supplements thereto.

     “Bank” means Manufacturers and Traders Trust Company, a New York banking corporation, its successors and assigns.

     “Bankruptcy Code” means the United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq., and all future acts supplemental thereto or amendatory thereof.

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     “Bond Documents” means and includes (without limitation) the Bonds, the Indenture, the Placement and Remarketing Agreement and any and all other documents which the Issuer or any other party or parties or their representatives, have executed and delivered, or may hereafter execute and deliver, to evidence or secure the Issuer’s Bond Obligations or any part thereof, or in connection therewith, together with any and all Supplements thereto.

     “Bond Fund” means the Bond Fund created in Section 5.1 of the Indenture.

     “Bond Payment Date” means any Interest Payment Date or any Sinking Fund Installment Date and any other date on which the principal of, premium (if any) on or interest on the Bonds is to be paid to the Owners thereof (whether at maturity thereof, or by acceleration of maturity or after notice of redemption or prepayment or otherwise).

     “Bond Purchase Drawing” means a Bond Purchase Interest Drawing or a Bond Purchase Principal Drawing.

     “Bond Purchase Interest Drawing” and “Bond Purchase Principal Drawing” each has the meaning given to that term by the Letters of Credit.

     “Bonds” means, collectively, the Series A Bonds and the Series B Bonds.

     “Bonds Tendered or Deemed Tendered for Purchase” has the meaning given to that term in the Letters of Credit.

     “Business Day” or “business day” means a day on which (a) banks located in any of the cities in which the Principal Office of the Trustee, the Bank, the Paying Agent and the Remarketing Agent is located are not required or authorized by law or executive order to close for business, and (b) The New York Stock Exchange is not closed.

     “Collateral Pledge Agreement” means the Collateral Pledge Agreement of even date herewith by and among the Lessee, as Pledgor, the Bank, as Pledgee, and Manufacturers and Traders Trust Company, acting in its capacity as Collateral Agent, together with any and all Supplements thereto.

     “Condemnation Award” has the meaning given to that term in the granting clauses of the Deed of Trust.

     “Deed of Trust” means the Amended and Restated Deed of Trust of even date herewith between the Issuer and the Individual Trustees, together with any and all Supplements thereto.

     “Downgrade” shall mean a withdrawal or a downgrading of one full grade from the long term debt ratings of the Bank as of the date hereof.

     “Eligible Lease Payments” means all payments made by the Lessee under the Facility Lease except (a) any common area maintenance fee or rent or similar charge under the Facility Lease and (b) $1,250 per month.

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     “Event of Default” and “Events of Default” shall have the meanings given to such terms in Section 8.1 hereof.

     “Facility” means the Additional Improvements located on the Land.

     “Facility Lease” means the Amended and Restated Lease Agreement of even date herewith between the Issuer and the Lessee, pursuant to which the Issuer leases the Additional Improvements to the Lessee, together with any and all Supplements thereto.

     “Fixed Rate”, “Fixed Rate Date” and “Fixed Rate Period” each has the meaning given to that term by the Indenture.

     “Government Acts” shall have the meaning given to such term in Section 7.2 hereof.

     “Improvements” has the meaning given to that term in the granting clauses of the Deed of Trust.

     “Indenture” means the Amended and Restated Trust Indenture of even date herewith between the Issuer and the Trustee, together with any and all Supplements thereto.

     “Individual Trustees” means the individual trustees acting as trustees under the Deed of Trust, or their successors in trust who may be acting under and pursuant to the Deed of Trust from time to time.

     “Interest Drawing” has the meaning given to that term by the Letters of Credit.

     “Interest Payment Date” has the meaning given to that term by the Indenture.

     “Issuer” means Maryland Economic Development Corporation, a body politic and corporate and a public instrumentality of the State, its successors and assigns.

     “Issuer’s Bond Obligations” means the limited obligations of the Issuer under the Bond Documents to (a) pay solely from the Trust Estate the principal of, premium (if any) and interest on, and purchase price of, the Bonds as required by Section 7.2 of the Indenture, when and as the same become due and payable (whether at the stated maturity thereof, or by acceleration of maturity or after notice of redemption or prepayment or otherwise), (b) pay from the sources described in Section 4.4 of the Indenture the purchase price of Bonds Tendered or Deemed Tendered for Purchase, (c) pay solely from Eligible Lease Payments all other payments required by the Bond Documents to be paid by the Issuer to the Trustee or to others, when and as the same shall become due and payable, and (d) timely perform, observe and comply with all of the terms, covenants, conditions, stipulations, and agreements, express or implied, which the Issuer is required by the Bond Documents to perform or observe.

     “Issuer’s Letter of Credit Obligations” means the limited obligations of the Issuer under the Letter of Credit Documents to pay all payments required by the Letter of Credit Documents, when and as the same become due and payable, and timely perform, observe and comply with all terms, covenants, conditions, stipulations and agreements, express or implied, which the Issuer is

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required by the Letter of Credit Documents to observe or perform. The “Issuer’s Letter of Credit Obligations” constitute “Issuer’s Credit Facility Obligations” (as defined in the Indenture).

     “Land” means the 10-acre (approximate) tract of land located in Montgomery County, Maryland, and more particularly described in Exhibit A attached to the Deed of Trust and made a part thereof, together with any and all improvements thereon.

     “Lessee” means Human Genome Sciences, Inc., a Delaware corporation, its successors and assigns.

     “Letters of Credit” means, collectively, the Series A Bonds Letter of Credit and the Series B Bonds Letter of Credit.

     “Letter of Credit Agreements” means, collectively, the Series A Bonds Letter of Credit Agreement and the Series B Bonds Letter of Credit Agreement.

     “Letter of Credit Documents” means the Letters of Credit, the Letter of Credit Agreements, the Deed of Trust, the Pledge and Security Agreement, the Pledged Bonds Custody Agreement, the Facility Lease, the Assignment of Leases, the Swap Agreement, the Standstill Agreement, and any and all other documents which the Issuer or any other party or parties or their representatives, have executed and delivered, or may hereafter execute and deliver, to evidence or secure the Issuer’s Letter of Credit Obligations, or any part thereof, or in connection therewith, together with any and all Supplements thereto. The “Letter of Credit Documents” constitute “Credit Facility Documents” (as defined in the Indenture).

     “LIBOR Rate” means the fluctuating annual rate of interest which shall at all times equal the interest rate which the Bank announces and declares from time to time to be its one (1) month London Interbank Offered Rate, adjusted for any Federal Reserve Board requirements imposed on the Bank from time to time. All interest at the LIBOR Rate or computed thereon shall be calculated on the basis of a 360 day-year factor applied to actual days elapsed and shall be adjusted on any date on which a change occurs in the LIBOR Rate.

     “Mandatory Tender Date” and “Mandatory Tender Notice” each has the meaning given to that term by the Indenture.

     “Outstanding”, “outstanding” or “Bonds Outstanding” has the meaning given to that term by the Indenture.

     “Owner” or “Owners” or “Owner of Bonds” or “Owners of Bonds” means the person or persons in whose name any Bond is registered on the books of the Issuer maintained by the Registrar.

     “Paying Agent” means the Trustee, or any successor Paying Agent appointed under the Indenture.

     “Penalty Rate” means the fluctuating rate per annum which is at all times equal to the Reimbursement Rate plus 2% per annum.

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     “Permitted Encumbrances” has the meaning given to that term by the Deed of Trust.

     “Person” or “person” means any natural person, firm, association, corporation, company, trust, partnership, public body or other entity.

     “Placement and Remarketing Agreement” means (a) the Amended and Restated Placement and Remarketing Agreement of even date herewith by and between the Remarketing Agent and the Issuer, together with any and all Supplements thereto, and (b) any other Remarketing Agreement or similar agreement by and between the Remarketing Agent and the Issuer, pursuant to which the Remarketing Agent agrees to use its best efforts to remarket and sell Bonds Tendered or Deemed Tendered for Purchase, together with any and all Supplements thereto.

     “Pledge and Security Agreement” means, collectively, (a) the Series A Bonds Pledge and Security Agreement, (b) the Series B Bonds Pledge and Security Agreement and (c) any other pledge and security agreement or similar agreement between the Issuer and the Credit Facility Provider pursuant to which Pledged Bonds are pledged as security for the Issuer’s Credit Facility Obligations, together with any and all Supplements thereto.

     “Pledged Bonds” means Bonds that, subsequent to a Bond Purchase Principal Drawing, are delivered to and held by the Pledged Bonds Custodian as security for the Issuer’s Letter of Credit Obligations and registered as directed by the Bank.

     “Pledged Bonds Custodian” means Manufacturers and Traders Trust Company, as agent for the Bank under the Pledged Bonds Custody Agreement, or any successor custodian of the Pledged Bonds acting as the Bank’s agent.

     “Pledged Bonds Custody Agreement” means, collectively, (a) the Series A Bonds Pledged Bonds Custody Agreement and (b) the Series B Bonds Pledged Bonds Custody Agreement, together with any and all Supplements thereto.

     “Principal Drawing” has the meaning given to that term by the Letters of Credit.

     “Principal Office” means, with respect to the Trustee, the Registrar, the Paying Agent, the Remarketing Agent, or the Bank, the office designated as such, from time to time, by the respective party in writing to the Issuer, the Trustee, the Paying Agent, the Registrar, the Remarketing Agent, and the Bank.

     “Property” means the Land, the Improvements, and all other items of property included in the term “Property” as used and defined in the granting clauses of the Deed of Trust.

     “Registrar” or “Bond Registrar” means the Trustee, or any successor Registrar appointed under the Indenture.

     “Reimbursement Rate” means the fluctuating rate of interest which is at all times equal to the LIBOR Rate plus 1% per annum.

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     “Remarketing Agent” means Manufacturers and Traders Trust Company, or any successor Remarketing Agent appointed under the Indenture.

     “Series A Bonds” means the Issuer’s $4,375,000 Taxable Variable Rate Demand/Fixed Rate Revenue Bonds (Human Genome Sciences, Inc. Facility), Series 1999 A, issued pursuant to the Indenture.

     “Series A Bonds Letter of Credit” means the Irrevocable Transferable Direct-Pay Letter of Credit No. SB-902681-0101 issued by the Bank’s predecessor in interest, Allfirst, to secure the Series A Bonds and dated December 30, 1999. Any extension, amendment or renewal of or substitution issued by the Bank for Letter of Credit No. SB-902681-0101 shall, without any action on the part of the Issuer, the Trustee or the Bank, be deemed an amendment to Exhibit A to the Series A Bonds Letter of Credit Agreement and shall be deemed a part of Letter of Credit No. SB-902681-0101 as herein described.

     “Series A Bonds Letter of Credit Agreement” means the Amended and Restated Letter of Credit Agreement of even date herewith between the Issuer and the Bank, together with any and all Supplements thereto.

     “Series A Bonds Pledge and Security Agreement” means the Amended and Restated Pledge and Security Agreement of even date herewith between the Issuer and the Bank, together with any and all Supplements thereto.

     “Series A Bonds Pledged Bonds Custody Agreement” means the Amended and Restated Pledged Bonds Custody Agreement of even date herewith between the Bank and the Pledged Bonds Custodian, together with any and all Supplements thereto.

     “Series B Bonds” means the Issuer’s $13,125,000 Taxable Variable Rate Demand/Fixed Rate Revenue Bonds (Human Genome Sciences, Inc. Facility), Series 1999 B, issued pursuant to the Indenture.

     “Series B Bonds Letter of Credit” means the Irrevocable Transferable Direct-Pay Letter of Credit No. SB-913158-0001 issued by the Bank to secure the Series B Bonds and dated the date hereof. Any extension, amendment or renewal of or substitution issued by the Bank for Letter of Credit No. SB-913185-0001 shall, without any action on the part of the Issuer, the Trustee or the Bank, be deemed an amendment to Exhibit A to the Series B Bonds Letter of Credit Agreement and shall be deemed to be part of Letter of Credit No. SB-913185-0001 as herein described.

     “Series B Bonds Letter of Credit Agreement” means the Letter of Credit Agreement of even date herewith between the Issuer and the Bank, together with any and all Supplements thereto.

     “Series B Bonds Pledge and Security Agreement” means the Pledge and Security Agreement of even date herewith between the Issuer and the Bank, together with any and all Supplements thereto.

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     “Series B Bonds Pledged Bonds Custody Agreement” means the Pledged Bonds Custody Agreement of even date herewith between the Bank and the Pledged Bonds Custodian, together with any and all Supplements thereto.

     “Sinking Fund Installment” and “Sinking Fund Installment Date” each has the meaning given to that term by the Indenture.

     “Standstill Agreement” means the Amended and Restated Standstill and Subordination Agreement of even date herewith among the Bank and the Maryland Department of Business and Economic Development, together with any and all Supplements thereto.

     “State” means the State of Maryland.

     “Supplement” or “Supplements” means any and all extensions, renewals, modifications, amendments, supplements and substitutions.

     “Swap Agreement” means, collectively, any ISDA Master Agreement and attached Schedules executed and delivered at any time and from time to time whether before or on or after the date hereof by the Issuer and the Bank, and any and all other documents relating to such Master Agreement, and any and all replacements of or substitutions for such Master Agreement or such other documents, as any such Master Agreement and other documents with attached Schedules or any such replacement or substitution thereof may at any time or from time to time be amended, restated, supplemented or otherwise modified.

     “Swap Obligations” means and includes all present and future indebtedness, obligations and liabilities of the Issuer to the Bank of any nature whatsoever under or in connection with the Swap Agreement, whether such indebtedness, obligations and liabilities are direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due, or now existing or hereafter arising. The Swap Obligations constitute part of the Issuer’s Letter of Credit Obligations.

     “Taxes” means all taxes, water rents, sewer rents, assessments and other governmental or municipal or public or private dues, charges and levies and any prior liens (including federal tax liens) for the Taxes which are or may be levied, imposed or assessed upon the Property or any part thereof, or any leases pertaining thereto, or upon the rents, issues, income or profits thereof, whether any or all of the aforementioned be levied directly or indirectly or as excise taxes or as income taxes.

     “Trust Estate” has the meaning given to that term by the Indenture.

     “Trustee” means Manufacturers and Traders Trust Company, a New York banking corporation having its Principal Office in Baltimore, Maryland, and its successor or successors in the trust created by the Indenture.

     “Variable Rate” has the meaning given to that term by the Indenture.

     “1997 Bond Documents” means the Bond Documents as defined in the 1997 Indenture, together with any and all Supplements thereto.

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     “1997 Bonds” means the $23,000,000 Maryland Economic Development Corporation Taxable Variable Rate Demand/Fixed Rate Revenue Bonds (Human Genome Sciences, Inc. Facility) 1997 Issue.

     “1997 Indenture” means the Trust Indenture dated as of December 1, 1997 between the Issuer and FMB Trust Company, National Association, predecessor in interest to the Trustee, executed in connection with the 1997 Bonds, together with any and all Supplements thereto.

     “1997 Letter of Credit Documents” means the Letter of Credit Documents as defined in the 1997 Indenture, together with any and all Supplements thereto.

ACCOUNTING TERMS

     Unless specifically provided otherwise, all accounting terms have the definitions given them in accordance with generally accepted accounting principles as applied to the applicable person on a consistent basis by its accountants in the preparation of its previous annual financial statements.

     Section 1.2 Rules of Construction. The words “hereof”, “herein”, “hereunder”, “hereto”, and other words of similar import refer to this Reimbursement Agreement in its entirety.

     The terms “agree” and “agreements” contained herein are intended to include and mean “covenant” and “covenants”.

     References to Articles, Sections, and other subdivisions of this Reimbursement Agreement are to the designated Articles, Sections, and other subdivisions of this Reimbursement Agreement as originally executed.

     The headings of this Reimbursement Agreement are for convenience only and shall not define or limit the provisions hereof.

     All references made (a) in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, and (b) in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well.

ARTICLE II

EFFECTIVE DATE OF REIMBURSEMENT AGREEMENT;
DURATION OF TERM

     Section 2.1 Effective Date of Reimbursement Agreement; Duration of Term. This Reimbursement Agreement shall become effective on the date hereof and shall continue in full force and effect until (a) the Letters of Credit have expired as therein provided, and (b) all of the Lessee’s obligations under this Reimbursement Agreement have been fully performed and satisfied.

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     In the event that an Act of Bankruptcy has occurred on or prior to the satisfaction of the conditions specified in the immediately preceding paragraph,, then this Reimbursement Agreement shall continue in full force and effect, and shall not expire, until (a) the Letters of Credit have expired in accordance with their terms, (b) all of the Lessee’s obligations hereunder have been fully performed and satisfied, and (c) either (i) a final order has been issued, holding that the Bank is not required to return any funds it has received from the Issuer or the Lessee, or (ii) all statutes of limitation for all causes of action under Chapter 5 of the Bankruptcy Code have expired.

ARTICLE III

PAYMENT PROVISIONS

     Section 3.1 Reimbursement and Other Payments. In consideration for the Bank’s agreement to extend the Series A Bonds Letter of Credit and to issue the Series B Bonds Letter of Credit, the Lessee hereby unconditionally acknowledges and agrees, for the benefit of the Bank, to pay and perform all of the Issuer’s Letter of Credit Obligations, including, without limitation, the Issuer’s obligation to reimburse the Bank for all amounts drawn under the Letters of Credit and all other amounts advanced or paid by the Bank, plus all expenses, indemnities and other amounts payable to or for the benefit of the Bank under the Letter of Credit Agreements, as and when the same shall become due and payable, provided however, that all such obligations shall be payable by the Lessee on a full recourse basis without regard to Section 14.15 of the Letter of Credit Agreements, and all of the obligations of the Lessee under this Reimbursement Agreement, and such obligations of the Lessee shall include, without limitation, the Lessee’s unconditional promise to pay to the Bank:

          (a) immediately on demand by the Bank, a sum equal to (i) any amount drawn under, or paid by the Bank in good faith under, the Letters of Credit pursuant to a Bond Purchase Principal Drawing, plus (ii) interest on such amount as provided in paragraph (j) below;

          (b) immediately and no later than 5:00 p.m. (without the necessity of any demand by or notice from the Bank) on each date that the Bank pays any amount drawn under, or paid by the Bank in good faith under, the Letters of Credit pursuant to a Principal Drawing or an Interest Drawing or an Acceleration Drawing, a sum equal to (i) such amount so drawn under, or paid by the Bank in good faith under, the Letters of Credit pursuant to a Principal Drawing or an Interest Drawing or an Acceleration Drawing, plus (ii) interest on such amount as provided in paragraph (j) below;

          (c) immediately on demand by the Bank, any amount drawn under, or paid by the Bank in good faith under, the Letters of Credit pursuant to a Bond Purchase Interest Drawing, a sum equal to (i) such amount so drawn under, or paid by the Bank in good faith under, the Letters of Credit pursuant to a Bond Purchase Interest Drawing, plus (ii) interest on such amount as provided in paragraph (j) below

          (d) immediately on demand by the Bank, a sum equal to (i) any and all reasonable charges and expenses (excluding the Bank’s internal overhead) which the Bank may pay or incur relative to the payment of any draft drawn under, or paid by the Bank in good faith

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under, the Letters of Credit or in connection with any amendment or extension of or substitution for or renewal of the Letters of Credit, plus (ii) interest thereon as provided in paragraph (j) below;

          (e) immediately on demand by the Bank, a sum equal to (i) the amount advanced or paid by the Bank pursuant to the provisions of Section 4.7 or Section 14.9 of the Letter of Credit Agreements, plus (ii) interest on such amount as provided in paragraph (j) below, plus (iii) any and all reasonable charges and expenses which the Bank may pay or incur relative to such payment;

          (f) immediately (without the necessity of any demand by or notice from the Bank) as and when due and payable, the Letter of Credit Fee and the Negotiation Fee as set forth in Section 4.1 of the Letter of Credit Agreements (including any additional amounts required by Section 5.4 of the Letter of Credit Agreements), plus interest thereon as provided in paragraph (j) below;

          (g) immediately on demand by the Bank, any and all expenses incurred by the Bank in enforcing any rights under the Letter of Credit Agreements or this Reimbursement Agreement plus interest thereon as provided in paragraph (j) below;

          (h) immediately on demand by the Bank, all other costs and expenses of the Bank, as set forth in the Letter of Credit Agreements (including, without limitation, all costs and expenses payable pursuant to Section 4.6 of the Letter of Credit Agreements) plus interest thereon as provided in paragraph (j) below;

          (i) immediately on demand by the Bank upon any transfer of the Letters of Credit, the transfer charge payable to the Bank pursuant to the Letters of Credit ($750) plus interest thereon as provided in paragraph (j) below (a “transfer” of the Letters of Credit means the designation of a new beneficiary thereunder as a substitute Trustee under the Indenture); and

          (j) immediately on demand by the Bank, interest on any and all amounts and sums payable by the Lessee under this Reimbursement Agreement at any time (including, without limitation, any and all amounts or sums described or referred to in paragraphs (a) through (i) above), such interest being payable from the date such amounts and sums become due until the Bank actually receives payment thereof in full, at the Reimbursement Rate. Interest on any amounts advanced or paid by the Bank or any costs, charges and expenses incurred by the Bank shall be due and payable from the date such amounts are advanced or costs are incurred or paid by the Bank until the Bank actually receives payment thereof in full at the Reimbursement Rate; provided, however, notwithstanding the foregoing provisions of this paragraph, interest on the amounts due pursuant to paragraphs (d), (f) and (h) shall not be due and payable until 15 days after notice to the Lessee of the amounts due.

     The Bank and the Lessee contemplate that pursuant to the Indenture, the amounts paid by the Bank under the Letters of Credit pursuant to a Principal Drawing or an Interest Drawing or a Bond Purchase Interest Drawing, will, in the ordinary course, be repaid directly to the Bank by the Trustee from certain payments made to the Issuer by the Lessee pursuant to the Facility Lease, which payments are to be deposited by the Trustee in the Bond Fund. The Lessee shall

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not, however, be relieved of liability for repaying any such amounts (plus interest thereon, at the Reimbursement Rate, from the date such amounts are paid by the Bank under the Letters of Credit) to the Bank by reason of any action or inaction on the part of the Trustee or any other person which results in a failure by the Bank to actually receive such amounts from the Trustee pursuant to the Indenture or results in any delay in the receipt by the Bank of such amount from the Trustee pursuant to the Indenture.

     All amounts paid by the Bank under the Letters of Credit shall bear interest from the date such amounts are paid by the Bank until such time as such amounts are actually repaid to the Bank.

     In connection with the foregoing, the Lessee acknowledges and agrees as follows: (a) the Issuer shall apply any and all amounts which it receives in respect of the principal of and interest on the Pledged Bonds to the repayment of amounts from time to time owing to the Bank under the Letter of Credit Agreements; and (b) notwithstanding any other terms and provisions of any of the Letter of Credit Documents, the amounts set forth hereinabove shall be due and payable in full by the Lessee at the time indicated, regardless of whether or not the Bank (or the Pledged Bonds Custodian, for the account of the Bank) is then holding any Pledged Bonds as a result of any Bond Purchase Principal Drawing and regardless of whether or not the Bank (in its sole discretion) has theretofore extended the time for payment of any amounts payable by the Lessee hereunder.

     Notwithstanding anything to the contrary set forth in this Section, following the date on which the Bank honors a Bond Purchase Principal Drawing, the Bank will not make demand for the payment of the amounts payable under paragraph (a) above in connection with such Bond Purchase Principal Drawing, so long as (1) within 48 hours after the Bank honors such Bond Purchase Principal Drawing (or such longer period of time not to exceed five Business Days if the Trustee advises the Bank that the delay is caused by administrative difficulties), the Pledged Bonds Custodian receives an aggregate principal amount of Bonds equal to the amount of such Bond Purchase Principal Drawing, registered by the Trustee in the Issuer’s name, as owner, and in the Bank’s name, as pledgee, (2) the Bank actually receives all payments of the principal of and interest on such Bonds, when due, (3) no Event of Default shall have occurred and be continuing, and (4) the Letters of Credit shall not have expired. On the date of the expiration of the Letters of Credit, all amounts payable under paragraph (a) above in connection with such Bond Purchase Principal Drawing which shall not have been repaid, together with all accrued and unpaid interest thereon, shall become immediately due and payable, without the necessity of any demand by or notice from the Bank; provided, however, if such Bond Purchase Principal Drawing is the result of a Downgrade, all amounts payable in connection with such Bond Purchase Principal Drawing which shall not have been repaid, together with all accrued and unpaid interest thereon, shall become immediately due and payable, without demand or notice from the Bank, on the day which is 180 days following the date on which the Bank honors such Bond Purchase Principal Drawing.

     Section 3.2 Payments due Upon Expiration of Letters of Credit. On the date on which the Letters of Credit expire, all amounts described in Section 3.1 above, and all other amounts owed to the Bank hereunder, together with all accrued and unpaid interest thereon, shall become immediately due and payable, without the necessity of any demand or notice from the Bank.

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     Section 3.3 Late Payments. In the event any payment required to be made by the Lessee in accordance with the provisions of Section 3.1 or Section 3.2 hereof or in accordance with any other provision of this Reimbursement Agreement is not paid within 15 days from the date on which the same is due and payable, such payment in default shall continue as an obligation of the Lessee, and such payment in default and the entire unpaid balance of all amounts owing hereunder shall bear interest, from the date on which the payment was due until such payment in default is paid in full, at the fluctuating rate which is at all times equal to the Penalty Rate. In addition, the Lessee shall pay (a) a late charge in an amount equal to 2% of the amount of any payment which is made more than 15 days after the date on which the same is due and payable (except for any payment with respect to a Bond Purchase Principal Drawing), and (b) all costs of collection, including reasonable attorneys’ fees, if this Reimbursement Agreement is referred to an attorney for collection after default by the Issuer.

     Section 3.4 Increased Costs Due to Change in Law. If any change in any law, regulation or official directive of any international, federal, state or local governmental authority (whether or not having the force of law) or in the interpretation thereof by any court or administrative agency or compliance by the Bank with any lawful request, law, regulation or directive from any applicable fiscal or monetary authority (whether or not having the force of law) shall either:

          (a) impose, modify or render applicable any reserve, special deposit or similar requirement against letters of credit issued by the Bank or require the inclusion of such letters of credit in any analysis of minimum capital requirements or capital adequacy; or

          (b) subject the Bank to any tax with respect to such letters of credit or any amount payable under the Letter of Credit Agreements (other than a tax on the overall net income of the Bank) imposed by the United States of America or the State; or

          (c) impose on the Bank any other condition regarding the Letter of Credit Agreements or the Letters of Credit, and the result of any such event shall be:

          (i) to increase the cost to the Bank of issuing or maintaining the Letters of Credit or any renewal thereof or of making, funding or maintaining the whole or any part of any unpaid drawing under the Letters of Credit (which increase in cost shall be determined by the Bank’s reasonable allocation of the aggregate of such cost increases resulting from such events); or

          (ii) to reduce the amount of any sum received or receivable by the Bank under the Letter of Credit Agreements or to require the Bank to make any payment or forego any interest; or

          (iii) to reduce the rate of return on the Bank’s capital as a result of issuing or maintaining the Letters of Credit and/or any renewals thereof (which reduction shall be determined by the Bank taking into consideration the Bank’s policies concerning capital adequacy),

then and in each such case, within five (5) days following the Lessee’s receipt of demand therefor from the Bank, the Lessee shall pay to the Bank, from time to time as specified by the

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Bank, additional amounts which shall be sufficient to compensate the Bank for such increased cost, reduction, payment or foregone interest, together with interest on each such amount from the date demanded until payment in full thereof at the Reimbursement Rate. A certificate as to each such increased cost, reduction, payment or foregone interest as a result of any such event, submitted in good faith by the Bank to the Lessee, shall be conclusive evidence of such additional amounts to be paid by the Lessee and the basis therefor, absent manifest error as to the amount thereof.

     Section 3.5 Computation. All payments of interest and other charges under this Reimbursement Agreement shall be computed on the basis of a 360-day year factor applied to the actual number of days elapsed. The rate of interest shall be adjusted on any day on which a change occurs in the LIBOR Rate.

     Section 3.6 Payment Procedure. All payments made by the Lessee under this Reimbursement Agreement shall be made to the Bank in lawful money of the United States of America at the time of payment and in immediately available funds at the Bank’s offices at 25 South Charles Street, Baltimore, Maryland 21201, before 12:00 noon, prevailing Baltimore, Maryland time on the date when due.

     Section 3.7 Business Days. If the date for any payment hereunder is a day which is not a Business Day, then for all purposes of this Reimbursement Agreement the payment then due shall be made on the next following Business Day, and such extension of time shall in each case be included in any computation of payments of interest.

ARTICLE IV

UNCONDITIONAL OBLIGATIONS

     Section 4.1 Obligations Absolute. The obligations of the Lessee under this Reimbursement Agreement shall be paid strictly in accordance with the terms of this Reimbursement Agreement, under any and all circumstances whatsoever; including, without limitation, the following circumstances: (a) any invalidity or unenforceability of the Letters of Credit, the Letter of Credit Agreements or any other agreement or instrument related thereto; (b) any amendment or waiver of, or any consent to or departure from, the terms of the Letters of Credit, the Letter of Credit Agreements or any other agreement or instrument related thereto; (c) the existence of any claim, set-off, defense or other right which the Lessee may have at any time against any beneficiary or any transferee of the Letters of Credit (or any person for whom the Lessee, any such beneficiary or any such transferee may be acting), the Bank or any other Person, whether in connection with this Reimbursement Agreement or any unrelated transaction; (d) any statement or any other document presented under the Letters of Credit proving to be forged, fraudulent, invalid or insufficient in any respect, or any statement therein being untrue or inaccurate in any respect whatsoever; (e) payment by the Bank under the Letters of Credit against presentation of a sight draft or certificate which substantially complies with the terms of the Letters of Credit; (f) the surrender or impairment of any security for the performance or observance of any of the agreements or terms of the Letter of Credit Agreements or this Reimbursement Agreement; or (g) any other circumstance, happening or omission whatsoever, whether or not similar to any of the foregoing. The Lessee understands and agrees that no

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payment under any other agreement will release it from liability hereunder unless the Bank has been indefeasibly paid in full.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

     Section 5.1 Representations, Warranties and Undertakings. The Lessee makes the following representations and warranties to induce the Bank to enter into this Reimbursement Agreement, to enter into the Letter of Credit Agreements, to extend the Series A Bonds Letter of Credit and to issue the Series B Bonds Letter of Credit:

          (a) Authority. The Lessee is a corporation duly organized and validly existing under the laws of the State of Delaware. The Lessee has the power to enter into this Reimbursement Agreement and the transactions contemplated hereunder and to carry out its obligations hereunder. By proper action, the Lessee has duly authorized the execution and delivery of this Reimbursement Agreement.

          (b) Binding Agreements. This Reimbursement Agreement and the Letter of Credit Documents to which the Lessee is a party have been duly and properly authorized, executed, sealed and delivered by the Lessee, constitutes valid and legally binding obligations of the Lessee, and is fully enforceable against the Lessee in accordance with their respective terms; provided, however, that the enforceability and binding nature of this Reimbursement Agreement and the Letter of Credit Documents to which the Lessee is a party are subject to bankruptcy, insolvency, reorganization and other state and federal laws affecting the enforcement of creditors’ rights generally, and, to the extent that certain remedies under such instruments require, or may require, enforcement by a court of equity, such principles of equity as the court having jurisdiction may impose.

          (c) Litigation. There are no proceedings pending or, to the knowledge of the Lessee, threatened in writing before any court or administrative agency which may affect the authority of the Lessee to enter into this Reimbursement Agreement or the Letter of Credit Documents to which the Lessee is a party.

          (d) No Conflicting Agreements, Laws, etc. The execution, delivery and performance by the Lessee of this Reimbursement Agreement and the Letter of Credit Documents to which the Lessee is a party, or any other document required to be delivered hereby by the Lessee, do not constitute a violation or breach of or a default under the Bylaws of the Lessee or any existing mortgage, indenture, contract, instrument or agreement binding on the Lessee or affecting its property, or any provision of law or order of any court binding upon the Lessee.

          (e) Liens or Security Interests. Except for liens being granted to the Bank, there exist no liens or security interests on or with respect to the Property (other than Permitted Encumbrances) or with respect to any security provided by the Lessee to the Bank for the Lessee’s obligations under this Reimbursement Agreement.

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               (f) Full Disclosure. All information heretofore furnished by the Lessee to the Bank in writing for purposes of or in connection with this Reimbursement Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Lessee to the Bank will be, true and accurate in all material respects on the date as of which such information is stated or certified.

ARTICLE VI

AFFIRMATIVE COVENANTS OF LESSEE

     Section 6.1 Affirmative Covenants of Lessee. Until the termination of this Reimbursement Agreement, unless the prior written consent to do otherwise is obtained from the Bank, the Lessee will:

               (a) Financial Statements. Furnish or cause to be furnished to the Bank the following:

     (i) as soon as available but in no event more than forty-five (45) days after filing with the Securities and Exchange Commission (the “SEC”), a copy of the 10Q Report of the Lessee filed with the SEC accompanied by a certificate of the chief financial officer of the Lessee stating whether any event has occurred which constitutes an Event of Default, or which would constitute such an Event of Default with the giving of notice or the lapse of time or both, and, if so, stating the facts with respect thereto; and

     (ii) as soon as available but in no event more than one hundred twenty (120) days after the close of each fiscal year of the Lessee, a copy of the 10K Report of the Lessee filed with the SEC and a copy of the annual audited financial statements relating to the Lessee prepared in accordance with GAAP, which financial statements shall include a balance sheet of the Lessee as at the end of such fiscal year and a statement of earnings and changes in stockholder’s equity of the Lessee for such fiscal year; and

     (iii) promptly upon transmission thereof, copies of any financial statements, proxy statements, reports and the like which the Lessee sends to its shareholders and copies of all registration statements (with exhibits); and

     (iv) with reasonable promptness, such budgets, cash flow projections, financial forecasts and other additional information, reports or statements as the Bank may from time to time reasonably request concerning the Lessee, the Property or any other matter related to the transactions that are the subject of this Reimbursement Agreement.

               (b) Taxes and Claims. Pay and discharge or cause to be paid and discharged all Taxes imposed upon the Property or any income derived therefrom prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might become a lien or charge upon the property. The Lessee shall have the right to contest the validity of any such tax, assessment, charge, levy or claim, by timely and appropriate proceedings, provided that the Lessee shall (a) give the Bank written notice of its intention to contest, (b) diligently prosecute such contest, (c) at all times effectively stay or prevent any official or judicial sale of the Property or any part thereof by reason of nonpayment of any such taxes, and (d) establish

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reasonable reserves for such liabilities being contested if the Bank reasonably determines such reserves to be necessary.

          (c) Compliance with Laws. Comply with all applicable federal, State and local laws, rules and regulations, subject to the Lessee’s right to contest the validity or applicability of any of the foregoing, at its sole cost and expense, in good faith and by appropriate and diligent proceedings.

          (d) Books and Records. Maintain appropriate books and records with respect to the Property and permit access by the Bank and its authorized representatives and employees to the books and records of the Lessee at the offices of the Lessee during normal business hours.

ARTICLE VII

INDEMNIFICATION

     Section 7.1 Indemnification of Bank. To the extent permitted by law, in addition to all amounts payable hereunder, the Lessee shall protect, indemnify, and save harmless the Bank and its officers, employees and agents against and from any and all liabilities, suits, actions, claims, demands, losses, expenses and costs of every kind and nature incurred by, or asserted or imposed against, the Bank and its officers, employees or agents, by reason of (a) any accident, injury (including death) or damage to any person or property, however caused (other than the gross negligence or willful misconduct of the Bank), resulting from, connected with or growing out of any act of commission or omission of the Lessee, or any officers, employees, agents, assignees, contractors or subcontractors of the Lessee or any use, non-use, possession, occupation, condition, operation, service, design, construction, acquisition, maintenance or management of, or on, or in connection with, the Property, or any part thereof; (b) federal and state securities laws, including, without limitation, any failure to register the Bonds, the Letters of Credit or any other “separate security” under federal or state securities laws; (c) solely with respect to information about the Lessee provided by the Lessee, any untrue statement of a material fact or any omission to state a material fact necessary in order to make any statements made, in light of the circumstances under which they were made, not misleading in connection with the sale of the Bonds (other than as a result of the gross negligence or willful misconduct of the Bank); and, in any such case, regardless of whether such liabilities, suits, actions, claims, demands, damages, losses, expenses and costs be against, or be suffered or sustained by, the Bank or its officers, agents or employees, or be against, or be suffered or sustained by, legal entities, officers, agents, or other persons to whom the Bank or its officers, agents or employees, become liable therefor. The Lessee may, and if so requested by the Bank shall, undertake to defend, at its sole cost and expense, any and all suits, actions and proceedings brought against the Bank or its officers, agents or employees in connection with any of the matters indemnified against in this Section. The Bank agrees to give the Lessee timely notice of and shall forward to the Lessee every demand, notice, summons or other process received with respect to any claim or legal proceedings within the purview hereof, but the failure of the Bank to give such notice shall not affect its right to indemnification hereunder, unless such failure shall have deprived the Lessee of a reasonable opportunity to contest any such claim or legal proceeding.

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     If the indemnification provided for herein is held by a court to be unavailable or is insufficient to hold the Bank harmless in respect of any losses, claims, damages or liabilities (or actions in respect thereof), then the Lessee shall contribute to the amount paid or payable by the Bank as a result of the losses, claims, damages or liabilities (or actions in respect thereof) (except those caused by the gross negligence or willful misconduct of the Bank) in such proportion as is appropriate to reflect the relative fault of the Lessee on the one hand and the Bank on the other hand, as well as any other relevant equitable considerations.

     Section 7.2 Indemnification Under Letters of Credit and Letter of Credit Agreements. In addition to all amounts payable hereunder and to the extent permitted by law, the Lessee hereby protects, indemnifies and holds harmless the Bank from and against, and hereby agrees to defend the Bank against, any and all claims, damages, losses, liabilities, costs or expenses whatsoever which the Bank may, at any time, sustain or incur by reason of or in consequence of or arising out of the issuance of the Letters of Credit; it being the intention of the parties that this Reimbursement Agreement shall be construed and applied to protect and indemnify the Bank against any and all risks involved in the issuance of the Letters of Credit all of which risks are hereby assumed by the Lessee, including, without limitation, any and all risks of the acts or omissions, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions, herein called “Government Acts”). Notwithstanding anything to the contrary herein contained, the Lessee shall have no obligation to indemnify the Bank from and against any liability incurred by the Bank arising solely out of the gross negligence or willful misconduct of the Bank. The Bank shall not, in any way, be liable for any failure by the Bank or anyone else to pay any drawing under the Letters of Credit as a result of any Government Acts or any other cause beyond the control of the Bank. Nothing in this Section 7.2 is intended to limit the Issuer’s reimbursement obligations contained in Article V hereof.

     The provisions of this Article shall survive the expiration of the Letters of Credit and the termination of the Bond Documents and the Letter of Credit Documents.

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

     Section 8.1 Events of Default Defined. The following shall be “Events of Default” under this Reimbursement Agreement, and the term “Event of Default” shall mean, whenever it is used in this Reimbursement Agreement, any one or more of the following events:

          (a) Any representation or warranty made herein or any statement or representation made in any certificate, report or opinion (including legal opinions), financial statement or other instrument furnished by the Lessee in connection with this Reimbursement Agreement, the Letters of Credit or the Letter of Credit Agreements, proves to have been incorrect, false or misleading in any material respect when made; or

          (b) The Lessee fails to pay, on the date on which the same is due and payable as herein provided, (i) any payment required by Article III hereof, or (ii) any other payment

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whatsoever required by this Reimbursement Agreement to be paid by the Lessee; and any such failure is not cured within 5 days after notice from the Bank to the Lessee; or

          (c) The Lessee fails to duly and promptly perform, comply with or observe any other term, covenant, condition or agreement contained in this Reimbursement Agreement, which failure remains unremedied for 30 days after written notice thereof shall have been given to the Lessee by the Bank; provided, however, if such failure be such that it cannot be corrected within 30 days, it shall not be an Event of Default if, in the reasonable opinion of the Bank, the Lessee is taking appropriate corrective action to cure the failure and if such failure will not impair the ability of the Lessee to pay or perform the Lessee’s obligations under this Reimbursement Agreement; or

          (d) An Act of Bankruptcy occurs with respect to the Lessee or the Lessee becomes generally unable to pay its debts as they become due; provided, however, if a proceeding with respect to an Act of Bankruptcy is filed or commenced against the Lessee, the same shall not constitute an Event of Default if such proceeding is dismissed within 60 days from the date of such Act of Bankruptcy; or

          (e) An “event of default” or “Event of Default” occurs under the Collateral Pledge Agreement, any of the Bond Documents, any of the Letter of Credit Documents, any of the 1997 Bond Documents or any of the 1997 Letter of Credit Documents; or

          (f) Any execution or attachment is levied against the Lessee’s interest in the Property, or any part thereof, and such execution or attachment is not set aside, discharged, bonded against, or stayed within 30 days after the same is levied; or

          (g) Any change in any zoning ordinance or any other public restriction is enacted, limiting or defining the uses which may be made of the Property or a part thereof, such that the existing use of the Property, as specified in the Letter of Credit Documents, would not be permitted after such restriction or zoning change; or

          (h) The Lessee fails to comply with any requirement of any governmental authority having jurisdiction over the Property within the time required by such governmental authority; or any proceeding is commenced or action taken to enforce any remedy for a violation of any requirement of a governmental authority or any restrictive covenant affecting the Property or any part thereof; provided, however, such failure shall not be an Event of Default if the Lessee is diligently contesting such requirement in good faith; or

          (i) Any amendment to any of the Bond Documents or the Letter of Credit Documents shall have been made without the prior written consent of the Bank; or

          (j) Notwithstanding the provisions of Section 9.5 hereof, if any material provision of this Reimbursement Agreement at any time for any reason ceases to be valid and binding on the Lessee, or is declared to be null and void, or the validity or enforceability thereof is contested by the Lessee or any governmental agency or authority, or the Lessee denies that it has any or further liability or obligation under this Reimbursement Agreement or any of the Bond Documents or the Letter of Credit Documents; or

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          (k) Within 48 hours following a Bond Purchase Principal Drawing (or such longer period of time, not to exceed five Business Days, if the Trustee advises the Bank that the delay is caused by administrative difficulties), the Trustee does not deliver, or cause to be delivered to the Pledged Bonds Custodian an aggregate principal amount of Bonds equal to the amount of the Bond Purchase Principal Drawing, registered in the name of the Bank, as pledgee; or

          (l) Any mechanics’ liens are established against the Property and are not caused to be discharged or bonded against by the Lessee within 30 days after it receives notice of the establishment thereof; or

          (m) The Facility Lease is terminated for any reason prior to the expiration or termination of the Letters of Credit or the full payment and performance of all of the Lessee’s obligations under this Reimbursement Agreement; provided, however, such termination shall not constitute an Event of Default if it is as a result of the Lessee’s exercise of its option to purchase the Property pursuant to the Facility Lease; or

          (n) The Deed of Trust, after delivery thereof, except to the extent permitted by the terms thereof, ceases to create a valid and perfected lien or security interest, as appropriate, of the priority required thereby, on any of the property purported to be covered thereby, or the Issuer or any other person liable for the Issuer’s Letter of Credit Obligations so states in writing.

     Section 8.2 Remedies on Default. Whenever any Event of Default referred to in Section 8.1 hereof occurs, the Bank may take any one or more of the following remedial steps:

          (a) The Bank, at its option, may (i) demand that the Trustee exercise its remedies under the Indenture and accelerate the maturity of the Bonds (in which event the Trustee is required to immediately draw under the Letters of Credit pursuant to Section 9.2(a) of the Indenture), and (ii) declare all amounts payable under Article III hereof (including amounts payable as a result of a drawing under the Letters of Credit as described in clause (i) above), together with all other moneys payable hereunder, to be immediately due and payable, whereupon the same shall become immediately due and payable, by written notice to that effect given to the Lessee, without protest, presentment, or further notice or demand, all of which are expressly waived by the Lessee. Upon such declaration by the Bank, payment of all amounts due under Article III hereof (including amounts payable as a result of a drawing under the Letters of Credit as described in clause (i) above) shall be made immediately by the Lessee, and the Lessee hereby promises to pay such amount immediately, to the Bank. Upon payment in full of all of the Lessee’s obligations under this Reimbursement Agreement, whether contingent or otherwise, but only upon the expiration of this Reimbursement Agreement, any remaining surplus of such funds held by the Bank as a result of payment pursuant to this Section 8.2(a) shall be applied first to pay any unpaid Administration Expenses and any remainder shall be returned to the Lessee, unless otherwise agreed by the Lessee and the Bank.

          (b) The Bank may take whatever action at law or in equity may appear necessary or desirable to collect the payments and other amounts then due and thereafter to become due or to enforce performance and observance of all of the Lessee’s obligations under this Reimbursement Agreement.

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          (c) The Bank, with or without resort to judicial process, may take such steps as the Bank deems appropriate to protect the Property from depredation or injury, including (without limitation) employment of watchmen or other protective services, and any expenses incurred by the Bank in taking such steps shall be paid by the Lessee to the Bank as provided in Section 9.9 hereof.

          (d) The Bank may proceed under the Maryland Uniform Commercial Code (or under the Uniform Commercial Code of any other jurisdiction in which any security for the Issuer’s Letter of Credit Obligations may be located from time to time) as to all or any part of the security for the Issuer’s Letter of Credit Obligations, and in conjunction therewith exercise all of the rights, remedies and powers of a secured party under the Maryland Uniform Commercial Code (or under the Uniform Commercial Code of any other jurisdiction in which any security for the Issuer’s Letter of Credit Obligations may be located from time to time), including, without limitation, taking possession of any security for the Lessee’s obligations under this Reimbursement Agreement without judicial process pursuant to Section 9-609 of the Maryland Uniform Commercial Code. Upon the occurrence of any Event of Default hereunder, the Lessee shall assemble all of the security for the Lessee’s obligations under this Reimbursement Agreement, and make the same available to the Bank. Any notification required by Section 9-611 of the Maryland Uniform Commercial Code shall be deemed reasonably and properly given if mailed certified mail, return receipt requested, postage prepaid, by the Bank to the Lessee at the address specified in Section 9.1 hereof at least 10 days before any sale or other disposition of the security for the Lessee’s obligations under this Reimbursement Agreement, or any portion thereof. Disposition of the security for the Lessee’s obligations under this Reimbursement Agreement, or any portion thereof, shall be deemed commercially reasonable if made pursuant to a public offering advertised at least twice in a newspaper of general circulation in the community in which the Property is located.

          (e) The Bank may exercise any and all remedies available to it under the Collateral Pledge Agreement, any of the Bond Documents and any of the Letter of Credit Documents.

     No action taken pursuant to this Section shall relieve the Lessee from any of the Lessee’s obligations under this Reimbursement Agreement, all of which shall survive any such action, and the Bank may take whatever action at law or in equity as may appear necessary and desirable to collect the payments and other amounts then due and thereafter to become due or to enforce the performance and observance of the Lessee’s obligations under this Reimbursement Agreement.

     Any amounts collected pursuant to action taken under this Section shall be paid over to the Bank and applied to the Lessee’s obligations under this Reimbursement Agreement.

     Section 8.3 No Remedy Exclusive. No remedy herein conferred upon or reserved to the Bank is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Reimbursement Agreement, the Collateral Pledge Agreement or any of the Letter of Credit Documents or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be

21

exercised from time to time and as often as may be deemed expedient. In order to entitle the Bank to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required.

     Section 8.4 Agreement to Pay Attorneys’ Fees and Expenses. In the event the Lessee defaults under any of the provisions of this Reimbursement Agreement, and the Bank employs attorneys or incurs other expenses for the collection of amounts due hereunder or the enforcement of performance or observance of any obligation or agreement on the part of the Lessee herein contained, the Lessee agrees that it will on demand therefor pay to the Bank the fees of such attorneys and such other expenses so incurred by the Bank.

     Section 8.5 Waiver of Event of Default; No Additional Waiver Implied by One Waiver. The Bank in its sole discretion may waive an Event of Default, provided that either (a) notice of the occurrence of an Event of Default has not yet been given to the Trustee, or (b) following such Event of Default, a drawing under the Letters of Credit is not required to be made by the Trustee in accordance with Section 9.2 of the Indenture.

     In the event any agreement contained in this Reimbursement Agreement is breached by the Lessee and thereafter waived (expressly or impliedly) by the Bank, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. Any forbearance (expressly or impliedly) by the Bank to demand payment for any amounts payable hereunder shall be limited to the particular payment for which the Bank forebears demand for payment and will not be deemed a forbearance to demand any other amount payable hereunder.

ARTICLE IX

MISCELLANEOUS

     Section 9.1 Notices. Except as otherwise provided in this Reimbursement Agreement, all notices, demands, requests, consents, approvals, certificates or other communications required under this Reimbursement Agreement to be in writing shall be sufficiently given and shall be deemed to have been properly given (i) if delivered by hand, when written confirmation of delivery is received by the sender, (ii) three days after the same is mailed by certified mail, postage prepaid, return receipt requested, or (iii) if sent by overnight courier, 24 hours after delivery to such overnight courier, addressed to the person to whom any such notice, demand, request, approval, certificate or other communication is to be given, at the appropriate address for the Principal Office of such person designated below:

Bank:	Manufacturers and Traders Trust Company
	25 South Charles Street, 11th Floor
	Baltimore, Maryland 21201
	Attention: Letter of Credit Department
	and

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	Manufacturers and Traders Trust Company
	1 Research Court, Suite 400
	Rockville, Maryland 20850
	Attention: Arthur L. Perraud
	with a copy to:
	Nancy R. Little, Esquire
	McGuireWoods LLP
	One James Center
	901 East Cary Street
	Richmond, Virginia 23219
Lessee:	Human Genome Sciences, Inc.
	14200 Shady Grove Road
	Rockville, Maryland 20850
	Attention: James H. Davis, Executive
	Vice President, General Counsel
	and Secretary

Any person listed above may, by notice given hereunder, designate any further or different addresses to which subsequent communications shall be sent. During any period in which the Registrar and the Paying Agent are the same and have the same address, any notice required to be given to either the Registrar or the Paying Agent, or both, may be given by one notice to the address for the Registrar and Paying Agent set forth above.

     Section 9.2 [INTENTIONALLY OMITTED].

     Section 9.3 [INTENTIONALLY OMITTED].

     Section 9.4 Binding Effect. This Reimbursement Agreement shall inure to the benefit of and shall be binding upon the Bank, the Lessee and their respective successors and assigns.

     Section 9.5 Illegality; Severability. If fulfillment of any provision hereof or any transaction related hereto or to the Letter of Credit Documents, at the time performance of such provisions shall be due, shall involve transcending the limit of validity prescribed by law, then ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity; and if any clause or provisions herein contained, operates or would prospectively operate to invalidate this Reimbursement Agreement in whole or in part, then such clause or provision only shall be void, as though not herein contained, and the remainder of this Reimbursement Agreement shall remain operative and in full force and effect.

     Section 9.6 Assignment. None of the Letter of Credit Documents to which the Lessee is a party may be assigned by the Lessee unless otherwise expressly permitted by the terms thereof. The Bank may at any time sell or grant participations to any other Person (a

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“participant”) in the Issuer’s Letter of Credit Obligations and the Letter of Credit Documents; provided, however, except as provided in the immediately following sentence, the Lessee shall continue to deal solely and directly with the Bank in connection with the Bank’s rights and remedies under this Reimbursement Agreement. The Lessee hereby authorizes the Bank and each such participant, in case of an Event of Default hereunder, to proceed directly, by right of setoff, banker’s lien or otherwise, against any assets of the Lessee which may at the time of such default be in the hands of the Bank or in the hands of such participant.

     Section 9.7 Consent to Jurisdiction; Service of Process; Waiver of Jury Trial.

          (a) The Lessee hereby agrees and consents that any action or proceeding arising out of or brought to enforce the provisions of this Reimbursement Agreement may be brought in any appropriate court in Montgomery County, Maryland or Baltimore City, Maryland, all at the sole election of the Bank, and by the execution of this Reimbursement Agreement the Lessee irrevocably consents to the jurisdiction of each such court.

          (b) If for any reason the Lessee should become not qualified to do business in the State, the Lessee hereby agrees to designate and appoint, without power of revocation, an agent for service of process within the State, as the agent for the Lessee upon whom may be served all process, pleadings, notice or other papers which may be served upon the Lessee as a result of any of the Lessee’s obligations under this Reimbursement Agreement.

          (c) The Lessee covenants that throughout the period during which any of the Lessee’s obligations under this Reimbursement Agreement remain outstanding, if a new agent for service of process within the State is designated pursuant to the terms of subsection (b) of this Section, the Lessee will immediately file with the Bank the name and address of such new agent and the date on which such appointment is to become effective.

          (d) The Lessee and the Bank hereby jointly waive trial by jury in any action or proceeding to which the Lessee and the Bank may be parties, arising out of or in any way pertaining to this Reimbursement Agreement or any of the Letter of Credit Documents. It is agreed and understood that this waiver constitutes a waiver of trial by jury of all claims against all parties to such actions or proceedings who are parties to the Letter of Credit Documents and the Bond Documents.

     This waiver is knowingly, willingly and voluntarily made by the Lessee, and the Lessee hereby represents that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. The Lessee further represents that it has been represented in the signing of this Reimbursement Agreement and in the making of this waiver by independent legal counsel, selected of its own free will, and that it has had the opportunity to discuss this waiver with counsel.

     Section 9.8 Further Assurances and Corrective Instruments. The Bank and the Lessee agree that they will, from time to time, execute and deliver or cause to be executed and delivered, such supplements hereto and such further instruments as may reasonably be required for carrying out the intention of the parties to, or facilitating the performance of, this Reimbursement Agreement.

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     Section 9.9 Right to Perform; Advances by Bank. If the Lessee fails to make or cause to be made any payment, or fails to perform, observe or comply with any of the Lessee’s obligations under this Reimbursement Agreement, the Bank, without notice to the Lessee and without waiving any default or releasing the Lessee from any of the Lessee’s obligations under this Reimbursement Agreement, and without being under any obligation to do so, may make such payment or perform any of the Lessee’s obligations under this Reimbursement Agreement for the account of the Lessee, and may enter upon the Property or any part thereof for that purpose and take all such action thereon as the Bank may consider necessary or appropriate for such purpose. All amounts so paid by the Bank and all costs, fees and expenses incurred by the Bank in connection with such payment or performance (including, without limitation, attorneys’ fees and expenses) shall be immediately due and payable by the Lessee as additional payments, together with interest thereon from the date the same are paid or incurred at the Penalty Rate until the same are paid in full by the Lessee.

     Section 9.10 Amendments, Changes and Modifications. This Reimbursement Agreement may not be amended, changed, modified, altered or terminated except by a written instrument executed by the Bank and the Lessee.

     Section 9.11 Execution of Counterparts. This Reimbursement Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

     Section 9.12 Law Governing Construction of Agreement. This Reimbursement Agreement is prepared and entered into with the intention that the law of the State shall govern its construction.

     Section 9.13 Effective Date. This Reimbursement Agreement has been dated as of the date above written solely for the purpose of convenience of reference and shall become effective upon its execution and delivery, on the date hereof, by the parties hereto. All representations and warranties set forth herein shall be deemed to have been made on the date hereof.

     Section 9.14 Conflicting Agreements. In the event of any conflict between the provisions of the Letter of Credit Documents and this Reimbursement Agreement regarding the payment and performance obligations of the Lessee, the provisions of this Reimbursement Agreement shall control as between the Bank and the Lessee.

     Section 9.15 Set-off. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, during the continuance of any Event of Default hereunder, the Bank is hereby authorized at any time and from time to time, without notice to the Lessee or to any other person or entity, any such notice being hereby expressly waived, to set-off and to appropriate and apply any and all deposits and any other indebtedness at any time held or owing by the Bank to or for the credit or the account of the Lessee against and on account of the obligations and liabilities of the Lessee to the Bank under this Reimbursement Agreement, irrespective of whether or not the Bank shall have made any demand hereunder.

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     IN WITNESS WHEREOF, the Lessee has caused this Reimbursement Agreement to be executed under seal in its name and on its behalf by its duly authorized officer; and the Bank has caused this Reimbursement Agreement to be executed under seal by its duly authorized officer, all being done as of the day and year first above written.

WITNESS:	HUMAN GENOME SCIENCES, INC., as Lessee
	By:	/s/ H. Thomas Watkins		(SEAL)
		Name:	H. Thomas Watkins
		Title:	President and Chief Executive Officer
WITNESS:	MANUFACTURERS AND TRADERS TRUST COMPANY, as Bank
	By:	/s/ Arthur L. Perraud		(SEAL)
		Name:	Arthur L. Perraud
		Title:	Vice President

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EX-10.14

Exhibit 10.14

COLLATERAL PLEDGE AGREEMENT

among

HUMAN GENOME SCIENCES, INC.,
as Pledgor,

MANUFACTURERS AND TRADERS TRUST COMPANY,
as Pledgee

and

MANUFACTURERS AND TRADERS TRUST COMPANY,
acting in its capacity as Collateral Agent

Dated as of December 1, 2009

$23,000,000
Maryland Economic Development Corporation
Taxable Variable Rate Demand/Fixed Rate Revenue Bonds

(Human Genome Sciences, Inc. Facility)
1997 Issue

and

$17,500,000
Maryland Economic Development Corporation
Taxable Variable Rate Demand/Fixed Rate Revenue Bonds

(Human Genome Sciences, Inc. Facility)
Series 1999 A and B

COLLATERAL PLEDGE AGREEMENT

     THIS COLLATERAL PLEDGE AGREEMENT (this “Agreement”) is dated as of December 1, 2009, and is among HUMAN GENOME SCIENCES, INC., a Delaware corporation (the “Pledgor”), MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation (the “Pledgee”), and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation, acting in its capacity as Collateral Agent (the “Collateral Agent”).

RECITALS

     Pursuant to, and in accordance with the provisions of Article 83A, Title 5, Subtitle 2 of the Annotated Code of Maryland, as amended from time to time (the “Act”), the Maryland Economic Development Corporation, a body politic and corporate and a public instrumentality of the State of Maryland (the “Issuer”) issued and sold its Taxable Variable Rate Demand/Fixed Rate Revenue Bonds (Human Genome Sciences, Inc. Facility), 1997 Issue, in the aggregate principal amount of $23,000,000 (the “1997 Bonds”) for the sole and exclusive purpose of financing a portion of (1) the acquisition of approximately 10 acres of land located in Montgomery County, Maryland (the “Land”) and (2) the construction of a process development and manufacturing plant on the Land containing approximately 84,000 square feet (the “Building”). The Land and the Building are collectively referred to as the “Facility.” The Issuer currently leases the Facility to the Pledgor pursuant to a Lease Agreement dated as of December 1, 1997, as amended or supplemented from time to time.

     The 1997 Bonds were issued pursuant to a Trust Indenture dated as of December 1, 1997, by and between the Issuer and FMB Trust Company, National Association (now known as Manufacturers and Traders Trust Company) (the “Trustee”).

     In order to enhance the marketability of the 1997 Bonds, at the request of the Issuer and the Lessee, Allfirst Bank (“Allfirst”), predecessor in interest to the Pledgee, issued to the Trustee Allfirst’s irrevocable transferable direct-pay letter of credit to provide payment for and secure the payment of the principal of and interest on, and the purchase price of, the 1997 Bonds (the “1997 Bonds Letter of Credit”).

     Pursuant to, and in accordance with the Act, the Issuer subsequently issued and sold its Taxable Variable Rate Demand/Fixed Rate Revenue Bonds (Human Genome Sciences, Inc. Facility) Series 1999 A and B, in the aggregate principal amount of $17,500,000 (the “1999 Bonds”) for the sole and exclusive purpose of financing a portion of the costs of improving and equipping a 43,000 square-foot (approximate) addition to the Building (the “Additional Improvements”). The Issuer currently leases the Additional Improvements to the Pledgor pursuant to an Amended and Restated Lease Agreement of even date herewith.

     The 1999 Bonds were issued pursuant to a Trust Indenture dated as of December 1, 1999, by and between the Issuer and the Trustee’s predecessor in interest, Allfirst Trust Company, National Association, which Trust Indenture has subsequently been amended and restated in its entirety pursuant to an Amended and Restated Trust Indenture of even date herewith.

     In order to enhance the marketability of the Series 1999 A Bonds, at the request of the Issuer and the Pledgor, Allfirst issued to the Trustee Allfirst’s irrevocable transferable direct-pay letter of credit to provide payment for and secure the payment of the principal of and interest on, and the purchase price of, the Series 1999 A Bonds (the “Series 1999 A Bonds Letter of Credit”).

     In order to enhance the marketability of the Series 1999 B Bonds, at the request of the Issuer and the Pledgor, First Union National Bank (“First Union”) issued to the Trustee First Union’s irrevocable transferable direct-pay letter of credit to provide payment for and secure the payment of the principal of and interest on, and the purchase price of, the Series 1999 B Bonds (the “First Union Series 1999 B Bonds Letter of Credit”).

     The 1997 Bonds Letter of Credit, the Series 1999 A Bonds Letter of Credit and the First Union Series 1999 B Bonds Letter of Credit each expire on December 15, 2009.

     At the request of the Issuer and the Pledgor, the Pledgee, as successor in interest to Allfirst, has agreed to extend the 1997 Bonds Letter of Credit and the Series 1999 A Bonds Letter of Credit.

     At the request of the Issuer and the Pledgor, in substitution for the First Union Series 1999 B Bonds Letter of Credit, the Pledgee has agreed to issue the Pledgee’s irrevocable transferrable direct-pay letter of credit to provide payment for and secure the payment of the principal of and interest on, and the purchase price of, the Series 1999 B Bonds (the “Substitute Series 1999 B Bonds Letter of Credit”).

     As a condition precedent to the extension of the 1997 Bonds Letter of Credit, the Pledgee has required that the Pledgor enter into a Reimbursement Agreement of even date herewith pursuant to which the Pledgor has agreed to reimburse the Pledgee for any draws made under the 1997 Bonds Letter of Credit and for certain other items set forth therein (as amended or supplemented from time to time, the “1997 Reimbursement Agreement”).

     As a condition precedent to the extension of the Series 1999 A Bonds Letter of Credit and the issuance of the Substitute Series 1999 B Bonds Letter of Credit, the Pledgee has required that the Pledgor enter into a Reimbursement Agreement of even date herewith pursuant to which the Pledgor has agreed to reimburse the Pledgee for any draws made under the Series 1999 A Bonds Letter of Credit and/or the Substitute Series 1999 B Bonds Letter of Credit and for certain other items set forth therein (as amended or supplemented from time to time, the “1999 Reimbursement Agreement” and, together with the 1997 Reimbursement Agreement, the “Reimbursement Agreements”).

     In order to secure the Pledgor’s obligations under the Reimbursement Agreements, the Pledgee requires that the Pledgor post cash collateral and/or securities with a minimum market value of $34,300,000 (the “Minimum Collateral Amount”).

     NOW, THEREFORE, in order to secure its obligations under the Reimbursement Agreements, the Pledgor hereby covenants and agrees with the Pledgee as follows:

     1. Grant of Security Interest; Custody; Perfection. The Pledgor hereby pledges, assigns and grants to the Pledgee a security interest in the cash and marketable securities on deposit in the account maintained by the Pledgor with the Collateral Agent as described in Exhibit A attached hereto and made a part hereof (the “Account”), the Account, and all interest and other income thereon and all cash and noncash proceeds thereof (all of the foregoing is herein collectively referred to as the “Collateral”) pursuant to the provisions of the Maryland Uniform Commercial Code, in order to secure the Pledgor’s obligations under the Reimbursement Agreements.

     The Collateral is to be held by the Collateral Agent on behalf of the Pledgee. The Pledgor hereby agrees that the Pledgee shall have with respect to the Collateral the rights and remedies of a secured party provided in the Maryland Uniform Commercial Code. The Collateral Agent will at all times maintain the Account at its offices in the State of Maryland.

     As of the effective date of this Agreement, the Pledgor has pledged, assigned and granted to the Pledgee a security interest in the Collateral and such Collateral and the Account have been designated on the records of the Collateral Agent as subject to the security interest granted pursuant to this Agreement in accordance with the provisions of the Maryland Uniform Commercial Code. The Pledgor and the Collateral Agent hereby agree that all securities or other property underlying any financial assets credited to the Account shall be registered in the name of the Collateral Agent, endorsed to the Collateral Agent or in blank or credited to another securities account maintained in the name of the Collateral Agent and in no case will any financial asset credited to the Account be registered in the name of the Pledgor, payable to the order of the Pledgor or specially indorsed to the Pledgor.

     The Collateral Agent hereby agrees that all property delivered to the Collateral Agent with respect to the pledge and security intended hereby will be held in or credited to the Account. The Collateral Agent further agrees that each item of property (including, without limitation, any investment property, financial asset, security, instrument, general intangible or cash) credited to the Account shall be treated as a “financial asset” within the meaning of Section 8-102(a)(9) of the Maryland Uniform Commercial Code.

     The Pledgor hereby directs the Collateral Agent, and the Collateral Agent hereby agrees, to comply with all entitlement orders of the Pledgee with respect to the Collateral and the Account without further consent of the Pledgor.

     3. Minimum Collateral Value. The Pledgor shall maintain on deposit, in the Account, Collateral with an actual market value of not less than the Minimum Collateral Amount, taking into account any penalties, fees, discounts or other amounts that could result in any reduction in the actual cash value of any of the Collateral upon any liquidation or early termination of any investments prior to the maturity date thereof.

     4. Investment; Preservation of Collateral. Funds held by the Collateral Agent hereunder shall be invested and reinvested by the Collateral Agent upon written order of the Pledgor only in Permitted Investments as described in Exhibit B attached hereto and made a part hereof. Such investments shall be registered in the name of the Collateral Agent and held by the Collateral Agent for the benefit of the Pledgee. The Collateral Agent shall not be responsible or

liable for any loss suffered in connection with any investment of moneys made by it in accordance with the Pledgor’s instruction.

     The Pledgor shall be responsible for the preservation of the Collateral in the Collateral Agent’s possession and shall take all action necessary to preserve the rights of the Pledgee against prior parties to the Collateral. Neither the Pledgee nor the Collateral Agent shall be under any duty (a) to collect any of the Collateral or any moneys due or to become due thereunder, (b) to give any notices with respect to the Collateral, (c) to preserve or maintain any of the Collateral not in its possession, or (d) to preserve rights of the Pledgor against prior parties to the Collateral. The Pledgee and the Collateral Agent shall be deemed to have exercised reasonable care with respect to any of the Collateral in their possession if the Pledgee or the Collateral Agent takes such action for that purpose as the Pledgor shall reasonably request in writing; provided, however, that no failure to comply with any such request shall, of itself, be deemed a failure to exercise reasonable care, and no failure to do any act not requested by the Pledgor shall be deemed a failure to exercise reasonable care.

     5. Pledgor’s Representations and Warranties and Covenants. The Pledgor represents and warrants and covenants that:

(i)	it has received value (as defined in Section 1-201 (44) of the Maryland Uniform Commercial Code),
(ii)	it has the right to create a security interest in the Collateral,
(iii)	the Collateral is not subject to the interest of any third person,
(iv)	the Pledgor will defend the Collateral against the claims and demands of all third parties,
(v)	all statements provided by Pledgor relating to the Collateral relied upon by the Pledgee prior to, contemporaneous with or subsequent to execution of this Agreement are or shall be true, correct, complete, valid and genuine in all material respects,
(vi)	it has taken or caused other persons to take all actions necessary to effect the creation and perfection of the Pledgee’s security interest in the Collateral, and has caused to be filed with the Maryland State Department of Assessments and Taxation, the Secretary of State of the jurisdiction of organization of the Pledgor, and, if the Account is maintained in a different jurisdiction, the Secretary of State of the jurisdiction in which the Account is maintained, UCC-1 financing statements naming the Pledgor as debtor and the Pledgee as a secured party and evidencing the lien or pledge created by this Agreement, and, together with the book entries described above, such actions taken with respect to the Collateral pursuant to this Agreement create a valid and perfected first priority security interest in the Collateral, pursuant to the Maryland Uniform Commercial Code,
(vii)	it has full power, authority and legal right to enter into this Agreement and to pledge and grant a lien on the Collateral pursuant to this Agreement, and this Agreement has been duly authorized, executed and delivered by Pledgor and constitutes the legal, valid and binding obligation of Pledgor, enforceable against Pledgor in accordance with its terms,
(viii)	no authorization, consent, approval, license, qualification or formal exemption from, nor any filing, declaration or registration with, any court, governmental

	authority, or with any securities exchange is required in connection with (A) the due execution, delivery or performance by Pledgor of this Agreement, (B) the assignment of, and the grant of a lien on (including priority thereof), the Collateral by Pledgor in the manner and for the purpose contemplated by this Agreement, or (C) the exercise of the rights and remedies of Pledgee created hereby except those that have been obtained or made concurrently with the execution hereof, including, without limitation, filings in the appropriate offices under the Maryland Uniform Commercial Code,
(ix)	Neither the execution and delivery of this Agreement, nor the consummation of the transactions herein contemplated, nor compliance with the terms and provisions hereof will conflict with or result in a breach of, Pledgor’s formation agreements, any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority binding on Pledgor, or any agreement or instrument to which Pledgor is a party or by which Pledgor is bound or to which any of the Collateral is subject, or result in the creation or imposition of any lien upon Pledgor’s earnings or assets pursuant to the terms of any such agreement or instrument,
(x)	the pledge of the Collateral to the Pledgee is not done in contemplation of insolvency or bankruptcy or with an intent to hinder, delay or defraud any of Pledgor’s creditors,
(xi)	it is not insolvent immediately before signing this Agreement and is not being rendered insolvent by the pledge of the Collateral to the Pledgee, and
(xii)	it will not pledge, assign or grant a security interest in the Collateral to any person other than the Pledgee.

     6. Partial Release of Collateral. Provided no Event of Default under this Agreement has occurred and is continuing, when the actual market value of the Collateral exceeds the Minimum Collateral Amount, the Pledgor shall have the right to request that the Pledgee release from the security interest granted pursuant to this Agreement Collateral in an amount equal to such excess; provided, however, the Pledgor shall not have the right to request such a release more than one time in any quarter. In the event that the Pledgor shall request that the Pledgee release Collateral from the security interest granted pursuant to this Agreement, the Pledgee shall not liquidate any Collateral for purposes of honoring such request without the prior written consent of the Pledgor.

     7. Deposits to Account. If at any time the actual market value of the Collateral is less than the Minimum Collateral Amount, the Pledgor shall within two (2) business days deposit to the Account and designate on the records of the Collateral Agent as subject to the security interest granted pursuant to this Agreement cash or marketable securities in an amount equal to the difference, between (a) the Minimum Collateral Amount, and (b) the actual market value of the Collateral. The Collateral Agent shall notify the Pledgor in writing of the amount to be deposited hereunder and the Pledgor shall promptly provide the Pledgee with evidence reasonably satisfactory to the Pledgee that such deposit has been made.

     Other than with respect to reporting requirements regarding the Collateral, the Collateral Agent shall have no obligations or responsibilities hereunder to any parties hereto with respect to any accounts of the Pledgor other than the Account. Notwithstanding the foregoing, however,

nothing herein provided shall abrogate the Collateral Agent’s responsibilities to the Pledgor with respect to any other accounts managed or held by the Collateral Agent for or on behalf of the Pledgor.

     8. Substitutions. Provided no Event of Default under this Agreement has occurred and is continuing, the Pledgor may at any time and from time to time substitute cash and marketable securities for the Collateral on deposit in the Account; provided, however, the actual market value of the Collateral shall at all times be equal to or greater than the Minimum Collateral Amount.

     9. Investment Earnings. Provided no Event of Default under this Agreement has occurred and is continuing, when the actual market value of the Collateral equals at least Minimum Collateral Amount, investment earnings on the Collateral shall, on the last day of each quarter thereafter, be distributed to the Pledgor. In connection with the distribution of any investment earnings on the Collateral pursuant to this Paragraph 9, the Pledgee shall not liquidate any Collateral for purposes of making such distribution without the prior written consent of the Pledgor.

     10. Reporting Requirements. Not more than five (5) business days following the end of each calendar month, the Collateral Agent shall furnish to the Pledgee and the Pledgor a statement of the actual market value of the Collateral on deposit in the Account.

     11. Authority Over Account; Limitations on Withdrawals. The Pledgee shall have sole authority over withdrawals of the Collateral from the Account and no withdrawal of the Collateral from the Account shall be made except upon the written instructions of the Pledgee signed by an authorized officer of the Pledgee; provided, however, such withdrawals shall only be permitted when there is an Event of Default pursuant to this Agreement or when the Pledgee is releasing excess funds pursuant to Paragraphs 6, 8 or 9 hereof. Any written instructions from the Pledgee shall permit withdrawals within two (2) business days from the date thereof. In relying upon such written instructions from the Pledgee, the Collateral Agent shall have no liability other than for its negligence or willful misconduct.

     12. Default; Remedies Upon Default. The occurrence of any one or more of the following events shall constitute an Event of Default under this Agreement: (a) an event of default under either of the Reimbursement Agreements; or (b) failure of the Pledgor to perform, observe, or comply with any of the provisions of this Agreement, and such failure shall remain uncured for a period of five (5) days in the event of a monetary default and thirty (30) days in the event of a non-monetary default after the date of written notice from the Pledgee to the Pledgor. The Pledgee shall contemporaneously give the Collateral Agent and the Pledgor written notice of an Event of Default hereunder and the Collateral Agent shall from receipt of such notice act only upon the instructions of the Pledgee and the Collateral Agent shall have no liability to the Pledgor in following such instructions.

     Upon an Event of Default under this Agreement that has not been waived by the Pledgee, and any time thereafter, the Pledgee may, among its other rights and remedies (1) cause the Collateral to be transferred to its name or to the name of its nominee or nominees and thereafter exercise as to the Collateral all rights, powers and remedies of an owner, (2) collect by legal

proceedings or otherwise all dividends, interest, principal payments, and other sums now or hereafter payable on account of the Collateral, and hold the same as Collateral, or apply the same to the expenses incurred by the Pledgee in such legal proceedings, the manner and distribution of the application to be in the sole discretion of the Pledgee, (3) enter into any extension, subordination, reorganization, deposit, merger, or consolidation agreement, or any other agreement relating to or affecting the Collateral and in connection therewith deposit or surrender control of such Collateral thereunder, and accept other property in exchange therefor and hold or apply such property or money so received in accordance with the provisions hereof, all of the foregoing specified rights and remedies, however, being subject to the rights of the Pledgor provided in the Maryland Uniform Commercial Code. The Pledgee shall give written notice to the Pledgor ten (10) days prior to the date of public sale of the Collateral or prior to the date after which private sale of the Collateral will be made.

     Subject to compliance with federal and state securities laws, full power and authority are hereby given to the Pledgee, acting through any of its respective officers, upon an Event of Default hereunder that has not been waived by the Pledgee, and at any time thereafter, at its election, to sell, assign, transfer and deliver the whole of the Collateral, or any part thereof or any additions thereto, or substitutes therefor, in such order as the Pledgee may elect, at public or private sale.

     To the extent the Pledgee actually receives any monies as a result of its exercise of any of the remedies provided for hereunder following the occurrence of an Event of Default hereunder, the Pledgee covenants and agrees that such monies, after deducting all costs incurred by the Pledgee in connection with the collection thereof, shall be credited against the obligations of the Pledgor under the Reimbursement Agreements in such order as the Pledgee in its discretion may determine.

     No failure or delay by the Pledgee to insist upon the strict performance of any term, condition, covenant, or agreement of this Agreement or of the Reimbursement Agreements, or to exercise any right, power, or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, condition, covenant, or amendment or of any such breach, or preclude the Pledgee from exercising any such right, power, or remedy at any later time or times. By accepting payment after the due date of any of the obligations under this Agreement or of the Reimbursement Agreements, the Pledgee shall not be deemed to have waived the right either to require prompt payment when due of all other such obligations or to declare a default for failure to effect such payment of any such other obligations.

     Each right, power, and remedy of the Pledgee as provided for in this Agreement or in the Reimbursement Agreements or now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for in this Agreement or in the Reimbursement Agreements or now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or beginning of the exercise by the Pledgee of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by the Pledgee of any or all such other rights, powers, or remedies.

     13. Costs and Expenses. All reasonable costs and expenses, including reasonable attorney’s fees and expenses, incurred or paid by the Pledgee in exercising any right, power or remedy conferred hereby, and in the endorsements thereof, shall become a part of the indebtedness or obligations secured hereby.

     14. Further Assurances. The Pledgor shall, at its expense, do, make, procure, execute and deliver all acts, things, writings and assurances as the Pledgee may at any time request to protect, assure or enforce its interest, rights and remedies created by, provided in or emanating from this Agreement.

     15. Release, Indulgences, etc. The Pledgor agrees that demand, notice, protest and all demands and notices of any action taken by the Pledgee under this Agreement, except those expressly provided for in this Agreement and the Reimbursement Agreements, are hereby waived. Without notice to and further consent from the Pledgor, without in any way waiving any of the provisions of this Agreement, and without in any way releasing all or any part of the Pledgor’s obligations under this Agreement or in the Collateral, the Pledgor hereby consents: (a) to any extension of time for payment of any of the obligations of the Pledgor under the Reimbursement Agreements; (b) to any renewal, modification, waiver, or release of, any of the obligations of the Pledgor under the Reimbursement Agreements; (c) to the addition to, or release of the Pledgor or of any other maker, accommodation party, endorser, guarantor, surety, or indemnitor from, any of their respective obligations under the Reimbursement Agreements; (d) to the addition to, or release of, all or any part of the collateral and security for the Reimbursement Agreements and all or any part of Collateral hereunder; (e) to any indulgence and/or waiver given to the Pledgor or to any other maker, accommodation party, endorser, guarantor, surety, or indemnitor of any of the obligations of the Pledgor under the Reimbursement Agreements.

     16. Liability, Duties, and Resignation of Collateral Agent.

          (a) The Collateral Agent shall hold the Collateral as agent for the Pledgee. The Collateral Agent agrees to send a written confirmation to the Pledgee that it is holding the Collateral and the Account for the sole and exclusive account of the Pledgee for the benefit of the Pledgee.

          (b) The Collateral Agent, its affiliates, directors and officers and its respective successors, assigns, agents and servants, absent negligence or willful misconduct, shall not be held to any personal liability whatsoever, in tort, contract or otherwise, in connection with the execution and delivery of, or performance of its obligations under, this Agreement.

          (c) This Agreement sets forth exclusively the duties of the Collateral Agent with respect to any and all matters pertinent hereto and no implied duties or obligations shall be read into this Agreement against the Collateral Agent. The Collateral Agent may act in reliance upon any instrument or signature believed by it to be genuine and may assume that any person purporting to give any writing, notice, advice or direction for or on behalf of the Pledgee in connection with the provisions hereof has been duly authorized to do so.

          (d) The Collateral Agent may resign from its obligations under this Agreement at any time after thirty (30) days’ prior written notice to the other parties hereto, but in no event shall Collateral Agent be released of its obligations hereunder unless and until a substitute eligible institution has been designated and has assumed in writing the obligations of Collateral Agent hereunder.

     17. Notices. All notices, demands, requests, consents, approvals, certificate or other communications required under this Agreement to be in writing shall be sufficiently given and shall be deemed to have been properly given (i) if delivered by hand, when written confirmation of delivery is received by the sender, (ii) three days after the same is mailed by certified mail, postage prepaid, return receipt requested, or (iii) if sent by overnight courier, 24 hours after delivery to such overnight courier, addressed to the person to whom any such notice, demand, request, approval, certificate or other communication is to be given, at the appropriate address of such person as designated below:

If to the Pledgor at:	Human Genome Sciences, Inc.
	14200 Shady Grove Road
	Rockville, Maryland 20850
	Attention: James H. Davis, Executive Vice President,
	General Counsel and Secretary
	Tel: (301) 251-6039
	Fax: (301) 517-8831
If to the Pledgee at:	Manufacturers and Traders Trust Company
	1 Research Court, Suite 400
	Rockville, Maryland 20850
	Attention: Arthur L. Perraud
	Senior Relationship Manager
	Tel: (240) 632-7808
	Fax: (240) 632-2621
If to the Collateral Agent at:	Manufacturers and Traders Trust Company
	25 South Charles Street, 16th Floor
	Mail Code MD2-CS58
	Baltimore, Maryland 21201
	Attention: Sabrina Thomas
	Tel: (410) 545-2193
	Fax: (410) 244-4236

     18. Miscellaneous. Neither this Agreement nor any term, condition, covenant, or agreement hereof may be changed, waived, discharged, or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge, or termination is sought. This Agreement shall be governed by the laws of the State of Maryland and shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of the Pledgee and its respective successors and assigns. As used herein, the singular number shall include the plural, and the use of the masculine, feminine, or neuter gender shall include all genders as the context may require, and the term “person” shall include an

individual, a corporation, an association, a partnership, a trust, a limited liability company, an organization, a government or political subdivision thereof, and a governmental agency. Headings and captions used in this Agreement are solely for convenience of reference and shall not affect the meaning of this Agreement. Unless varied by this Agreement, all terms used herein which are defined by the Maryland Uniform Commercial Code shall have the same meanings hereunder as assigned to them by the Maryland Uniform Commercial Code. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute one and the same

     19. Termination. This Agreement shall terminate when 1997 Bonds Letter of Credit, the Series 1999 A Bonds Letter of Credit and the Substitute Series 1999 B Bonds Letter of Credit terminate and all obligations under the Reimbursement Agreements have been indefeasibly paid and performed in full, and upon the termination of this Agreement, the Pledgee shall instruct the Collateral Agent to reassign to the Pledgor, without recourse or warranty, express or implied, the then existing rights, title and interest of the Pledgee in and to the Collateral, the costs of such reassignment to be borne by the Pledgor.

(SIGNATURES APPEAR ON FOLLOWING PAGE)

     WITNESS the signature and seal of the Parties as of the date first written above.

WITNESS:	HUMAN GENOME SCIENCES, INC., as Pledgor
	By:	/s/ H. Thomas Watkins		(SEAL)
		Name:	H. Thomas Watkins
		Title:	President and Chief Executive Officer
WITNESS:	MANUFACTURERS AND TRADERS TRUST, COMPANY, as Pledgee
	By:	/s/ Arthur L. Perraud		(SEAL)
		Name:	Arthur L. Perraud
		Title:	Vice President
WITNESS:	MANUFACTURERS AND TRADERS TRUST COMPANY, as Collateral Agent
	By:	/s/ Cassandra J. Cole		(SEAL)
		Name:	Cassandra J. Cole
		Title:	Vice President

Exhibit A to
Collateral Pledge Agreement

DESCRIPTION OF ACCOUNT

Account Owner	Account Name	Account Number
Human Genome Sciences

Exhibit B to
Collateral Pledge Agreement

PERMITTED INVESTMENTS

     The term “Permitted Investments” as used in this Collateral Pledge Agreement means any of the following:

     Any investments allowed under the investment guidelines approved by the board of directors of the Pledgor, provided that such investments shall meet the following limitations:

     Such investments shall be direct obligations of the United States of America or other obligations the timely payment of the principal of and interest on which are fully and unconditionally guaranteed by the United States of America or debt securities rated “A-” or better by Standard & Poor’s Ratings Services or “Aa3” or better by Moody’s Investors Service, Inc, provided that (i) no more than ten percent (10%) of the Collateral shall be invested at any time in the obligations of any one corporate issuer, (ii) no such obligation shall have a maturity or market expected average life in excess of seven (7) years, and (iii) such obligations shall not have an average duration exceeding seven (7) years.

EX-12.1

EXHIBIT 12.1

	Ratio of Earnings to Fixed Charges
	(dollars in thousands, except ratio data)
	Year ended December 31,
	2009		2008			2007			2006			2005
Earnings (Loss):
Earnings (loss) before provision for income taxes	$	4,385	$	(268,891	)	$	(284,371	)	$	(264,087	)	$	(244,553	)
Fixed Charges		77,780		82,930			80,927			59,505			31,813
Total Earnings (Loss)	$	82,165	$	(185,961	)	$	(203,444	)	$	(204,582	)	$	(212,740	)
Fixed Charges:
Interest expense on indebtedness (including amortization of debt expense and discount)	$	58,424	$	62,912		$	60,716		$	39,606		$	17,199
Interest expense on portion of rent expense representative of interest		19,356		20,018			20,211			19,899			14,614
Total Fixed Charges	$	77,780	$	82,930		$	80,927		$	59,505		$	31,813
Ratio of Earnings to Fixed Charges		1.06		—			—			—			—
Coverage deficiency (1)(2)(3)	$	—	$	(268,891	)	$	(284,371	)	$	(264,087	)	$	(244,553	)

(1)	The Company’s Ratio of Earnings to Fixed Charges for the year ended December 31, 2009 includes a gain on extinguishment debt of $38,873, a gain on sale of an equity investment of $5,259 and reflects revenues received in connection with the delivery of raxibacumab to the Strategic National Stockpile. These amounts should not be considered indicative of the Company’s future performance.
(2)	The Company’s Coverage deficiency for 2008 includes a gain on the sale of an equity investment of $32,518 partially offset by a charge for impaired investment of $6,284.
(3)	The Company’s Coverage deficiency for 2006 includes charges for facility-related exit charges of $29,510 partially offset by a gain on the sale of an equity investment of $14,759.

EX-21.1

EXHIBIT 21.1

Subsidiaries

Name	Jurisdiction of Incorporation
Human Genome Sciences Pacific Pty Ltd.	Australia
Human Genome Sciences Europe GmbH	Germany

EX-23.1

EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements:

(1)	Registration Statement (Form S-3 No. 333-121724) of Human Genome Sciences, Inc.,
(2)	Registration Statement (Form S-3 No. 333-128874) of Human Genome Sciences, Inc.,
(3)	Registration Statement (Form S-3 No. 333-162731) of Human Genome Sciences, Inc.,
(4)	Registration Statement (Form S-8 No. 333-44798) of Human Genome Sciences, Inc. 2000 Stock Incentive Plan and Human Genome Sciences, Inc. Employee Stock Purchase Plan,
(5)	Registration Statement (Form S-8 No. 333-66670) of Human Genome Sciences, Inc. Amended and Restated 2000 Stock Incentive Plan,
(6)	Registration Statement (Form S-8 No. 333-89392) of Human Genome Sciences, Inc. Amended and Restated 2000 Stock Incentive Plan,
(7)	Registration Statement (Form S-8 No. 333-104219) of Human Genome Sciences, Inc. Amended and Restated 2000 Stock Incentive Plan,
(8)	Registration Statement (Form S-8 No. 333-142713) of Human Genome Sciences, Inc. Employee Stock Purchase Plan and Non-Employee Director Equity Compensation Plan,
(9)	Registration Statement (Form S-8 No. 333-156334) of Human Genome Sciences, Inc. Employee Stock Purchase Plan,
(10)	Registration Statement (Form S-8 No. 333-159003) of Human Genome Sciences, Inc. Amended and Restated Stock Incentive Plan

of our reports dated March 2, 2010, with respect to the consolidated financial statements of Human Genome Sciences, Inc., and the effectiveness of internal control over financial reporting of Human Genome Sciences, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2009.

/s/ Ernst & Young LLP

Baltimore, Maryland
March 2, 2010

EX-31.1

EXHIBIT 31.1

I, H. Thomas Watkins, certify that:

1.	I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2009 of Human Genome Sciences, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ H. Thomas Watkins  

H. Thomas Watkins 

President and Chief Executive Officer
(Principal Executive Officer) 

Date: March 2, 2010

EX-31.2

EXHIBIT 31.2

I, Timothy C. Barabe, certify that:

1.	I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2009 of Human Genome Sciences, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Timothy C. Barabe  

Timothy C. Barabe 

Senior Vice President and Chief Financial Officer
(Principal Financial Officer) 

Date: March 2, 2010

EX-32.1

EXHIBIT 32.1

Certification of Principal Executive Officer
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)

I, H. Thomas Watkins, President and Chief Executive Officer (principal executive officer) of Human Genome Sciences, Inc. (the “Registrant”), certify, to the best of my knowledge, based upon a review of the Annual Report on Form 10-K for the period ended December 31, 2009 of the Registrant (the “Report”), that:

(1)	The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ H. Thomas Watkins
Name:	H. Thomas Watkins
Date: March 2, 2010

EX-32.2

EXHIBIT 32.2

Certification of Principal Financial Officer
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)

I, Timothy C. Barabe, Senior Vice President and Chief Financial Officer (principal financial officer) of Human Genome Sciences, Inc. (the “Registrant”), certify, to the best of my knowledge, based upon a review of the Annual Report on Form 10-K for the period ended December 31, 2009 of the Registrant (the “Report”), that:

(1)	The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ Timothy C. Barabe
Name:	Timothy C. Barabe
Date: March 2, 2010