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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO
SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
NEOZYME II CORPORATION
(NAME OF SUBJECT COMPANY)
NEOZYME II ACQUISITION CORP.
GENZYME CORPORATION
(BIDDERS)
UNITS, EACH CONSISTING OF ONE SHARE OF CALLABLE COMMON STOCK, $1.00 PAR VALUE,
OF NEOZYME II CORPORATION AND ONE CALLABLE WARRANT TO PURCHASE
TWO SHARES OF GENERAL DIVISION COMMON STOCK, $.01 PAR VALUE, AND 0.135 SHARE OF
TISSUE REPAIR DIVISION COMMON STOCK, $.01 PAR VALUE, OF GENZYME CORPORATION
(TITLE OF CLASS OF SECURITIES)
G6420H11
(CUSIP NUMBER OF CLASS OF SECURITIES)
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PETER WIRTH, ESQ.
EXECUTIVE VICE PRESIDENT AND CHIEF LEGAL COUNSEL
GENZYME CORPORATION
ONE KENDALL SQUARE
CAMBRIDGE, MA 02139
(617) 252-7500
WITH A COPY TO:
MAUREEN P. MANNING, ESQ.
PALMER & DODGE LLP
ONE BEACON STREET
BOSTON, MA 02108
(617) 573-0100
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND
COMMUNICATIONS ON BEHALF OF BIDDERS)
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CALCULATION OF FILING FEE
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Transaction Valuation*: $108,675,000 Amount of Filing Fee: $21,735
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* For purposes of calculating fee only. This amount is based upon (a) 2,415,000
Units of Neozyme II Corporation (the "Units"), outstanding as of September
27, 1996 and (b) the price offered per Unit ($45.00). The amount of the
filing fee, calculated in accordance with Regulation 240.0-11 under the
Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of
the value of the Units to be purchased.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
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Amount Previously Paid: Not applicable
Form or Registration No.: Not applicable
Filing Party: Not applicable
Date Filed: Not applicable
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This Tender Offer Statement on Schedule 14D-1 relates to the offer by
Neozyme II Acquisition Corp., a British Virgin Islands ("BVI") international
business company (the "Purchaser") and a wholly-owned subsidiary of Genzyme
Corporation, a Massachusetts corporation ("Genzyme"), to purchase all of the
outstanding units, each consisting of one share of Callable Common Stock, $1.00
par value, of Neozyme II Corporation, a BVI international business company (the
"Company"), and one Callable Warrant to purchase two shares of General Division
Common Stock, $.01 par value, and 0.135 share of Tissue Repair Division Common
Stock, $.01 par value, of Genzyme (the "Units") at a purchase price of $45.00
per Unit, net to the seller in cash, without interest thereon, upon the terms
and subject to the conditions set forth in the Offer to Purchase dated September
27, 1996 (the "Offer to Purchase"), a copy of which is attached hereto as
Exhibit (a)(1), and in the related Letter of Transmittal (which, together with
any amendments or supplements thereto, collectively constitute the "Offer"), a
copy of which is attached hereto as Exhibit (a)(2).
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Neozyme II Corporation and the
address of its principal executive offices is the Todman Building, Main Street,
Road Town, Tortola, British Virgin Islands.
(b) The exact title of the class of equity securities being sought pursuant
to the Offer is Units, each consisting of one share of Callable Common Stock,
$1.00 par value, of Neozyme II Corporation and one Callable Warrant to purchase
two shares of General Division Common Stock, $.01 par value, and 0.135 share of
Tissue Repair Division Common Stock, $.01 par value, of Genzyme Corporation. The
information set forth in the Offer to Purchase under "INTRODUCTION" is
incorporated herein by reference.
(c) The information set forth in the Offer to Purchase under "THE TENDER
OFFER - Section 5. Price Range of Units; Dividends" is incorporated herein by
reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is filed by Genzyme and the Purchaser. The
information set forth in the Offer to Purchase under "INTRODUCTION," "THE TENDER
OFFER - Section 6. Certain Information Concerning the Company," "- Section 7.
Certain Information Concerning Genzyme and the Purchaser" and Schedules I and II
and is incorporated herein by reference.
(e) and (f) The information set forth in the Offer to Purchase under "THE
TENDER OFFER - Section 7. Certain Information Concerning Genzyme and the
Purchaser" is incorporated herein by reference. During the last five years,
neither the Purchaser nor Genzyme, nor, to the best knowledge of the Purchaser
or Genzyme, any of the persons listed in Schedule I to the Offer to Purchase,
(i) has been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such law.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Offer to Purchase under
"SPECIAL FACTORS - Section 2. Agreements and Relationships Between the Company
and Genzyme," "- Section 3. Background of the Transaction," and "- Section 6.
The Purchase Agreement; Appraisal Rights" is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the Offer to Purchase under "THE TENDER
OFFER - Section 8. Source and Amount of Funds" is incorporated herein by
reference.
(b)-(c) Not applicable.
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ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in the Offer to Purchase under
"INTRODUCTION," "SPECIAL FACTORS -- Section 2. Agreements and Relationship
Between the Company and Genzyme," "-- Section 5. Reasons for the Transactions;
Purpose and Structure of the Transaction; Plans for the Company after the
Transaction," "-- Section 6. The Purchase Agreement; Appraisal Rights,"
"-- Section 8. Certain Effects of the Transaction" and "THE TENDER
OFFER -- Section 5. Price Range of Units; Dividends" is incorporated herein by
reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) The information set forth in the Offer to Purchase under
"INTRODUCTION," "SPECIAL FACTORS -- Section 2. Agreements and Relationships
Between the Company and Genzyme" and "THE TENDER OFFER -- Section 7. Certain
Information Concerning Genzyme and the Purchaser" and Schedules I and II to the
Offer to Purchase is incorporated herein by reference.
(b) Not applicable.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Offer to Purchase under "INTRODUCTION,"
"SPECIAL FACTORS -- Section 2. Agreements and Relationships Between the Company
and Genzyme," "-- Section 3. Background of the Transaction" and "-- Section 6.
The Purchase Agreement; Appraisal Rights" is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Information set forth in the Offer to Purchase under "INTRODUCTION,"
"SPECIAL FACTORS -- Section 9. Fees and Expenses" and "THE TENDER
OFFER -- Section 12. Fees and Expenses" is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in the Offer to Purchase under "THE TENDER
OFFER -- Section 7. Certain Information Concerning Genzyme and the Purchaser" is
incorporated herein by reference.
The incorporation by reference herein of the above-referenced financial
information does not constitute an admission that such information is material
to a decision by a stockholder of the Company whether to sell, tender or hold
Units being sought pursuant to the Offer.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the Offer to Purchase under
"INTRODUCTION," "SPECIAL FACTORS -- Section 2. Agreements and Relationships
Between the Company and Genzyme," and "-- Section 5. Reasons for the
Transaction; Purpose and Structure of the Transaction; Plans for the Company
after the Transaction" is incorporated herein by reference.
(b) and (c) The information set forth in the Offer to Purchase under
"INTRODUCTION," "THE TENDER OFFER -- Section 2. Acceptance for Payment and
Payment for Units" and "-- Section 10. Certain Legal Matters; Regulatory
Approvals," is incorporated herein by reference.
(d) The information set forth in the Offer to Purchase under "SPECIAL
FACTORS -- Section 8. Certain Effects of the Transaction" is incorporated herein
by reference.
(e) None.
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(f) The information set forth in the Offer to Purchase, the Letter of
Transmittal and the Purchase Agreement, dated as of September 20, 1996, by and
among, Genzyme, the Purchaser and the Company is incorporated herein by
reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
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(a)(1) -- Offer to Purchase dated September 27, 1996
(a)(2) -- Letter of Transmittal
(a)(3) -- Notice of Guaranteed Delivery
(a)(4) -- Letter from Robertson, Stephens & Company LLC to Brokers, Dealers, Banks,
Trust Companies and Other Nominees
(a)(5) -- Letter to Clients for Use by Brokers, Dealers, Banks, Trust Companies and
Other Nominees
(a)(6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9
(a)(7) -- Press Release of Genzyme dated September 6, 1996(1)
(a)(8) -- Press Release of Genzyme dated September 23, 1996(2)
(a)(9) -- Press Release of Genzyme dated September 27, 1996
(a)(10) -- Summary Advertisement dated September 27, 1996
(b) -- Not Applicable
(c)(1) -- Purchase Agreement dated as of September 20, 1996 by and among Genzyme, the
Purchaser and the Company(2)
(c)(2) -- Research and Development Agreement, dated as of April 28, 1992 between
Genzyme and the Company(3)
(c)(3) -- Technology License Agreement, dated as of April 28, 1992 between Genzyme and
the Company(3)
(c)(4) -- Purchase Option Agreement, dated April 28, 1992, between Genzyme and the
Underwriters (as therein defined)(3)
(c)(5) -- Services Agreement, dated April 28, 1992, between Genzyme and the Company(4)
(c)(6) -- Administrative Agreement, dated April 28, 1992, between Genzyme and the
Company(3)
(c)(7) -- Series 1992 Note of the Company dated April 28, 1992(3)
(c)(8) -- Amendment No. 1 dated August 11, 1993 to Technology License Agreement and
Research and Development Agreement between Genzyme and the Company(4)
(c)(9) -- License and Development Agreement dated as of August 11, 1993 between Genzyme
and Univax Biologics, Inc.(5)
(d) -- Not Applicable
(e) -- Not Applicable
(f) -- Not Applicable
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(1) Incorporated by reference from Amendment No. 1 to Genzyme's statement on
Form 13D relating to the Company, filed with the Securities and Exchange
Commission on September 6, 1996.
(2) Incorporated by reference from Amendment No. 2 to Genzyme's statement on
Form 13D relating to the Company, filed with the Securities and Exchange
Commission on September 24, 1996.
(3) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1992 (File No. 0-14680).
(4) Incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1993 (File No. 0-14680).
(5) Incorporated by reference from the Quarterly Report on Form 10-Q of Univax
(File No. 0-19748) for the quarter ended September 30, 1993. Confidential
treatment has been granted for certain portions of this Exhibit.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
NEOZYME II ACQUISITION CORP.
By: /s/ Peter Wirth
Peter Wirth
Secretary
GENZYME CORPORATION
By: /s/ Peter Wirth
Peter Wirth
Executive Vice President, Legal
Affairs
and Chief Legal Counsel
Dated: September 27, 1996
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EXHIBIT INDEX
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DESCRIPTION
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(a)(1) -- Offer to Purchase dated September 27, 1996
(a)(2) -- Letter of Transmittal
(a)(3) -- Notice of Guaranteed Delivery
(a)(4) -- Letter from Robertson, Stephens & Company LLC to Brokers, Dealers, Banks, Trust
Companies and Other Nominees
(a)(5) -- Letter to Clients for Use by Brokers, Dealers, Banks, Trust Companies and Other
Nominees
(a)(6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9
(a)(7) -- Press Release of Genzyme dated September 6, 1996 (1)
(a)(8) -- Press Release of Genzyme dated September 6, 1996 (2)
(a)(9) -- Press Release of Genzyme dated September 27, 1996
(a)(10) -- Summary Advertisement dated September 27, 1996
(b) -- Not Applicable
(c)(1) -- Purchase Agreement dated as of September 20, 1996 by and among Genzyme, the
Purchaser and the Company (2)
(c)(2) -- Research and Development Agreement, dated as of April 28, 1992 between Genzyme
and the Company (3)
(c)(3) -- Technology License Agreement, dated as of April 28, 1992 between Genzyme and the
Company (3)
(c)(4) -- Purchase Option Agreement, dated April 28, 1992 between Genzyme and the
Underwriters (as therein defined) (3)
(c)(5) -- Services Agreement, dated April 28, 1992 between Genzyme and the Company (4)
(c)(6) -- Administrative Agreement, dated April 28, 1992 between Genzyme and the Company
(3)
(c)(7) -- Series 1992 Note of the Company dated April 28, 1992 (3)
(c)(8) -- Amendment No. 1 dated August 11, 1993 to Technology License Agreement and
Research and Development Agreement between Genzyme and the Company (4)
(c)(9) -- License and Development Agreement dated as of August 11, 1993 between Genzyme
and Univax Biologics, Inc.(5)
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(1) Incorporated by reference from Amendment No. 1 to Genzyme's statement on
Form 13D relating to the Company, filed with the Securities and Exchange
Commission on September 6, 1996.
(2) Incorporated by reference from Amendment No. 2 to Genzyme's statement on
Form 13D relating to the Company, filed with the Securities and Exchange
Commission on September 24, 1996.
(3) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1992 (File No. 0-14680).
(4) Incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1993 (File No. 0-14680).
(5) Incorporated by reference from the Quarterly Report on Form 10-Q of Univax
(File No. 0-19748) for the quarter ended September 30, 1993. Confidential
treatment has been granted for certain portions of this Exhibit.
6
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OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING UNITS, EACH UNIT CONSISTING OF
ONE SHARE OF CALLABLE COMMON STOCK
of
NEOZYME II CORPORATION
and
ONE CALLABLE WARRANT TO PURCHASE
TWO SHARES OF GENERAL DIVISION COMMON STOCK
AND 0.135 SHARE OF TISSUE REPAIR DIVISION COMMON STOCK
of
GENZYME CORPORATION
at
$45.00 NET PER UNIT
by
NEOZYME II ACQUISITION CORP.
a wholly owned subsidiary
of
GENZYME CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
MONDAY, OCTOBER 28, 1996, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED ON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST A
MAJORITY OF THE UNITS OUTSTANDING. IF LESS THAN A MAJORITY OF THE UNITS
OUTSTANDING ARE VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF
THE OFFER, NEOZYME II ACQUISITION CORP. (THE "PURCHASER") MAY ELECT TO AMEND AND
EXTEND THE OFFER TO ELIMINATE THIS CONDITION. IN THAT EVENT, DURING THE PERIOD
THAT THE OFFER IS EXTENDED, NEOZYME II CORPORATION (THE "COMPANY") SHALL, IN
ACCORDANCE WITH APPLICABLE LAWS AND THE PURCHASE AGREEMENT, SOLICIT THE APPROVAL
OF ITS SHAREHOLDERS FOR THE SECOND STEP TRANSACTION AS DESCRIBED BELOW.
ALTERNATIVELY, THE PURCHASER MAY ELECT TO TERMINATE THE OFFER AND, PROMPTLY
THEREAFTER, REQUEST THAT THE COMPANY SOLICIT THE APPROVAL OF ITS SHAREHOLDERS
FOR THE SECOND STEP TRANSACTION. IF THE PURCHASER DOES NOT MAKE EITHER ELECTION,
GENZYME CORPORATION ("GENZYME"), THE PURCHASER OR THE COMPANY MAY TERMINATE THE
PURCHASE AGREEMENT.
THE BOARD OF DIRECTORS OF THE COMPANY, BASED UPON, AMONG OTHER THINGS, THE
UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE OF THE BOARD CONSISTING OF THE
DIRECTORS OF THE COMPANY WHO ARE NOT OFFICERS OR DIRECTORS OF GENZYME, HAS
UNANIMOUSLY DETERMINED THAT EACH OF THE OFFER AND THE SECOND STEP TRANSACTION
REFERRED TO HEREIN IS FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF THE
UNITS ("HOLDERS"), HAS APPROVED THE OFFER AND THE SECOND STEP TRANSACTION AND
RECOMMENDS THAT THE HOLDERS ACCEPT THE OFFER AND TENDER THEIR UNITS PURSUANT TO
THE OFFER.
IMPORTANT
Any Holder desiring to tender all or any portion of such Holder's units (the
"Units"), each consisting of one share (the "Shares") of callable common stock,
par value $1.00 per share (the "Callable Common Stock"), of the Company and one
callable warrant (the "Callable Warrants") to purchase two shares of General
Division common stock, par value $.01 per share, and 0.135 share of Tissue
Repair Division common stock, par value $.01 per share, of Genzyme should either
(1) complete and sign the Letter of Transmittal (or a facsimile thereof) in
accordance with the instructions in the Letter of Transmittal and mail or
deliver it together with the certificates representing the Shares and the
Callable Warrants included in the tendered Units, and any other required
documents, to the Depositary or (2) request such Holder's broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
such Holder. Book-entry transfer procedures are not available to Holders. Any
Holder whose Units are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee must contact such broker, dealer,
commercial bank, trust company or other nominee if such Holder desires to tender
such Units.
A Holder who desires to tender Units and whose certificates representing the
Shares and the Callable Warrants included in such Units are not immediately
available may tender such Units by following the procedures for guaranteed
delivery set forth in "THE TENDER OFFER -- Section 3. Procedures for Accepting
the Offer and Tendering Units."
Questions and requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Additional copies
of this Offer to Purchase, the Letter of Transmittal and the Notice of
Guaranteed Delivery may also be obtained from the Information Agent or from
brokers, dealers, commercial banks or trust companies.
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THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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The Dealer Manager for the Offer is:
ROBERTSON, STEPHENS & COMPANY LLC
September 27, 1996
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TABLE OF CONTENTS
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INTRODUCTION............................................................................ 3
SPECIAL FACTORS......................................................................... 6
1. Establishment and History of the Company........................................ 6
2. Agreements and Relationships Between the Company and Genzyme.................... 6
3. Background of the Transaction................................................... 8
4. Recommendation of the Company's Board of Directors; Fairness of the
Transaction..................................................................... 12
5. Reasons for the Transaction; Purpose and Structure of the Transaction; Plans for
the Company after the Transaction............................................... 19
6. The Purchase Agreement; Appraisal Rights........................................ 30
7. Certain Federal Income Tax Consequences......................................... 38
8. Certain Effects of the Transaction.............................................. 40
9. Fees and Expenses............................................................... 42
THE TENDER OFFER........................................................................ 43
1. Terms of the Offer; Expiration Date............................................. 43
2. Acceptance for Payment and Payment for Units.................................... 44
3. Procedures for Accepting the Offer and Tendering Units.......................... 45
4. Withdrawal Rights............................................................... 47
5. Price Range of Units; Dividends................................................. 48
6. Certain Information Concerning the Company...................................... 49
7. Certain Information Concerning Genzyme and the Purchaser........................ 51
8. Source and Amount of Funds...................................................... 62
9. Certain Conditions of the Offer................................................. 62
10. Certain Legal Matters; Regulatory Approvals..................................... 63
11. Dividends and Distributions..................................................... 63
12. Fees and Expenses............................................................... 64
13. Miscellaneous................................................................... 64
SCHEDULE I Members of the Boards of Directors and Executive Officers of Genzyme
and the Purchaser.................................................... I-1
SCHEDULE II Members of the Board of Directors and Executive Officer of the
Company.............................................................. II-1
ANNEX I Opinion of Hambrecht & Quist LLC..................................... A-1
ANNEX II Opinion of Robertson, Stephens & Company LLC......................... B-1
ANNEX III Section 83 of the BVI International Business Companies Ordinance,
1984................................................................. C-1
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TO THE HOLDERS OF UNITS OF
NEOZYME II CORPORATION:
INTRODUCTION
Neozyme II Acquisition Corp. (the "Purchaser"), a British Virgin Islands
("BVI") international business company and a wholly owned subsidiary of Genzyme
Corporation ("Genzyme"), a Massachusetts corporation, hereby offers to purchase
all of the outstanding units (the "Units"), each consisting of one share (the
"Shares") of callable common stock, par value $1.00 per share (the "Callable
Common Stock"), of Neozyme II Corporation ("Neozyme II" or the "Company"), a BVI
international business company, and one callable warrant (the "Callable
Warrants") to purchase two shares of General Division common stock, par value
$.01 per share ("General Division Common Stock"), and 0.135 share of Tissue
Repair Division common stock, par value $.01 per share ("Tissue Repair Division
Common Stock"), of Genzyme, at a purchase price of $45.00 per Unit, net to the
seller in cash, without interest thereon (the "Offer Price"), upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which, together with any amendments or supplements hereto
or thereto, collectively constitute the "Offer").
Tendering Holders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase by the Purchaser
of Units pursuant to the Offer. The Purchaser will pay all fees and expenses of
Robertson, Stephens & Company LLC ("Robertson, Stephens & Company"), which is
acting as the Dealer Manager for the Offer (in such capacity, the "Dealer
Manager"), American Stock Transfer & Trust Company, which is acting as the
Depositary (the "Depositary"), and Corporate Investor Communications, Inc.,
which is acting as the Information Agent (the "Information Agent"), incurred in
connection with the Offer. See "SPECIAL FACTORS -- Section 9. Fees and Expenses"
and "THE TENDER OFFER -- Section 12. Fees and Expenses."
THE BOARD OF DIRECTORS OF THE COMPANY, BASED UPON, AMONG OTHER THINGS, THE
UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE OF THE BOARD CONSISTING OF THE
DIRECTORS OF THE COMPANY WHO ARE NOT OFFICERS OR DIRECTORS OF GENZYME,
UNANIMOUSLY HAS DETERMINED THAT EACH OF THE OFFER AND THE SECOND STEP
TRANSACTION IS FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS, HAS APPROVED
THE OFFER AND THE SECOND STEP TRANSACTION AND RECOMMENDS THAT THE HOLDERS ACCEPT
THE OFFER AND TENDER THEIR UNITS PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED ON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST A
MAJORITY OF THE UNITS OUTSTANDING (THE "MINIMUM CONDITION"). IF LESS THAN A
MAJORITY OF THE UNITS OUTSTANDING ARE VALIDLY TENDERED AND NOT WITHDRAWN PRIOR
TO THE EXPIRATION OF THE OFFER, THE PURCHASER MAY ELECT TO AMEND AND EXTEND THE
OFFER TO ELIMINATE THIS CONDITION. IN THAT EVENT, DURING THE PERIOD THAT THE
OFFER IS EXTENDED, THE COMPANY SHALL, IN ACCORDANCE WITH APPLICABLE LAWS AND THE
PURCHASE AGREEMENT, SOLICIT THE APPROVAL OF THE HOLDERS OF THE SHARES FOR THE
SECOND STEP TRANSACTION AS DESCRIBED BELOW. ALTERNATIVELY, THE PURCHASER MAY
ELECT TO TERMINATE THE OFFER AND, PROMPTLY THEREAFTER, REQUEST THAT THE COMPANY
SOLICIT THE APPROVAL OF THE HOLDERS OF THE SHARES FOR THE SECOND STEP
TRANSACTION. IF THE PURCHASER DOES NOT MAKE EITHER ELECTION, GENZYME, THE
PURCHASER OR THE COMPANY MAY TERMINATE THE PURCHASE AGREEMENT. SEE "THE TENDER
OFFER -- SECTION 9. CERTAIN CONDITIONS OF THE OFFER."
The Offer is being made pursuant to a Purchase Agreement dated as of
September 20, 1996 (the "Purchase Agreement") among Genzyme, the Purchaser and
the Company. The Purchase Agreement
3
<PAGE> 4
provides that, among other things, as soon as practicable after the purchase of
Units pursuant to, or in certain circumstances the termination of, the Offer,
and the satisfaction of the other conditions contained in the Purchase Agreement
and in accordance with the applicable provisions of the BVI International
Business Companies Ordinance, 1984 (the "BVI Law"), the Purchaser will cause a
transaction by which Genzyme will, directly or indirectly, acquire all of the
Shares included in the untendered Units (the "Second Step Transaction"). If the
Offer is consummated and 90% or more of the Units are tendered and accepted, the
Purchaser will either (i) effect a merger of the Company into the Purchaser or
(ii) cause the Company to redeem all Shares included in the untendered Units. If
the Offer is consummated but less than 90% of the Units are tendered and
accepted, or if, pursuant to the Purchase Agreement, the Offer is terminated or
amended and the requisite approval of the Company's shareholders for the Second
Step Transaction is obtained, then the Second Step Transaction will be effected
as a merger of a wholly owned subsidiary of the Purchaser with and into the
Company. Regardless of the form of the Second Step Transaction, the
consideration to be received as a result of the Second Step Transaction by
holders of Shares included in the untendered Units (other than Genzyme, the
Purchaser or the Company or any direct or indirect subsidiary of any of them and
Holders, if any, who shall have demanded and perfected their appraisal rights
under the applicable provisions of the BVI Law) will be $29.00 per Share in
cash, without interest. Any Callable Warrants included in the untendered Units
will remain outstanding following the Second Step Transaction. Genzyme does not
intend to list the Callable Warrants remaining outstanding after the Second Step
Transaction on any securities exchange or to make a market in the Callable
Warrants. As a result, no liquid market may develop for the Callable Warrants,
which may adversely affect their value. See "SPECIAL FACTORS -- Section 8.
Certain Effects of the Transaction."
The Company has advised Genzyme that Hambrecht & Quist LLC ("Hambrecht &
Quist"), financial advisor to the Special Committee, has delivered to the
Special Committee and the Company's Board of Directors its written opinion dated
September 20, 1996 that, on the basis of and subject to the matters set forth
therein, the cash consideration to be received by the Holders in exchange for
Units pursuant to the Offer and in exchange for Shares in the Second Step
Transaction is fair to such Holders from a financial point of view (the "H&Q
Opinion"). The Company has delivered to the Purchaser a copy of the H&Q Opinion,
together with Hambrecht & Quist's written consent to the inclusion of or
reference to the H&Q Opinion in the Tender Offer Statement on Schedule 14D-1
(the "Schedule 14D-1") filed by Genzyme and the Purchaser with the Securities
and Exchange Commission (the "Commission") in connection with the Offer, the
Rule 13e-3 Transaction Statement on Schedule 13E-3 filed by Genzyme, the
Purchaser and the Company with the Commission and the Schedule 14D-9 filed by
the Company with the Commission in connection with the Offer (the "Schedule
14D-9"). A copy of the H&Q Opinion is attached hereto as Annex I. See "SPECIAL
FACTORS -- Section 4. Recommendation of the Company's Board of Directors;
Fairness of the Transaction."
The Company has filed with the Commission the Schedule 14D-9, which is
being mailed to Holders concurrently herewith.
The Company has advised the Purchaser that, as of September 20, 1996, there
were 2,415,000 Units outstanding and that there were no Units or Shares reserved
for issuance for any purpose. As of such date, neither Genzyme nor the Purchaser
owned any Units; however, Genzyme is deemed to beneficially own all of the
outstanding shares of Neozyme II Callable Common Stock as a result of an option
to purchase all of the outstanding Shares, which option may be exercised by
Genzyme at any time through December 31, 1996. See "SPECIAL FACTORS -- Section
2. Agreements and Relationships Between the Company and Genzyme." Based upon
2,415,000 Units outstanding as of September 20, 1996, 1,207,501 Units must be
tendered in order to satisfy the Minimum Condition. All of the directors and the
executive officers of Genzyme and the Company currently intend to tender to the
Purchaser pursuant to the Offer all of the Units being sought by the Purchaser
that they hold of record or beneficially. Units tendered by officers and
directors of Genzyme and the Company will be purchased by the Purchaser on the
same terms and conditions offered to all Holders.
In order to effect the Second Step Transaction as promptly as possible
following completion, or under certain circumstances the termination, of the
Offer, the Board of Directors of the Company has authorized a Plan of Merger
relating to a merger of a wholly owned subsidiary of the Purchaser with and into
the Company
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(the "Merger Plan") in accordance with the BVI Law and the Company's Memorandum
and Articles of Association. The consummation of the Second Step Transaction is
subject to the satisfaction or waiver of certain conditions, including the
approval and adoption of the Merger Plan by the requisite vote or consent of the
Holders, if required by the BVI Law. Under the BVI Law and the Company's
Memorandum and Articles of Association, if the Purchaser acquires at least a
majority of the outstanding Units, the Purchaser would have sufficient voting
power to approve the Merger Plan by written consent in lieu of a meeting of
Holders and without the vote or consent of any other Holder and consummate the
Second Step Transaction. In addition, under the BVI Law, if the Purchaser
acquires at least 90% of the outstanding Units, the Purchaser would have the
power to consummate a merger of the Company into the Purchaser, or require the
Company to redeem all of the Shares not held by the Purchaser, without a vote of
the Holders. In either event, the Purchaser intends to take all necessary and
appropriate action to cause the Second Step Transaction to become effective as
soon as reasonably practicable after the consummation, or under certain
circumstances the termination, of the Offer without a meeting of the Holders.
See "SPECIAL FACTORS -- Section 6. The Purchase Agreement; Appraisal Rights."
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
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SPECIAL FACTORS
1. ESTABLISHMENT AND HISTORY OF THE COMPANY
The Company was formed in March 1992 to contract with Genzyme to conduct
research, development and clinical testing of biotherapeutic products
("Products") for the treatment of cystic fibrosis ("CF") by protein replacement
or gene therapy (the "Field"). In August 1993, the Field was expanded to include
the products involved in Genzyme's collaboration with North American Biological,
Inc. ("NABI"). The lead product of the NABI collaboration, known as
HyperGAM(TM)+CF, was an antibody-based product for the prevention and treatment
of bacterial infections in CF patients. Development of all products in the NABI
collaboration was discontinued in June 1996 following an interim analysis of
data from a Phase II clinical trial of HyperGAM(TM)+CF. See "SPECIAL
FACTORS -- Section 5. Reasons for the Transaction; Purpose and Structure of the
Transaction; Plans for the Company after the Transaction." As used herein, the
term "Field" refers to the Field as so expanded.
In May 1992, the Company and Genzyme completed a public offering (the "Unit
Offering") of 2,415,000 units (the "Offered Units"), each Offered Unit
consisting of one Share, one Series N Warrant to purchase, prior to the
adjustment described in the next paragraph, one share of common stock, par value
$.01 per share, of Genzyme ("Genzyme Common Stock") and one Callable Warrant to
purchase, prior to the adjustment described in the next paragraph, one share of
Genzyme Common Stock, at a price to the public of $35.00 per Offered Unit. The
Company received all of the approximately $78 million in net proceeds from the
Unit Offering. In connection with the Unit Offering, the Company issued its
Series 1992 Note to Genzyme and entered into a Technology License Agreement,
Development Agreement, Purchase Option Agreement, Services Agreement and
Administrative Agreement with Genzyme. The terms of the Series 1992 Note and
such agreements are summarized below.
The Series N Warrants began trading separately from the Offered Units on
August 4, 1992, resulting in the Offered Units becoming the Units, consisting of
the Callable Common Stock and the Callable Warrants. As a result of a subsequent
recapitalization and stock split by Genzyme, each Callable Warrant now
represents the right to purchase two shares of Genzyme General Division Common
Stock and 0.135 share of Genzyme Tissue Repair Division Common Stock. The Units
trade on the Nasdaq National Market (the "NNM") under the symbol NIIUF.
2. AGREEMENTS AND RELATIONSHIPS BETWEEN THE COMPANY AND GENZYME
TECHNOLOGY LICENSE AGREEMENT. Under the Technology License Agreement,
Genzyme granted to Neozyme II a worldwide exclusive right and license to
manufacture and sell Products within the Field based on all patent and other
intellectual property rights owned, controlled or acquired by Genzyme during the
term of the Development Agreement and as to which Genzyme has the right to grant
sublicenses.
Neozyme II paid Genzyme $5 million in consideration for Genzyme entering
into the Technology License Agreement and in recognition of Genzyme's expertise
and expenditures in developing the technology licensed to Neozyme II. Genzyme
agreed to use commercially reasonable efforts to secure such technology rights
as it deems reasonably necessary to conduct the research to be performed for
Neozyme II under the Development Agreement. Neozyme II is obligated to assume,
subject to its prior consent, any royalty or other obligations to third parties
undertaken by Genzyme in the primary license. The license is otherwise royalty
free.
Also pursuant to the Technology License Agreement, Neozyme II granted to
Genzyme a royalty-free, fully paid, irrevocable, perpetual, worldwide, exclusive
right and license to engage in any and all uses of Improvements, except for
those that are within the Field. "Improvements" consist of technology
discovered, developed or otherwise acquired in the course of research conducted
by Genzyme for Neozyme II under the Development Agreement. Neozyme II has agreed
that it will not, without first obtaining the consent of Genzyme, sublicense,
disclose or otherwise transfer any rights in the technology licensed to it by
Genzyme, or in Improvements, to any third party before the expiration or
termination of the Purchase Option Agreement.
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Either party may terminate the Technology License Agreement under certain
circumstances including breach by the other party of the Technology License
Agreement or the Development Agreement that continues unremedied for 60 days. If
the Technology License Agreement is terminated, the parties are obligated to
negotiate commercially reasonable royalties or other compensation for certain
rights, depending on which party terminated the agreement.
DEVELOPMENT AGREEMENT. Under the Development Agreement, Neozyme II has
engaged Genzyme to perform all of its research, development and clinical testing
activities relating to the Products through December 31, 1996 unless terminated
earlier. Genzyme agreed to use commercially reasonable efforts to conduct these
activities pursuant to certain work plans and budgets prepared by Genzyme and
approved by Neozyme II.
Neozyme II is obligated to reimburse Genzyme for all costs associated with
Genzyme's work under the Development Agreement up to an amount consisting of
substantially all of the net proceeds from the Unit Offering plus interest
accrued thereon, less the $5 million payment to Genzyme under the Technology
License Agreement, less funds for use by Neozyme II for general and
administrative expenses and less $1 million to be retained by Neozyme II for
working capital (in the aggregate, the "Available Funds"). Genzyme may engage
other parties to assist in the work performed for Neozyme II under the
Development Agreement, provided that amounts paid to non-affiliates of Genzyme
may not exceed $15 million unless otherwise approved by Neozyme II. As of August
31, 1996, Neozyme II had paid approximately $74.5 million to Genzyme under the
Development Agreement. Based upon the work plan and budget approved for 1996 by
the Neozyme II Board of Directors, Neozyme expects the Available Funds to be
substantially exhausted by December 31, 1996.
The Development Agreement may be terminated by either party under certain
circumstances including breach by the other party of the Technology License
Agreement or the Development Agreement that continues unremedied for 60 days.
The Development Agreement also provides that it will terminate 90 days after the
Available Funds become exhausted unless Genzyme elects to continue commercially
reasonable efforts to continue research and development of the Products at its
expense. Genzyme is under no obligation to continue such research and
development. Genzyme may assign its rights and delegate its obligations only to
an affiliate of Genzyme, certain successors of Genzyme or certain parties that
acquire substantially all of the assets of Genzyme under certain circumstances.
Neozyme II may not assign its rights or delegate its obligations under the
Development Agreement.
PURCHASE OPTION AGREEMENT. The Shares are subject to a purchase option
agreement (the "Purchase Option Agreement") pursuant to which Genzyme may
purchase all (but not less than all) of the shares from the holders thereof at
any time through December 31, 1996, unless exercisability is accelerated upon
exhaustion of the Available Funds.
The Purchase Option is exercisable until December 31, 1996, at an exercise
price per share that increases each month through December 31, 1996 to a maximum
of $117.00 per share. The Purchase Option Exercise Price may be paid in cash, in
shares of Genzyme stock, or in any combination thereof, at Genzyme's discretion.
As of the date of this Offer to Purchase, the exercise price per share of the
Purchase Option was $108.50.
Termination of the Development Agreement or the Technology License
Agreement due to a material breach by one of the parties will cause the Purchase
Option to terminate 60 days thereafter in the case of a breach by Genzyme or 120
days thereafter in the case of a breach by Neozyme II.
SERIES 1992 NOTE. In 1992, Neozyme II issued a note in the principal
amount of $100,000 to Genzyme (the "Series 1992 Note"). The Series 1992 Note is
due on the day following the termination of the Purchase Option Agreement and
may not be prepaid. Pursuant to Neozyme II's Amended and Restated Memorandum of
Association and Amended and Restated Articles of Association, Neozyme II and its
shareholders are prohibited from taking any action or permitting any action to
be taken that is inconsistent with Genzyme's rights under the Purchase Option
Agreement. In addition, pursuant to the Company's Memorandum of Association,
while the Series 1992 Note is outstanding, Neozyme II may not issue additional
capital stock, borrow more than $1 million in the aggregate, declare or pay
dividends utilizing funds committed to be paid to
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Genzyme under the Development Agreement, merge, liquidate or sell all or
substantially all of its assets without the approval of Genzyme.
SERVICES AND ADMINISTRATIVE AGREEMENTS. Pursuant to these agreements, a
subsidiary of Genzyme (Genzyme Limited) provides certain financial, legal and
administrative services to Neozyme II on a cost reimbursement basis, and Neozyme
II is required to provide a list of record holders of the Callable Common Stock
to Genzyme upon Genzyme's exercise of the Purchase Option.
OTHER RELATIONSHIPS
Since the Company's inception, the sole executive officer of the Company
has been an employee of Genzyme. From March 1992 until January 1996, G. Jan van
Heek, a Senior Vice President of Genzyme, served as the Company's President and
Treasurer. In January 1996, Mr. van Heek resigned as President and Treasurer of
the Company, and Paul M. Edwards was appointed to these positions. Mr. Edwards
also serves as Vice President and General Manager -- UK Operations for Genzyme,
a position he has held since April 1993. Henri A. Termeer, the Chairman of the
Board of the Company, is the Chairman, President and Chief Executive Officer of
Genzyme. In addition, Mr. Termeer is a trustee of Hambrecht & Quist Healthcare
Investors and Hambrecht & Quist Life Sciences Investors. Hambrecht & Quist has
acted as the Special Committee's financial advisor in connection with the
offering. Gregory D. Phelps, a Director of the Company, is an Executive Vice
President of Genzyme. Robert J. Carpenter, a Director of the Company, also
serves as a Director of Genzyme.
The Company does not have and has never had its own research and
development employees or facilities and, therefore, it is heavily dependent upon
the employees, facilities and other resources of Genzyme. Genzyme and the
Company have also engaged the same independent auditors and outside legal
counsel since the Company's inception. Any material adverse change in the
business or financial condition of Genzyme could have a material adverse effect
upon the Company.
As of September 20, 1996, neither Genzyme nor the Purchaser owned any
Units; however, Genzyme is deemed to beneficially own all of the outstanding
Shares as a result of its option under the Purchase Option Agreement. See
Schedule I and II for information concerning the ownership of Callable Common
Stock by the directors and executive officers of Genzyme.
3. BACKGROUND OF THE TRANSACTION
Beginning in the spring of 1996, Genzyme began to consider potential
alternatives to its existing contractual relationship with the Company. In
connection with these internal discussions, the members of Genzyme's management
responsible for overseeing the research program in CF (the "CF Program")
undertook an overall assessment of the CF Program, including the various
approaches to the treatment of CF which have been explored, the then-current
status of each such approach, the scientific questions that remained to be
addressed before an effective treatment for CF could be achieved, Genzyme's
knowledge of competitive CF programs, the Company's intellectual property
portfolio and the status of the HyperGAM(TM)+CF clinical trial then being
conducted by NABI, including the significance of the interim analysis for the
trial expected to be received in June 1996. A management report summarizing this
overall CF Program assessment was presented to the Genzyme Board of Directors at
its annual meeting held on May 16, 1996, along with a preliminary analysis of
Genzyme's alternatives to the existing relationship with the Company. No actions
in respect of a transaction with the Company were authorized at the meeting.
Following the May 16, 1996 meeting, Genzyme continued to explore internally
alternative transactions that could be effected with the Company. On June 13,
1996, David J. McLachlan, Chief Financial Officer of Genzyme, contacted Kennett
F. Burnes, a director of the Company who is neither an officer nor a director of
Genzyme. Mr. McLachlan advised Mr. Burnes that, with just over six months
remaining under the terms of the various agreements between the Genzyme and the
Company, Genzyme was considering alternatives to its existing relationship with
the Company and that, among the alternatives under discussion, Genzyme was
considering the possibility of making an acquisition proposal on terms different
from the Purchase Option or making a proposal to continue funding the CF
Program. Mr. McLachlan further advised that, while the
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Genzyme Board of Directors had not approved any proposal concerning the Company,
Genzyme expected to have authorization from the Genzyme Board to make a proposal
to the Company's Board of Directors at the next regularly scheduled meeting of
the Company's Board to be held on July 23, 1996. Mr. McLachlan then suggested
that it would be appropriate for the Company's Board of Directors to consider
engaging independent advisors in connection with any possible transaction that
might occur with Genzyme.
In response to Mr. McLachlan's call, Mr. Burnes contacted the investment
banking firm of Hambrecht & Quist and the law firm of Hale and Dorr to discuss
the possible engagement of these firms to advise the Company's Board of
Directors in any transaction with Genzyme.
On June 20, 1996, NABI and Genzyme received the results of an interim
analysis for the clinical trial being conducted for HyperGAM(TM)+ CF from an
independent statistician. Although no major issues with the safety of the
product were identified, the data also showed no difference in efficacy between
those patients in the trial receiving placebo and those receiving either a high
or low dose of HyperGAM(TM)+ CF. On June 21, 1996, a special meeting of the
Company's Board of Directors was convened and a summary of the interim analysis
for the HyperGAM(TM)+ CF trial was presented to the Board. Following the
presentation, the Company's Board of Directors voted unanimously to terminate
the agreement with NABI and, later that day, the Company and NABI announced the
discontinuation of the trial. There were no discussions regarding the
relationship between Genzyme and the Company at this meeting of the Company's
Board of Directors.
In light of the discontinuation of the HyperGAM(TM)+ CF trial, Genzyme
re-evaluated the alternatives under consideration with respect to the Company.
In connection with these efforts, in July 1996, Genzyme engaged Robertson,
Stephens & Company to provide financial advisory services to Genzyme in
connection with a possible acquisition of the Company. In connection with its
engagement, Robertson, Stephens & Company conducted a due diligence review of
the Company.
On July 18, 1996, at a regularly scheduled meeting of the Genzyme Board of
Directors, Genzyme management presented an analysis of Genzyme's options
regarding the Company, and recommended that Genzyme make an offer to acquire the
outstanding Units. Representatives of Robertson, Stephens & Company then made a
preliminary presentation to the Genzyme Board of Directors. Following the
presentations, the Genzyme Board of Directors voted to authorize management to
initiate discussions regarding the acquisition of the Company with the
independent directors of the Company and, if and when management determined that
an offer would be in the best interest of Genzyme, to make an offer to acquire
the outstanding Units at a price of up to $40 per Unit in cash.
After such meeting, Mr. McLachlan called Mr. Burnes to advise him that
Genzyme was considering the possibility of presenting an acquisition proposal to
the Company's Board of Directors at the meeting scheduled for July 23, 1996.
Following this call, on July 22, 1996 at the request of Mr. Burnes, Dennis J.
Purcell, a Managing Director of Hambrecht & Quist, called Peter Wirth, Genzyme's
General Counsel, to discuss the agenda for the upcoming meeting of the Company's
Board of Directors. Mr. Wirth indicated that, as originally scheduled, the
purpose of the meeting was to provide the Company's Board of Directors with an
update as to the current status of the CF Program and that, as Mr. McLachlan had
related to Mr. Burnes, Genzyme was also considering the possibility of
presenting an acquisition proposal to the Company's Board. In response, Mr.
Purcell suggested that while it was important for Genzyme to provide the
Company's Board of Directors with an update as to the current status of the CF
Program, significant additional due diligence would be required before the
Company's Board would be in a position to respond to any acquisition proposal
Genzyme might make. In response to Mr. Purcell's comments, it was agreed that
the topics of discussion for the next day's meeting would be directed primarily
towards the CF Program update and the process that might be followed in
considering an acquisition proposal from Genzyme once the Company was prepared
to respond to such a proposal.
On July 23, 1996, a meeting of the Company's Board of Directors was
convened. In addition to the members of the Board, representatives of Genzyme's
management and Mr. Purcell were present. At the meeting, an update of the report
summarizing the overall CF Program assessment previously presented to the
Genzyme Board of Directors was presented to the Company's Board of Directors.
Following the report, Mr. Wirth advised the Company's Board of Directors that,
in view of the current status of the CF Program,
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Genzyme did not expect to exercise the Purchase Option and that, in lieu of the
Purchase Option, Genzyme's management was considering the possibility of making
an acquisition proposal with respect to the Company. Mr. Wirth then described in
general terms the process that might be followed by the Company's Board of
Directors in considering an acquisition proposal from Genzyme and suggested that
the Company's Board appoint a special committee of directors to consider any
such proposal that Genzyme might determine to make.
In response to Mr. Wirth's comments, the Company's Board of Directors
appointed the Special Committee consisting of Mr. Burnes and Robert E. Flynn,
the two directors of the Company who are not officers or directors of Genzyme,
to consider any acquisition proposal which might be made by Genzyme. The members
of the Special Committee and Mr. Purcell then requested that management provide
a list of experts in the CF field who might be retained to perform an
independent technical evaluation of the CF Program. It was further requested
that management make available members of the CF Program staff for purposes of
conducting due diligence. On July 25, 1996, Hambrecht & Quist selected Melissa
Rosenfeld, M.D., a leading scientist in the CF field, as its technical
consultant.
On August 2, 1996, representatives of Hambrecht & Quist and Hale and Dorr
and Dr. Rosenfeld met with representatives of management to conduct a due
diligence review of the Company and the CF Program.
Following such due diligence session, Hambrecht & Quist had discussions
with Robertson Stephens & Company and Hale and Dorr had discussions with Palmer
& Dodge, Genzyme's outside law firm, concerning the timing and process of the
due diligence review and a response to any acquisition proposal Genzyme might
make. Mr. Burnes and Mr. McLachlan also discussed the status of the Special
Committee's efforts by telephone.
On August 7, 1996, a meeting of the Special Committee was held to review
the status of due diligence efforts and discussions with Genzyme regarding a
potential acquisition proposal. Representatives of Hambrecht & Quist and Hale
and Dorr participated in the meeting. The Special Committee approved and
ratified the engagement of Hambrecht & Quist as financial advisor, Hale and Dorr
as legal counsel and Dr. Rosenfeld as technical consultant.
On August 8, 1996, a conference call between representatives of Genzyme,
representatives of Hambrecht & Quist and Mr. Burnes was held. During the call,
Mr. Wirth stated that Genzyme's management was considering making a proposal to
acquire all of the outstanding Units for cash at a price per Unit equal to a
discount of 10% to 15% from the then-current market price of the Units. Messrs.
Wirth and McLachlan explained further that Genzyme believed a below-market price
was justified in view of the current status of the CF Program, including the
failure of HyperGAM(TM)+CF, the largely inactive status of the protein
replacement program and the uncertainty surrounding gene therapy. In response to
questions from representatives of Hambrecht & Quist regarding alternatives to a
cash transaction, Mr. McLachlan advised that Genzyme had rejected the use of
Genzyme stock, warrants or contingent value rights due to concerns over dilution
and because it believed that the use of contingent rights would make the
transaction more difficult for investors to value. In response to the comments
from Messrs. Wirth and McLachlan, Messrs. Purcell and Burnes stated that the
Special Committee would be unlikely to accept any offer at a price below market,
but noted that Hambrecht & Quist had not yet concluded its analyses and,
therefore, it was premature to commence negotiations regarding an acquisition
price.
Over the next weeks, Hambrecht & Quist and Hale and Dorr continued to
conduct additional due diligence with respect to the Company. In particular,
Hambrecht & Quist requested, received and reviewed documents from Genzyme
relating to the Company, including general corporate materials, financial and
accounting information, financial projections, license agreements and
collaborations with third parties, copies of reports made to the Board of
Directors concerning progress of the Company's research and development programs
and analysts' reports on the Company, its competitors and CF in general. In
addition, representatives of Hambrecht & Quist began to make informal inquiries
as to the possible interest of potential third party purchasers of the Company.
Hale and Dorr reviewed the existing agreements between the Company and Genzyme
as well as the Company's patent position. Dr. Rosenfeld also continued to
conduct additional due
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diligence with respect to the Company and the CF Program and provided an
assessment of the CF Program to Hambrecht & Quist.
At a meeting of the Special Committee held on August 22, 1996, Hambrecht &
Quist reported on the status of its due diligence review, indicating that, with
the assistance of Dr. Rosenfeld, progress had been made on assessing the
Company's technology. Hambrecht & Quist also indicated that it had made some
informal inquiries as to the possible interest of potential third party
purchasers, and determined that interest in the Company appeared to be
insignificant due, among other things, to the limited nature of the Company's
technology rights. Hale and Dorr provided an assessment of the Company's patent
portfolio. It was also reported that the Company had agreed to indemnify the
members of the Special Committee against liabilities arising out of their
service on the Special Committee.
On September 3, 1996, Messrs. McLachlan and Wirth met with David G. Golden,
a Managing Director of Hambrecht & Quist, and Mr. Purcell to discuss the
proposed acquisition price. Messrs. McLachlan and Wirth reiterated Genzyme's
position that an acquisition price per Unit equal to a discount of 10% to 15%
from the then current market price of the Units was appropriate in view of the
status of the CF Program. Hambrecht & Quist stated that it did not believe the
Special Committee would accept an acquisition price below market and that
Genzyme should expect to have to pay a premium over the then-current market
price of the Units. On September 4, 1996 Mr. McLachlan and Mr. Burnes discussed
the previous day's telephone conference. Mr. Burnes reiterated that the Special
Committee believed that any offer should be above the then current market price.
On the morning of September 5, 1996, the Genzyme Board of Directors
authorized management to propose an acquisition at $45 per Unit in cash if
Genzyme's management could reach an agreement with the Special Committee at such
price and if the Special Committee would recommend such price to the Holders.
Mr. Termeer contacted Mr. Burnes and indicated that Genzyme's management would
be willing to recommend to Genzyme's Board of Directors an increased acquisition
price of $45 per Unit in cash, if the Special Committee would recommend such
price to the Holders (the "Genzyme Proposal"). Mr. Burnes agreed to review the
Genzyme Proposal with Mr. Flynn and Hambrecht & Quist.
In the evening of September 5, 1996, the Special Committee met to consider
the Genzyme Proposal. Hambrecht & Quist presented its preliminary analysis of
the fairness of the Genzyme Proposal to the holders of the Units from a
financial point of view and expressed its preliminary opinion that the Genzyme
Proposal was fair to the holders of the Units from a financial point of view.
Hambrecht & Quist noted that its opinion was subject to negotiation and review
of the documentation for the transaction and satisfactory resolution of the
structure of the transaction with respect to those Holders who do not tender
their Units pursuant to the Offer. After review of the foregoing analysis and
other considerations, the Special Committee unanimously approved in principle a
transaction in which Units of the Company would be purchased by Genzyme at a
purchase price of $45 per Unit in cash, subject to (a) negotiation and execution
of definitive agreements, (b) receipt of Hambrecht & Quist's written fairness
opinion, and (c) satisfactory resolution of the structure of the transaction
with respect to non-tendering shareholders.
On September 6, 1996, the Company and Genzyme jointly announced that they
had reached an agreement in principle relating to the acquisition of the Company
for $45 per Unit, subject to negotiation and execution of a definitive
acquisition agreement.
During the next two weeks, drafts of the Purchase Agreement were exchanged
between Genzyme and the Company and their respective legal and financial
advisors and the terms of such agreement were negotiated, including the
structure of the Second Step Transaction, the amount of consideration to be paid
in connection with the Second Step Transaction and arrangements between the
parties in the event of a superior transaction, including the payment of a
termination fee to Genzyme upon the consummation of a superior transaction and
Genzyme's agreement to consent to the early assignment of the Technology License
Agreement in connection with a superior transaction.
On September 10, 1996, the Special Committee met with its financial and
legal advisors to review issues relating to the draft Purchase Agreement.
Hambrecht & Quist reported that several of the Company's
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shareholders had contacted it with respect to the Offer, and indicated that
shareholders had expressed dissatisfaction with the $45 price per Unit,
principally due to their perception that Genzyme had previously led them to
believe that any repurchase of the Units would be at a higher price.
On September 17, 1996, the Genzyme Board of Directors held a special
meeting to assess the status of the proposed transaction. At such meeting,
Robertson, Stephens & Company made a presentation to the Genzyme Board (the
"Robertson, Stephens & Company Presentation"). The Genzyme Board then reviewed
with management the status of negotiations concerning the Purchase Agreement.
On September 20, 1996, the Special Committee met with its financial and
legal advisors to consider the Purchase Agreement. As described more fully below
under "SPECIAL FACTORS -- Section 4. Recommendation of the Company's Board of
Directors; Fairness of the Transaction", the Special Committee unanimously
recommended that Neozyme II's Board of Directors approve the Offer and the
Second Step Transaction. Thereafter, the full Neozyme II Board of Directors met
and, upon the receiving the recommendation the Special Committee, unanimously
determined (i) to accept the recommendation of the Special Committee, (ii) based
upon, among other considerations, the recommendation of the Special Committee
that the Offer and the Second Step Transaction are fair to, and in the best
interests of, holders of the Units and (iii) to approve the Purchase Agreement
and the transactions contemplated thereby.
Following the meeting of the Company's Board of Directors on September 20,
1996, the Genzyme Board of Directors held a special meeting. At such meeting,
Robertson, Stephens & Company delivered to the Genzyme Board its written
opinion, dated September 20, 1996 (the "Robertson, Stephens & Company Opinion"),
that, as of such date, and based upon and subject to the factors and assumptions
set forth in such opinion, the Offer Price was fair to Genzyme from a financial
point of view. After discussion with respect to the Offer and the other terms
and conditions of and transactions contemplated by the Purchase Agreement and
considering the matters discussed under "SPECIAL FACTORS -- Section 4.
Recommendation of the Company's Board of Directors; Fairness of the Transaction"
and "-- Section 5. Reasons for the Transaction; Purpose and Structure of the
Transaction; Plans for the Company after the Transaction" and the Robertson,
Stephens & Company Opinion, the Genzyme Board unanimously determined (i) to
approve the Offer and the Second Step Transaction, the Purchase Agreement and
the transactions contemplated thereby and (ii) that, based upon, among other
things, the conclusion of the Special Committee and the Company's Board, the
terms of the Offer and the Second Step Transaction are fair to unaffiliated
holders of the Units.
The Purchase Agreement was executed by the parties and on September 23,
1996 a press release announcing the execution of the Purchase Agreement was
issued.
On September 27, 1996, the Purchaser commenced the Offer.
4. RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS; FAIRNESS OF THE
TRANSACTION
At a meeting held on September 20, 1996, the Special Committee unanimously
determined that the Offer and the Second Step Transaction are fair to, and in
the best interests of, the Holders and resolved to recommend that the Board (a)
determine that the Offer and the Second Step Transaction are fair to, and in the
best interests of, the Holders; (b) adopt and approve the Offer, the Second Step
Transaction, the Purchase Agreement and the transactions contemplated thereby;
and (c) recommend that the Holders accept the Offer and tender their Units to
the Purchaser pursuant to the Offer.
In determining that the Offer and the Second Step Transaction are fair to,
and in the best interests of, the Holders, and in making its recommendation to
the Board, the Special Committee considered the following factors, which, taken
as a whole, supported its decision:
(a) the financial condition of the Company, including the fact that
the Company's current cash is expected to be substantially exhausted by
December 31, 1996 and the uncertain prospects of raising new capital in
light of the current financing market for biotechnology companies,
including the fact that many public offerings of biotechnology companies
have either been postponed or priced below anticipated price ranges;
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(b) the status of the Company's technology programs (based, in part,
on input previously provided to Hambrecht & Quist by Dr. Rosenfeld and a
prior oral presentation concerning the patent position of the Company's
technology by Hale and Dorr, the Committee's independent legal counsel),
including the fact that the Company's protein replacement therapy program
has been largely inactive since 1994 and the decision in June 1996 to halt
clinical trials for HyperGAM(TM)+CF;
(c) the prospects of the Company, including the fact that the
Company's gene therapy programs are unlikely to yield commercially viable
products within the CF field for at least several years;
(d) the fact that the market value of the Units is currently
significantly lower than the Purchase Option Exercise Price and, that given
the current status of the Company's technology programs and its prospects,
the likelihood that the per Unit trading price on the NNM will not reach
the Purchase Option Exercise Price prior to the expiration of the Purchase
Option Agreement on December 31, 1996;
(e) the valuation analyses presented to the Special Committee by
Hambrecht & Quist at its September 5, 1996 and September 20, 1996 meetings;
(f) the H&Q Opinion stating that, on the basis of and subject to the
matters set forth therein, the cash consideration to be received by the
shareholders of the Company in exchange for the Units in the Offer and in
exchange for the Shares in the Second Step Transaction are fair to the
holders of the Units and the Shares from a financial point of view. The H&Q
Opinion contains a description of the factors considered, the assumptions
made and the scope of review undertaken by Hambrecht & Quist in rendering
the H&Q Opinion and is included herein as Annex I and is incorporated
herein by reference. SHAREHOLDERS ARE URGED TO READ THE H&Q OPINION
CAREFULLY IN ITS ENTIRETY;
(g) the judgment of the Special Committee that $45 per Unit is the
highest price reasonably available to the Company's shareholders for the
following reasons:
(1) the course of negotiations between the parties regarding the
offering price, including the fact that Genzyme's original indication of
interest was at a price level approximately 10% to 15% below the then
current trading price of the Units of $44 and the fact that the $45 per
Unit price represented a premium over the $44 1/16 trading price of the
Units on the day before an agreement in principle with Genzyme was
announced;
(2) the pursuit of alternate transactions with third parties was
not deemed to be a viable alternative (based, in part, on input received
by Hambrecht & Quist in response to informal inquiries as to the
possible interest of potential third party purchasers) given the nature
of the contractual arrangements between the Company and Genzyme and the
fact that the Company's rights in the technology developed in the course
of its research programs is limited to the Field; and
(3) since September 6, 1996, when Genzyme and the Company publicly
announced an agreement in principle on an acquisition at $45 per Unit in
cash, no third party had expressed an interest in having discussions
with the Company to Hambrecht & Quist, which was identified in the press
release as the Company's contact, or the Special Committee; and
(h) the terms and conditions of the Purchase Agreement, including the
right of the Special Committee to terminate the Purchase Agreement in order
to proceed with a Superior Transaction.
The Special Committee also considered the following negative factors
relating to the Offer and the Second Step Transaction:
(a) since the announcement of an agreement in principle with Genzyme,
a number of the Company's shareholders contacted Hambrecht & Quist and the
Special Committee and indicated they believe Genzyme should pay more than
$45 per Unit, due, in part, to the indirect benefits Genzyme has received
from the Company's technology programs; and
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(b) the upside potential if the Company's technology programs, which
are well regarded in scientific circles, are ultimately successful in
discovering one or more products useful in the treatment of CF.
The members of the Special Committee evaluated the above factors in light
of their knowledge of the business of the Company and their business judgment
and concluded that the factors supporting a decision to approve the Purchase
Agreement outweighed the negative factors described above. In view of the wide
variety of factors considered in connection with its evaluation of the Offer and
the Second Step Transaction, the Special Committee did not find it practicable
to, and did not, quantify or attempt to assign relative weights to the specific
factors considered in reaching its decision.
The Special Committee believes the process it followed in approving the
Offer and the Second Step Transaction was procedurally fair and unbiased because
(a) the Special Committee, consisting of all the directors of the Company who
are not directors or officers of Genzyme, was constituted to consider and
evaluate Genzyme's acquisition proposal with respect to the Company; (b) the
members of the Special Committee will not personally benefit from the
transactions contemplated by the Purchase Agreement (other than in their
capacity as holders of Units); (c) the Special Committee retained independent
advisors to assist it in evaluating Genzyme's acquisition proposal; (d) the
Special Committee obtained the valuation analysis of Hambrecht & Quist and the
H&Q Opinion; and (e) the Special Committee negotiated with Genzyme on an arm's
length basis and with the assistance of its advisors.
On September 20, 1996, the Board held a meeting and, based upon, among
other things, the unanimous recommendation of the Special Committee (which was
adopted by the Board in all respects), determined that the Offer and the Second
Step Transaction are fair to, and in the best interests of, the Holders,
approved the Offer and the Second Step Transaction and resolved to recommend
that the Holders accept the Offer and tender their Units to the Purchaser
pursuant to the Offer.
OPINION OF FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE
The Special Committee engaged Hambrecht & Quist to act as its financial
advisor in connection with Genzyme's proposed acquisition of the Company and to
render an opinion as to the fairness from a financial point of view to (a) the
holders of Units of the consideration to be received by such holders in
connection with Genzyme's offer to purchase all of the outstanding Units at a
purchase price of $45.00 per Unit in cash, and (b) the holders of the Shares of
the consideration to be received by such holders in connection with the Second
Step Transaction pursuant to which, if the Offer is consummated, but not all of
the Units are tendered and accepted or, if the Offer is terminated in accordance
with the Purchase Agreement so that Genzyme may pursue a Termination
Solicitation, Genzyme will acquire, directly or indirectly, all of the remaining
Shares in exchange for cash in an amount equal to $29.00 per Share. Hambrecht &
Quist rendered its oral opinion (subsequently confirmed in writing) on September
20, 1996 to the Special Committee that, as of such date, the consideration to be
received by the holders of the Units pursuant to the Offer and the consideration
to be received by the holders of the Shares pursuant to the Second Step
Transaction is fair to such holders from a financial point of view. Hambrecht &
Quist also delivered its oral opinion (subsequently confirmed in writing) to the
Company's Board of Directors at its meeting on September 20, 1996. A COPY OF
HAMBRECHT & QUIST'S OPINION DATED SEPTEMBER 20, 1996, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED, THE SCOPE AND LIMITATIONS OF THE REVIEW
UNDERTAKEN AND THE PROCEDURES FOLLOWED BY HAMBRECHT & QUIST IS ATTACHED AS ANNEX
I TO THIS OFFER TO PURCHASE. NEOZYME II SHAREHOLDERS ARE ADVISED TO READ THE
OPINION IN ITS ENTIRETY. Hambrecht & Quist delivered to the Special Committee
written materials covering its methods of analyzing the Company and the Callable
Warrants and the financial results of such analyses in connection with its
September 20, 1996 opinion, which are attached as an exhibit to the Schedule
13E-3 filed with the Commission in connection with the Offer and will be
available for inspection and copying at the principal executive offices of
Genzyme during regular business hours by any interested shareholder of the
Company or a representative of such shareholder who has been so designated in
writing.
No limitations were placed on Hambrecht & Quist by the Special Committee
with respect to the investigation made or the procedures followed in preparing
and rendering the H&Q Opinion. Hambrecht & Quist was not requested to and did
not make any recommendation to the Special Committee as to the amount of
consideration to
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be offered to the Company's shareholders in the Offer and the Second Step
Transaction, which consideration was determined through negotiations between the
Special Committee and its financial and legal advisors and Genzyme and its
financial and legal advisors. Hambrecht & Quist was not requested to and did not
formally solicit third party indications of interest in acquiring all or any
part of the Company. Hambrecht & Quist did, however, make informal inquiries as
to the possible interest of potential third party purchasers, and determined
that interest in the Company appeared to be insignificant due, among other
things, to the limited nature of the Company's technology rights. Holders of
Units should note that the opinion expressed by Hambrecht & Quist was provided
for the information of the Special Committee and the Board of Directors of the
Company in its evaluation of the Offer and the Second Step Transaction and does
not constitute a recommendation to any shareholder as to how such shareholder
should act with respect to the Offer.
In connection with its review of the proposed transaction with Genzyme, and
in arriving at its opinion, Hambrecht & Quist, among other things: (i) reviewed
the publicly available consolidated financial statements of the Company for
recent years and interim periods to date and certain other relevant financial
and operating data of the Company made available to Hambrecht & Quist from
published sources and from the internal records of the Company; (ii) discussed
with certain members of the managements of the Company and Genzyme the business,
financial condition and prospects of the Company; (iii) reviewed the publicly
available consolidated financial statements of Genzyme for recent years and
interim periods to date; (iv) reviewed certain internal financial and operating
information, including certain projections, relating to the Company prepared by
the management of Genzyme; (v) reviewed the recent reported prices and trading
activity for the Units and compared such information and certain financial
information of the Company with similar information for certain other companies
engaged in businesses Hambrecht & Quist considered comparable to that of the
Company; (vi) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions; (vii) reviewed drafts of the
Purchase Agreement, the Offer Documents and certain other materials to be filed
with the Securities and Exchange Commission in connection with the Offer; and
(viii) performed such other analyses and examinations and considered such other
information, financial studies, analyses and investigations and financial,
economic and market data as Hambrecht & Quist deemed relevant.
In rendering its opinion, Hambrecht & Quist assumed and relied upon the
accuracy and completeness of all of the information concerning the Company and
Genzyme considered in connection with its review of the proposed transaction,
and Hambrecht & Quist did not assume any responsibility for independent
verification of such information. Hambrecht & Quist did not prepare any
independent valuation or appraisal of any of the assets or liabilities of the
Company, nor did Hambrecht & Quist conduct a physical inspection of the
properties and facilities of the Company. With respect to the financial
forecasts and projections made available to Hambrecht & Quist and used in its
analysis, Hambrecht & Quist assumed that they reflected the best currently
available estimates and judgments of the expected future financial performance
of the Company. For purposes of its opinion, Hambrecht & Quist assumed that the
Company was not a party to any pending transactions, including external
financings, recapitalizations or material merger discussions, other than the
proposed transaction with Genzyme and those activities undertaken in the
ordinary course of conducting its business. Hambrecht & Quist's opinion was
necessarily based upon market, economic, financial and other conditions as they
existed and could be evaluated as of the date of their opinion and any change in
such conditions would require a reevaluation of that opinion.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. The summary
of the Hambrecht & Quist analyses set forth below does not purport to be a
complete description of the analyses underlying the H&Q Opinion. In arriving at
its opinion, Hambrecht & Quist did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevance of each analysis and factor. Accordingly,
Hambrecht & Quist believes that its analyses and the summary set forth below
must be considered as a whole and that selecting portions of its analyses,
without considering all analyses, or of the summary set forth below, without
considering all factors and analyses, could create an incomplete view of the
processes underlying the analyses set forth in the Hambrecht & Quist
presentation to the Special Committee and the H&Q Opinion. In performing its
analyses, Hambrecht & Quist made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which
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are beyond the control of the Company and Genzyme. The analyses performed by
Hambrecht & Quist (and summarized below) are not necessarily indicative of
actual values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Additionally, analyses relating to
the values of businesses do not purport to be appraisals or to reflect the
prices at which businesses actually may be sold.
Analysis of Technology and Stage of Development. Hambrecht & Quist
reviewed and analyzed, among other things, the Field in which Neozyme II is
engaged (i.e., the research, development and clinical testing of products for
the treatment of cystic fibrosis), Neozyme II's intellectual property rights
(which are limited to technology in the Field, with all technology developed by
the Company with application outside the Field being licensed back to Genzyme
exclusively on a royalty free basis) and approaches to treating CF. In
connection with its review, Hambrecht & Quist retained the outside consulting
services of an independent leading scientist in the field of CF, Dr. Rosenfeld.
The role of Dr. Rosenfeld was not to appraise or value any of the Company's
technology, but to assist Hambrecht & Quist in assessing, among other things,
the quality and progress of the Company's science and its stage of scientific
and clinical development. On the basis of its analysis, Hambrecht & Quist
observed the following: (i) the Company's most advanced approach to treating
cystic fibrosis has been gene therapy using an adenovirus vector; (ii) this
approach has encountered several significant obstacles that make the development
of a gene therapy product unlikely in the next few years (Genzyme forecasts
commercialization in 2003); (iii) while gene therapy approaches using an
adenoassociated virus or a lipid vector hold promise, these approaches are in
comparatively early stages and a pivotal trial for a particular vector is not
likely in the near future; and (iv) Genzyme's work in the areas of protein
replacement and Hypergam(TM)+CF have proved to be disappointments and
development of these products have been suspended and terminated, respectively.
Comparable Company Analysis. Hambrecht & Quist reviewed and compared
selected historical financials, operating and stock market performance data of
the Company to the corresponding data of four publicly traded biotechnology
companies with a scientific focus in the area of gene therapy (the "Gene Therapy
Companies"). The Gene Therapy Companies included in this Group were GeneMedicine
Incorporated, Somatix Therapy Corporation, Targeted Genetics Corporation and
Vical Incorporated. Hambrecht & Quist compared cash, book value, net income,
enterprise value (consisting of equity value plus debt less cash) and burn rate
(cash used in operating activities plus capital expenditures) for the latest
available 12 month period ("LTM") for each of the Gene Therapy Companies with
the Company. Hambrecht & Quist also analyzed the financial ratios of market
value to cash and market value to book value. Hambrecht & Quist calculated the
ratio of the cash position to the LTM burn rate of each of the Gene Therapy
Companies to determine the "survival index" (the number of consecutive annual
periods that such company could continue to fund cash losses at the rate
experienced in the LTM from the most recently available reported cash without
obtaining additional capital) and compared such information from such Gene
Therapy Companies with the Company. The average enterprise value of the Gene
Therapy Companies was $75.3 million ($70.3 million excluding the high and low)
compared to an enterprise value of $61.4 million for the Company based on the
Offer (assuming a value of $16.00 per Callable Warrant). Hambrecht & Quist noted
that the Gene Therapy Companies had research projects in multiple disease areas
while the Company is limited to the Field and has no rights to gene delivery or
other technology outside the Field.
Hambrecht & Quist also reviewed and compared selected historical and
projected financials, operating and stock market performance data of certain
publicly traded biotechnology and pharmaceutical companies (the "Established
Companies Comparables"). This comparison provided a basis for the range of
Price-Earnings ("P/E") multiples used in further analysis, particularly the
Terminal Value (as defined below) in connection with the discounted cash flow
analyses described below. The companies included in the Established Companies
Comparables were the following: Johnson & Johnson, Merck & Co, Pfizer Inc.,
SmithKline Beecham, Glaxo-Wellcome, Chiron Corp., Amgen Inc. and Genentech Inc.
Hambrecht & Quist did not attempt to prepare any further quantitative valuation
analyses based on the Established Companies Comparables because Hambrecht &
Quist believed that any comparative multiples that might be derived based upon
earnings or other financial data of such companies would not be meaningful when
applied to the Company's operating losses.
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Hambrecht & Quist also reviewed and analyzed the acquisition by Chiron of
Viagene and the acquisition of Genetic Therapy by Sandoz. Hambrecht & Quist
observed that Chiron acquired Viagene in a transaction valued at $102 million,
representing a premium of 67% over the market value of Viagene stock one day
prior to the transaction's announcement and that Sandoz acquired Genetic Therapy
in a transaction valued at $295 million, representing a premium of 38% over the
market value of Genetic Therapy stock one day prior to the transaction's
announcement. Hambrecht & Quist did not attempt to prepare any further
quantitative valuation analyses based on these acquisition transactions because
Hambrecht & Quist believed that differences in the technologies of each company
and the differences in the market conditions at the time such acquisitions were
made would make such analyses meaningless.
Comparable SWORD Analysis. Hambrecht & Quist noted that the Shares had
originally been offered as part of a unit financing in which purchasers bought a
Unit consisting of (i) one Share, (ii) one Series N Warrant and (iii) one
Callable Warrant. Hambrecht & Quist reviewed and analyzed the original offering
of the Units and other comparable public offerings of special purpose funding
companies commonly referred to as Stock Warrant for Off-Balance Sheet Research
and Development Companies ("SWORDs"). Hambrecht & Quist also reviewed the stock
prices and market performances of the Units and the comparable SWORD offerings.
Where the stock of SWORD companies was repurchased by the SWORD sponsor in a
negotiated transaction and not pursuant to the original purchase option,
Hambrecht & Quist analyzed a number of factors, including the purchase price
attributable to the technology, the discount to the original purchase option
price and calculated the implied rate of return from the original offering date.
The sponsor companies of the comparable SWORD offerings included in this
analysis were ALZA Corp., Centocor, Inc. (two such offerings), Immunex
Corporation, Elan Corporation PLC (two such offerings), Genetics Institute Inc.,
Gensia, Inc., Cytogen Corp., Genzyme Corporation (including only Neozyme
Corporation and not Neozyme II Corporation), PerSeptive Biosystems Inc., and
Ligand Pharmaceuticals, Inc./Allergan, Inc. (a co-sponsored SWORD). Hambrecht &
Quist observed that the value of the average SWORD units had appreciated
(inclusive of implied appreciation where such units had been repurchased by the
sponsoring companies) approximately 71.6% (from offering date to September 19,
1996), as compared to a 63.4% increase in value of the Units. Hambrecht & Quist
also observed that, at the time of the unit offering, the average value of the
warrants at an assumed 40% volatility in the SWORD sponsoring company
represented approximately 54.6% of the aggregate SWORD unit value and that in
the case of the Company, the Genzyme warrants represented approximately 23.7% of
the value of the Unit at the time of the original offering. Accordingly,
Hambrecht & Quist observed that, of the $35.00 per Unit offering price,
approximately $8.30 per Unit was allocable to the Series N Warrants and
approximately $26.70 per Unit was allocable to the Shares and the Callable
Warrants. The Series N Warrants originally included in the Units have separated
from the Units and now trade separately under the symbol "GENZZ" (the closing
price on September 19, 1996 was $11.50 per Series N Warrant). These figures were
compared with a valuation of $29.00 per Share included in the Units and $16.00
per warrant for the Callable Warrants included in the Units. In addition,
Hambrecht & Quist observed that the discount to the original purchase option
price of SWORDs repurchased in negotiated transactions was 58.7%, compared to
61.5% for the Company pursuant to the Offer and that the rate of return in
negotiated repurchases was -9.2% for the comparable SWORD repurchases, compared
to 6.5% for the Units.
Discounted Cash Flow Analysis. Hambrecht & Quist analyzed the theoretical
valuation of the Company based on the unlevered discounted cash flow of its
projected financial performance under three scenarios: (i) the Company launches
a cystic fibrosis product in 2003 in accordance with the projections Genzyme
provided Hambrecht & Quist (the "Base Case"); (ii) the Company's anticipated
product launch is delayed until 2004 (the "Delayed Scenario"); and (iii) the
Company's anticipated product launch is accelerated by one year to 2002 (the
"Accelerated Scenario"). In all three scenarios, Hambrecht & Quist used discount
rates ranging from 25% to 40% to calculate the present value (the "Present
Value") of the Company's projected stream of after-tax cash flows through 2005.
Hambrecht & Quist then calculated a terminal value (the "Terminal Value") for
the Company which represents the hypothetical value of selling
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the entire business at the end of 2005 and discounting the amount received from
such hypothetical sale to its net present value (using the same discount rate as
applied to the Present Value). The Terminal Value used under all scenarios was
based upon multiples of 14.0x to 24.0x projected net income for the year 2005.
The range of 14.0x to 24.0x projected net income reflects a range of P/E
multiples derived from the Established Companies Comparables. For the purposes
of this analysis, Hambrecht & Quist relied on the Genzyme's management's
estimate of projected revenues with respect to all scenarios and altered only
the year in which such revenues would be recognized, with respect to the Delayed
Scenario and the Accelerated Scenario. To estimate the total present value of
the Company's business, before giving effect to its capital structure, Hambrecht
& Quist added the Present Value to the Terminal Value.
Using the Base Case, Hambrecht & Quist calculated a range of present
values, including $41.9 million at a 35% discount rate and an 18.0x exit
multiple, $72.3 million at a 30% discount rate and an 18.0x exit multiple, $50.7
million at a 35% discount rate and an 20.0x exit multiple and $84.8 million at a
30% discount rate and an 20.0x exit multiple. Using the Delayed Scenario,
Hambrecht & Quist calculated a range of present values, including $3.2 million
at a 35% discount rate and an 18.0x exit multiple, $17.0 million at a 30%
discount rate and an 18.0x exit multiple, $8.0 million at a 35% discount rate
and an 20.0x exit multiple and $23.8 million at a 30% discount rate and an 20.0x
exit multiple. Using the Accelerated Scenario, Hambrecht & Quist calculated a
range of present values, including $71.6 million at a 35% discount rate and an
18.0x exit multiple, $114.1 million at a 30% discount rate and an 18.0x exit
multiple, $82.6 million at a 35% discount rate and an 20.0x exit multiple and
$130.0 million at a 30% discount rate and an 20.0x exit multiple. Hambrecht &
Quist observed that the Offer of approximately $70.0 million (assuming a value
of $38.6 million for the Callable Warrants) for the Company fell within the
middle ranges calculated using the Base Case Scenario, above the middle ranges
calculated using the Delayed Scenario and below the middle ranges calculated
using the Accelerated Scenario.
Warrant Valuation Analysis. Hambrecht & Quist analyzed the valuation of
the Callable Warrants using the Black-Sholes option valuation formula. Such
formula suggested that the value of the warrant for two shares of General
Division Common Stock based on a range of volatility of 45% to 55% to be between
$13.03 and $16.57. Additionally, such formula suggested that the value of the
warrant for 0.135 share of Tissue Repair Common Stock based on a range of
volatility to be between $0.32 and $0.42. Hambrecht & Quist also noted that the
implied volatility based on a $16.00 warrant valuation was approximately 53.8%.
Accordingly, Hambrecht & Quist concluded that the aggregated value of the
Callable Warrants range from $32.2 million to $41.0 million, or $13.33 to $16.98
per Callable Warrant.
Stock Trading History Analysis. Hambrecht & Quist examined the trading
history of (i) the Units in terms of both price and volume from September 5,
1995 to September 4, 1996 and (ii) the Units and Genzyme common stock, compared
to the American Biotechnology Index from August 4, 1992 to September 6, 1996.
Hambrecht & Quist noted that, over the period, the Units increased in value at a
far greater rate than either Genzyme common stock or the American Biotechnology
Index, which tended to trade in parallel.
No company or transaction used in the above analyses is identical to the
Company, Genzyme or the proposed transaction. Accordingly, an analysis of the
results of the foregoing is not mathematical; rather it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading values of the companies or company to which they are compared. The
foregoing description of Hambrecht & Quist's opinion is qualified in its
entirety by reference to the full text of such opinion, which is attached hereto
as Annex I.
Certain Relationship; Terms of Engagement. Hambrecht & Quist, as part of
its investment banking services, is regularly engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
strategic transactions, corporate restructurings, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. The Special Committee selected
Hambrecht & Quist to serve as its financial advisor in connection with the
proposed transaction with Genzyme because it is an internationally recognized
investment banking firm whose
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professionals have substantial experience in SWORDs transactions and
transactions similar to the Offer and the Second Step Transaction. Hambrecht &
Quist has, from time to time, provided financial advisory services to Genzyme,
and has received fees for rendering these services. In July 1996, Hambrecht &
Quist acted as managing underwriter for a public offering of Genzyme Transgenics
Corporation, an affiliate of Genzyme and received as compensation fees and
commissions of approximately $312,000. In the ordinary course of business,
Hambrecht & Quist acts as a market maker and broker in the publicly traded
securities of the Company and Genzyme and receives customary compensation in
connection therewith, and also provides research coverage for Genzyme. In the
ordinary course of business, Hambrecht & Quist actively trades in the equity
securities of the Company and Genzyme for its own account and for the accounts
of its customers and, accordingly, may at any time hold a long or short position
in such securities. Hambrecht & Quist may in the future provide additional
investment banking or other financial advisory services to Genzyme.
Pursuant to an engagement letter dated August 2, 1996, the Company has
agreed to pay Hambrecht & Quist a retainer in the amount of $50,000 and a fee in
connection with its services as financial advisor to the Special Committee and
the rendering of a fairness opinion. The Company has agreed to pay a fee of
$200,000 upon the delivery of the fairness opinion. The retainer and fairness
opinion fee shall be credited against any Transaction Fee (as defined below).
Upon consummation by the Company of the proposed transaction, the Company shall
pay Hambrecht & Quist a fee (the "Transaction Fee"), payable in cash on closing,
of 1.0% of the value of the consideration to be received by holders of Units
plus 3.0% of the value of the consideration to be received by holders of Units
in excess of $43.00. The Company has agreed to reimburse Hambrecht & Quist for
its reasonable out of pocket expenses, and to indemnify Hambrecht & Quist
against certain liabilities, including liabilities under the federal securities
laws or relating to or arising out of Hambrecht & Quist's engagement as
financial advisor. The amount of compensation to be paid to Hambrecht & Quist
was determined by negotiations between the Special Committee and Hambrecht &
Quist.
5. REASONS FOR THE TRANSACTION; PURPOSE AND STRUCTURE OF THE TRANSACTION; PLANS
FOR THE COMPANY AFTER THE TRANSACTION
In determining to seek to acquire the Company, the Board of Directors of
Genzyme carefully considered the status of the technology and product
development of the Company, which is summarized below.
STATUS OF PRODUCT DEVELOPMENT
Product Opportunity
CF is the most common fatal genetic disease afflicting the caucasian
population. Approximately one in every 2,500 infants in the United States is
born with the disease. Although improvements have been made over the last 20
years in alleviating certain symptoms of the disease and delaying its progress,
the underlying disease remains untreated and patients have an average life
expectancy of only 29 years. There are approximately 30,000 CF patients in North
America.
CF is caused by one or more mutations in the gene responsible for
determining the molecular structure of a protein called cystic fibrosis
transmembrane conductance regulator ("CFTR"). The absence of functional CFTR
protein from the membrane of airway surface cells disrupts the ion transport
mechanism of the cells and contributes to the formation of a thick, dehydrated
mucus that cannot be eliminated from the lungs in the normal fashion. Build-up
of this mucus fosters recurrent infections that cause breathing difficulties and
damage to the lungs, eventually leading to respiratory failure and death.
Elsewhere in the body, the gene defect often results in digestive, reproductive
and other problems. Such other problems are unlikely to be alleviated in the
event CF-induced airway and lung damage is effectively treated.
Neozyme II's work relating to the treatment of CF initially concentrated on
two promising therapies to correct the basic defect in CF airway cells: gene
therapy to augment the mutant genes with genes that would enable the patient's
cells to produce normal CFTR protein, and protein replacement therapy to augment
the missing or defective CFTR protein with properly functioning CFTR protein.
For technical and competitive reasons, the gene therapy approach has been
emphasized during the last two years, and currently the protein replacement
program is largely inactive. Neozyme II also funded NABI's efforts to develop
passive
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immunization antibody products primarily for the prevention and treatment of
bacterial infections common in CF patients. See "HyperGAM(TM)+CF" below.
Progress to Date
The gene responsible for the defective protein present in CF patients was
identified by scientists at the University of Michigan and the Hospital for Sick
Children in Toronto and their findings were published in 1989. Since that time,
and on behalf of Neozyme II since March 1992, Genzyme scientists have
intensively studied the gene and the protein and have made significant technical
progress that should facilitate the development of effective therapies for the
treatment of CF patients. These results have been published in leading
scientific journals, and Genzyme has filed United States and foreign patent
applications covering certain aspects of this work.
GENE THERAPY. Gene therapy is a promising new technique being developed as
a treatment for several genetic diseases including CF. To date, over 139
protocols for preliminary clinical studies of gene therapy for a variety of
diseases have been approved by the National Institutes of Health.
Because of the innovative nature of gene therapy and public policy issues
surrounding the insertion of new genetic information into cells, the Company
expects that early clinical evaluation will continue to entail especially
careful testing in a limited number of patients. On behalf of Neozyme II,
Genzyme is currently conducting preliminary clinical testing of Neozyme II's
gene therapy products. The timing and results of these initial studies will
determine whether and when pivotal trials to determine safety and effectiveness
will be undertaken. These pivotal trials may involve large groups of patients
for lengthy periods of time in order to address the uncertainties surrounding
insertion of new genetic information into humans and to show clinical
effectiveness in the treatment of a progressive disease. All of Genzyme's
efforts related to gene therapies for CF are funded by Neozyme II.
On behalf of Neozyme II, Genzyme scientists have demonstrated that the
defective ion transport mechanism present in airway cells taken from CF patients
can be corrected in vitro by the insertion of normal CFTR genes into the cells.
However, the techniques for inserting genetic material into cells outside the
body are not expected to be useful in gene therapy for CF because there is no
practical way to remove and re-implant cells from the airways of CF patients.
For this reason, Neozyme II's proposed gene therapy Product will likely need to
be administered directly to the airways of the lung. Neozyme II believes that
its gene therapy Product would need to be readministered periodically as the
transferred gene ceases to function or is lost and as the treated cells
naturally die and are replaced.
Vectors are presently regarded as critical components of gene therapeutics
which facilitate targeting and delivery of genetic material to the appropriate
cells and affect the efficiency and duration of gene expression. On behalf of
Neozyme II, Genzyme is developing both viral and non-viral vectors for
delivering the gene encoding CFTR to the surface cells lining the airways.
Animal studies aimed at demonstrating the potential safety and effectiveness of
a variety of vectors have been initiated and several have been successfully
completed and reported in scientific journals.
Viral Vectors. On behalf of Neozyme II, Genzyme and collaborators at the
University of Iowa, in 1993, conducted a small study in CF patients using an
adenovirus-gene product administered to nasal epithelium. Results collected from
the study showed that it is possible to correct the biochemical defect in CF
cells in nasal epithelium in vivo. The study results, published in October 1993,
were the first published report of a successful gene transfer in CF patients and
the first successful application of an adenovirus vector in gene therapy.
However, in a 1995 publication reporting the results of a similar study,
researchers from the University of North Carolina questioned the efficacy of
gene transfer using adenovirus.
In December 1993, a Genzyme collaborator received Recombinant DNA Advisory
Committee ("RAC") approval for a study involving repeat administration of
Genzyme's second generation adenovirus vector to the nasal epithelium and sinus
passages of CF patients. The nasal part of this study was initiated during the
first quarter of 1994 and was completed in the second quarter of 1995.
Aggregated data from this study showed limited evidence of gene expression at
the intermediate doses but not at the highest dose. The
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virus appeared safe, but a complex immune response to the adenovirus was
measured in almost all patients. This and other data obtained in animals and
submitted for publication in 1995 suggest that immune response may limit the
efficacy of repeat dose therapy with adenovirus. The sinus study was not
conducted due to the lack of interpretable baseline data in the CF sinus.
During the fourth quarter of 1994, Genzyme received RAC approval and
submitted a protocol to the United States Food and Drug Administration (the
"FDA") for a two part safety study involving administration of its second
generation adenovirus vector to the lungs of up to 40 CF patients via
bronchoscope and aerosol. Bronchoscopic administration commenced in the first
quarter of 1995, and aerosol administration commenced in September 1995.
Additionally, in September 1995, Genzyme switched to the use of a third-
generation adenovirus vector with an improved safety profile as part of this
same study. The study is currently ongoing.
In parallel with these clinical studies, Genzyme, on behalf of Neozyme II,
is conducting extensive research into proving the safety and efficacy of
adenovirus. Particular emphasis is being placed on immunology, since it now
appears that new vectors or methods need to be developed so as to reduce the
patient's immune response and to increase the efficacy of adenovirus vectors.
Such improvements may be necessary in order for adenovirus vectors to be
clinically useful in chronic therapy.
Non-Viral Vectors. In addition to pursuing adenovirus and other viral
vectors, Neozyme II is developing lipid-DNA complexes as vectors for gene
therapy. Neozyme II believes that lipid-based vectors may offer advantages due
to their reduced immunogenicity and ease of manufacture relative to viral
vectors. Genzyme has synthesized, evaluated and filed patent applications on
numerous new lipids. Several of these have shown significantly greater activity
in vivo than commercially available lipids. To augment its internal efforts,
Genzyme has entered into arrangements with third parties to gain access to
non-viral gene delivery technologies. To date, the most significant such
arrangement is an October 1993 exclusive research agreement with Vical, Inc. to
evaluate Vical's cytofectins as non-viral gene delivery vectors for treating CF.
The plasmid expression system containing the DNA also affects expression
efficiency, and Genzyme has designed various new plasmid constructs to enhance
expression. Although substantial progress has been made in both lipid and
plasmid constructs, currently the optimal formulation of the best lipid-DNA
complex is still less efficient than adenovirus as measured in single dose in
vivo experiments.
In December 1993, a Genzyme collaborator received RAC approval for a CF
nasal protocol utilizing a lipid-DNA complex containing DMRIE, one of Vical's
proprietary cytofectins. This study commenced in September 1995 and is currently
ongoing. In December 1994, Genzyme also initiated a collaboration with a British
academic group for purposes of further studying Neozyme II's proprietary
lipid-DNA complexes.
In December 1995, Genzyme submitted an IND to the FDA for a nasal study
using a proprietary lipid-DNA complex developed by Genzyme. The study was
initiated in January 1996 by Genzyme and its collaborators at the University of
Iowa and completed in the second quarter of 1996. The study entailed the
administration of the lipid- DNA complex to one nostril of nine CF patients and
administration of the DNA plasmid alone to the patients' other nostril as a
control. Although the results showed that the lipid-DNA compound was well
tolerated, they did not demonstrate the lipid-DNA compound to be superior to the
plasmid DNA in improving ion exchange across the cell membrane. A follow-on
study to gather additional information is planned for later this year.
Also in the second quarter of 1996, Genzyme completed a safety study in
which the lipid alone was delivered in aerosol form to the lungs of 15 non-CF
volunteers. The study showed that aerosolized delivery of the lipid to the lung
was well tolerated. Based on these results, a pilot study involving aerosol
administration of a lipid-DNA complex to the lungs of CF patients was planned to
start later this year in the United Kingdom ("UK"). The commencement of this
trial was placed on hold by the UK Medicines Control Agency ("MCA"), pending
resolution of certain safety issues raised by the MCA. Genzyme has responded to
these issues and submitted a revised protocol for the trial. There can be no
assurance that the MCA will accept the revised protocol or require additional
data that would further delay the trial. In the event that the revised protocol
is not accepted, Genzyme plans to revise the IND currently on file with the FDA
for the lipid-DNA complex to include an aerosol protocol.
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Protein Replacement Therapy. CFTR is a membrane protein, a class of
molecules which historically has been difficult to produce in conventional cell
culture in active form and large quantities. Genzyme, however, has been able to
develop recombinant cell lines that can synthesize the protein and has published
data on the feasibility at laboratory scale of producing and purifying
functional CFTR protein from mammalian and insect cells. In collaboration with
researchers at Tufts University and Genzyme Transgenics Corporation, transgenic
expression techniques were used successfully to breed mice and rabbits that
secrete human CFTR protein in their milk. Based on these results, Genzyme
engaged Genzyme Transgenics Corporation to develop transgenic goats that express
CFTR in their milk. Although one transgenic goat has been born, it did not
synthesize measurable CFTR in its milk and no further work is currently
underway.
As a membrane protein, CFTR must be delivered into the cell membrane to be
effective. On behalf of Neozyme II, Genzyme has investigated various methods to
deliver the CFTR protein across the planar bilayer of epithelial cells. In 1995,
Genzyme reported in several publications the technical feasibility of delivering
small but detectable amounts of functional CFTR to epithelial cells in vitro
using virosomes. However, the effect detected was transient.
As a theoretical matter, gene therapy is significantly more efficient than
protein replacement because each DNA particle delivered will produce multiple
copies of protein; whereas, in protein replacement, each delivered unit results
in delivery of only one protein molecule. Both protein replacement and gene
therapy have significant technical challenges related to delivery, but since
gene therapy is more efficient once delivered, Genzyme has chosen to concentrate
its efforts in this area. Although still a potentially viable approach,
currently the protein replacement program is largely inactive.
HyperGAM(TM)+CF. In August 1993, Genzyme entered into an alliance with
NABI to develop a polyclonal antibody product called HyperGAM(TM)+CF for use in
passive immunization of CF patients infected with Pseudomonas bacteria, which
are a major medical problem associated with CF and a frequent cause of
hospitalization. Neozyme II believed that HyperGAM(TM)+CF could be complementary
to the Company's gene therapy or protein replacement products by preventing or
treating Pseudomonas infections in conjunction with correcting the basic defect
in airway cells. In exchange for funding Genzyme's share of NABI's development
costs, Neozyme II received the exclusive right to market HyperGAM(TM)+CF
worldwide and share in the profits with NABI.
A Phase I clinical trial involving single dose administration of
HyperGAM(TM)+CF was completed in 1994 and showed that HyperGAM(TM)+CF appeared
to be safe and supported a monthly dosing regimen. A multi-center, dose ranging
Phase II clinical trial to assess safety and efficacy of the product in chronic
administration commenced in the first quarter of 1995. In June 1996, Neozyme II
and NABI announced the halt of the Phase II clinical trial for HyperGAM(TM)+CF
because an interim analysis of the trial data showed no evidence of a reduction
in the number of acute pulmonary exacerbations in trial participants. No major
issues with the safety of the product were identified. On June 21, 1996, after
review of the interim analysis data, the Board of Directors of Neozyme II voted
unanimously to terminate the license and development agreement with NABI. Under
the terms of the agreement with NABI, Neozyme II is required to reimburse NABI
for certain costs incurred in connection with the wind down of the
HyperGAM(TM)+CF program up to a maximum of $900,000.
REASONS FOR THE TRANSACTION
Genzyme believes that a gene-based therapy for CF represents the most
promising approach for addressing this important unmet medical need. Despite
significant development progress under the CF Program, however, the key
milestone of demonstrating clinical efficacy of a gene therapy approach has not
been and, Genzyme believes, will not be demonstrated until well after the
expiration of the Purchase Option on December 31, 1996, if at all. Accordingly,
Genzyme believes the value of Neozyme II is significantly below the current
Purchase Option Exercise Price and, absent unforeseen progress in the CF
Program, Genzyme does not intend to exercise the Purchase Option.
Notwithstanding the present intention not to exercise the Purchase Option,
the Genzyme Board of Directors has determined that the acquisition of Neozyme II
at this time on and subject to the terms of the Purchase Agreement is in the
best interests of Genzyme and its stockholders for the following reasons:
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Acceptable Valuation and Timing; Avoid Dilution. Genzyme believes that the
Offer allows Genzyme to acquire Neozyme II at a price that appropriately
reflects the value of Neozyme II at its current stage of development and within
the time frame contemplated at the inception of Neozyme II. In addition, if the
Offer is consummated, the number of outstanding warrants to acquire Genzyme
stock will be significantly reduced, thereby reducing potential future dilution
of Genzyme stock.
Continuity of Program Development. Genzyme desires to maintain its
commitment to the CF community to continue the research, development and
clinical evaluation of the two gene therapy approaches currently being evaluated
in the CF Program in an effort to reach the key milestone of demonstrating
clinical efficacy as soon as possible. Genzyme expects, however, that advancing
the CF Program through demonstration of clinical efficacy will require
significant additional investment materially in excess of the remaining
resources available from Neozyme II, which resources will be substantially
depleted by the end of 1996. In the event that the Offer is rejected, Neozyme II
will be required to seek alternative sources of capital to continue funding the
CF Program, such as raising additional capital, an acquisition by a third party
or some form of collaboration with a third party. Genzyme believes that any such
alternative would involve significant time, expense and uncertainty and, more
important, could result in the interruption of the research, development and
clinical evaluation efforts being conducted under the CF Program. Any such
interruption could have a material adverse effect on the time required to
demonstrate clinical efficacy. Acquiring Neozyme II at this time, therefore,
allows Genzyme to maintain its commitment to the CF community, while preserving
the continuity of its CF development efforts.
Preservation of Competitive Advantage. While the CF Program has
experienced setbacks relating to the failure of HyperGAM(TM)+CF and the largely
inactive status of the protein replacement program due to the significant
technical challenges related to this approach, Genzyme believes that, with both
viral and non-viral vector systems in clinical evaluation for CF, the CF Program
is the most comprehensive program among those competitors active in the CF
field. Substantially all of the value created by the CF Program derives,
however, from the intellectual property developed under the CF Program. In the
event that Neozyme II is required to seek alternative sources of capital to
continue funding the CF Program, Genzyme believes that Neozyme II would be
required to disclose such intellectual property to interested third parties,
including existing or potential competitors, in connection with seeking such
funding and that such disclosure notwithstanding the existence of non-disclosure
agreements, could jeopardize the competitive position and diminish the value of
the CF Program and related gene delivery technology developed by Genzyme.
Genzyme believes that the acquisition of Neozyme II by Genzyme at this time
would avoid the risks of such disclosure and, accordingly, would allow Genzyme
to preserve the competitive advantage of the CF Program.
Investor Relations. If the Offer is not successful and Neozyme II seeks
alternative sources of funding, absent unforeseen progress in the CF Program,
Genzyme may determine not to make any acquisition proposal upon expiration of
the Purchase Option or, if Genzyme determines to make a subsequent proposal, it
is likely that such proposal would be at a price below $45 per Unit. As also
noted above, Genzyme expects that substantial commitments in time and capital
will be required to advance the CF Program through a demonstration of clinical
efficacy. In view of these commitments, the value realizable by the existing
investors in Neozyme II could fall well below the $45 per Unit now being offered
by Genzyme. Accordingly, Genzyme believes that effecting the Offer at this time
at a premium to the market price of the Units at the time that an agreement in
principal was reached will allow investors to realize a fair price for their
investment, while avoiding the risk of any such future decline in the value of
Neozyme II.
Potential Gene Therapy Collaborations. Genzyme views the CF market and the
gene therapy approach as an attractive opportunity that fits well with Genzyme's
corporate objectives of developing novel therapeutics to address significant
unmet medical needs. In particular, Genzyme has developed significant expertise
outside of the CF field and the acquisition of rights to gene therapy-based
programs within the CF field provides Genzyme with the ability to accelerate its
overall gene therapy development by continuing work on the most advanced
programs, thereby making Genzyme a more attractive partner.
In reaching its determination that the acquisition of Neozyme II at this
time on and subject to the terms of the Offer and the Second Step Transaction is
fair to and in the best interests of Genzyme and its
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stockholders, the Genzyme Board of Directors evaluated the factors considered by
it in light of the directors' knowledge of the business and operations of
Genzyme and Neozyme II and their respective business judgments. In addition, the
Genzyme Board considered the presentation made to it on September 17, 1996 by
Robertson, Stephens & Company (the "Robertson, Stephens & Company Presentation")
and the written opinion, dated September 20, 1996, of Robertson, Stephens &
Company (the "Robertson Stephens Opinion") (a copy of which is attached hereto
as Annex II) that, based upon and subject to the factors and assumptions set
forth in such opinion, the Offer Price was fair to Genzyme from a financial
point of view. The Genzyme Board of Directors did not find it practicable to and
did not quantify or assign relative weight to the specific factors considered by
it in reaching its determination. A detailed description of the Robertson,
Stephens & Company Presentation and the Robertson, Stephens & Company Opinion
are set forth below.
OPINION OF FINANCIAL ADVISOR TO GENZYME
Robertson, Stephens & Company is acting as Genzyme's exclusive financial
advisor and as Dealer Manager in connection with the Offer. Robertson, Stephens
& Company was engaged on the basis of its experience as a financial advisor in
connection with mergers and acquisitions as well as on its industry knowledge
and familiarity with the Company.
At a special meeting of the Genzyme Board held on September 17, 1996,
Robertson, Stephens & Company made the Robertson, Stephens & Company
Presentation and, on September 20, 1996, Robertson, Stephens & Company delivered
the Robertson, Stephens & Company Opinion to the Genzyme Board. No limitations
were imposed by the Genzyme Board upon Robertson, Stephens & Company with
respect to investigations made or procedures followed by Robertson, Stephens &
Company in rendering the Robertson, Stephens & Company Opinion. Robertson,
Stephens & Company was not requested to opine as to the fairness of the Offer
Price to the Company or to the Holders or the fairness of the consideration to
be paid by Genzyme pursuant to the Second Step Transaction.
The full text of the Robertson, Stephens & Company Opinion, which sets
forth the assumptions made, matters considered and limitations on the review
undertaken by Robertson, Stephens & Company, is attached as Annex II to this
Offer to Purchase and is incorporated herein by reference. The Robertson,
Stephens & Company Opinion has been provided to the Genzyme Board for its
information. It is directed only to the fairness from a financial point of view
to Genzyme of the Offer Price and does not constitute a recommendation to any
Holder as to whether such Holder should tender any or all of its Units pursuant
to the Offer. The summary of the Robertson, Stephens & Company Opinion set forth
in this Offer to Purchase is qualified in its entirety by reference to the full
text of the opinion set forth in Annex II and incorporated herein by reference.
The summary set forth below does not purport to be a complete description
of the analyses underlying the Robertson, Stephens & Company Opinion or the
Robertson, Stephens & Company Presentation. The preparation of a fairness
opinion is a complex analytic process involving various determinations as to the
most appropriate and relevant methods of financial analysis and the application
of those methods to the particular circumstances and, therefore, such an opinion
is not readily susceptible to partial analysis or summary description. In
arriving at its opinion, Robertson, Stephens & Company did not attribute any
particular weight to any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, Robertson, Stephens & Company believes that its analyses
must be considered as a whole and that selecting portions of its analyses,
without considering all analyses, would create an incomplete view of the process
underlying its opinion.
For purposes of the Robertson, Stephens & Company Opinion, Robertson,
Stephens & Company, among other things: (i) reviewed financial information
regarding the Company furnished to Robertson, Stephens & Company by the Company,
including certain financial forecasts prepared by the management of the Company;
(ii) reviewed publicly available information regarding the Company; (iii) held
discussions with the management of the Company concerning the business, past and
current business operations, financial condition and future prospects of the
Company; (iv) reviewed a draft dated September 20, 1996 of the Purchase
Agreement; (v) reviewed the stock price and trading history of the Company; (vi)
reviewed the valuations of publicly traded companies that Robertson, Stephens &
Company deemed comparable to the
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Company; (vii) compared the financial terms of the Offer with other transactions
which Robertson, Stephens & Company deemed relevant; (viii) prepared a
discounted cash flow analysis of the Company; (ix) analyzed the value of the
Callable Warrants; and (x) made such other studies and inquiries, and reviewed
such other data, as Robertson, Stephens & Company deemed relevant.
In arriving at its opinion, Robertson, Stephens & Company did not
independently verify any of the foregoing information and relied on all such
information being complete and accurate in all material respects. Furthermore,
Robertson, Stephens & Company did not make any independent appraisal of the
properties or assets and liabilities of the Company, nor was Robertson, Stephens
& Company furnished with any such evaluations or appraisals. With respect to the
financial forecasts (and the assumptions and bases therefor) of the Company
provided to Robertson, Stephens & Company by the management of the Company,
Robertson, Stephens & Company assumed that such forecasts had been reasonably
prepared in good faith on the basis of reasonable assumptions and reflected the
best available estimates and judgments of the management of the Company as to
the likely future financial performance of the Company. In that regard,
Robertson, Stephens & Company relied on the assumptions of the management of the
Company with respect to the effect on such forecasts of the potential outcome of
the Company's pending patent applications. The Robertson, Stephens & Company
Opinion was necessarily based upon market, economic, and other conditions that
existed and could be evaluated as of the date of the Robertson, Stephens &
Company Opinion and on information available to Robertson, Stephens & Company as
of such date.
The following is a summary of the analyses performed by Robertson, Stephens
& Company in connection with the preparation of the Robertson, Stephens &
Company Presentation and the Robertson, Stephens & Company Opinion. A copy of
the Robertson, Stephens & Company Presentation will be made available for
inspection and copying at the principal executive offices of Genzyme during
regular business hours by any interested Holder, or his representative who has
been so designated in writing.
STOCK PRICE AND TRADING HISTORY
Robertson, Stephens & Company reviewed the trading activity of the Units
and the Series N Warrants, including the daily closing price and daily volume of
each of the Units and the Series N Warrants, for the period from January 3, 1995
to September 13, 1996 and identified certain events that had a significant
effect on the prices of the Units and the Series N Warrants.
VALUATION ANALYSIS
Introduction. In valuing the Units, Robertson, Stephens & Company
performed a comparable company analysis, a comparable transaction analysis, a
discounted cash flow analysis and a warrant valuation analysis, each of which is
described in detail below. The comparable company analysis, comparable
transaction analysis for acquisitions of non-SWORDS (as defined below) and
discounted cash flow analysis were used to determine ranges for the Technology
Value (as defined below) of the Company. The comparable transaction analysis for
acquisitions of SWORDS was used to calculate the premiums paid by acquiring
companies in comparable acquisitions in order to determine the Equity Value (as
defined below) of the Company. For the warrant valuation analysis, Robertson,
Stephens & Company used the Black-Scholes formula to determine an implied value
per Callable Warrant. By adding to the Technology Value the implied aggregate
value of the Callable Warrants, based on an implied value, solely for purposes
of this analysis, per Callable Warrant of $15.12, Robertson, Stephens & Company
determined the equity value of the Company (the "Equity Value"), which
represents the aggregate market capitalization of the Units.
Comparable Company Analysis. Robertson, Stephens & Company performed an
analysis of companies engaged in research and development activities in the area
of gene therapy and which are considered by Robertson, Stephens & Company to be
reasonably comparable to the Company. The Tier 1 companies identified by
Robertson, Stephens & Company comprise Somatix Therapy Corporation and Vical
Incorporated (the "Tier 1 Companies"), and the Tier 2a companies identified by
Robertson, Stephens & Company comprise Avigen, Inc., Cell Genesys, Inc.,
GeneMedicine, Inc. and Targeted Genetics Corporation (the "Tier 2a Companies").
Robertson, Stephens & Company identified as the Tier 2b companies Immusol, Inc.,
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Introgen Therapeutics, Inc. and Transkaryotic Therapies, Inc. (the "Tier 2b
Companies"), each of which had recently filed a registration statement with
respect to an initial public offering. Robertson, Stephens & Company noted that
the Tier 1 Companies generally trade at significantly higher market
capitalizations than the Tier 2a Companies because they have one or more of the
following characteristics: (i) more enabling technologies, (ii) more substantial
corporate endorsements, (iii) broader patent estates, (iv) later stages of
clinical development and (v) more significant disease market opportunities.
Robertson, Stephens & Company then determined a Technology Value range. For
purposes of this methodology, Robertson, Stephens & Company defined Technology
Value as the market capitalization less cash and cash equivalents for each of
the comparable companies. For the Tier 1 Companies and the Tier 2a Companies,
market capitalization was based on market data as of September 13, 1996. For the
Tier 2b Companies, market capitalization was based on the mid-point of the
proposed initial public offering price disclosed in each such company's
registration statement and the expected number of fully diluted shares
outstanding immediately after such offering.
Based on this analysis, Robertson, Stephens & Company determined a range of
Technology Value of (i) between $104.7 million and $169.3 million for the Tier 1
Companies, (ii) between $28.4 million and $57.5 million for the Tier 2a
Companies and (iii) between $115.4 and $168.5 million for the Tier 2b Companies.
By including the implied value of the Callable Warrants, Robertson, Stephens &
Company calculated a range of Equity Value of (i) between $141.2 million and
$205.8 million, or $58.46 and $85.23 per Unit, based on the Tier 1 Companies,
(ii) between $64.9 million and $94.0 million, or $26.89 and $38.91 per Unit,
based on the Tier 2a Companies and (iii) between $151.9 million and $205.0
million, or $62.90 and $84.90 per Unit, based on the Tier 2b Companies.
Robertson, Stephens & Company also reviewed the trading performance of the
Units over the period from January 3, 1995 to September 13, 1996 and compared
such performance with that of indices representing the average trading prices
for each of the Tier 1 Companies and the Tier 2a Companies. Such review
indicated that, over such period, the trading price of the Units, the Tier 1
Companies and the Tier 2a Companies increased by 55.5%, 82.7% and 0.4%,
respectively.
No company utilized in the comparable company analysis was identical to the
Company. In particular, Robertson, Stephens & Company noted that the Company's
assets are limited to determining the application of potential gene therapy
products in the treatment of CF only. Certain of the comparable companies have
broader gene therapy technology programs, with potential applications to CF and
the treatment of other diseases. Accordingly, an analysis of the results of such
a comparison is not purely mathematical as several factors that are not relevant
to the Company could affect the public trading value of the comparable companies
to which the Company is being compared.
Comparable Transaction Analysis: Acquisitions of SWORDS
Companies. Robertson, Stephens & Company analyzed publicly available
information for 11 Stock/Warrant for Off balance sheet Research and Development
Subsidiary ("SWORDS") acquisitions within the biopharmaceutical industry (the
"SWORDS Acquisitions") considered by Robertson, Stephens & Company to be
reasonably comparable to the Company. The SWORDS Acquisitions analyzed were: (i)
PerSeptive Biosystems, Inc.'s acquisition of PerSeptive Technologies II
Corporation, (ii) Elan Corporation, plc's acquisition of Advanced Therapeutic
Systems Limited, (iii) Cytogen Corporation's acquisition of CytoRad Corporation,
(iv) Centocor, Inc.'s acquisition of Tocor II, Inc., (v) Gensia Pharmaceuticals
Inc.'s acquisition of Aramed, Inc., (vi) Genetics Institute, Inc.'s acquisition
of SciGenics Incorporated, (vii) Genzyme Corporation's acquisition of Neozyme I
Corporation, (viii) Elan Corporation, plc's acquisition of Drug Research Corp.,
(ix) Immunex Corporation's acquisition of Receptech Corp., (x) Centocor, Inc.'s
acquisition of Tocor, Inc. and (xi) Alza NV's acquisition of Bio-Electro
Systems, Inc. In five of the SWORDS Acquisitions, the acquiring sponsor company
exercised its contractual option to acquire the SWORDS company. The other six
SWORDS Acquisitions were negotiated transactions at prices below the option
exercise price.
For each of the SWORDS Acquisitions, Robertson, Stephens & Company
determined (i) the annual compounded return, (ii) the premium paid to the SWORDS
unit price, or to the aggregate price of the SWORDS common stock and the
detachable warrants to acquire the common stock of the sponsor company
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("Sponsor Warrants") for those SWORDS whose Sponsor Warrants had detached from
the SWORDS units and were trading separately (the "Combined Premium"), 28 days
prior to the date of announcement of the SWORDS Acquisition and (iii) the
premium paid to the SWORDS unit price, or to the SWORDS common stock price for
those SWORDS whose Sponsor Warrants had detached from the SWORDS units and were
trading separately (the "Ex-Sponsor Warrant Premium"), 28 days prior to the date
of announcement of the SWORDS Acquisition. Robertson, Stephens & Company
determined that (i) the annual compounded return for the SWORDS Acquisitions
ranged from -28.5% to 42.9%, (ii) the Combined Premium ranged from -3.6% to
135.6% and (iii) the Ex-Sponsor Warrant Premium ranged from 1.5% to 143.8%.
Excluding the SWORDS Acquisitions effected upon the exercise of the sponsor
company's contractual purchase option, such ranges were -28.5% to 26.4%, -3.6%
to 135.6% and 2.8% to 143.8%, respectively.
Robertson, Stephens & Company calculated a range for the Equity Value by
(i) applying the annual compounded return to the Unit Offering price of $35.00
per Unit and (ii) applying the Ex-Sponsor Warrant Premium to the market price of
the Units as of September 5, 1996. In each such case, Robertson, Stephens &
Company excluded from its analysis the SWORDS Acquisitions effected upon the
exercise of a contractual purchase option. Based on this analysis, Robertson,
Stephens & Company calculated ranges of Equity Value of (i) between -$7.2
million and $209.4 million, or -$2.97 and $86.71 per Unit, applying the annual
compounded return, and (ii) between $110.1 million and $261.2 million, or $45.60
and $108.16 per Unit, applying the Ex-Sponsor Warrant Premium.
No company utilized in the comparable SWORDS Acquisitions analysis was
identical to the Company, and no transaction utilized in the comparable SWORDS
Acquisitions analysis was identical to the Offer and Second Step Transaction.
Accordingly, an analysis of the results of such a comparison is not purely
mathematical but instead involves complex considerations and judgments
concerning differences in historical and projected financial and operating
characteristics of the comparable companies and other factors that could affect
the acquisition value of such companies and the Company.
Comparable Transaction Analysis: Acquisitions of Non-SWORDS Early-Stage
Biotechnology Companies. Robertson, Stephens & Company analyzed publicly
available information for seven acquisitions of non-SWORDS, early-stage
biotechnology companies (the "Non-SWORDS Acquisitions") considered by Robertson,
Stephens & Company to be reasonably comparable to the Company (each, an
"Acquired Company"). The Non-SWORDS Acquisitions analyzed were: (i) Targeted
Genetics Corporation's acquisition of RGene Therapeutics, Inc., (ii)
Schering-Plough Corporation's acquisition of Canji, Inc., (iii) Rhone-Poulenc
Rorer Inc.'s acquisition of Applied Immune Sciences, Inc., (iv) Sandoz AG's
acquisition of Genetic Therapy, Inc., (v) Cytogen Corporation's acquisition of
Cellcor, Inc., (vi) Chiron Corporation's acquisition of Viagene, Inc. and (vii)
Ligand Pharmaceuticals Incorporated's acquisition of Glycomed Incorporated.
For the Non-SWORDS Acquisitions, Robertson, Stephens & Company calculated
the price paid by the acquiring company as a multiple of (i) the total research
and development expenses accrued for the Acquired Company since its inception
including, where applicable, in-process research and development (the "R&D
Multiple") and (ii) the Technology Value of the Acquired Company (the
"Technology Value Multiple"). For purposes of this methodology, Robertson,
Stephens & Company defined Technology Value as the equity market capitalization
of the Acquired Company one month prior to the announcement date of the
acquisition plus total debt less current cash. In addition, Robertson, Stephens
& Company calculated the premium paid for the Acquired Company to the price per
share of the Common Stock of the Acquired Company (a) one day prior to the
announcement date of the acquisition (the "One Day Premium") and (b) one month
prior to the announcement date of the acquisition (the "One Month Premium").
Robertson, Stephens & Company excluded from its acquisition premium analysis two
of the Acquired Companies that were not publicly traded as of the date of the
acquisition. Robertson, Stephens & Company determined that (i) the R&D Multiple
ranged from 0.7x to 7.4x, (ii) the Technology Value Multiple ranged from 1.5x to
3.1x, (iii) the One Day Premium ranged from 33.0% to 149.4% and (iv) the One
Month Premium ranged from 35.3% to 95.3%.
Robertson, Stephens & Company calculated a range for the Equity Value by
applying (i) the R&D Multiple to total research and development expenses for the
CFTR gene therapy program (but not for the HyperGAM(TM)+CF and CFTR protein
replacement therapy programs) since the inception of the Company of
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$36.6 million, (ii) the Technology Value Multiple to an estimated Technology
Value (which, solely for purposes of this analysis, Robertson, Stephens &
Company deemed to be $71.0 million, calculated as the market value of the
Company as of September 13, 1996 less the implied aggregate value of the
Callable Warrants), (iii) the One Day Premium to an acquisition price of $29.25
per share of the Callable Common Stock and (iv) the One Month Premium to an
acquisition price of $29.25 per share of the Callable Common Stock. Based on
this analysis, Robertson, Stephens & Company calculated a range of Equity Value
of (a) between $61.2 million and $306.6 million, or $25.36 and $126.94 per Unit,
applying the R&D Multiple, (b) between $140.5 million and $256.1 million, or
$58.18 and $106.06 per Unit, applying the Technology Value Multiple, (c) between
$130.5 million and $212.7 million, or $54.03 and $88.06 per Unit, applying the
One Day Premium, and (d) between $132.1 million and $174.5 million, or $54.70
and $72.27 per Unit, applying the One Month Premium.
No company utilized in the comparable Non-SWORDS Acquisitions transaction
analysis was identical to the Company, and no transaction utilized in the
comparable Non-SWORDS Acquisitions analysis was identical to the Offer and the
Second Step Transaction. Accordingly, an analysis of the results of such a
comparison is not purely mathematical but instead involves complex
considerations and judgments concerning differences in historical and projected
financial and operating characteristics of the comparable companies and other
factors that could affect the acquisition value of such companies and the
Company.
Discounted Cash Flow Analysis. Robertson, Stephens & Company performed a
discounted cash flow analysis of the projected cash flows of the Company for the
years 1997 through 2006 to 2008, based upon projections provided to Robertson,
Stephens & Company by the management of the Company. In conducting its
discounted cash flow analysis, Robertson, Stephens & Company utilized
projections representing three cases, each developed by the management of the
Company. These cases consisted of a base case (the "Base Case") and two adjusted
cases (the "Upside Case" and the "Downside Case"). In developing the three
cases, the management of the Company made certain assumptions regarding (i)
patient growth, (ii) market penetration, (iii) non-U.S. revenues and (iv)
royalty income. None of the cases assigned any value to discontinued or
suspended research operations, including the HyperGAM(TM)+CF and CFTR protein
replacement therapy programs.
For each of the three cases, Robertson, Stephens & Company calculated a
range for the Technology Value. For purposes of this analysis, Robertson,
Stephens & Company utilized discount rates ranging from 30.0% to 35.0% and
terminal value multiples of earnings before interest and taxes ("EBIT") ranging
from 8.0x to 10.0x.
Based on this analysis, Robertson, Stephens & Company calculated a range of
Technology Value of (i) between $20.9 million and $85.0 million, or $8.64 and
$35.19 per share of the Callable Common Stock, based on the Base Case, (ii)
between $49.9 million and $153.8 million, or $20.68 and $63.69 per share of the
Callable Common Stock, based on the Upside Case, and (iii) between $4.0 million
and $61.4 million, or $1.65 and $25.41 per share of the Callable Common Stock,
based on the Downside Case. By including the implied value of $15.12 per
Callable Warrant, Robertson, Stephens & Company calculated a range of Equity
Value of (i) between $57.4 million and $121.5 million, or $23.78 and $50.32 per
Unit, based on the Base Case, (ii) between $86.4 million and $190.3 million, or
$35.79 and $78.81 per Unit, based on the Upside Case, and (iii) between $40.5
million and $97.9 million, or $16.78 and $40.55 per Unit, based on the Downside
Case. Robertson, Stephens & Company noted that a discounted cash flow analysis
is a less reliable indicator of value for an early-stage biopharmaceutical
company such as the Company due to, among other things, the uncertainties in
developing a therapeutic product that satisfies both regulatory and market
requirements.
Valuation of Callable Warrants. Robertson, Stephens & Company also
performed a valuation of the maximum theoretical price per Callable Warrant by
using the Black-Scholes formula for valuing warrants of publicly traded
companies. The Black-Scholes formula incorporates the following information: (i)
a price per share of common stock, calculated as the sum of the price per share
of General Division Common Stock, par value $.01 per share, of Genzyme ("General
Share"), multiplied by two and the price per share of Tissue Repair Division
Common Stock, par value $.01 per share, of Genzyme ("Tissue Repair Share")
multiplied by 0.135, (ii) an exercise price of the Callable Warrants, calculated
as the 20-day trailing average of the sum of
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the price per share of a General Share multiplied by two and the price per share
of a Tissue Repair Share multiplied by 0.135, (iii) an exercise date of the
Callable Warrants of December 31, 1998, (iv) an interest rate of 6.3%, (v)
estimated levels of volatility ranging from 40.9% to 60.9% and (vi) an
adjustment in the price per General Share due to dilution. Robertson, Stephens &
Company computed a per Callable Warrant value ranging from $12.19 to $17.03,
respectively. For purposes of this analysis, Robertson, Stephens & Company noted
that one reliable indicator of the value of the Callable Warrants is the
historical 100-day volatility of the blended General Shares and Tissue Repair
Shares, which is 52.9% and yields an adjusted value per Callable Warrant of
$15.12.
GENERAL
The preparation of fairness opinions involves various determinations as to
the most appropriate and relevant quantitative and qualitative methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, such opinions are not readily susceptible to
summary description. Accordingly, Robertson, Stephens & Company believes its
analyses must be considered as a whole and that considering any portion of such
analyses and the factors, without considering all such analyses and current
factors, could create a misleading or incomplete view of the process underlying
such opinions. In its analyses, Robertson, Stephens & Company made numerous
assumptions with respect to industry performance, general business and other
conditions and matters, many of which are beyond the control of the Company. Any
estimates contained in these analyses are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than as set forth therein. In addition, analyses relating
to the value of a business do not purport to be appraisals or to reflect the
prices at which such businesses actually may be sold.
Robertson, Stephens & Company was engaged on the basis of its experience as
a financial advisor in connection with mergers and acquisitions as well as on
its industry knowledge and familiarity with the Company. Robertson, Stephens &
Company is a nationally recognized investment banking firm. As part of its
investment banking business, Robertson, Stephens & Company is frequently engaged
in the valuation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, secondary distributions of
securities, private placements and other purposes. In the course of its market-
making and other activities, Robertson, Stephens & Company may, from time to
time, have a long or short position in and buy and sell securities of the
Company.
Genzyme has agreed to pay Robertson, Stephens & Company a total fee of
$440,000 for its services as financial advisor to Genzyme and as Dealer Manager.
Of such total fee, $50,000 will be payable upon the purchase of Units pursuant
to the Offer. Genzyme has also agreed to reimburse Robertson, Stephens & Company
for its reasonable out-of-pocket expenses, including the fees and expenses of
its legal counsel. Genzyme has further agreed to indemnify Robertson, Stephens &
Company for certain liabilities relating to or arising out of services provided
by Robertson, Stephens & Company as financial advisor or as Dealer Manager,
including, without limitation, certain liabilities under U.S. federal securities
laws.
PURPOSE AND STRUCTURE OF THE TRANSACTION
The purpose of the Offer is to enable Genzyme, through its wholly owned
subsidiary, to acquire the entire equity interest of the Company, and to enable
Genzyme to acquire the Callable Warrants associated with the Units that are
tendered to reduce the possible dilution to Genzyme's existing stockholders.
Following the completion, or under certain circumstances the termination, of the
Offer, Genzyme and the Purchaser intend to acquire any Shares included in the
untendered Units by consummating the Second Step Transaction. In the Second Step
Transaction, holders of Shares included in the untendered Units (other than
Genzyme, the Purchaser or the Company or any direct or indirect subsidiary of
any of them and Holders, if any, who are entitled to and who perfect their
appraisal rights under the applicable provisions of the BVI Law), will receive
$29.00 per Share in cash, without interest. Any Callable Warrants included in
the untendered Units will remain outstanding following the Second Step
Transaction. The acquisition of the Company is structured as a cash tender offer
followed by the Second Step Transaction in order to expedite the opportunity for
Genzyme and the Purchaser to obtain a controlling interest in the Company, to
enable Genzyme to acquire some or all
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of the Callable Warrants, to provide a prompt and orderly transfer of ownership
of the Company from the Company's current Holders to the Purchaser and to
provide the Company's current Holders with cash for all of their Units. In the
event that the Minimum Condition is not satisfied, the Purchase Agreement
provides that the Purchaser may elect to amend and extend the Offer to eliminate
this condition. In that event, during the period that the Offer is extended, the
Company shall, in accordance with applicable laws and the Purchase Agreement,
solicit the approval of the holders of the Shares for the Second Step
Transaction. Alternatively, the Purchaser may elect to terminate the Offer and,
promptly thereafter, request that the Company solicit the approval of the
holders of the Shares for the Second Step Transaction. If the Purchaser does not
make either election, Genzyme, the Purchaser or the Company may terminate the
Purchase Agreement. See "SPECIAL FACTORS -- Section 6. The Purchase Agreement;
Appraisal Rights."
Under the BVI Law and the Company's Memorandum and Articles of Association,
if the Purchaser acquires at least a majority of the outstanding Shares, the
Purchaser would have sufficient voting power to approve the Merger Plan, if
necessary, and consummate the Second Step Transaction, by written consent in
lieu of a meeting of the Holders and without the vote or consent of any other
Holders. In addition, under the BVI Law, if the Purchaser acquires at least 90%
of the outstanding Shares, the Purchaser would have the power to consummate a
merger of the Company with and into the Purchaser, or require the Company to
redeem all of the Shares not held by the Purchaser, without a vote of the
Holders. In either event, the Purchaser intends to take all necessary and
appropriate action to cause the Second Step Transaction to become effective as
soon as reasonably practicable after the consummation, or under certain
circumstances the termination, of the Offer without a meeting of the Holders.
PLANS FOR THE COMPANY AFTER THE TRANSACTION
Although Genzyme is considering pursuing corporate partnering arrangements
with third parties to jointly develop products based, in part, on technology
owned by the Company, except as described in this Offer to Purchase, neither
Genzyme nor the Purchaser has any present plans or proposals which relate to or
would result in any extraordinary corporate transaction, such as a merger,
reorganization, liquidation, or sale or transfer or a material amount of assets
involving the Company, or any material changes in the Company's capitalization,
dividend policy, corporate structure or business or the composition of the
Company's Board of Directors or management.
The Purchase Agreement provides that, upon the acceptance for payment of
and payment by the Purchaser for any Units pursuant to the Offer, the Purchaser
shall be entitled to designate persons to be elected as Class A directors of the
Company so as to give the Purchaser representation on the Company's Board of
Directors proportional to its ownership of Units. See "SPECIAL
FACTORS -- Section 6. The Purchase Agreement; Appraisal Rights."
6. THE PURCHASE AGREEMENT; APPRAISAL RIGHTS
THE PURCHASE AGREEMENT
The following is a brief summary of certain provisions of the Purchase
Agreement, a copy of which is filed as an exhibit to the Schedule 14D-1 and is
incorporated herein by reference. This summary does not purport to be complete
and is qualified in its entirety by reference to the Purchase Agreement.
Capitalized terms used herein and not otherwise defined have the same meaning as
in the Purchase Agreement.
The Offer. The Purchase Agreement provides for the commencement of the
Offer as soon as practicable and in any event within five business days of the
public announcement of the Purchaser's intention to make the Offer. The
obligation of the Purchaser to commence the Offer and accept for payment any
Units tendered is subject to the satisfaction of certain conditions (including
the Minimum Condition) which are described in "THE TENDER OFFER -- Section 9.
Certain Conditions of the Offer." The Purchase Agreement provides that without
the consent of the Company, as approved by the Special Committee, the Purchaser
shall not amend or waive the Minimum Condition or the Majority Consent Condition
(as defined below), extend the Offer, reduce the maximum number of Units to be
purchased, reduce the price to be paid per Unit pursuant to the Offer or amend
any other material term of the Offer in a manner adverse to the holders of the
Units.
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Pursuant to the Purchase Agreement, if on October 28, 1996 (the "Initial
Expiration Date"), the Minimum Condition has not been satisfied, the Purchaser
may, not later than 9:00 a.m., eastern time, on the next business day following
the Initial Expiration Date, elect either (x) to extend the Offer for a period
not to exceed 60 days and amend the Offer to delete the Minimum Condition and
add the Majority Consent Condition (as defined below), in which case, promptly
thereafter, the Company shall commence to convene a meeting or solicit the
written consent of its shareholders for approval of the Merger Plan (the
foregoing being referred to as the "Simultaneous Solicitation") or (y) terminate
the Offer and promptly return all tendered Units, in which case, promptly
thereafter, the Company shall commence to convene a meeting or solicit the
written consent of its shareholders for approval of the Merger Plan (the
foregoing being referred to as the "Termination Solicitation"), in either case
with such solicitation or meeting to be conducted in accordance with applicable
law and the terms of the Purchase Agreement. The Majority Consent Condition is
defined in the Purchase Agreement to mean that the sum of (a) the Shares
included in the Units tendered and not withdrawn as of the new expiration date
of the Offer (provided such Shares may be voted in favor of the Merger Plan at
the meeting or pursuant to the consent solicitation by the Purchaser immediately
after the purchase of the Units which include such Shares in the Offer by the
Purchaser) plus (b) the number of Shares held by holders who have voted in favor
of the Merger Plan at the meeting or pursuant to the consent solicitation as of
the new expiration date of the Offer (but excluding any such Shares that would
result in double counting with (a) above) represents not less than a majority of
the Shares outstanding.
Approval of the Second Step Transaction. The Board of Directors of the
Company has authorized the Merger Plan in accordance with applicable law and the
Company's Memorandum and Articles of Association. The Company has agreed in the
Purchase Agreement, at the request of Genzyme, to take all action (coordinating
the timing thereof with Genzyme and the Purchaser) to the extent necessary to
convene a meeting of the Holders as promptly as practicable after the purchase
of Units pursuant to the Offer, if required by applicable law for consummation
of the Second Step Transaction, to consider and vote upon the approval of the
Merger Plan or to solicit the written consent of the Holders to approve the
Merger Plan promptly after such purchase, or at the request of Genzyme, promptly
after the commencement of the Offer and while it is pending upon the election of
Genzyme to pursue the Simultaneous Solicitation or following the termination of
the Offer upon the election of Genzyme to pursue the Termination Solicitation.
If required by applicable law, the Company has agreed to promptly prepare and
file with the Commission, and use its best efforts to have cleared by the
Commission, a proxy, consent solicitation or information statement relating to
the Second Step Transaction in compliance with applicable law.
The Second Step Transaction. The Purchase Agreement provides that, as soon
as practicable following the consummation of the Offer, the satisfaction of the
Majority Consent Condition (in the event of a Simultaneous Solicitation) or the
satisfaction of the conditions to effect the merger pursuant to the Merger Plan
(in the event of a Termination Solicitation) and subject to the terms and
conditions thereof and the satisfaction or waiver of the other conditions to the
Second Step Transaction and in accordance with the BVI Law, the Purchaser shall
cause to be effected a transaction that results in Genzyme owning, directly or
indirectly, all of the Shares of the Company. If the Offer is consummated and
90% or more of the Units are tendered and accepted, the Purchaser will either
(i) effect a merger of the Company into the Purchaser or (ii) cause the Company
to redeem all Shares included in the untendered Units. If the Offer is
consummated but less than 90% of the Units are tendered and accepted, or if,
pursuant to the Termination Solicitation, the requisite approval of the
Company's shareholders for the Second Step Transaction is obtained, then the
Second Step Transaction will be effected as a merger of the Company with a
wholly owned subsidiary of the Purchaser. Regardless of the form of the Second
Step Transaction, the consideration to be received as a result of the Second
Step Transaction by holders of Shares included in the untendered Units (other
than Genzyme, the Purchaser or the Company or any direct or indirect subsidiary
of any of them and holders, if any, who shall have demanded and perfected their
appraisal rights under the applicable provisions of the BVI Law) will be $29.00
per Share in cash, without interest (the "Second Step Consideration").
Upon consummation of the Second Step Transaction, the Callable Warrants
will become exercisable and, beginning on the day following the Effective Date,
will trade separately from the right to receive the Second Step Consideration on
account of the Callable Common Stock.
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Indemnification and Insurance. The Purchase Agreement provides that proper
provision will be made so that any affiliate of Genzyme that succeeds to the
assets and liabilities of the Company or, at Genzyme's option, Genzyme, shall
assume all of the obligations of the Company under the indemnification
agreements between the Company and the members of the Special Committee as in
effect on the date of the Purchase Agreement and, if amended prior to the
Effective Date, on the Effective Date. Genzyme, the Purchaser and the Company
have also agreed that in the event the Company or the successor entity (i)
consolidates with or merges into any other person and shall not be the surviving
corporation or (ii) transfers all or substantially all of its assets to any
person, then, and in each case, proper provision shall be made so that the
successors and assigns of such successor entity or at Genzyme's option, Genzyme,
shall assume the indemnity obligations under such agreements. The Purchase
Agreement also provides that the Company, and from and after the consummation of
the Offer (or the Merger in the event of the Termination Solicitation) Genzyme,
shall, to the fullest extent permitted by applicable law, indemnify and hold
harmless each present and former director or officer of the Company against all
losses arising out of any act or omission in their capacity as an officer,
director or employee of the Company. Additionally, Genzyme is obligated to
maintain, for three years from the Effective Date, directors' and officers'
liability insurance policies covering the directors and officers of the Company
with coverages and other terms at least as favorable as is currently in effect;
provided that Genzyme is not obligated to spend more than 150% of the current
annual premiums paid by the Company for such insurance, and, following such
three year period until the sixth anniversary of the Effective Date, Genzyme has
agreed to assume the indemnification obligations of the Company under the
indemnification agreements referred to above to the extent that it has not
already done so.
Designation of Directors. The Purchase Agreement provides that, promptly
upon the acceptance for payment of and payment by the Purchaser for any Units
pursuant to the Offer, and from time to time thereafter as Units are accepted
for payment and paid for by the Purchaser, the Purchaser shall be entitled to
designate such number of Class A directors of the Company, rounded to the
nearest whole number, as will give the Purchaser representation on the Company's
Board of Directors equal to at least that number of directors which equals the
product of the total number of the Company's directors (after giving effect to
the directors elected in accordance with this procedure) multiplied by the
percentage that such number of Units so accepted for payment and paid for by the
Purchaser bears to the number of Units outstanding, and the Company shall, at
such time, take such actions as are necessary to cause the Purchaser's designees
to be so elected or appointed; provided, however, that, notwithstanding the
Purchaser's right to designate certain of the Company's directors as described
above, until the Effective Date, the Company's Class A Directors shall include
at least two directors who were directors on September 20, 1996 and who are not
officers or directors of Genzyme or the Purchaser (the "Independent Directors");
provided further, that, if the number of Independent Directors shall be reduced
below two for any reason whatsoever, any remaining Independent Director shall be
entitled to designate a person who is not an officer or director of Genzyme or
the Purchaser to fill such vacancy who shall be deemed to be an Independent
Director or, if no Independent Directors then remain, the other directors shall
designate two persons to fill such vacancies who shall not be designees,
stockholders, directors, officers or affiliates of Genzyme or the Purchaser, and
such persons shall be deemed to be Independent Directors.
Notwithstanding anything in the Purchase Agreement to the contrary, subject
to the terms of the Company's Memorandum of Association and Articles of
Association, in the event that the Purchaser's designees are appointed or
elected as the Company's directors, after the acceptance for payment of Units
pursuant to the Offer and prior to the Effective Date, the affirmative vote of a
majority (or, if there are only one or two Independent Directors, the single or
unanimous vote, as the case may be) of the Independent Directors (who shall act
as an independent committee of the Board of Directors for this purpose) shall be
required, and alone shall be sufficient, to (i) amend or terminate the Purchase
Agreement by the Company, (ii) exercise or waive any of the Company's rights or
remedies under the Purchase Agreement, (iii) extend the time for performance of
Genzyme's and the Purchaser's respective obligations under the Purchase
Agreement, or (iv) approve any other action by the Company that the Independent
Directors determine could adversely affect the interests of the Holders (other
than Genzyme, the Purchaser and their affiliates) with respect to the
transactions contemplated by the Purchase Agreement.
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Representations and Warranties. The Purchase Agreement contains certain
customary representations and warranties of the parties. The Company has made
representations and warranties to Genzyme and the Purchaser regarding, among
other things: (i) the Company's organization and qualification; (ii) the
Company's capitalization; (iii) the Company's authority to enter into and
perform its obligations under the Purchase Agreement (subject to approval of the
Merger Plan by the shareholders to the extent required by the BVI Law); (iv) the
compliance of the transactions contemplated by the Purchase Agreement with the
Company's Memorandum of Association and Articles of Association, certain
agreements and applicable laws; and (v) the accuracy and completeness of the
Company's Schedule 14D-9 filed in connection with the Offer and any proxy or
information statement to be filed in connection with the Second Step
Transaction.
Genzyme and the Purchaser have made representations and warranties to the
Company regarding, among other things: (i) Genzyme's and the Purchaser's
organization and qualification; (ii) Genzyme's and the Purchaser's authority to
enter into and perform their respective obligations under the Purchase
Agreement; (iii) the compliance of the transactions contemplated by the Purchase
Agreement with Genzyme's and the Purchaser's respective charters or other
governing instruments, certain agreements and applicable laws; and (iv) the
accuracy and completeness of the documents filed by Genzyme and the Purchaser
with the Commission in connection with the Offer.
The representations and warranties contained in the Purchase Agreement
shall expire upon consummation of the Offer.
Conditions to the Second Step Transaction. The obligations of each of the
Company, the Purchaser and Genzyme to consummate the Second Step Transaction,
other than following a Termination Solicitation, are subject to the following
conditions: (i) the Purchaser shall have made the Offer on the terms and
conditions set forth therein and shall have purchased, or caused to be
purchased, all Units validly tendered and not withdrawn pursuant to the Offer;
provided, however, that this condition is not applicable to the obligations of
Genzyme or the Purchaser if, in breach of the Purchase Agreement or the terms of
the Offer, the Purchaser fails to purchase any Units validly tendered and not
withdrawn pursuant to the Offer; (ii) the Merger Plan shall have been approved
and adopted by the requisite vote or consent of the Holders, if any, required by
the BVI Law and the Company's Memorandum of Association and Articles of
Association; and (iii) no preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission nor any statute,
rule, regulation or executive order promulgated or enacted by any governmental
authority shall be in effect, which would make the acquisition by Genzyme or the
Purchaser of the Callable Common Stock illegal or otherwise prevent the
consummation of the Second Step Transaction. In addition to the condition set
forth in clause (ii) of the preceding sentence, following a Termination
Solicitation in which clause (ii) of the preceding sentence has been satisfied,
the Purchaser shall not be obligated to effect a merger pursuant to the Merger
Plan if on or before the Effective Date any of the following shall occur or
shall be determined by the Purchaser to have occurred and remain in effect:
(a) except for matters which affect generally the economy or the industry
in which the Company is engaged and except for continued losses incurred by the
Company as a result of its operations and continued depletion of its cash
resources in the ordinary course of business or consistent with the annual
workplan currently in effect, any change shall have occurred in the business,
properties, assets, liabilities, capitalization, shareholders equity, financial
condition, operations, licenses or franchises or results of operations of the
Company which has a Material Adverse Effect (as defined in the Purchase
Agreement); or
(b) there shall have been instituted or be pending any action, proceeding,
application or counterclaim before any court or governmental or regulatory body
which (i) challenges the validity of or seeks to restrain the consummation of or
to impose any material limitation, on any transaction contemplated by the
Purchase Agreement or seeks (ii) to obtain any material amount of damages in
connection with such transactions; or
(c) any statute, regulation, order or injunction shall have been enacted,
entered, enforced or deemed applicable to the Merger that is reasonably likely
to, directly or indirectly, result in any of the consequences referred to in
paragraph (b) above; or
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(d) the representations and warranties of the Company set forth in the
Purchase Agreement shall not be true in any material respect as though made on
such date, or the Company shall have failed in any material respect to perform
any material obligation or covenant required in the Purchase Agreement to be
performed or complied with by it; or
(e) the Company shall have entered into, or shall have publicly announced
its intention to enter into, an agreement or agreement in principle with respect
to any Acquisition Proposal (as defined below).
Acquisition Proposals. The Company has agreed in the Purchase Agreement
that it shall not, directly or indirectly through any officer, director,
employee, financial advisor, representative or agent of the Company: (i) solicit
or initiate any inquiries or proposals for a merger, consolidation, business
combination, sale of substantial assets, sale of shares of capital stock
(including without limitation by way of a tender offer) or similar transactions
involving the Company, other than the transactions contemplated by the Purchase
Agreement (any of the foregoing inquiries or proposals being referred to as an
"Acquisition Proposal"); (ii) engage in negotiations or discussions concerning,
or provide any non-public information to any person or entity relating to, any
Acquisition Proposal; or (iii) agree to, approve or recommend any Acquisition
Proposal; provided, however, that nothing contained in the Purchase Agreement
shall prevent the Company, the Company's directors or the Special Committee
(through any officer, director, employee, financial advisor, representative or
agent) from (A) engaging in negotiations or discussions in response to an
inquiry that was not solicited after September 20, 1996; (B) furnishing
non-public information to any person or entity in connection with an unsolicited
written Acquisition Proposal by such person or entity or recommending an
unsolicited written Acquisition Proposal to the Holders, if and only to the
extent that (1) the Company's Board of Directors or the Special Committee, as
the case may be, believe in good faith (after consultation with its financial
advisor) that the party requesting such non-public information is capable of
financing a transaction more favorable to the Holders from a financial point of
view than the transaction contemplated by the Purchase Agreement and the
Company's Board of Directors or the Special Committee, as the case may be,
determine in good faith (after consultation with outside legal counsel) that
such action is necessary to comply with their fiduciary duties to Holders under
applicable law and (2) prior to furnishing such non-public information to such
person or entity, the Company's Board of Directors or the Special Committee, as
the case may be, receive from such person or entity an executed confidentiality
agreement on customary terms or (C) complying with Rule 14e-2 promulgated under
the Exchange Act with regard to an Acquisition Proposal.
The Company has further agreed that it will notify Genzyme in writing
within 24 hours after receipt by the Company (or its advisors) of any written
Acquisition Proposal or any written request for non-public information pursuant
to which it intends to provide non-public information.
Conduct of Business. Pursuant to the Purchase Agreement the Company has
agreed that, except as otherwise expressly contemplated thereby, prior to the
Effective Date or such earlier time as designees of the Purchaser constitute a
majority of the Company's Directors (determined on the basis of the combined
voting power of the Company's Class A and Class B Directors): (a) the business
of the Company shall in all material respects be conducted only in, and the
Company shall not take any material action except in, the ordinary course of
business and consistent with past practice, and the Company shall use all
reasonable efforts, consistent with past practice or the annual workplan
currently in effect, to maintain and preserve its business organization, assets,
and advantageous business relationships; (b) the Company shall not make any tax
election or, except in the ordinary course of business and consistent with past
practice, settle or compromise any federal, state, local or foreign tax
liability; and (c) the Company shall not agree, in writing or otherwise, to take
any of the foregoing actions or any action which would make any representation
or warranty of the Company in the Purchase Agreement untrue or incorrect in any
material respect, or which would materially impair or prevent the occurrence of
any condition described in "THE TENDER OFFER -- Section 9. Certain Conditions to
the Offer" prior to the consummation of the Offer.
In addition to the foregoing, the Purchase Agreement provides that, if the
Minimum Condition has not been satisfied on the Initial Expiration Date, and the
Purchaser elects to proceed with either a Simultaneous Solicitation or a
Termination Solicitation, then until the earlier of the Effective Date or the
termination of the Purchase Agreement, the Special Committee shall be authorized
to take such actions as it may deem
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appropriate to reduce or eliminate any discretionary spending by the Company or
by Genzyme on behalf of the Company not contractually committed to with a person
or entity that is not a party to the Purchase Agreement; provided that, Genzyme
may elect to continue such spending on its own account and to the extent it
elects to do so, the Company will, if the Merger is effected, reimburse Genzyme
for such expenditures immediately prior to the Effective Date.
Fees and Expenses. The Purchase Agreement provides that each party thereto
shall bear all of the fees and expenses incurred by it in connection with the
negotiation and performance of the Purchase Agreement and no party to the
Purchase Agreement may recover any such fees and expenses from another party
upon termination of the Purchase Agreement, except for a termination fee payable
to Genzyme as further described under the heading "Effect of Termination
Resulting from a Superior Transaction."
Termination. The Purchase Agreement may be terminated at any time prior to
the Effective Date as follows:
(a) by the mutual written consent of the Boards of Directors of
Genzyme, the Purchaser and the Company, with the affirmative vote of a
majority of the Independent Directors (who shall act as an independent
committee of the Board of Directors of the Company for this purpose) being
required, and alone being sufficient, for action by the Board of Directors
of the Company for this purpose;
(b) by the Company upon approval of the Special Committee: (i) if (A)
the Purchaser shall have terminated the Offer without the purchase of any
Units thereunder; or (B) the Purchaser shall not have paid for all Units
validly tendered pursuant to the Offer and not withdrawn within 90 days
after the commencement of the Offer, unless such termination of the Offer
or failure to pay for Units shall have been caused by or resulted from the
failure of the Company to perform in any material respect any of its
covenants or agreements contained in the Purchase Agreement, the material
breach by the Company of any of its representations or warranties contained
in the Purchase Agreement or an election by the Purchaser to terminate the
Offer and effect a Termination Solicitation; or (ii) if the Effective Date
shall not have occurred on or before the six-month anniversary of the
execution of the Purchase Agreement due to a failure of any of the
conditions to the obligation of the Company to effect the Second Step
Transaction as described above under the heading Conditions to the Second
Step Transaction, or if the Purchaser has elected to proceed with the
Termination Solicitation, if the Effective Date shall not have occurred on
or before the six-month anniversary of the date of the Purchase Agreement;
or (iii) if, prior to the purchase of any Units pursuant to the Offer, or
the Effective Date if the Purchaser has elected to proceed with a
Termination Solicitation, Genzyme or the Purchaser materially fails to
perform any of their respective obligations under the Purchase Agreement
and such nonperformance has a material adverse effect on Genzyme's or the
Purchaser's ability to consummate the Offer or the Second Step Transaction;
or (iv) if, in the event the Minimum Condition shall not have been
satisfied on the Initial Expiration Date and the Purchaser shall have
amended the Offer or terminated the Offer pursuant to its election to
proceed with either the Simultaneous Solicitation or the Termination
Solicitation, the Purchaser has materially failed to perform any of its
obligation in connection with the Simultaneous or Termination Solicitation;
or (v) if, prior to the purchase of Units pursuant to the Offer, or the
Effective Date if the Purchaser has elected to proceed with the Termination
Solicitation, the Special Committee shall have withdrawn or modified its
approval or recommendation of the Offer or the Purchase Agreement in order
to approve the execution by the Company of a definitive agreement providing
for the acquisition of the Company or substantially all of its assets or a
merger or other business combination or in order to approve a tender offer
for all of the Shares or Units by a third party, in any case, as determined
by the Special Committee, on terms more favorable to the Company's
shareholders than the Offer (a "Superior Transaction"), provided, that (i)
the Company shall have provided Genzyme with at least five business days'
written notice of such Superior Transaction, including a copy of the
proposed agreement and (ii) the Company shall not have violated the
provisions described above under "Acquisition Proposals"; or
(c) by Genzyme or the Purchaser (i) if, due to an occurrence that
would result in a failure to satisfy any condition to the consummation of
the Offer or the Majority Consent Condition if the Purchaser has
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elected to proceed with the Simultaneous Solicitation, the Purchaser shall
have (A) failed to commence the Offer within 5 business days of the date on
which the Purchaser's intention to make the Offer is publicly announced;
(B) terminated the Offer without the purchase of any Units thereunder; or
(C) failed to pay for all Units validly tendered pursuant to the Offer and
not withdrawn within 90 days after commencement of the Offer, unless such
failure or termination shall have been caused by or results from (x) the
failure of Genzyme or the Purchaser to perform in any material respect any
of its covenants or agreements contained in the Purchase Agreement, (y) the
material breach by Genzyme or the Purchaser of any of its representations
or warranties contained in the Purchase Agreement, or (z) the Purchaser's
election to proceed to seek approval of the Merger Plan pursuant to the
Termination Solicitation; or (ii) if the Effective Date shall not have
occurred on or before the six-month anniversary of the date of the Purchase
Agreement due to a failure of any of the conditions to the obligations of
Genzyme or the Purchaser to effect the Second Step Transaction as described
above under the heading "Conditions to the Second Step Transaction"; or
(iii) if, prior to the purchase of Units pursuant to the Offer, or the
Effective Date if the Purchaser has elected to proceed with the Termination
Solicitation, the Company's directors shall have publicly withdrawn or
modified in a manner adverse to the Purchaser their approval or
recommendation of the Offer or the Purchase Agreement or recommended
acceptance of a Superior Transaction or shall have resolved to do any of
the foregoing.
Effect of Termination. In the event of the termination of the Purchase
Agreement as provided under the heading "Termination," all obligations and
agreements of the parties set forth therein shall forthwith terminate and be of
no further force or effect, and there shall be no liability on the part of
Genzyme, the Purchaser or the Company thereunder except (a) as provided under
the headings "Effect of Termination Resulting from a Superior Transaction" and
"Ancillary Agreements" below and (b) that the foregoing shall not relieve any
party for liability for any breach of the Purchase Agreement occurring prior to
such termination.
Effect of Termination Resulting from a Superior Transaction. In the event
of the termination of the Purchase Agreement by the Company in accordance with
clause (b)(v) under the heading "Termination" or by Genzyme or the Purchaser in
accordance with (x) clause (c)(iii) under the heading "Termination", or (y)
clause (c)(i) or (c)(ii) under the heading "Termination" if such termination is
based on the failure of the Company to perform in any material respect any of
its covenants or agreements contained in the Purchase Agreement, the Purchase
Agreement requires that the Company pay to Genzyme a termination fee of $500,000
upon consummation of any Superior Transaction.
Ancillary Agreements. In the event of any termination of the Purchase
Agreement (x) by the Company in accordance with clause (b)(v) or by Genzyme or
the Purchaser in accordance with clause (c)(iii) under the heading "Termination"
above as a result of a Superior Transaction in connection with which the Company
shall not have violated the provisions described above under the heading
"Acquisition Proposals,", or (y) by Genzyme or the Purchaser pursuant to clause
(c)(i) under the heading "Termination" above, unless such termination is based
on the failure of the Company to perform in any material respect any of its
covenants or agreements contained in the Purchase Agreement, Genzyme has agreed
that, effective upon consummation of such Superior Transaction, it shall, at the
Company's request, (a) consent to the Superior Transaction in its capacity as
holder of the Company's Series 1992 Note and pursuant to all applicable
provisions of the Company's Memorandum of Association; (b) terminate the
Purchase Option Agreement, in which event the Series 1992 Note will become due
and payable in accordance with its terms; (c) consent to the assignment by the
Company of the Technology License Agreement; (d) at the option of Genzyme,
terminate or consent to the assignment by the Company of each of the Research
and Development Agreement, the Services Agreement, and the Administrative
Agreement.
Amendment. Subject to the amendment provision described above under the
heading "Designation of Directors," the Purchase Agreement may not be amended
except by action of the Boards of Directors of each of the parties to the
Purchase Agreement, set forth in an instrument in writing signed on behalf of
each of the parties; provided, however, that the Board of Directors of the
Company shall not act to amend the Purchase Agreement without the approval of
the Special Committee.
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Waiver. At any time prior to the Effective Date, whether before or after
any special meeting or written action of the Holders to approve the Second Step
Transaction, any party to the Purchase Agreement, subject to the waiver
provisions described above under the heading "Designation of Directors," by
action taken by its Board of Directors (and in the case of the Company, subject
to the approval of the Special Committee), may (i) extend the time for the
performance of any of the obligations or other acts of any other party to the
Purchase Agreement or (ii) subject to the third sentence above under the heading
"The Offer" and the proviso contained above under the heading "Amendment," waive
compliance with any of the agreements of any other party or with any conditions
to its own obligations. Any agreement on the part of a party to the Purchase
Agreement to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party by a duly authorized
officer.
APPRAISAL RIGHTS
No appraisal rights are available in connection with the Offer. However, if
the Second Step Transaction is consummated, Holders may have certain rights
under Section 83 of the BVI Law to dissent and demand appraisal of, and to
receive payment in cash of the fair value of, their Shares. Under the BVI Law,
holders of shares of a BVI company are entitled to payment of fair value for
their shares upon dissenting from mergers (if the BVI company is a constituent
company in the merger and not the surviving company), consolidations, certain
dispositions of more than 50% of the company's assets, compulsory redemptions of
shares, and certain other transactions (a "Specified Transaction"). In order to
assert rights under Section 83, the following procedures must be followed:
- A Holder who desires to exercise dissenters' rights must give to the
Company before or at the meeting of Holders at which the Specified
Transaction is submitted to a vote, a written notice of an objection
to the Specified Transaction. The objection must include a statement
that the Holder proposes to demand payment for his shares if the
action is taken. In the event that the Holder does not receive notice
of the meeting, or if the proposed action is authorized by written
consent without a meeting, no notice of objection is required.
- Within 20 days following the authorization of the Specified
Transaction by vote or written consent, the Company must give written
notice of the action to each Holder who gave written objection or from
whom written objection was not required, except those who voted for,
or consented in writing to, the proposed action. A Holder to whom the
Company is required to give notice who elects to dissent must, within
20 days of notice or authorization, give to the Company a written
notice of his decision to elect to dissent, stating such Holder's name
and address, the number and class or series of shares involved (which
must include all shares held by such Holder) and a demand for payment
of fair value for the shares. Upon the giving of notice, the Holder
ceases to have the rights of a Holder with the exception of the right
to be paid for the fair value of his shares.
- Within 7 days of the later to occur of: (i) the expiration of the
period within which Holders may give notice or election of dissent or
(ii) the effective date of the Specified Transaction, the surviving
corporation must make a written offer to each dissenting Holder to
purchase his shares at a price that the Company determines to be their
fair value.
- If within 30 days of the offer, the Company and the dissenting Holder
agree on the price to be paid for the shares, the Company will pay
such amount to the Holder upon surrender of the certificates
representing the shares.
- If the Company and the dissenting Holder fail to agree on a price
within 30 days, the following shall occur within the next 20 days:
(i) the Company and the Holder shall each designate an appraiser;
(ii) the two designated appraisers shall designate a third
appraiser;
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(iii) the three appraisers shall fix the fair value of the
dissenting Holders' shares as of the close of business on the day prior
to the vote on the Specified Transaction, excluding any appreciation or
depreciation directly or indirectly induced by the Specified
Transaction, and such value shall be binding on the Company and the
dissenter; and
(iv) the Company shall pay the dissenting Holder such amount in
money upon the surrender of the certificates representing the shares.
- The enforcement by a Holder of dissenters' rights will exclude the
enforcement by the Holder of his other rights as a holder of shares,
other than the Holder's right to obtain relief on the ground that the
action taken was illegal.
See Annex II attached hereto for the full text of Section 83 of the BVI
Law.
7. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A SUMMARY OF THE MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES TO HOLDERS OF THE TRANSACTIONS DESCRIBED IN THIS OFFER TO PURCHASE.
THE TAX CONSEQUENCES OF THE TRANSACTIONS WILL DEPEND IN LARGE PART ON THE FACTS
AND CIRCUMSTANCES APPLICABLE TO EACH HOLDER. THEREFORE, EACH HOLDER IS URGED TO
CONSULT THE HOLDER'S OWN TAX ADVISORS REGARDING THE UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES TO THAT HOLDER. NO INFORMATION IS PROVIDED WITH RESPECT TO
STATE, LOCAL, OR FOREIGN TAX CONSEQUENCES, AND HOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS WITH RESPECT TO SUCH CONSEQUENCES.
The discussion does not address federal income tax consequences applicable
to all Holders, some of whom may be subject to special rules (including, for
example, Holders who own, or are considered as owning pursuant to certain
attribution rules, five percent or more of the outstanding Shares). The
discussion focuses on Holders who are individual citizens or residents of the
United States and domestic corporations and has only limited application to
Holders who are foreign corporations, regulated investment companies, life
insurance companies, financial institutions, estates, trusts, tax-exempt
organizations or nonresident aliens. Also, unless otherwise stated, the
discussion assumes that each of the Units, Shares and Callable Warrants are
capital assets in the hands of the Holder at all relevant times.
The discussion is based upon existing federal income tax law, including the
Internal Revenue Code of 1986, as amended (the "Code"), income tax regulations
issued by the Internal Revenue Service (the "IRS"), rulings of the IRS and court
decisions. Future changes in the federal income tax laws could adversely affect
a Holder.
CONSEQUENCES OF PASSIVE FOREIGN INVESTMENT COMPANY STATUS
In each year that Neozyme II has been in existence, Neozyme II has
determined that it qualified as a Passive Foreign Investment Company ("PFIC")
and has sent to the holders of the Units the PFIC annual information statement
and a form of an election statement whereby the shareholder could elect to treat
Neozyme II as a qualified electing fund ("QEF") and to include annually in gross
income the shareholder's pro rata share of Neozyme II's ordinary earnings and
net capital gain (his "QEF inclusion").
If a Holder has not elected to treat Neozyme II as a QEF, any gain
recognized by such non-electing Holder as a result of the disposition of the
Holder's Shares pursuant to the transactions described in this Offer to Purchase
will be treated as ordinary income. The non-electing Holder's tax liability with
respect to such gain will be determined by allocating such gain in pro rata
amounts to each day in the Holder's holding period for the Shares and by
multiplying the gain allocated to each taxable year of the Holder other than the
current taxable year by the highest rate of tax in effect for the Holder in that
year, without regard to the actual rate that applied to the Holder's income in
that year. The non-electing Holder will be subject to an interest charge on the
taxes so determined at the rates and using the methods in Section 6621 of the
Code for underpayments of tax, as if the Holder had recognized the gain
allocated to each prior taxable year in that prior taxable year.
If a Holder elected to treat Neozyme II as a QEF in the first taxable year
that the Holder held Shares or later made the election and also either (i)
elected to treat the Shares generally as if they were sold on the first day of
the taxable year for which the election was made or (ii) elected to include in
the Holder's gross income
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the earnings and profits attributable to the Shares as of the first day of the
taxable year for which the election was made, any gain recognized by such
electing Holder as a result of the disposition of the Holder's Shares pursuant
to the transactions described in this Offer to Purchase will generally be
capital gain if the stock is held as a capital asset on the disposition date.
If for any taxable year an electing Holder elected under Section 1294 of
the Code to extend the time for the payment of the tax on a QEF inclusion and
that extension has not expired, the disposition of the Holder's Shares pursuant
to the transactions described in this Offer to Purchase will cause the extension
to expire. The extension will expire on the due date (without regard to
extensions) of the Holder's tax return for the taxable year in which the
disposition occurs.
Following the consummation of the transactions described in this Offer to
Purchase, Genzyme may make an election pursuant to Section 338 of the Code. Such
an election may cause an electing Holder to recognize a substantially increased
QEF inclusion. However, the basis of the electing Holder's Shares should be
increased by the amount of the QEF inclusion. Any additional amounts of net
capital gain QEF inclusion resulting from the Section 338 election should thus
be offset by a reduced amount of capital gain or a capital loss in respect of
the electing Holder's sale of the Shares. However, any additional amounts of
ordinary earnings QEF inclusion resulting from the Section 338 election could
not generally be offset by a capital loss (except possibly for certain
relatively small amounts in the case of individuals).
CONSEQUENCES TO HOLDERS WHOSE UNITS ARE TENDERED AND ACCEPTED PURSUANT TO THE
TENDER OFFER
A Holder who tenders a Unit pursuant to the Offer and does not properly
withdraw such Unit prior to the expiration of the Offer will be deemed to have
sold each of the Unit's constituent elements, i.e., one share of Callable Common
Stock and one Callable Warrant, for the Offer Price and will be required to
allocate the Offer Price between these constituent elements in proportion to
their relative fair market values on the purchase date.
The Holder will recognize gain or loss with respect to the deemed sale of
the Callable Warrant in an amount equal to the difference between the amount of
the Offer Price allocable to the Callable Warrant and the portion of the
Holder's adjusted basis in the Unit allocable to the Callable Warrant. This gain
or loss will generally be capital gain or loss if the Unit is held as a capital
asset on the purchase date and will be long-term capital gain or loss if the
Unit has been held for more than one year on the purchase date.
The Holder will recognize gain or loss with respect to the deemed sale of
the share of Callable Common Stock in an amount equal to the difference between
the amount of the purchase price of the Unit allocable to the share of Callable
Common Stock and the portion of the Holder's adjusted basis in the Unit
allocable to the share of Callable Common Stock. Except as otherwise described
above under Consequences of Passive Foreign Investment Company Status, this gain
or loss will generally be capital gain or loss if the Unit is held as a capital
asset on the purchase date and will be long-term capital gain or loss if the
Unit has been held for more than one year on the purchase date.
CONSEQUENCES TO HOLDERS WHO DO NOT TENDER THEIR UNITS
If the Offer is consummated, Genzyme intends to effect the Second Step
Transaction, pursuant to which all of the Shares included in untendered Units
will be converted into the right to receive cash in an amount per Share equal to
the Second Step Consideration. The Callable Warrants associated with these
Shares will become exercisable and will separate and be transferable separately
from the right to receive cash for the Shares.
A Holder whose Shares are converted to the right to receive cash in the
Second Step Transaction will recognize gain or loss in an amount equal to the
difference between the Second Step Consideration and the portion of the Holder's
adjusted basis in the Unit allocable to the Shares. Except as otherwise
described above under Consequences of Passive Foreign Investment Company Status,
this gain or loss will generally be capital gain or loss if the Unit is held as
a capital asset on the Effective Date and will be long-term capital gain or loss
if the Unit has been held for more than one year on the Effective Date.
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A Holder will not recognize income, gain or loss as a result of the
acceleration in the exercisability of the Callable Warrants or their separation
from the Shares.
OTHER CONSIDERATIONS
Uncertainty exists as to the treatment of the initial grant to Genzyme of
the Purchase Option. The IRS might take the position that the Callable Warrants
received as part of a Unit in the initial Unit Offering in April 1992 were
issued by Genzyme in exchange for the separate grant of the Purchase Option by
the initial purchasers of the Units and that the full purchase price of the
Units was paid in exchange for the Callable Common Stock. In that event, upon
the lapse or termination of the Purchase Option, a Holder might recognize a
short-term capital gain in an amount equal to the value of the Callable Warrants
on the closing date of the initial Unit Offering, less the Holder's tax basis in
the Callable Warrants.
If a Holder were treated as having paid the full purchase price for the
Unit in exchange for the Callable Common Stock and as then having granted the
Purchase Option to Genzyme in exchange for the Warrants, the Holder would have
an increased tax basis in the Callable Common Stock which would reduce the
amount of gain (or increase the amount of loss) realized upon a disposition of
the Callable Common Stock pursuant to the transactions described in this Offer
to Purchase. Any such loss would be available to offset any gain taken into
account from a lapse or termination of the Purchase Option.
United States Taxation of Non-U.S. Persons
The following is a general discussion of certain anticipated United States
federal income tax consequences of a disposition of Units or Shares to a Holder
who, for United States federal income tax purposes, (1) is not a "United States
person", (2) is not, and has not been, engaged in a United States trade or
business and (3) in the case of an individual, will not be present in the United
States for 183 days or more during the taxable year of the Holder that includes
the date of disposition of the Holder's Units or Shares. A "United States
person" means a citizen or resident of the United States for United States
federal income tax purposes, a corporation, partnership or other entity created
or organized in or under the laws of the United States or any state thereof, or
an estate or trust, the income of which is subject to United States federal
income tax regardless of its sources. The following discussion does not consider
specific facts and circumstances that may be relevant to a particular Non-U.S.
Holder's tax position. Specifically, this discussion does not address the United
States tax consequences to any person who might own, or be considered as owning
pursuant to certain attribution rules, 5 percent or more of the outstanding
Shares. Furthermore, the following discussion is based on current provisions of
the Code and on administrative and judicial interpretations as of the date
hereof, all of which are subject to change. Each Non-U.S. Holder, as well as
each non-United States person who is or has been engaged in a United States
trade or business or who is an individual who has been present in the United
States for 183 days or more during a taxable year, or who may be eligible for
special treatment under an applicable income tax treaty is urged to consult a
tax advisor with respect to the United States federal income tax consequences of
the disposition of Units or Shares, as well as any tax consequences that may
arise under the laws of any foreign, state, local or other taxing jurisdiction.
A Non-U.S. Holder will not be subject to United States federal income tax
(and no tax will generally be withheld) with respect to gain recognized on a
disposition of the Units or of Callable Common Stock. Backup withholding
requirements may apply to the gross proceeds paid to a Non-U.S. Holder upon the
disposition of the Units or Shares, unless the holder certifies its foreign
status or otherwise establishes an exemption. A Non-U.S. Holder may obtain a
refund of any amounts withheld under the backup withholding rules by filing the
appropriate claim for refund with the Internal Revenue Service.
8. CERTAIN EFFECTS OF THE TRANSACTION
Interest in Assets and Earnings. Neither Genzyme or the Purchaser
currently owns any of the outstanding Units. As a result of the Offer and the
Second Step Transaction, Genzyme (directly or indirectly through the Purchaser)
will own the entire equity interest in the Company and will thereby be entitled
to 100% of the Company's net assets and earnings and the current Holders will no
longer have an equity interest in the Company.
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Voting Power. Unless waived by Genzyme and the Purchaser, the Offer is
conditioned upon the tender of at least a majority of the outstanding Units. If
a majority of the outstanding Units are tendered in the Offer, the Purchaser
will have the right under the BVI Law and the Company's Memorandum of
Association and Articles of Association to approve the Second Step Transaction
by written consent in lieu of a meeting of stockholders and without the vote or
consent of any of the remaining Holders. In addition, under the BVI Law, if the
Purchaser acquires at least 90% of the outstanding Units, the Purchaser would
have the power to approve a merger of the Company into the Purchaser, or require
the Company to redeem all of the Shares not held by the Purchaser, in each case
without a vote of the Holders.
NNM Quotation. Depending upon the aggregate market value and the number of
Units not purchased pursuant to the Offer, as well as the identity of the
holders of such Units, the Units may no longer meet the quantitative
requirements of the National Association of Securities Dealers, Inc. the
("NASD") for continued inclusion in the NNM, which require that an issuer have
at least 200,000 publicly held shares, held by at least 400 stockholders or 300
stockholders of round lots, with a market value of at least $1 million, have net
tangible assets of at least $1 million, $2 million or $4 million (depending on
profitability levels during the issuer's four most recent fiscal years) and have
a minimum bid price per shares of $1 (unless the issuer has a public float of at
least $3 million and at least $4 million of net tangible assets).
In the event that the Units no longer meet the requirements for NNM
quotation, it is possible that the Units would continue to trade in the
over-the-counter market and that price or other quotations might still be
available from other sources. The extent of the public market for the Units and
the availability of such quotations would, however, depend upon such factors as
the number of holders and/or the aggregate market value of such Units remaining
at such time, the interest in maintaining a market in such Units on the part of
securities firms, the possible termination of registration of such Units under
the Exchange Act, as described below, and other factors. The Purchaser cannot
predict whether a reduction in the number of Units that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for or
marketability of the Units or whether it would cause future market prices to be
greater or less than the price to be paid in the Offer.
The Purchaser and Genzyme intend to cancel all Callable Warrants purchased
by the Purchaser pursuant to the Offer. Following the Second Step Transaction,
Genzyme does not intend to list the outstanding Callable Warrants on the NNM,
and therefore, any market that may develop for the Callable Warrants may be
adversely affected.
Exchange Act Registration. The Units are currently registered under the
Exchange Act. The purchase of Units pursuant to the Offer or following
consummation of the Offer may result in the Units becoming eligible for
deregistration under the Exchange Act. Registration of the Units may be
terminated upon application of the Company to the Commission if the Units are
not listed on a national securities exchange and there are fewer than 300 record
holders of the Units. There currently are fewer than 300 record holders of the
Units. The termination of the registration of the Units under the Exchange Act,
assuming there are no other securities of the Company subject to registration,
would result in the suspension of the Company's obligation to file reports
pursuant to Section 15(d) of the Exchange Act, thereby substantially reducing
the information required to be furnished by the Company to holders of the Units
and would make certain provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b), the requirement of furnishing a
proxy statement in connection with stockholders' meetings pursuant to Section
14(a) and the requirements of Rule 13e-3 under the Exchange Act with respect to
"going private" transactions, no longer applicable to the Units. Furthermore,
"affiliates" of the Company and persons holder "restricted securities" of the
Company may be deprived of the ability to dispose of the securities pursuant to
Rule 144 under the Securities Act. If registration of the Units under the
Exchange Act were terminated, the Units would no longer be "margin securities"
or eligible for NNM quotation. The Purchaser presently intends to seek to cause
the Company to terminate the registration of the Units under the Exchange Act as
soon after the consummation of the Offer or Second Step Transaction as the
requirements for termination of registration are met. In addition, following the
Second Step Transaction, the outstanding Callable Warrants may not meet the
requirements for registration under the Exchange Act, and the provisions of the
Exchange Act described
41
<PAGE> 42
above applicable to transactions in the Units would similarly not apply to
transactions in the Callable Warrants.
Margin Regulations. The Units are currently "margin securities" under the
rule of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), which has the effect, among other things, of allowing brokers
to extend credit on the collateral of such Units for the purpose of buying,
carrying or trading in securities ("purpose loans"). Depending upon factors such
as the number of record holders of the Units and the number and market value of
publicly held Units, following the purchase of Units pursuant to the Offer or
following consummation of the Offer, the Units might no longer constitute
"margin securities" for purposes of the Federal Reserve Board's margin
regulations and therefore could no longer be used as collateral for purpose
loans made by brokers.
9. FEES AND EXPENSES
The following is an estimate of expenses to be incurred in connection with
the Offer and the Second Step Transaction, other than (i) the fees and expenses
of Robertson, Stephens & Company (see "SPECIAL FACTORS -- Section 5. Reasons for
the Transaction; Purpose and Structure of the Transaction; Plans for the Company
after the Transaction," and (ii) the fees and expenses of Hambrecht & Quist (see
"SPECIAL FACTORS -- Section 4. Recommendation of the Company's Board of
Directors; Fairness of the Transaction"). The Purchase Agreement provides that
all costs and expenses incurred in connection with the Offer and the Second Step
Transaction will be paid by the party incurring such costs and expenses, whether
or not the Offer or the Second Step Transaction is consummated.
Expenses to be paid by Genzyme and the Purchaser:
<TABLE>
<S> <C>
Legal Fees and Expenses................................................... $200,000
Printing and Mailing...................................................... $100,000
Advertising............................................................... $ 65,000
Filing Fees............................................................... $ 21,375
Depositary Fees........................................................... $ 7,500
Information Agent Fees.................................................... $ 15,000
Accounting Fees and Expenses.............................................. $ 50,000
Miscellaneous............................................................. $ 16,125
========
Total........................................................... $475,000
</TABLE>
Expenses to be paid by the Company:
<TABLE>
<S> <C>
Legal Fees and Expenses................................................... $180,000
Printing and Mailing...................................................... $ 25,000
Miscellaneous............................................................. $ 20,000
========
Total........................................................... $225,000
</TABLE>
42
<PAGE> 43
THE TENDER OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment and pay for all Units
validly tendered prior to the Expiration Date (as defined below) and not
properly withdrawn as provided in "THE TENDER OFFER -- Section 4. Withdrawal
Rights." The term "Expiration Date" means 5:00 p.m., New York City time, on
October 28, 1996, unless and until the Purchaser, in its sole discretion (but
subject to the terms and conditions of the Purchase Agreement), shall have
extended the period during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire.
Subject to the applicable rules and regulations of the Commission, the
Purchaser expressly reserves the right, in its sole discretion (but subject to
the terms and conditions of the Purchase Agreement), at any time and from time
to time, to extend the period during which the Offer is open for any reason,
including the failure to satisfy any of the conditions specified in "THE TENDER
OFFER -- Section 9. Certain Conditions of the Offer," and thereby delay
acceptance for payment of, or payment for, any Units, by giving oral or written
notice of such extension to the Depositary. There can be no assurance that the
Purchaser will exercise its right to extend the Offer. During any such
extension, all Units previously tendered and not properly withdrawn will remain
subject to the Offer, subject to the rights of a tendering Holder to withdraw
such Holder's Units. See "THE TENDER OFFER -- Section 4. Withdrawal Rights."
Subject to the applicable rules and regulations of the Commission, the
Purchaser also expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Purchase Agreement), at any time and from
time to time, to (i) delay acceptance for payment of or, regardless of whether
the Units were theretofore accepted for payment, payment for, any Units pending
receipt of any regulatory approvals that may be required as described in "THE
TENDER OFFER -- Section 10. Certain Legal Matters; Regulatory Approvals," (ii)
terminate the Offer and not accept for payment (or pay for) any Units if any of
the conditions referred to in "THE TENDER OFFER -- Section 9. Certain Conditions
of the Offer" have not been satisfied or upon the occurrence and during the
continuance of any of the events specified in "THE TENDER OFFER -- Section 9.
Certain Conditions of the Offer" and (iii) waive any condition or amend the
Offer in any respect, in each case, by giving oral or written notice of such
delay, termination, waiver or amendment to the Depositary and by making a public
announcement thereof. The Purchase Agreement provides that, without the consent
of the Company, as approved by the Special Committee, the Purchaser shall not
amend or waive the Minimum Condition or the Majority Consent Condition (as
defined below), extend the offer, reduce the maximum number of Units to be
purchased, reduce the price to be paid per Unit pursuant to the Offer and amend
any other material term of the Offer in a manner adverse to the Holders.
Pursuant to the Purchase Agreement, if on October 28, 1996, the Minimum
Condition has not been satisfied, the Purchaser may, not later than 9:00 a.m.,
eastern time, on the next business day following the Initial Expiration Date,
elect either (x) to extend the Offer for a period not to exceed 60 days and
amend the Offer to delete the Minimum Condition and add the Majority Consent
Condition, in which case, promptly thereafter, the Company shall commence to
convene a meeting or solicit the written consent of its shareholders for
approval of the Merger Plan, or (y) terminate the Offer and promptly return all
tendered Units, in which case, promptly thereafter, the Company shall commence
to convene a meeting or solicit the written consent of the its shareholders for
approval of the Merger Plan, in either case with such solicitation or meeting to
be conducted in accordance with applicable law and the terms of the Purchase
Agreement. The Majority Consent Condition is defined in the Purchase Agreement
to mean that the sum of (a) the Shares included in the Units tendered and not
withdrawn as of the new expiration date of the Offer (provided such Shares may
be voted in favor of the Merger Plan at the meeting or pursuant to the consent
solicitation by the Purchaser immediately after the purchase of the Units which
include such Shares in the Offer by the Purchaser) plus (b) the number of Shares
held by holders who have voted in favor of the Merger Plan at the meeting or
pursuant to the consent solicitation as of the new expiration date of the Offer
(but excluding any such Shares that would result
43
<PAGE> 44
in double counting with (a) above) represents not less than a majority of the
Shares outstanding. The Purchaser acknowledges (x) that Rule 14e-1(c) under the
Exchange Act requires the Purchaser to pay the consideration offered or return
the Units tendered promptly after the termination or withdrawal of the Offer and
(y) that the Purchaser may not delay acceptance for payment of, or payment for
(except as provided in clause (i) of the first sentence of this paragraph), any
Units upon the occurrence of any of the conditions specified in "THE TENDER
OFFER -- Section 9. Certain Conditions of the Offer" without extending the
period of time during which the Offer is open.
If the Minimum Condition or any other condition specified in "THE TENDER
OFFER -- Section 9. Certain Conditions of the Offer" is not fulfilled by the
Expiration Date, the Purchaser reserves the right (but shall not be obligated)
to (i) decline to purchase any of the Units tendered, return all tendered Units
to tendering Holders and terminate the Offer, (ii) subject to the terms and
conditions of the Purchase Agreement, extend the Offer and retain all tendered
Units until the expiration of the Offer, as extended, subject to the terms and
conditions of the Offer (including any rights of Holders to withdraw their
Units) or (iii) subject to the terms and conditions of the Purchase Agreement,
waive or reduce the condition and, subject to complying with applicable rules
and regulations of the Commission, accept for payment and purchase all Units
validly tendered.
Any extension, delay, termination, waiver or amendment will be followed as
promptly as practicable by a public announcement thereof, such announcement, in
the case of an extension, to be made no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
Without limiting the manner in which the Purchaser may choose to make any public
announcement, except as provided by applicable law (including Rules 14d-4(c),
14d-6(d) and 14e-1 under the Exchange Act, which require that material changes
be promptly disseminated to Holders), the Purchaser will have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by issuing a release to the Dow Jones News Service.
If, in accordance with the terms and conditions of the Purchase Agreement,
the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or waives a material condition of the Offer,
the Purchaser will disseminate additional tender offer materials (including by
public announcement as set forth above) and extend the Offer to the extent
required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The
minimum period during which an offer must remain open following material changes
in the terms of the offer or information concerning the offer, other than a
change in price, a change in percentage of securities sought or a change in any
dealer's soliciting fee, will depend upon the facts and circumstances, including
the relative materiality of the changes. With respect to a change in price or,
subject to certain limitations, a change in the percentage of securities sought
or a change in any dealer's soliciting fee, a minimum ten business day period
from the day of such change is generally required to allow for adequate
dissemination to Holders. Accordingly, if, prior to the Expiration Date, the
Purchaser decreases the number of Units being sought, increases the
consideration offered pursuant to the Offer or adds a dealer's soliciting fee,
and if the Offer is scheduled to expire at any time earlier than the period
ending on the tenth business day from the date that notice of such increase,
decrease or addition is first published, sent or given to the Holders, the Offer
will be extended at least until the expiration of such ten business day period.
For purposes of the Offer, a "business day" means any day other than a Saturday,
Sunday or a federal holiday and consists of the time period from 12:01 a.m.
through 12:00 midnight, New York City time.
The Company has elected to disseminate the Offer to the Holders. This Offer
to Purchase and the related Letter of Transmittal and, if required, other
relevant material will be mailed to record holders of Units and will be
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the Company's
list of Holders for subsequent transmittal to beneficial owners of Units.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will purchase by accepting for payment, and paying
for, all Units validly tendered prior to the Expiration Date and not properly
withdrawn
44
<PAGE> 45
(including Units validly tendered and not withdrawn during any extension of the
Offer, if the Offer is extended, subject to the terms and conditions of such
extension), promptly after the Expiration Date. In addition, subject to
complying with Rule 14e-1 under the Exchange Act, the Purchaser expressly
reserves the right, in its sole discretion (but subject to the terms and
conditions of the Purchase Agreement), to delay the acceptance for payment of,
or payment for, Units in order to comply, in whole or in part, with any other
applicable law.
In all cases, payment for Units tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
certificates representing the Callable Common Stock and the Callable Warrants
included in the Units ("Unit Certificates"), (ii) the Letter of Transmittal (or
a facsimile thereof), properly completed and duly executed, with any required
signature guarantee, and (iii) any other documents required by the Letter of
Transmittal. Accordingly, payment may be made to tendering Holders at different
times if delivery of the Units and other required documents occurs at different
times.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Units validly tendered and not properly
withdrawn if, as and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Units pursuant to
the Offer. Upon the terms and subject to the conditions of the Offer, payment
for Units so accepted for payment pursuant to the Offer will be made by deposit
of the aggregate purchase price therefor with the Depositary, which will act as
agent for tendering Holders for the purpose of receiving payment from the
Purchaser and transmitting such payment to Holders whose Units have been
accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE
FOR UNITS BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR
ANY DELAY IN MAKING SUCH PAYMENT. Upon the deposit of funds with the Depositary
for the purpose of making payment to validly tendering Holders, the Purchaser's
obligation to make such payment shall be satisfied and such tendering Holders
must thereafter look solely to the Depositary for payment of the amounts owed to
them by reason of the acceptance for payment of Units pursuant to the Offer.
If any tendered Units are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if the Unit Certificates are
submitted for more Units than are tendered, Unit Certificates representing Units
not purchased or not tendered will be returned, without expense to the tendering
Holder, as soon as practicable following expiration of termination of the Offer.
If, prior to the Expiration Date, the Purchaser increases the consideration
to be paid per Unit, the Purchaser will pay such increased consideration for all
Units purchased pursuant to the Offer, whether or not such Units have been
tendered or purchased prior to such increase in consideration.
The Purchase Agreement provides that it shall not be assigned except that
the Purchaser may assign its rights and obligations to Genzyme or to one or more
direct or indirect wholly owned subsidiaries of Genzyme which in a written
instrument shall make all the representations and warranties of the Purchaser
set forth therein and shall agree to assume all of the Purchaser's obligations
thereunder and be bound by all of the terms and conditions of the Purchase
Agreement; provided, however, that no such assignment shall relieve Genzyme or
the Purchaser of its obligations thereunder.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING UNITS
General. Except as set forth below, in order for Units to be validly
tendered pursuant to the Offer, the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, together with any required
signature guarantees and any other documents required by the Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth on the back cover of the Offer to Purchase prior to the Expiration Date,
and either (i) Unit Certificates representing tendered Units must be received by
the Depositary at such address prior to the Expiration Date, or (ii) the
guaranteed delivery procedures set forth below must be complied with. Book-entry
transfer procedures are not available to Holders.
No alternative, conditional or contingent tenders will be accepted and no
fractional Units will be purchased. All tendering Holders, by execution of the
Letter of Transmittal (or facsimile thereof), waive any right to receive any
notice of the acceptance of their Units for payment.
45
<PAGE> 46
THE METHOD OF DELIVERY OF UNIT CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE SOLE OPTION AND RISK OF EACH TENDERING
HOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION 3, THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm that is a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the Securities
Transfer Agents Medallion Program, the Stock Exchanges' Medallion Program or the
New York Stock Exchange, Inc. Medallion Signature Program (an "Eligible
Institution"), unless the Units tendered thereby are tendered (i) by a
registered Holder of Units who has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 1 of the Letter of Transmittal.
If the Unit Certificates are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made, or Unit
Certificates for unpurchased Units are to be returned, to a person other than
the registered holder(s), then the tendered Unit Certificates must be endorsed
or accompanied by appropriate stock powers signed exactly as the name(s) of the
registered holder(s) appear on the Unit Certificates with the signature(s) on
such Unit Certificates or stock powers guaranteed by an Eligible Institution as
provided above and in the letter of transmittal. See Instructions 1 and 5 of the
Letter of Transmittal.
Guaranteed Delivery. If a Holder desires to tender Units pursuant to the
Offer and such Holder's Unit Certificates are not immediately available or time
will not permit all of the required documents to reach the Depositary prior to
the Expiration Date, such Units may nevertheless be tendered, provided that all
of the following conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(c) the Unit Certificates for all tendered Units, in proper form for
transfer, in each case together with the Letter of Transmittal (or a
facsimile thereof) properly completed and duly executed, with any required
signature guarantees and any other documents required by the Letter of
Transmittal are received by the Depositary within three NNM trading days
after the date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Units accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Unit Certificates therefor, a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), together with
any required signature guarantees and any other documents required by the Letter
of Transmittal. Accordingly, payment might not be made to all tendering Holders
at the same time, and will depend upon when Unit Certificates are received into
the Depositary's account.
Backup Federal Income Tax Withholding. Under the federal income tax laws,
the Depositary may, under certain circumstances, be required to withhold 31% of
the amount of any payments made to certain Holders pursuant to the Offer. TO
PREVENT SUCH BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENTS MADE
TO CERTAIN HOLDERS OF THE PURCHASE PRICE OF UNITS PURCHASED PURSUANT TO THE
OFFER, EACH SUCH HOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH HOLDER'S CORRECT
TAXPAYER IDENTIFICATION NUMBER AND CERTIFY
46
<PAGE> 47
THAT SUCH HOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY
COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. SEE
INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL.
Appointment as Proxy. By executing the Letter of Transmittal, a tendering
Holder irrevocably appoints designees of the Purchaser as the Holder's
attorneys-in-fact and proxies in the manner set forth in the Letter of
Transmittal, each with full power of substitution with respect to any Units
tendered thereby (and with respect to any and all other Units or other
securities issued or issuable in respect of such Units on or after September 20,
1996). All such powers of attorney and proxies will be considered irrevocable
and coupled with an interest in the tendered Units. This appointment will be
effective when, and only to the extent that, the Purchaser accepts such Units
for payment and deposits the purchase price therefor with the Depositary. Upon
such payment, all prior powers of attorney and proxies given by such Holder with
respect to such Units (and other Units and securities issued or issuable in
respect of such Units on or after September 20, 1996) will, without further
action, be revoked, and no subsequent powers of attorney and proxies may be
given nor any subsequent written consents executed by such Holder (and, if given
or executed, will not be deemed effective). Upon such payment by the Purchaser,
the designees of the Purchaser will, with respect to such Units and other
securities, be empowered to exercise all voting and other rights of such Holder
as they in their sole discretion may deem proper at any annual or special
meeting of the Holders, or any adjournment or postponement thereof, by written
consent in lieu of any such meeting or otherwise. The Purchaser reserves the
right to require that, in order for Units to be deemed validly tendered,
immediately upon the Purchaser's payment for such Units, the Purchaser must be
able to exercise full voting and other rights of a record and beneficial holder,
including voting at any meeting of Holders.
Determination of Validity. All questions as to the validity, form,
eligibility (including the time of receipt) and acceptance for payment of any
tendered Units pursuant to any of the procedures described above will be
determined by the Purchaser, in its sole discretion, which determination will be
final and binding on all parties. The Purchaser reserves the absolute right to
reject any and all tenders of any particular Units determined by it not to be in
appropriate form or the acceptance of or payment for which may, in the opinion
of its counsel, be unlawful. The Purchaser also reserves the absolute right to
waive any of the conditions of the Offer (subject to the terms and conditions of
the Purchase Agreement) or any defect or irregularities in the tender of any
particular Units, whether or not similar defects or irregularities are waived in
the case of any other Units. The Purchaser's interpretations of the terms and
conditions of the Offer (including the Letter of Transmittal and Instructions
thereto) will be final and binding. No tender of Units will be deemed to have
been validly made until all defects and irregularities have been cured or
waived. None of Genzyme, the Purchaser, any of their respective affiliates or
assigns, the Dealer Manager, the Information Agent, the Depositary nor any other
person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
The Purchaser's acceptance for payment of Units tendered pursuant to the
Offer will constitute a binding agreement between the tendering Holder and the
Purchaser upon the terms and subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 4, tenders of Units made
pursuant to the Offer are irrevocable. Units tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofor
accepted for payment as provided herein, may also be withdrawn at any time after
November 25, 1996.
If the Purchaser extends the Offer, is delayed in, or delays, its
acceptance for payment or payment for Units or is unable to accept for payment
or pay for Units for any reason, then, without prejudice to the Purchaser's
other rights under the Offer, tendered Units may nevertheless be retained by the
Depositary, on behalf of the Purchaser, and may not be withdrawn except to the
extent tendering Holders are entitled to and duly exercise withdrawal rights as
described in this Section 4. Any such delay will be accompanied by an extension
of the Offer to the extent required by law.
47
<PAGE> 48
In order for a withdrawal to be effective, a written, telegraphic or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person who
tendered the Units to be withdrawn, the number of Units to be withdrawn and the
name of the registered holder of such Units, if different from that of the
person who tendered such Units. If Unit Certificates to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such Unit Certificates, the tendering Holder must also submit the
serial numbers shown on such Unit Certificates to the Depository and the
signatures on the notice of withdrawal must be guaranteed by an Eligible
Institution, unless such Units have been tendered for the account of an Eligible
Institution.
Withdrawals may not be revoked and any Units properly withdrawn will
thereafter be deemed not to have been validly tendered for purposes of the
Offer. However, withdrawn Units may be re-tendered at any time prior to the
Expiration Date by following one of the procedures described in "THE TENDER
OFFER -- Section 3. Procedures for Accepting the Offer and Tendering Units."
All questions as to the form and validity (including the time of receipt)
of any notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of Genzyme, the
Purchaser, any of their affiliates or assigns, the Dealer Manager, the
Information Agent, the Depositary or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or incur any liability for failing to give any such notification.
5. PRICE RANGE OF UNITS; DIVIDENDS
The Units are traded in the over-the-counter market and are included on the
NNM under the symbol "NIIUF". The following table sets forth the high and low
sales prices per Unit on the NNM, as reported in publicly available sources for
each of the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
Year Ended December 31, 1994:
First Quarter............................................................. 37 1/2 31 1/2
Second Quarter............................................................ 37 1/4 33 1/2
Third Quarter............................................................. 34 1/2 32
Fourth Quarter............................................................ 34 1/2 25 1/2
Year Ended December 31, 1995:
First Quarter............................................................. 38 3/4 28 1/2
Second Quarter............................................................ 39 3/4 37 7/8
Third Quarter............................................................. 43 1/2 38 3/4
Fourth Quarter............................................................ 47 3/4 41 1/2
Year Ending December 31, 1996:
First Quarter............................................................. 53 38 1/8
Second Quarter............................................................ 52 3/4 41
Third Quarter (through September 26, 1996)................................ 45 1/2 43
</TABLE>
As of September 25, 1996, there were 77 holders of record of the Units and
in excess of 750 beneficial owners of Units.
On September 5, 1996, the last full trading day prior to Genzyme's issuance
of a press release announcing that it had reached an agreement in principle for
the acquisition of the Company at a price $45.00 per Unit net to the seller in
cash, the closing sale price per Unit as reported on the NNM was $44 1/16. On
September 19, 1996, the last full trading day prior to the public announcement
of the execution of the Purchase Agreement and of the Purchaser's intention to
commence the Offer, the closing sale price per Unit as reported on the
48
<PAGE> 49
NNM was $44 1/2. On September 26, 1996, the last full trading day prior to the
commencement of the Offer, the closing sale price per Unit as reported on the
NNM was $44 1/2.
HOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE UNITS.
The Company has never declared or paid any cash dividends in respect of the
Callable Common Stock, and is prohibited by the terms of its Memorandum of
Association from doing so without the consent of Genzyme.
6. CERTAIN INFORMATION CONCERNING THE COMPANY
Except as otherwise set forth herein, the information concerning the
Company set forth in this Section 6 and elsewhere in this Offer to Purchase has
been furnished by the Company or has been taken from, or is based upon, publicly
available documents on file with the Commission and other public sources.
Holders are urged to review the publicly available information concerning the
Company before acting on the Offer. Although neither Genzyme nor the Purchaser
has any knowledge of any facts that would indicate that any statements contained
herein which are based on such documents are untrue, neither Genzyme nor the
Purchaser takes any responsibility for the accuracy or completeness of the
information concerning the Company furnished by the Company or contained in such
documents or herein or for any failure by the Company to disclose events which
may have occurred and which may have affected or may affect the significance or
accuracy of any such information but that are unknown to Genzyme or the
Purchaser.
General. The Company, a BVI international business company, is engaged,
through Genzyme, in the research, development and clinical testing of products
for the treatment of CF. See "SPECIAL FACTORS -- Section 1. Establishment of the
Company;" "-- Section 2. Agreements and Relationships Between the Company and
Genzyme" and "-- Section 5. Reasons for the Transaction; Purpose and Structure
of the Transaction; Plans for the Company after the Offering -- Status of the
Programs." The principal executive offices of the Company are located at the
Todman Building, Main Street, Road Town, Tortola, British Virgin Islands.
Directors and Executive Officers. The name, business address, principal
occupation, five-year employment history and citizenship of each of the
directors and executive officers of the Company are set forth in Schedule II
hereto. Schedule II also sets forth information concerning the ownership of
Units by the directors and the executive officers of the Company.
The Company is subject to the disclosure requirements of the Exchange Act
and in accordance therewith is required to file reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. In addition, the Company has filed a statement on
Schedule 14D-9 regarding its recommendation to the Holders with respect to the
Offer. Such reports, proxy statements, Schedule 14D-9 and other information are
available for inspection at the Commission's public reference facilities at 450
Fifth Street, N.W., Washington, D.C. 20549 and should also be available for
inspection at the regional offices of the Commission located at 7 World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies may be obtained at
prescribed rates from the Commission's principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549. Certain reports and other information can also be
obtained through the Commission's Electronic Data Gathering, Analysis and
Retrieval System which is publicly available through the Commission's World Wide
Web site (http://www.sec.gov).
Financial Information. Set forth below is certain selected financial data
with respect to the Company excerpted or derived from the audited financial
statements contained in the Company's Annual Report on Form 10-K for its fiscal
year ended December 31, 1995 and the unaudited financial statements contained in
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1996 (the "Company Reports"). More comprehensive financial information is
included in the Company Reports and in other documents filed by the Company with
the Commission (which may be inspected or obtained in the manner set forth
above), and the following data is qualified in its entirety by reference to the
Company Reports and
49
<PAGE> 50
other documents and all of the financial information (including any related
notes) contained therein or incorporated by reference.
NEOZYME II CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
SUMMARY FINANCIAL DATA
(HISTORICAL)
(Amounts in thousands, except for per share amounts)
<TABLE>
<CAPTION>
CUMULATIVE CUMULATIVE
FROM FROM
MARCH 2, 1992 MARCH 2, 1992
(DATE OF SIX MONTHS ENDED (DATE OF
INCEPTION) TO YEAR ENDED DECEMBER 31, JUNE 30, INCEPTION) TO
DECEMBER 31, ----------------------------- ------------------- JUNE 30,
1992 1993 1994 1995 1995 1996 1996
------------- ------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Investment income..................... $ 2,576 $ 5,567 $ 2,522 $ 1,497 $ 820 $ 453 $ 12,615
Operating costs and expenses:
Selling, general, administrative,
research and development
expenses(1)......................... 10,501 12,807 18,012 24,455 11,810 10,758 76,533
------------- ------- -------- -------- -------- -------- -------------
Net loss................................ $(7,925) $(7,240) $(15,490) $(22,958) $(10,990) $(10,305) $ (63,918)
============= ======= ======== ======== ======== ======== =============
Common Share Data:
Per common share...................... $ (4.17) $ (3.00) $ (6.41) $ (9.51) $ (4.55) $ (4.27) $ (27.59)
============= ======= ======== ======== ======== ======== =============
Average shares outstanding............ 1,901 2,415 2,415 2,415 2,415 2,415 2,317
============= ======= ======== ======== ======== ======== =============
JUNE 30,
Combined Balance Sheet Data: 1996
--------
Cash and investment(2)................ $ 13,814
Working capital....................... 14,183
Total assets.......................... 14,341
Note payable to Genzyme
Corporation(3)...................... 100
Stockholders' equity.................. 14,083
Book value per Neozyme II callable
common share ($10.10 at December 31,
1995)............................... $ 5.83
</TABLE>
- ---------------
(1) In May 1992, Neozyme II paid a technology license fee of $5,000,000 to
Genzyme in consideration for Genzyme entering into the Technology License
Agreement and in recognition of Genzyme's expertise and expenditures in
developing technology licensed to Neozyme II.
(2) Cash and investments includes cash, cash equivalents, and short-term
investments.
(3) In May 1992, Neozyme II issues a note in the principal amount of $100,000
to Genzyme (the "Series 1992 Note") which is due on the day following the
termination of the Purchase Option Agreement with Genzyme and may not be
prepaid.
(4) The ratio of earnings to fixed charges is not presented for Neozyme II due
to the absence of fixed charges.
During the course of discussions between representatives of Genzyme and the
Special Committee that led to the execution of the Purchase Agreement, certain
non-public business and financial information about the Company was reviewed.
The Company does not as a matter of course make public any forecasts or
projections as to future performance or earnings, and the information set forth
below is included in this Offer to Purchase only because such information was
received by representatives of the parties. The forecasted and projected
financial information set forth below was not prepared with a view to public
disclosure or compliance with published guidelines of the Commission or the
guidelines established by the American Institute of Certified Public Accountants
regarding projections and forecasts. None of Genzyme, the Purchaser or the
Company, nor any of their respective financial advisors, assumes any
responsibility for the accuracy of this information. While presented with
numerical specificity, this information is based upon a variety of assumptions
relating to the business of the Company which may not be realized and is subject
to significant
50
<PAGE> 51
uncertainties and contingencies, all of which are difficult to predict and many
of which are beyond the control of the Company. There can be no assurance that
the projected or forecasted results will be realized, and actual results may
vary materially and adversely from those shown. The projections were based on
certain assumptions regarding patient growth, market penetration, royalty income
and other factors. The projections forecast base case net losses of
approximately $8 million to $11 million in each of 1996 through 2002, base case
revenue for 2003, 2004 and 2005 of approximately $26 million, $165 million and
$293 million, respectively, and base case net income for 2003, 2004 and 2005 of
approximately $300,000, $42 million and $76 million, respectively.
7. CERTAIN INFORMATION CONCERNING GENZYME AND THE PURCHASER
Genzyme. Genzyme, a Massachusetts corporation with its principal executive
offices located at One Kendall Square, Cambridge, MA 02139, is a diversified,
integrated human health care company which operates in five major business
areas. Genzyme's business activities in the areas of pharmaceuticals, genetic
diagnostic services and therapeutic diagnostic and surgical products and
pharmaceuticals are organized as the Genzyme General Division. Genzyme's
activities to develop, manufacture and market technologically advanced products
for the treatment or cartilage damage, severe burns and chronic skin ulcers are
conducted through the Genzyme Tissue Repair Division. Genzyme's common stock is
divided into two classes, General Division Common Stock and Tissue Repair
Division Common Stock, each of which is traded in the over-the-counter market
and is included on the NNM under the symbol "GENZ" and "GENZL," respectively.
Genzyme is subject to the disclosure requirements of the Exchange Act and
in accordance therewith is required to file reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. Such reports, proxy statements and other information are
available for inspection and copying at prescribed rates at the offices of the
Commission as set forth in "THE TENDER OFFER -- Section 6. Certain Information
Concerning the Company."
In addition to the Offer described herein, Genzyme has engaged in the
following transactions or negotiations with its affiliates in the last fiscal
year:
(i) IG Laboratories, Inc. In October 1994, Genzyme management began
consulting with its investment bankers regarding the potential acquisition
of all of the shares of the common stock of IG Laboratories, Inc., a
majority owned subsidiary of Genzyme ("IG"), not then owned by Genzyme. At
the same time, the IG Board established a committee (the "IG Independent
Committee") consisting of the directors of IG who were not affiliated with
Genzyme. The IG Independent Committee was charged with investigating and
considering the options available to IG for the further development of its
business or for a business combination with a third party, including
Genzyme. Between October 1994 and February 1995, the IG Independent
Committee consulted independent financial and legal advisors. Such advisors
began meeting with representatives of Genzyme in January 1995.
On February 15, 1995, Genzyme sent a proposal to the IG Independent
Committee to acquire all outstanding shares of IG's common stock not owned
by Genzyme through a merger of IG and Genzyme in which IG stockholders
other than Genzyme would receive shares of Genzyme General Division Common
Stock in exchange for their shares of IG Common Stock. On May 18, 1995,
Genzyme and the IG Independent Committee executed a letter of intent
pursuant to which the IG Independent Committee recommended to the full IG
Board of Directors the acquisition by Genzyme of all the outstanding shares
of IG's Common Stock. Genzyme and IG entered into an Agreement and Plan of
Merger dated as of June 10, 1995 providing, among other things, for the
merger of IG with and into Genzyme and for the exchange of all outstanding
shares of IG Common Stock (other than shares held by IG as treasury stock
or by Genzyme or subsidiaries of IG or Genzyme) for a number of shares of
Genzyme General Division Common Stock determined by dividing $7.00 by the
average of the closing prices reported by the Nasdaq National Market for
Genzyme General Division Common Stock during the ten trading days ending on
the second trading day prior to the closing date. The merger was approved
by a majority of the IG stockholders on September 29, 1995 and was
consummated on October 2 1995, and each outstanding share of IG Common
Stock (other than as indicated above) was converted into .1201 share of
Genzyme General Division Common Stock in accordance with the Merger
Agreement.
51
<PAGE> 52
(ii) Surgical Aids Partnership. On January 30, 1996, Genzyme made a
proposal to a special committee (the "Special Committee") of the Board of
Directors of the general partner of the Genzyme Development Partners, L.P.
(the "Partnership") offering to purchase substantially all of the assets of
the Partnership for approximately $93 million payable in shares of Genzyme
General Division Common Stock. The parties were unable to agree upon the
purchase price, and negotiations have been terminated.
The Purchaser. The Purchaser, a BVI international business company and a
wholly-owned subsidiary of Genzyme, was incorporated in September 1996 solely
for purposes of the transactions contemplated by the Purchase Agreement. It is
not anticipated that, prior to the consummation of the Offer, the Purchaser will
have any significant assets or liabilities (other than those arising under the
Purchase Agreement or otherwise in connection with the Offer or the Second Step
Transaction) or engage in any activities other than those incident to its
formation and capitalization and the Offer and Second Step Transaction. No
meaningful financial information concerning the Purchaser is available. The
principal executive offices of the Purchaser are located at Craigmuir Chambers,
Road Town, Tortola, British Virgin Islands.
Directors and Executive Officers. The name, business address, principal
occupation, five-year employment history and citizenship of each of the
directors and executive officers of Genzyme and the Purchaser are set forth in
Schedule I hereto.
Certain Transactions. Except for the Purchase Agreement and as otherwise
set forth in this Offer to Purchase, neither Genzyme nor the Purchaser
beneficially owns or has a right to acquire, directly or indirectly, any Units
and neither Genzyme nor Purchaser nor, to the best knowledge of Genzyme and the
Purchaser, any of the persons listed in Schedule I to this Offer to Purchase,
nor any associate or majority-owned subsidiary of any of the foregoing, nor any
of the respective executive officers, directors or subsidiaries of any of the
foregoing, has effected any transaction in the Units during the past 60 days.
Set forth in Schedule I hereto is information concerning the ownership of Units
by the directors and executive officers of Genzyme.
Except as provided in the Purchase Agreement and as otherwise set forth in
this Offer to Purchase, neither Genzyme nor the Purchaser nor, to the best
knowledge of Genzyme and the Purchaser, any of the persons listed on Schedule I
hereto, has any contract, arrangement, understanding or relationship with any
other person with respect to any Units or other securities of the Company,
including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or voting of any such Units or other
securities, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss or the giving or withholding of
proxies.
Except as set forth in this Offer to Purchase (particularly the sections
entitled "SPECIAL FACTORS -- Section 2. Agreements and Relationships Between the
Company and Genzyme" and "-- Section 3. Background of the Transaction"), since
January 1, 1993, there have been no contacts, negotiations or transactions
between any of Genzyme, the Purchaser, any subsidiary of Genzyme or the
Purchaser or, to the best knowledge of Genzyme and the Purchaser, any of the
persons listed on Schedule I hereto, on the one hand, and the Company or any of
its officers, directors or affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
an election of directors, or a sale or other transfer of a material amount of
assets.
Except as set forth in this Offer to Purchaser neither Genzyme nor the
Purchaser nor, to the best knowledge of Genzyme and the Purchaser, any of the
persons listed on Schedule I hereto has, since January 1, 1993, had any business
relationships or transactions with the Company or any of its executive officers,
directors or affiliates that would require disclosure herein under the rules and
regulations of the Commission applicable to the Offer.
Except as described in this Offer to Purchase, Genzyme has no plans or
proposals that relate to or would result in: (i) the acquisition by any person
of additional securities of Genzyme, or the disposition of securities of
Genzyme; (ii) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving Genzyme or any of its subsidiaries;
(iii) a sale or transfer of a material amount of assets of Genzyme or any of its
subsidiaries; (iv) any change in the present board of directors or management of
Genzyme including, but not limited to, any plans or proposals to change the
number or the terms of directors, to fill any
52
<PAGE> 53
existing vacancy on the board or to change any material term of the employment
contract of any executive officer; (v) any material change in the present
dividend rate or policy, or indebtedness or capitalization of Genzyme; (vi) any
other material change in Genzyme's corporate structure or business; (vii)
changes in Genzyme's charter, by-laws or instruments corresponding thereto or
other actions which may impede the acquisition of control of Genzyme by any
person; (viii) causing a class of equity security of Genzyme to be delisted from
a national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(ix) a class of equity security of Genzyme becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the Exchange Act; or (x) the
suspension of Genzyme's obligation to file reports pursuant to Section 15(d) of
the Exchange Act. Notwithstanding the foregoing, Genzyme from time to time
considers various transactions, including mergers and recapitalizations, which
may affect its corporate structure or certain areas of its business. There can
be no assurance that Genzyme will not effect any such transaction at any point
in the future.
Financial Information. Set forth below is certain selected financial data
with respect to Genzyme excerpted or derived from the audited consolidated
financial statements contained in Genzyme's Annual Report on Form 10-K for its
fiscal year ended December 31, 1995 and the unaudited financial statements
contained in Genzyme's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1996 (the "Genzyme Reports"). More comprehensive financial
information is included in Schedule III hereof, in the Genzyme Reports and in
other documents filed by Genzyme with the Commission (which may be inspected and
copies thereof obtained at the offices of the Commission as set forth in "THE
TENDER OFFER -- Section 6. Certain Information Concerning the Company").
53
<PAGE> 54
GENZYME CORPORATION AND SUBSIDIARIES
SUMMARY FINANCIAL DATA
(HISTORICAL)
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE AND RATIO AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of Operations Data(1):
Net revenues(2).............................. $121,916 $219,079 $270,371 $311,051 $383,783 $181,794 $229,132
Operating costs and expenses:
Cost of products and services sold and
selling, general, administrative, research
and development expenses................... 112,483 176,110 220,345 260,953 329,094 155,940 200,309
Amortization expense.......................... 1,200... 3,037 5,964 4,741 4,677 2,430 2,536
Other expenses(3)............................. -- 68,005 75,517 11,215 14,216 -- 1,465
-------- -------- -------- -------- -------- -------- --------
113,683 247,152 301,826 276,909 347,987 158,370 204,310
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)....................... 8,233 (28,073) (31,455) 34,142 35,796 23,424 24,822
Other income and (expenses):
Investment income............................ 12,371 21,981 12,209 9,101 8,814 3,062 9,103
Interest expense............................. (2,088) (7,099) (2,500) (1,354) (1,109) (220) (395)
Other........................................ 6,427... 1,678 9,192 (11,105) (202) (876) (347)
-------- -------- -------- -------- -------- -------- --------
16,710.. 16,560 18,901 (3,358) 7,503 1,966 8,361
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes and
extraordinary credit......................... 24,943 (11,513) (12,554) 30,784 43,299 25,390 33,183
Benefit (Provision) for income taxes.......... (12,484) (18,804) 6,459 (14,481) (21,649) (9,394) (13,107)
-------- -------- -------- -------- -------- -------- --------
Extraordinary credit resulting from
utilization of operating loss
carryforwards................................ 8,387 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)............................. $ 20,846 $(30,317) $ (6,095) $ 16,303 $ 21,650 $ 15,996 $ 20,076
======== ======== ======== ======== ======== ======== ========
Common Share Data:
Attributable to the General Division:
Net income (loss).......................... $ 21,107 $(29,809) $ 18,020 $ 32,054 $ 43,680 $ 24,965 $ 39,318
======== ======== ======== ======== ======== ======== ========
Per common and common equivalent share:
Income (loss) before extraordinary
credit................................. $ 0.27 $ (0.67) $ 0.34 $ 0.61 $ 0.73 $ 0.44 $ 0.54
Extraordinary credit..................... 0.18 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)........................ $ 0.45 $ (0.67) $ 0.34 $ 0.61 $ 0.73 $ 0.44 $ 0.54
======== ======== ======== ======== ======== ======== ========
Average shares outstanding(4).............. 47,108 44,740 52,500 52,338 60,184 56,210 72,880
======== ======== ======== ======== ======== ======== ========
Attributable to the Tissue Repair Division:
Net loss................................... $ (261) $ (508) $(24,115) $(15,751) $(22,030) $ (8,969) $(19,242)
======== ======== ======== ======== ======== ======== ========
Per common share........................... $ (0.10) $ (0.17) $ (7.43) $ (4.40) $ (2.28) $ (1.03) $ (1.55)
======== ======== ======== ======== ======== ======== ========
Average shares outstanding................. 2,739 3,019 3,245 3,578 9,659 8,721 12,411
======== ======== ======== ======== ======== ======== ========
Ratio of earnings to fixed charges,
consolidated(5).............................. 5.7x (0.0)x (0.6)x 2.5x 3.4x 3.9x 6.6x
Ratio of EBITDA to interest costs,
consolidated(6).............................. 16.1x 0.9x 2.6x 4.8x 6.6x 7.4x 17.2x
EBITDA(5)..................................... $ 34,501 $ 6,632 $ 6,767 $ 50,364 $ 67,046 $ 37,205 $ 45,574
</TABLE>
54
<PAGE> 55
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------
<S> <C>
Consolidated Balance Sheet Data:
Cash and investments(7)........................................................................................ $ 334,535
Working capital(8)............................................................................................. 373,491
Total assets(9)................................................................................................ 1,006,329
Long-term debt and capital lease obligations excluding current portion(10)..................................... 32,921
General Division equity(10).................................................................................... 842,936
Book value per General Division common share ($21.14 at December 31, 1995)..................................... $ 12.16
Tissue Repair Division equity.................................................................................. 38,109
Book value per Tissue Repair Division common share ($3.79 at December 31, 1995)................................ $ 3.00
</TABLE>
- ---------------
(1) In October 1992, Genzyme acquired all the outstanding common shares of
Vivigen, Inc. ("Vivigen") in a transaction accounted for as a pooling of
interests. Accordingly, Genzyme's financial data has been restated to
include Vivigen for all periods presented.
(2) In July 1993, GTR received a technology license fee of $2,000,000 from
Neozyme I related to expansion of the field of the Vianain(R) debriding
product.
(3) Includes charges related to the purchase of in-process research and
development totaling $51.1 million, $49.0 million, $11.2 million and $14.2
million, respectively, for the years ended December 31, 1992, 1993, 1994
and 1995; impaired goodwill and restructuring costs totaling $26.5 million
for the year ended December 31, 1993, and charges for purchase options and
financing expenses totaling $16.9 million, for the year ended December 31,
1992.
(4) Reflects July 25, 1996 2-for-1 stock split of shares of General Division
Stock.
(5) The ratio of earnings to fixed charges is calculated by dividing the sum of
(i) net income (loss) before income taxes and extraordinary credits and
(ii) fixed charges excluding capitalized interest, by fixed charges. Fixed
charges consist of interest (expensed and capitalized), amortization of
debt issuance costs and the estimated interest portion of rent expense.
Fixed charges exceeded earnings for the years ended December 31, 1992 and
1993 by $12.2 million and $17.3 million, respectively.
(6) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization and extraordinary items. Interest costs
include interest expensed and interest capitalized. EBITDA should not be
considered an alternative measure of the Company's net income, operating
performance, cash flow or liquidity. The ratio of EBITDA to interest costs
is included herein to provide additional information related to the
Company's ability to service debt.
(7) Cash and investments includes cash, cash equivalents, and short- and
long-term investments.
(8) Genzyme has an available line of credit with a commercial bank of $215
million which may be used by either the General or Tissue Repair Division.
As of June 1996, Genzyme's Tissue Repair Division ("GTR") borrowed $15
million under this credit line at an interest rate of approximately 6.06%
as temporary financing for its manufacturing capacity expansion project. In
July 1996, the General Division used $200 million to finance the
acquisition of DSP.
(9) In April 1996, the Company acquired Genetrix, Inc., in a tax free exchange
of General Division Stock which was accounted for as a purchase. In the
aggregate, approximately 1,380,000 shares of General Division Stock valued
at $36.5 million were issued. In July, the Company acquired DSP for cash of
approximately $250.8 million financed by cash of $50.8 million and line of
credit borrowings of $200 million.
(10) In October 1991, the Company issued $100.0 million of 6 3/4% convertible
subordinated notes due October 2001 and received net proceeds of $97.3
million. The notes were converted into shares of General Division Stock in
March 1996.
55
<PAGE> 56
GENZYME GENERAL DIVISION
SUMMARY FINANCIAL DATA
(HISTORICAL)
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Combined Statement of Operations Data(1):
Net revenues................................. $119,624 $216,413 $265,687 $310,727 $378,563 $179,517 $225,771
Operating costs and expenses:
Cost of products and services sold and
selling, general, administrative, research
and development expenses................... 109,930 172,936 216,839 256,064 300,498 144,113 176,747
Amortization expense.......................... 1,200 3,037 5,964 4,741 4,677 2,430 2,536
Other expenses(2)............................. -- 68,005 50,517 -- 14,216 -- 1,465
-------- -------- -------- -------- -------- -------- --------
111,130 243,978 273,320 260,805 319,391 146,543 180,748
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)....................... 8,494 (27,565) (7,633) 49,922 59,172 32,974 45,023
Other income and (expenses):
Investment income............................ 12,371 21,981 12,209 9,072 7,428 2,481 8,144
Interest expense............................. (2,088) (7,099) (2,500) (1,354) (1,069) (220) (395)
Other........................................ 6,427 1,678 9,192 (11,105) (202) (876) (347)
-------- -------- -------- -------- -------- -------- --------
16,710 16,560 18,901 (3,387) 6,157 1,385 7,402
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes and
extraordinary credit......................... 25,204 (11,005) 11,268 46,535 65,329 34,359 52,425
Benefit (Provision) for income taxes.......... (12,589) (19,007) (2,812) (16,341) (30,506) (13,056) (20,909)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary credit..... 12,615 (30,012) 8,456 30,194 34,823 21,303 31,516
Extraordinary credit resulting from
utilization of operating loss
carryforwards................................ 8,323 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)............................. 20,938 (30,012) 8,456 30,194 34,823 21,303 31,516
Tax benefit allocated from GTR................ 169 203 9,564 1,860 8,857 3,662 7,802
-------- -------- -------- -------- -------- -------- --------
Net income (loss) attributable to General
Division Stock............................... $ 21,107 $(29,809) $ 18,020 $ 32,054 $ 43,680 $ 24,965 $ 39,318
======== ======== ======== ======== ======== ======== ========
Common Share Data:
Attributable to the General Division:
Net income (loss).......................... $ 21,107 $(29,809) $ 18,020 $ 32,054 $ 43,680 $ 24,965 $ 39,318
======== ======== ======== ======== ======== ======== ========
Per common and common equivalent share:
Income (loss) before extraordinary
credit................................. $ 0.27 $ (0.67) $ 0.34 $ 0.61 $ 0.73 $ 0.44 $ 0.54
Extraordinary credit..................... 0.18 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)........................ $ 0.45 $ (0.67) $ 0.34 $ 0.61 $ 0.73 $ 0.44 $ 0.54
======== ======== ======== ======== ======== ======== ========
Average shares outstanding(3).............. 47,108 44,740 52,500 52,338 60,184 56,210 72,880
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------
<S> <C>
Combined Balance Sheet Data:
Cash and investments(4).............................................................................. $ 298,555
Working capital...................................................................................... 355,426
Total assets(5)...................................................................................... 948,841
Long-term debt and capital lease obligations excluding current portion(5)............................ 32,170
Stockholders' equity(6).............................................................................. 842,936
</TABLE>
- ---------------
(1) In October 1992, Genzyme acquired all the outstanding common shares of
Vivigen, Inc. ("Vivigen") in a transaction accounted for as a pooling of
interests. Accordingly, Genzyme's financial data has been restated to
include Vivigen for all periods presented.
(2) Includes charges related to the purchase of in-process research and
development totaling $51.1 million, $24.0 million and $14.2 million,
respectively, for the years ended December 31, 1992, 1993, and 1995;
impaired goodwill and restructuring costs
56
<PAGE> 57
totaling $26.5 million for the year ended December 31, 1993, and charges for
purchase options and financing expenses totaling $16.9 million, for the year
ended December 31, 1992.
(3) Reflects July 25, 1996 2-for-1 stock split of shares of General Division
Stock.
(4) Cash and investments includes cash, cash equivalents, and short- and
long-term investments.
(5) In April 1996, the Company acquired Genetrix, Inc., in a tax free exchange
of General Division Stock which was accounted for as a purchase. In the
aggregate, approximately 1,380,000 shares of General Division Stock valued
at $36.5 million were issued. In July, the General Division acquired DSP for
cash of approximately $250.8 million financed by cash of $50.8 million and
line of credit borrowings of $200 million.
(6) In October 1991, the Company issued $100.0 million of 6 3/4% convertible
subordinated notes due October 2001 and received net proceeds of $97.3
million. The notes were converted into shares of General Division Stock in
March 1996.
57
<PAGE> 58
GENZYME TISSUE REPAIR DIVISION
SUMMARY FINANCIAL DATA
(HISTORICAL)
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Combined Statement of Operations Data:
Net revenues(1).............................. $ 2,291 $ 2,666 $ 4,684 $ 324 $ 5,220 $ 2,277 $ 3,361
Operating costs and expenses:
Cost of products and services sold and
selling, general, administrative, research
and development expenses................... 2,552 3,174 3,506 4,889 28,596 11,827 23,562
Other expenses(2)............................ -- -- 25,000 11,215 -- -- --
------ ------- --------- --------- --------- -------- ---------
2,552 3,174 28,506 16,104 28,596 11,827 23,562
------ ------- --------- --------- --------- -------- ---------
Operating income (loss)....................... (261) (508) (23,822) (15,780) (23,376) (9,550) (20,201)
Other income and (expenses):
Investment income............................ -- -- -- 29 1,386 605 964
Interest expense............................. -- -- -- -- (40) (24) (5)
------ ------- --------- --------- --------- -------- ---------
-- -- -- 29 1,346 581 959
------ ------- --------- --------- --------- -------- ---------
Income (loss) before income taxes and
extraordinary credit......................... (261) (508) (23,822) (15,751) (22,030) (8,969) (19,242)
Benefit (Provision) for income taxes.......... 50 -- (38) -- -- -- --
------ ------- --------- --------- --------- -------- ---------
Net loss...................................... (211) (508) (23,860) (15,751) (22,030) (8,969) (19,242)
Tax benefit allocated to the General
Division..................................... (50) -- (255) -- -- -- --
------ ------- --------- --------- --------- -------- ---------
Net loss..................................... $ (261) $ (508) $(24,115) $(15,751) $(22,030) $ (8,969) $(19,242)
====== ======= ========= ========= ========= ======== =========
Common Share Data:
Attributable to the Tissue Repair Division:
Net loss................................... $ (261) $ (508) $(24,115) $(15,751) $(22,030) $ (8,969) $(19,242)
====== ======= ========= ========= ========= ======== =========
Per common share........................... $ (0.10) $ (0.17) $ (7.43) $ (4.40) $ (2.28) $ (1.03) $ (1.55)
====== ======= ========= ========= ========= ======== =========
Average shares outstanding................. 2,739 3,019 3,245 3,578 9,659 8,721 12,411
====== ======= ========= ========= ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------
<S> <C>
Combined Balance Sheet Data:
Cash and investments(3)......................................................................................... $35,980
Working capital(4).............................................................................................. 18,065
Total assets.................................................................................................... 59,796
Long-term debt and capital lease obligations excluding current portion.......................................... 751
Stockholders' equity............................................................................................ 38,109
</TABLE>
- ---------------
(1) In July 1993, GTR received a technology license fee of $2,000,000 from
Neozyme I related to expansion of the field of the Vianain(R) debriding
product.
(2) Includes charges related to the purchase of in-process research and
development totaling $25 million and $11.2 million, respectively, for the
year ended December 31, 1993 and 1994.
(3) Cash and investments includes cash, cash equivalents, and short- and
long-term investments.
(4) Genzyme has an available line of credit with a commercial bank of $215
million which may be used by either the General or Tissue Repair Division.
In June 1996, Genzyme's Tissue Repair Division ("GTR") borrowed $15 million
under this credit line at an interest rate of approximately 6.06% as
temporary financing for its manufacturing capacity expansion project.
Set forth below is certain pro forma selected financial data with respect
to Genzyme to give effect to the consummation of the Offer and the Second Step
Transaction (assuming that all outstanding Units are tendered in the Offer).
58
<PAGE> 59
GENZYME CORPORATION AND SUBSIDIARIES
UNAUDITED SUMMARY PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
The pro forma statement of operations data and ratios have been prepared as
if the acquisition of Genetrix, Inc. (the "Genetrix Acquisition"), the
acquisition of DSP (the "DSP Acquisition") and the probable merger with Neozyme
II (the "Neozyme II Acquisition") occurred as of January 1, 1995. The pro forma
balance sheet data has been prepared as if the Genetrix Acquisition, DSP
Acquisition and Neozyme II Acquisition occurred on June 30, 1996. The pro forma
summary financial data do not purport to represent what the results of
operations or financial position of the Company would have been if such
transactions had occurred at the date indicated and do not purport to project
results of the Company for any future periods.
<TABLE>
<CAPTION>
SIX
MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ --------
<S> <C> <C>
Pro Forma Consolidated Statement of Operations Data(1):
Net revenues............................................................................. $476,850 $279,878
Operating costs and expenses:
Cost of products and services sold and selling, general, administrative, research and
development expenses................................................................... 434,406 251,832
Amortization expense..................................................................... 13,551 8,931
Other expenses(2)........................................................................ 17,801 2,011
-------- --------
465,758 262,774
-------- --------
Operating income........................................................................... 11,092 17,104
Other income and (expenses):
Investment income........................................................................ 4,895 6,836
Interest expense......................................................................... (13,511) (6,611)
Other.................................................................................... (1,556) (1,284)
-------- --------
(10,172) (1,059)
-------- --------
Income before income taxes................................................................. 920 16,045
Provision for income taxes................................................................. (9,124) (9,486)
-------- --------
Net income................................................................................. $ (8,204) $ 6,559
======== ========
Attributable to General Division Stock:
Net income............................................................................... $ 13,826 $ 25,801
Per common and common equivalent share................................................... $ 0.22 $ 0.35
Average shares outstanding............................................................... 61,565 73,800
Attributable to TR Stock:
Net loss................................................................................. $(22,030) $(19,242)
Per common share......................................................................... $ (2.28) $ (1.55)
Average shares outstanding............................................................... 9,659 12,411
Ratio of earnings to fixed charges(3), consolidated........................................ 0.7x 2.2x
</TABLE>
59
<PAGE> 60
<TABLE>
<CAPTION>
JUNE 30,
1996
------------
<S> <C> <C>
Pro Forma Consolidated Balance Sheet Data(1):
Cash and investments(4).................................................................. $ 190,627
Working capital.......................................................................... 46,565
Total assets............................................................................. 1,115,104
Long-term debt, capital lease obligations excluding current portion, and other noncurrent
liabilities............................................................................ 33,147
Pro Forma General Division equity(5)..................................................... 722,883
Pro Forma Book value per General Division common share................................... $ 10.22
Pro Forma Tissue Repair Division equity.................................................. 38,109
Pro Forma book value per Tissue Repair Division common share............................. $ 3.00
</TABLE>
- ---------------
(1) On May 1, 1996, the Company acquired Genetrix Inc., a privately held genetic
testing laboratory based in Phoenix, Arizona, in a tax-free exchange of
General Division Common Stock. In the aggregate, approximately 1,380,000
shares of General Division Common Stock, valued at approximately $36.5
million, were issued for all the outstanding shares of Genetrix preferred
stock and Genetrix common stock, (together with the Genetrix Preferred Stock
"Genetrix Stock"). The acquisition was accounted for as a purchase. The
total purchase price of approximately $39.7 million included acquisition
costs of $3.8 million. Approximately $35 million of the excess purchase
price was allocated to goodwill and is being amortized over 15 years. On
July 1, 1996, Genzyme completed the acquisition of Deknatel, Snowden,
Pencer, Inc., a privately held specialty surgical products company. The
Company paid approximately $250 million which was partially funded by $200
million borrowed under a revolving credit facility. The total purchase price
of $250.8 million included acquisition costs of $5.8 million. Approximately
$36 million was allocated to tangible net assets, $70 million was allocated
to patents and tradenames (useful life of 12 and 40 years, respectively),
$24.2 million to in-process technology and $127.8 million to goodwill
(useful life of 40 years). The amount allocated to in-process technology was
charged to expense and is reflected as a charge to accumulated deficit in
the pro forma balance sheet but is not reflected in the pro forma statement
of operations as it is a material nonrecurring charge. On September 23,
1996, Genzyme announced that it had signed a definitive Purchase Agreement
with Neozyme II under which Genzyme will commence a tender offer for all
outstanding units of Neozyme II at $45 per Unit in cash. The unaudited pro
forma consolidated financial data presented herein assumes that all
outstanding Units are tendered in the Offer. The total purchase price of
$109.7 million includes acquisition costs of $1.0 million and has been
allocated to the net assets of Neozyme II of $14.1 million and to in-process
technology of $95.6 million. The amount allocated to in-process technology
is reflected as a charge to accumulated deficit in the pro forma balance
sheet and is not reflected in the pro forma statement of operations as it is
a material nonrecurring charge which will be charged to expense upon
completion of the acquisition.
(2) Includes charges related to the purchase of in-process research and
development of $14.2 million for the year ended December 31, 1995.
(3) The ratio of earnings to fixed charges is calculated by dividing the sum of
(i) net income (loss) before income taxes and extraordinary credits and (ii)
fixed charges, by fixed charges. Fixed charges consist of interest (expensed
and capitalized), amortization of debt issuance costs and the estimated
interest portion of rent expense.
(4) Cash and investments includes cash, cash equivalents, and short- and
long-term investments.
(5) In October 1991, the Company issued $100.0 million of 6 3/4% convertible
subordinated notes due October 2001 and received net proceeds of $97.3
million. The notes were converted into shares of General Division Stock in
March 1996.
60
<PAGE> 61
GENZYME GENERAL DIVISION
UNAUDITED SUMMARY PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO AMOUNTS)
The pro forma statement of operations data has been prepared as if the
Genetrix Acquisition, the DSP Acquisition and the Neozyme II Acquisition
occurred as of January 1, 1995. The pro forma balance sheet data has been
prepared as if the Genetrix Acquisition, DSP Acquisition and the Neozyme II
Acquisition occurred on June 30, 1996. The pro forma summary financial data do
not purport to represent what the results of operations or financial position of
the General Division would have been if such transactions had occurred at the
date indicated and do not purport to project results of the General Division for
any future periods.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ ----------
<S> <C> <C>
Pro Forma Combined Statement of Operations Data(1):
Net revenues.......................................................... $471,630 $276,517
Operating costs and expenses:
Cost of products and services sold and selling, general,
administrative, research and development expenses................ 405,810 228,270
Amortization expense................................................ 13,551 8,931
Other expenses(2)................................................... 17,801 2,011
------------ ----------
437,162 239,212
------------ ----------
Operating income...................................................... 34,468 37,305
Other income and (expenses):
Investment income................................................... 3,509 5,877
Interest expense.................................................... (13,471) (6,611)
Other............................................................... (1,556) (1,284)
------------ ----------
(11,518) (2,018)
------------ ----------
Income before income taxes............................................ 22,950 35,287
Provision for income taxes............................................ (17,981) (17,288)
------------ ----------
Net income............................................................ 4,969 17,999
Tax benefit allocated from GTR........................................ 8,857 7,802
------------ ----------
Net income attributable to General Division Stock..................... $ 13,826 $ 25,801
============ ==========
Per common and common equivalent share:
Net income.......................................................... $ 0.22 $ 0.35
Average shares outstanding.......................................... 61,565 73,800
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
1996
----------
<S> <C> <C>
Pro Forma Combined Balance Sheet Data(1):
Cash and investments(3).............................................. $ 154,647
Working capital...................................................... 28,500
Total assets......................................................... 1,057,616
Long-term debt, capital lease obligations excluding current portion,
and other noncurrent liabilities.................................. 32,396
Division equity(4)................................................... 722,883
</TABLE>
- ---------------
(1) On May 1, 1996, the Company acquired Genetrix Inc., a privately held genetic
testing laboratory based in Phoenix, Arizona, in a tax-free exchange of
General Division Common Stock. In the aggregate, approximately 1,380,000
shares of General Division Common Stock, valued at approximately $36.5
million, were issued for all the outstanding shares of Genetrix preferred
stock and Genetrix common
61
<PAGE> 62
stock, together with the Genetrix Preferred Stock "Genetrix Stock". The
acquisition was account for as a purchase. The total purchase price of
approximately $39.7 million included acquisition costs of $3.8 million.
Approximately $35 million of the excess purchase price was allocated to
goodwill and is being amortized over 15 years. On July 1, 1996, Genzyme
completed the acquisition of Deknatel, Snowden, Pencer, Inc., a privately
held specialty surgical products company. The Company paid approximately
$250 million which was partially funded by $200 million borrowed under a
revolving credit facility. The total purchase price of $250.8 million
included acquisition costs of $5.8 million. Approximately $36 million was
allocated to tangible net assets, $70 million was allocated to patents and
tradenames (useful life of 12 and 40 years, respectively), $24.2 million to
in-process technology and $127.8 million to goodwill (useful life of 40
years). The amount allocated to in-process technology was charged to
expense and is reflected as a charge to accumulated deficit in the pro
forma balance sheet but is not reflected in the pro forma statement of
operations as it is a material nonrecurring charge. On September 23, 1996,
Genzyme announced that it had signed a definitive Purchase Agreement with
Neozyme II under which Genzyme will commence a tender offer for all
outstanding units of Neozyme II at $45 per Unit in cash. The unaudited
summary pro forma financial combined financial data presented herein
assumes that all outstanding Units are tendered in the Offer. The total
purchase price of $109.7 million includes acquisition costs of $1.0 million
and has been allocated to the net assets of Neozyme II of $14.1 million and
to in-process technology of $95.6 million. The amount allocated to
in-process technology is reflected as a charge to accumulated deficit in
the pro forma balance sheet and is not reflected in the pro forma statement
of operations as it is a material nonrecurring charge which will be charged
to expense upon completion of the acquisition.
(2) Includes charges related to the purchase of in-process research and
development $14.2 million for the year ended December 31, 1995.
(3) Cash and investments includes cash, cash equivalents, and short- and
long-term investments.
(4) In October 1991, the Company issued $100.0 million of 6 3/4% convertible
subordinated notes due October 2001 and received net proceeds of $97.3
million. The notes were converted into shares of General Division Stock in
March 1996.
8. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the
Purchaser to purchase 2,415,000 Units pursuant to the Offer, and to pay related
fees and expenses is estimated to be approximately $109 million. The Purchaser
expects to obtain such funds from Genzyme. Genzyme intends to obtain such funds
from its available corporate funds. Obtaining financing is not a condition to
the Offer or the Second Step Transaction.
9. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provisions
of the Offer, and in addition to the condition that Units that would constitute
not less than a majority of the Units outstanding are validly tendered prior to
expiration of the Offer and not withdrawn, the Purchaser shall not be required
to accept for payment and pay for any Units tendered pursuant to the Offer, may
postpone the purchase of, and payment for, Units tendered, and may terminate or
amend the Offer if at any time on or after the date of the Purchase Agreement,
and at or before the time of acceptance for payment of any such Units (whether
or not any Units have theretofore been accepted for payment and paid for
pursuant to the Offer) any of the following shall occur or shall be determined
by the Purchaser to have occurred and remain in effect:
(a) except for matters which affect generally the economy or the
industry in which the Company is engaged and except for continued losses
incurred by the Company as a result of its operations and continued
depletion of its cash resources in the ordinary course of business or
consistent with the annual workplan currently in effect, any change shall
have occurred in the business, properties, assets, liabilities,
capitalization, stockholders' equity, financial condition, operations,
licenses or franchises or results of operations of the Company which has a
Material Adverse Effect (as defined in the Purchase Agreement); or
(b) there shall have been instituted or be pending any action,
proceeding, application or counterclaim before any court or governmental or
regulatory body which (i) challenges the validity of or seeks to restrain
the consummation of or to impose any material limitation, on any
transaction contemplated by the Purchase Agreement or seeks (ii) to obtain
any material amount of damages in connection with such transactions; or
62
<PAGE> 63
(c) any statute, regulation, order or injunction shall have been
enacted, entered, enforced or deemed applicable to the Offer or the Second
Step Transaction that is reasonably likely to, directly or indirectly,
result in any of the consequences referred to in paragraph (b) above; or
(d) the Board of Directors of the Company shall have publicly
(including by amendment of its Schedule 14D-9) withdrawn or modified in a
manner adverse to the Purchaser its approval or recommendation of the Offer
or shall have resolved to do so; or
(e) the representations and warranties of the Company set forth in the
Purchase Agreement shall not be true in any material respect as though made
on such date or the Company shall have failed in any material respect to
perform any material obligation or covenant required in the Purchase
Agreement to be performed or complied with by it; or
(f) the Company shall have entered into, or shall have publicly
announced its intention to enter into, an agreement or agreement in
principle with respect to any Acquisition Proposal (as defined in the
Purchase Agreement).
10. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS. Neither Genzyme nor the
Purchaser is aware of any license or regulatory permit that appears to be
material to the business of the Company that might be adversely affected by the
Purchaser's acquisition of Units as contemplated herein. Neither Genzyme nor the
Purchaser is aware of any other material filing, approval or other action by any
federal or state governmental or administrative authority that would be required
for the acquisition of Units by the Purchaser as contemplated herein, including
any approval required under the Hart-Scott-Rodino Act. Should any such approval
or action be required, it is currently contemplated that such approval or action
would be sought. There is, however, no present intention to delay the purchase
of Units tendered pursuant to the Offer pending the outcome of any such approval
or action. There can be no assurance that any such approval or action, if
needed, would be obtained without substantial conditions or that adverse
consequences might not result to Genzyme's, the Purchaser's or the Company's
business in the event that such approvals were not obtained or such actions were
not taken. The Purchaser's obligation under the Offer to accept for payment and
pay for Units is subject to certain conditions, including conditions relating to
the legal matters discussed in this Section 10. See "THE TENDER OFFER -- Section
9. Certain Conditions of the Offer."
11. DIVIDENDS AND DISTRIBUTIONS. If, on or after September 20, 1996, the
Company should declare or pay any dividend or other distribution (including,
without limitation, the issuance of additional Shares pursuant to a stock
dividend or stock split or the issuance of rights for the purchase of any
securities) with respect to the Callable Common Stock that is payable or
distributable to Holders of record on a date occurring prior to the transfer to
the name of the Purchaser or its nominees or transferees on the Company's stock
transfer records of the Units purchased pursuant to the Offer, then, without
prejudice to the Purchaser's rights described in "THE TENDER OFFER -- Section 9.
Certain Conditions of the Offer," (i) the purchase price per Unit payable by the
Purchaser pursuant to the Offer will be reduced in the amount of any such cash
dividend or distribution and (ii) the whole of any non-cash dividend or
distribution (including, without limitation, additional shares or rights as
aforesaid) will be required to be remitted promptly and transferred by each
tendering Holder to the Depositary for the account of the Purchaser accompanied
by appropriate documentation of transfer and pending such remittance or
appropriate assurance thereof, the Purchaser will be entitled to all rights and
privileges as owner of any such non-cash dividend, distribution or right, and
may withhold the entire purchase price or deduct from the purchase price the
amount of value of such non-cash dividend, distribution or right, as determined
by the Purchaser in its sole discretion.
If, on or after September 20, 1996, the Company should split the shares of
Callable Common Stock or combine or otherwise change the shares of Callable
Common Stock or its capitalization, then, without prejudice to the Purchaser's
rights described in "THE TENDER OFFER -- Section 9. Certain Conditions of the
Offer," appropriate adjustments to reflect such split, combination or change may
be made by the Purchaser in the purchase price and other terms of the Offer,
including, without limitation, the number or type of securities offered to be
purchased.
63
<PAGE> 64
12. FEES AND EXPENSES. Genzyme engaged Robertson, Stephens & Company to
act as its financial advisor and as Dealer Manager. See "SPECIAL
FACTORS -- Reasons for the Transaction; Purpose and Structure of the
Transaction; Plans for the Company after the Transaction" for a description of
Robertson, Stephens & Company's compensation.
Genzyme has retained Corporate Investor Communications, Inc. to act as the
Information Agent and American Stock Transfer & Trust Company as the Depositary
in connection with the Offer. The Information Agent may contact holders of Units
by mail, telephone, telex, telecopy, telegraph and personal interview and may
request brokers, dealers, commercial banks, trust companies and other nominees
to forward the Offer materials to beneficial owners. Each of the Information
Agent and the Depositary will receive reasonable and customary compensation for
its services, will be reimbursed for certain reasonable out-of-pocket expenses
and will be indemnified against certain liabilities and expenses in connection
with the Offer, including, without limitation, certain liabilities under U.S.
federal securities laws.
Neither Genzyme nor the Purchaser will pay any fees or commissions to any
broker or dealer or any other person for soliciting tenders of Units pursuant to
the Offer (other than to the Dealer Manager and the Information Agent). Brokers,
dealers, commercial banks and trust companies will, upon request, be reimbursed
by the Purchaser for customary mailing and handling expenses incurred by them in
forwarding Offer materials to their customers.
13. MISCELLANEOUS. The Offer is being made solely by this Offer to
Purchase and the related Letter of Transmittal and is being made to all holders
of Units. The Purchaser is not aware of any state where the making of the Offer
is prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Units pursuant thereto, the
Purchaser will make a good faith effort to comply with such state statute.If,
after such good faith effort, the Purchaser cannot comply with such state
statute, the Offer will not be made to, nor will tenders be accepted from or on
behalf of, the Holders in such state. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of the Purchaser by the
Dealer Manager or one or more registered brokers or dealers that are licensed
under the laws of such jurisdiction.
The Purchaser has filed with the Commission (i) a Schedule 14D-1 together
with exhibits, pursuant to Rule 14d-3 promulgated by the Commission under the
Exchange Act, furnishing certain additional information with respect to the
Offer, (ii) a Schedule 13E-3 together with exhibits, pursuant to Rule 13e-3
promulgated by the Commission under the Exchange Act, furnishing certain
additional information with respect to the Offer, and (iii) a Schedule 13E-4
together with exhibits, pursuant to Rule 13e-4 promulgated by the Commission
under the Exchange Act, furnishing certain additional information with respect
to the Offer. Such statements and any amendments thereto, including exhibits,
may be examined and copies may be obtained at the same places and in the same
manner as set forth with respect to information about the Company in "THE TENDER
OFFER -- Section 6. Certain Information Concerning the Company" (except that
such statement and amendments may not be available in the regional offices of
the Commission).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF GENZYME, THE PURCHASER OR THE COMPANY NOT CONTAINED
HEREIN OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED.
NEOZYME II ACQUISITION CORP.
September 27, 1996
64
<PAGE> 65
SCHEDULE I
MEMBERS OF THE BOARDS OF DIRECTORS AND
EXECUTIVE OFFICERS OF GENZYME AND THE PURCHASER
1. Directors and Executive Officers of Genzyme. The name, business address
and position with Genzyme, present principal occupation or employment and five
year employment history of each of the directors and executive officers of
Genzyme, together with the names, principal businesses and addresses of any
corporations or other organizations in which such principal occupations are
conducted are set forth below. Unless otherwise indicated, each occupation set
forth refers to Genzyme, each individual is a United States citizen and each
individual's business address is One Kendall Square, Cambridge, MA 02139. Unless
otherwise indicated, no director or executive officer of Genzyme beneficially
owns any Units (or rights to acquire Units).
<TABLE>
<CAPTION>
NAME POSITION WITH GENZYME
- --------------------------------------------- ---------------------------------------------
<S> <C>
Henri A. Termeer............................. Chairman of the Board; President; Chief
Executive Officer
Geoffrey F. Cox.............................. Executive Vice President
David D. Fleming............................. Group Senior Vice President, Diagnostics
John V. Heffernan............................ Senior Vice President, Human Resources
Elliott D. Hillback, Jr...................... Senior Vice President, Genomics
Mark A. Hofer................................ Senior Vice President; Chief Patent Counsel
David J. McLachlan........................... Executive Vice President, Finance; Chief
Financial Officer
Gregory D. Phelps............................ Executive Vice President
James R. Rasmussen........................... Senior Vice President, Research
Alan E. Smith................................ Senior Vice President, Research; Chief
Scientific Officer
Peter Wirth.................................. Executive Vice President, Legal Affairs;
Chief Legal Counsel
Evan M. Lebson............................... Treasurer
John M. McPherson............................ Senior Vice President, Protein Development
Richard A. Moscicki.......................... Senior Vice President, Clinical, Medical and
Regulatory Affairs; Chief Medical Officer
G. Jan van Heek.............................. Group Senior Vice President; Therapeutics
Constantine E. Anagnostopoulos............... Director
Douglas A. Berthiaume........................ Director
Henry E. Blair............................... Director
Charles L. Cooney............................ Director
Robert J. Carpenter.......................... Director
Henry R. Lewis............................... Director
</TABLE>
Mr. Termeer has served as President and a Director of Genzyme since October
1983, as Chief Executive Officer since December 1985 and as Chairman of the
Board since May 1988. For ten years prior to joining Genzyme, Mr. Termeer worked
for Baxter Travenol Laboratories, Inc., a manufacturer of human health care
products. Mr. Termeer is Chairman of the Boards of Genzyme Transgenics
Corporation (an affiliate of Genzyme) and Neozyme II. Mr. Termeer is also a
director of Abiomed, Inc., AutoImmune Inc., GelTex Pharmaceuticals, Inc. and
Xenova Ltd. and a trustee of Hambrecht & Quist Healthcare Investors and
Hambrecht & Quist Life Sciences Investors. Mr. Termeer is a citizen of The
Netherlands and beneficially owns 3,300 Units.
<PAGE> 66
Dr. Cox joined Genzyme in June 1984 and served as Senior Vice President,
Operations of Genzyme from May 1988 until September 1996, when he became an
Executive Vice President. For 14 years prior to joining Genzyme, Dr. Cox worked
for the manufacturing division of British Fermentation Products, Ltd., a
division of Gist-Brocades N.V. Mr. Cox is a citizen of the United Kingdom.
Mr. Fleming joined Genzyme in April 1984. He has served as President of
Genzyme Diagnostics Division since January 1989 and a Senior Vice President of
Genzyme from August 1989 until September 1996. He was named Group Senior Vice
President of Genzyme in September 1996. For 11 years prior to joining Genzyme,
he worked for Baxter Travenol Laboratories, Inc.
Mr. Heffernan joined Genzyme as Vice President, Human Resources in October
1989 and has served as Senior Vice President, Human Resources since May 1992.
Prior to joining Genzyme, he served for more than five years as Vice President,
Human Resources Corporate Staff of GTE Corporation, a diversified communications
and electronics company.
Mr. Hillback became Senior Vice President, Genomics in September 1996. He
served as Senior Vice President and as President of Integrated Genetics
(formerly IG Laboratories, Inc., a majority-owned subsidiary merged into Genzyme
in October 1995) from July 1990 until September 1996. For one year before
joining Genzyme, he was President and Chief Executive Officer of Cellcor
Therapies, Inc., a biotechnology company. Prior to that, Mr. Hillback was
employed for six years in the human health care products business of The BOC
Group, Inc., most recently as President of its Glasrock Home Health Care
subsidiary. For 11 years prior to joining The BOC Group, Inc., he served in
varying capacities at Baxter Travenol Laboratories, Inc. Mr. Hillback is also a
director of IVF America, Inc., an in vitro fertilization services company in
which Genzyme holds a minority interest.
Mr. Hofer joined Genzyme in August 1989 as Vice President and General
Counsel, served as Senior Vice President and General Counsel from May 1992 until
December 1995 and has been Senior Vice President and Chief Patent Counsel since
January 1996. Prior to joining Genzyme, he served as Chief Patent Counsel for
Integrated Genetics, Inc., a biotechnology company, from July 1987 until its
acquisition by Genzyme in August 1989. From March 1981 until July 1987, he
served as Patent Counsel for Johnson & Johnson specializing in biotechnology.
Mr. McLachlan joined Genzyme in December 1989 and served as Senior Vice
President, Finance until September 1996, when he became Executive Vice
President, Finance. He has served as Chief Financial Officer since joining
Genzyme. Prior to joining Genzyme, he served for more than five years as Vice
President of Finance for Adams-Russell Electronics Inc., a defense electronics
manufacturer, and Adams-Russell Co., Inc., a cable television company. Mr.
McLachlan is also a director of HearX, Ltd. Mr. McLachlan beneficially owns
1,400 Units.
Mr. Phelps joined Genzyme as Senior Vice President in November 1991 and was
named Executive Vice President in September 1996. Prior to joining Genzyme, Mr.
Phelps served as President and Chief Executive Officer of Viagene, Inc., a
biotechnology company, from October 1988 to June 1990, and of ZymoGenetics,
Inc., a biotechnology company, from May 1986 to August 1988, and held various
positions at Baxter Travenol Laboratories, Inc., a manufacturer of human health
care products, from 1975 to 1986. Mr. Phelps is also a director of Neozyme II
and Oxtex International Inc. Mr. Phelps beneficially owns 2,500 Units.
Dr. Rasmussen joined Genzyme in June 1984 and has served as Senior Vice
President, Research since August 1989. Prior to joining Genzyme, he was an
Assistant Professor of Chemistry at Cornell University.
Dr. Smith joined Genzyme in August 1989 as Senior Vice President, Research.
He also became Genzyme's Chief Scientific Officer in September 1996. Prior to
joining Genzyme, he served as Vice President-Scientific Director of Integrated
Genetics, Inc., from November 1984 until its acquisition by Genzyme in August
1989. From October 1980 to October 1984, Dr. Smith was head of the Biochemistry
Division of the National Institute for Medical Research, Mill Hill, London,
England. Dr. Smith also serves as a director of Genzyme Transgenics Corporation.
Dr. Smith is a citizen of the United Kingdom.
<PAGE> 67
Mr. Wirth joined Genzyme in January 1996 as Senior Vice President and
General Counsel and became Executive Vice President, Legal Affairs and Chief
Legal Officer in September 1996. He will remain a partner of Palmer & Dodge LLP,
a Boston, Massachusetts law firm, a position he has held since 1982 until
September 30, 1996, at which time he will become of Counsel. Palmer & Dodge LLP
is counsel to Genzyme, the Purchaser and the Company.
Mr. Lebson joined Genzyme in August 1989 as Executive Assistant to the
President and served as Vice President, Financial Operations from April 1990 to
August 1991 and as Vice President and Treasurer from August 1991 to September
1996. He currently serves as Treasurer of Genzyme. Prior to joining Genzyme, he
served as Treasurer and Chief Financial Officer of Integrated Genetics, Inc.
from 1983 until its acquisition by Genzyme in August 1989. Mr. Lebson is also
Vice President and Treasurer of Genzyme Transgenics Corporation.
Dr. McPherson joined Genzyme in August 1989 and served as Vice President,
Therapeutic Protein Development from November 1989 to May 1993 and as Vice
President, Biotherapeutic Product Development since then. He was appointed Vice
President, Research and Development of Genzyme Tissue Repair Division in
December 1994. Prior to joining Genzyme, he was, since April 1988, Director,
Protein Chemistry of Integrated Genetics, Inc.
Dr. Moscicki joined Genzyme in March 1992 as Medical Director, became Vice
President, Medical Affairs in early 1993 and was named Vice President, Clinical,
Medical and Regulatory Affairs in December 1993. In September 1996, he became
Senior Vice President, Clinical, Medical and Regulatory Affairs and Chief
Medical Officer. Since 1979, he has also been a physician staff member at the
Massachusetts General Hospital and a faculty member at the Harvard Medical
School.
Mr. van Heek joined Genzyme in September 1991 as General Manager of its
wholly-owned subsidiary, Genzyme, B.V., and became a Genzyme Vice President and
the President of Genzyme Therapeutics Division in December 1993. In September
1996 he was named Group Senior Vice President, Therapeutics. Prior to joining
Genzyme, he was, since 1988, Vice President/General Manager of the Fenwal
Division of Baxter Healthcare Corporation. Mr. van Heek also has served as
President and Treasurer of Neozyme II from March 1992 to January 1996. Mr. van
Heek is a citizen of The Netherlands and beneficially owns 400 Units.
Dr. Anagnostopoulos is Managing General Partner of Gateway Associates,
which is the general partner of Gateway Venture Partners III, L.P., a venture
capital partnership. From January 1986 to April 1987, Dr. Anagnostopoulos was a
consultant to Monsanto Company, a producer of pharmaceuticals, chemicals,
plastics and textiles, and to Alafi Capital, a venture capital firm. From 1982
through 1985, he served as Corporate Vice President of Monsanto Company. His
principal business address is Gateway Associates, 800 Maryland Avenue, Suite
1190, St. Louis, MO 63105.
Mr. Berthiaume is Chairman, President and Chief Executive Officer of Waters
Corporation, a high technology manufacturer of products used for analysis and
purification, formerly a division of Millipore Corporation. From May 1991 to
August 1994, he was President of the Waters Division of Millipore Corporation,
and from 1988 to 1991, he was Chief Financial Officer of Millipore Corporation.
His principal business address is Waters Corporation, 34 Maple Street, Milford,
MA 01757.
Mr. Blair is a consultant to several companies, including Genzyme. Prior to
January 1990, Mr. Blair was Senior Vice President, Scientific Affairs of
Genzyme. Before joining Genzyme in 1981, he was Associate Director of the New
England Enzyme Center at Tufts University School of Medicine. Mr. Blair is also
a director of Genzyme Transgenics Corporation, Dynagen, Inc. and Celtrix
Pharmaceuticals, Inc. His principal business address is P.O. Box 648, 275 Mill
Way, Barnstable, MA 02630.
Mr. Carpenter is President and Chief Executive Officer of VacTex, Inc., a
privately held biotechnology company which he co-founded in November 1995, and
Chairman of GelTex Pharmaceuticals, Inc., a publicly held pharmaceutical
development company which he co-founded in November 1991 and where he served as
President and Chief Executive Officer until May 1993. Mr. Carpenter was Chairman
of the Board, President and Chief Executive Officer of Integrated Genetics,
Inc., a biotechnology company that merged with Genzyme in 1989. Following the
merger and until 1991, Mr. Carpenter was Executive Vice President of
<PAGE> 68
Genzyme, and Chief Executive Officer and Chairman of the Board of IG
Laboratories, Inc. Mr. Carpenter is also a director of Apex Biosciences, Inc.
and Neozyme II. His principal business address is VacTex, Inc., 70 Walnut
Street, Wellesley, MA 02181. Mr. Carpenter owns 2,000 Units, including 1,000
owned by Mr. Carpenter's wife, as to which he disclaims beneficial ownership.
Dr. Cooney is a Professor of Chemical and Biochemical Engineering and
Co-Director of the Program on the Pharmaceutical Industry at Massachusetts
Institute of Technology ("MIT"). Dr. Cooney joined the MIT faculty as an
Assistant Professor in 1970 and became a Professor in 1982. Dr. Cooney is also a
principal of BioInformation Associates, Inc., a consulting company. His
principal business address is Massachusetts Institute of Technology, 25 Ames
Street, Building 66, Room 472, Cambridge, MA 02139.
Mr. Lewis is a consultant to several companies and Chairman of the Board of
Delphax Systems, a manufacturer of high speed non-impact printers, and a member
of the Board of Dyax Corp., a bioseparation, pharmaceutical discovery and
development company. From 1986 to February 1991, Mr. Lewis was the Vice Chairman
of the Board of Dennison Manufacturing Company, a manufacturer and distributor
of products for the stationery, technical paper, and industrial and retail
systems markets. From 1982 to 1986, Mr. Lewis was a Senior Vice President of
Dennison Manufacturing Company. His principal business address is Protein
Engineering Corporation, 35 Clover Street, Belmont, MA 02178.
2. Directors and Executive Officers of the Purchaser. The name, business
address and position with the Purchaser, present principal occupation or
employment and five year employment history of each of the directors and
executive officers of the Purchaser, together with the names, principal
businesses and addresses of any corporations or other organizations in which
such principal occupations are conducted are set forth below. Unless otherwise
indicated, each individual is a United States citizen, and no director or
executive officer of the Purchaser beneficially owns any Units (or rights to
acquire Units).
<TABLE>
<CAPTION>
NAME POSITION WITH THE PURCHASER
- --------------------------------------------- ---------------------------------------------
<S> <C>
David J. McLachlan........................... President and Treasurer
Peter Wirth.................................. Secretary
</TABLE>
See Section 1 of this Schedule I for information concerning Messrs.
McLachlan and Wirth.
<PAGE> 69
SCHEDULE II
MEMBERS OF THE BOARDS OF DIRECTORS AND
EXECUTIVE OFFICERS OF NEOZYME II
The name, business address and position with Neozyme II, present principal
occupation or employment and five year employment history of each of the
directors and executive officers of Neozyme II, together with the names,
principal businesses and addresses of any corporations or other organizations in
which such principal occupations are conducted are set forth below. Unless
otherwise indicated, each individual is a United States citizen and each
individual's business address is One Kendall Square, Cambridge, MA 02139. Unless
otherwise indicated, no director or executive officer of Neozyme II beneficially
owns any Units (or rights to acquire Units).
<TABLE>
<CAPTION>
NAME POSITION WITH NEOZYME II
- --------------------------------------------------------------------- ------------------------
<S> <C>
Paul M. Edwards...................................................... President and Treasurer
Kennett F. Burnes.................................................... Director
Robert J. Carpenter.................................................. Director
Robert E. Flynn...................................................... Director
Gregory D. Phelps.................................................... Director
Henri A. Termeer..................................................... Director
</TABLE>
Mr. Edwards became President and Treasurer of Neozyme II in January 1996.
Mr. Edwards also serves as Vice President and General Manager -- UK Operations
for Genzyme, a position he has held since April 1993. He joined Genzyme Limited,
a Genzyme subsidiary in the UK, in 1986 as a Production Manager and became its
Director, Manufacturing Operations in 1990. Prior to joining Genzyme Limited,
Mr. Edwards was employed by Beecham Pharmaceuticals from September 1979 in
varying capacities. Mr. Edwards is a citizen of the United Kingdom.
Mr. Burnes is President and Chief Operating Officer of Cabot Corporation, a
specialty chemicals and materials and energy company, a position he has held
since February 1995. From August 1988 through February 1995, he was Executive
Vice President of Cabot Corporation, and from November 1987 through August 1988,
he was Vice President and General Counsel of Cabot Corporation. Prior to joining
Cabot Corporation, Mr. Burnes was a partner at the Boston, Massachusetts law
firm of Choate, Hall & Stewart. Mr. Burnes is also a director of Cabot
Corporation. His principal business address is Cabot Corporation, 75 State
Street, Boston, MA 02109. He beneficially owns 500 Units.
Mr. Carpenter is President and Chief Executive Officer of VacTex, Inc., a
privately held biotechnology company which he co-founded in November 1995, and
Chairman of GelTex Pharmaceuticals, Inc., a publicly held pharmaceutical
development company which he co-founded in November 1991 and where he served as
President and Chief Executive Officer until May 1993. Mr. Carpenter was Chairman
of the Board, President and Chief Executive Officer of Integrated Genetics,
Inc., a biotechnology company that merged with Genzyme in 1989. Following the
merger and until 1991, Mr. Carpenter was Executive Vice President of Genzyme,
and Chief Executive Officer and Chairman of the Board of IG Laboratories, Inc.
Mr. Carpenter is also a director of Apex Biosciences, Inc. and Genzyme. His
principal business address is VacTex, Inc., 70 Walnut Street, Wellesley, MA
02181. Mr. Carpenter owns 2,000 Units, including 1,000 owned by Mr. Carpenter's
wife, as to which he disclaims beneficial ownership.
Mr. Flynn has been President of Houghton & Richards, Inc., a privately held
tool steel sales company, since 1976. He is also a director of the Massachusetts
Cystic Fibrosis Foundation and a trustee of the national Cystic Fibrosis
Foundation. His principal business address is Houghton & Richards Corporation,
P.O. Box 509, Marlborough, MA 01752. He owns 7,850 Units, including 1,600 Units
held in an employee benefit plan trust of which Mr. Flynn is the trustee and in
which Mr. Flynn has a minority interest, 300 Units held by Mr. Flynn as
custodian of accounts for the benefit of his children, 950 Units owned by Mr.
Flynn's spouse and
<PAGE> 70
1,000 Units owned in irrevocable trusts for the benefit of his children. Mr.
Flynn disclaims beneficial ownership of the Units owned by his spouse and the
Units owned in the trusts for the benefit of his children.
Mr. Phelps joined Genzyme as Senior Vice President in November 1991 and was
named Executive Vice President in September 1996. Prior to joining Genzyme, Mr.
Phelps served as President and Chief Executive Officer of Viagene, Inc., a
biotechnology company, from October 1988 to June 1990, and of ZymoGenetics,
Inc., a biotechnology company, from May 1986 to August 1988, and held various
positions at Baxter Travenol Laboratories, Inc., a manufacturer of human health
care products, from 1975 to 1986. Mr. Phelps is also a director of Oxtex
International Inc. Mr. Phelps beneficially owns 2,500 Units.
Mr. Termeer has served as President and a Director of Genzyme since October
1983, as Chief Executive Officer since December 1985 and as Chairman of the
Board since May 1988. For ten years prior to joining Genzyme, Mr. Termeer worked
for Baxter Travenol Laboratories, Inc., a manufacturer of human health care
products. Mr. Termeer is Chairman of the Boards of Genzyme Transgenics
Corporation. Mr. Termeer is also a director of Abiomed, Inc., AutomImmune Inc.,
GelTex Pharmaceuticals, Inc. and Xenova Ltd. and a trustee of Hambrecht & Quist
Healthcare Investors and Hambrecht & Quist Life Sciences Investors. Mr. Termeer
is a citizen of The Netherlands. Mr. Termeer beneficially owns 3,300 Units.
<PAGE> 71
ANNEX I
HAMBRECHT & QUIST LLC
ONE BUSH STREET
SAN FRANCISCO, CA 94104
(415)576-3300
September 20, 1996
CONFIDENTIAL
The Special Committee of The Board of Directors
The Board of Directors
Neozyme II Corporation
Todman Building
Main Street
Road Town, Tortola
British Virgin Islands
Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to the holders of the outstanding shares of callable common stock, par value
$1.00 per share ("Common Stock"), of Neozyme II Corporation ("Neozyme" or the
"Company") of the consideration to be received by such holders in connection
with a proposed transaction (the "Proposed Transaction") pursuant to which an
affiliate of Genzyme Corporation ("Genzyme") will offer to purchase the
outstanding units of Neozyme (the "Units") at a purchase price of $45.00 per
Unit in cash (the "Offer"). As of the date hereof, all of the outstanding Common
Stock is owned as part of a Unit, each of which consists of (i) one share of
Common Stock and (ii) one callable warrant to purchase two shares of Genzyme
General Division Common Stock and 0.135 shares of Genzyme Tissue Repair Division
Common Stock. The Offer will be made by means of offering documents (the "Offer
Documents") to be filed with the Securities and Exchange Commission. If the
Offer is consummated, but not all of the Units are tendered and accepted or, if
the Offer is terminated in accordance with Section 1.1(b)(ii) of the Purchase
Agreement, Genzyme has, pursuant to a Purchase Agreement (the "Purchase
Agreement") dated as of September 20, 1996, agreed to effect a second step
transaction (the "Second Step Transaction") in which Genzyme will acquire,
directly or indirectly, all of the remaining Common Stock in exchange for cash
in an amount equal to $29.00 per share of Common Stock.
Hambrecht & Quist LLC ("Hambrecht & Quist"), as part of its investment banking
services, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, strategic transactions,
corporate restructurings, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. We have acted as a financial advisor to the Special
Committee of the Board of Directors of Neozyme in connection with the Proposed
Transaction, and we will receive a fee for our services, which include the
rendering of this opinion.
SAN FRANCISCO * NEW YORK * BOSTON
MEMBERS NEW YORK STOCK EXCHANGE * AMERICAN STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
<PAGE> 72
The Special Committee of the Board of Directors
The Board of Directors
Neozyme II Corporation
Page 2
We are familiar with Genzyme and have, from time to time, provided financial
advisory services to Genzyme, and we have received fees for rendering these
services. In July 1996, we acted as managing underwriter for a public offering
of Genzyme Transgenics Corporation, an affiliate of Genzyme. In the ordinary
course of business, Hambrecht & Quist acts as a market maker and broker in the
publicly traded securities of Neozyme and Genzyme and receives customary
compensation in connection therewith, and also provides research coverage for
Genzyme. In the ordinary course of business, Hambrecht & Quist actively trades
in the equity securities of Neozyme and Genzyme for its own account and for
the accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities. Hambrecht & Quist may in the future provide
additional investment banking or other financial advisory services to Genzyme.
In connection with our review of the proposed Transaction, and in arriving at
our opinion, we have, among other things:
(i) reviewed the publicly available consolidated financial statements
of Neozyme for recent years and interim periods to date and certain
other relevant financial and operating data of Neozyme made
available to us from published sources and from the internal
records of Neozyme;
(ii) discussed with certain members of the managements of Neozyme and
Genzyme the business, financial condition and prospects of
Neozyme;
(iii) reviewed the publicly available consolidated financial statements
of Genzyme for recent years and interim periods to date;
(iv) reviewed certain internal financial and operating information,
including certain projections, relating to Neozyme prepared by the
management of Genzyme;
(v) reviewed the recent reported prices and trading activity for the
Common Stock and compared such information and certain financial
information of Neozyme with similar information for certain other
companies engaged in businesses we considered comparable to that of
Neozyme;
(vi) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(vii) reviewed drafts of the Purchase Agreement, the Offer Documents and
certain other materials to be filed with the Securities and
Exchange Commission in connection with the Offer; and
(ix) performed such other analyses and examinations and considered such
other information, financial studies, analyses and investigations
and financial, economic and market data as we deemed relevant.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all of the information concerning Neozyme and Genzyme
considered in connection with our review of the Proposed Transaction, and we
have not assumed any responsibility for independent verification
<PAGE> 73
The Special Committee of the Board of Directors
The Board of Directors
Neozyme II Corporation
Page 3
of such information. We have not prepared any independent valuation or
appraisal of any of the assets or liabilities of Neozyme, nor have we conducted
a physical inspection of the properties and facilities of the Company. With
respect to the financial forecasts and projections made available to us and
used in our analysis, we have assumed that they reflect the best currently
available estimates and judgments of the expected future financial performance
of Neozyme. For purposes of this opinion, we have assumed that Neozyme is not a
party to any pending transactions, including external financings,
recapitalizations or material merger discussions, other than the Proposed
Transaction and those activities undertaken in the ordinary course of
conducting its business. Our opinion is necessarily based upon market,
economic, financial and other conditions as they exist and can be evaluated as
of the date of this letter and any change in such conditions would require a
reevaluation of this opinion. We were not requested to, and did not, formally
solicit indications of interest from any other parties in connection with a
possible acquisition of, or business combination with, Neozyme.
It is understood that this letter is for the information of the Special
Committee and the Board of Directors only and may not be used for any other
purpose without our prior written consent; provided, however, that this letter
may be reproduced in full in any filing with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, including Schedules
14D-1, 14-D9 and 13E-3 to be filed in connection with the Offer. This letter
does not constitute a recommendation to any Neozyme stockholder as to whether
such stockholder should accept the Offer. In addition, we express no opinion,
however, as to the adequacy of any consideration received in the Proposed
Transaction by Genzyme or any of its affiliates.
Based upon and subject to the foregoing and after considering such other
matters as we deem relevant, we are of the opinion that as of the date hereof
the consideration to be received by the holders of the Units pursuant to the
Offer and the consideration to be received by the holders of the Common Stock
pursuant to the Second Step Transaction is fair to such holders from a
financial point of view.
Very truly yours,
Hambrecht & Quist LLC
By /s/ David G. Golden
----------------------------
David G. Golden
Managing Director
<PAGE> 74
ANNEX II
[ROBERTSON STEPHENS & COMPANY LETTERHEAD]
September 20, 1996
Board of Directors
Genzyme Corporation
One Kendall Square
Cambridge, MA 02139-1562
Members of the Board:
You have asked our opinion with respect to the fairness from a financial point
of view, as of the date hereof, to Genzyme Corporation ("Genzyme"), of the Offer
Price (as defined below) to be paid by Genzyme in the proposed acquisition
(the "Acquisition") of Neozyme II Corporation ("Neozyme") by Neozyme II
Acquisition Corporation (the "Purchaser"), a wholly owned subsidiary of
Genzyme, pursuant to the Purchase Agreement (the "Agreement") proposed to be
entered into among Genzyme, the Purchaser and Neozyme.
Under the terms of the Agreement, the Purchaser will make a tender offer (the
"Offer") to purchase all of the outstanding units (the "Units"), each of which
consists of (i) one share of Callable Common Stock, par value $1.00 per share
(the "Shares"), of Neozyme and (ii) Callable Warrants (the "Warrants") to
purchase two shares of General Division Common Stock of Genzyme and 0.135
shares of Tissue Repair Division Common Stock of Genzyme, at a price of $45.00
per Unit, net to the seller in cash (the "Offer Price"). In addition, if any
Units remain outstanding following the completion of the Offer, Genzyme will
effect a transaction (the "Second Step Transaction") pursuant to which the
Shares associated with such outstanding Units will be acquired, directly or
indirectly, by Genzyme and the Warrants associated with such outstanding Units
will remain outstanding. In the Second Step Transaction, holders of such
outstanding Units will receive $29.00 in cash per Share. The terms and
conditions of the Offer and the Second Step Transaction are set out more fully
in the Agreement.
For purposes of this opinion we have: (i) reviewed financial information
regarding Neozyme furnished to us by Neozyme, including certain financial
forecasts prepared by the management of Neozyme; (ii) reviewed publicly
available information regarding Neozyme; (iii) held discussions with the
management of Neozyme concerning the business, past and current business
operations, financial condition and future prospects of Neozyme; (iv) reviewed
a draft dated September 20, 1996 of the Agreement; (v) reviewed the stock price
and trading history of Neozyme; (vi) reviewed the valuations of publicly traded
companies that we deemed comparable to Neozyme; (vii) compared the financial
terms of the Acquisition with other transactions which we deemed
<PAGE> 75
Board of Directors
Genzyme Corporation
September 20, 1996
Page Two
relevant; (viii) prepared a discounted cash flow analysis of Neozyme; (ix)
analyzed the value of the Warrants; and (x) made such other studies and
inquiries, and reviewed such other data, as we deemed relevant.
In connection with our opinion we have not independently verified any of the
foregoing information and have relied on all such information being complete
and accurate in all material respects. Furthermore, we have not made any
independent appraisal of the properties or assets and liabilities of Neozyme,
nor have we been furnished with any such evaluations or appraisals. With
respect to the financial forecasts (and the assumptions and bases therefor) of
Neozyme provided to us by the management of Neozyme, we have assumed that such
forecasts have been reasonably prepared in good faith on the basis of
reasonable assumptions and reflect the best available estimates and judgments
of the management of Neozyme as to the likely future financial performance of
Neozyme. In that regard we have relied on the assumptions of the management of
Neozyme with respect to the effect on such forecasts of the potential outcome
of Neozyme's pending patent applications. This opinion is necessarily based
upon market, economic and other conditions that exist and can be evaluated as
of the date of this letter, and on information available to us as of the date
hereof.
We have acted as financial advisor to Genzyme in connection with the
Acquisition and will act as Dealer Manager in connection with the Offer. A
portion of our fees in connection with such services will be payable upon
consummation of the Offer. In the ordinary course of our business, we may
actively trade the securities of Genzyme and Neozyme for our own account and
for the accounts of our customers and, accordingly, may at any time hold a long
or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of Genzyme.
Based upon and subject to the foregoing considerations, it is our opinion that,
as of the date hereof, the Offer Price to be paid by Genzyme in the Acquisition
is fair to Genzyme from a financial point of view.
Very truly yours,
ROBERTSON, STEPHENS & COMPANY LLC
By: Robertson, Stephens & Company Group, L.L.C.
<PAGE> 76
ANNEX III
SECTION 83 OF THE BVI INTERNATIONAL BUSINESS COMPANIES ORDINANCE, 1984
SUMMARY OF STOCKHOLDER APPRAISAL RIGHTS AND TEXT
OF SECTION 83 OF THE BVI INTERNATIONAL BUSINESS COMPANIES ORDINANCE, 1984
Summary of Stockholder Appraisal Rights. No appraisal rights are available
in connection with the Offer. However, if the Second Step Transaction is a
merger, consolidation, sale or other disposition of more than 50 percent of the
assets of the Company, or a redemption, stockholders will have certain rights
under the BVI Law to dissent and demand appraisal of, and to receive payment in
cash of the fair value of, their shares of Callable Common Stock. Such rights to
dissent, if the statutory procedures were complied with, could lead to an
arbitration proceeding to determine the fair value of the Callable Common Stock,
as of the day prior to the date on which the stockholders' vote was taken
approving the Second Step Transaction (excluding any appreciation or
depreciation directly or indirectly induced by the action or its proposal),
required to be paid in cash to such dissenting holders for their shares of
Callable Common Stock. The value determined in an arbitration proceeding could
be the same, more or less than the portion of the purchase price per Unit
attributable to the share of Callable Common Stock included in each Unit in the
Offer or the consideration per share of Callable Common Stock to be paid in the
Second Step Transaction.
RIGHTS OF DISSENTERS
83. (1) A member of a company incorporated under this Ordinance is entitled
to payment of the fair value of his shares upon dissenting from
(a) a merger, if the company is a constituent company, unless the
company is the surviving company and the member continues to hold the same
or similar shares;
(b) a consolidation, if the company is a constituent company;
(c) any sale, transfer, lease, exchange or other disposition of more
than 50 percent of the assets or business of the company, if not made in
the usual or regular course of the business carried on by the company, but
not including
(i) a disposition pursuant to an order of the court having
jurisdiction in the matter;
(ii) a disposition for money on terms requiring all or
substantially all net proceeds to be distributed to the members in
accordance with their respective interests within one year after the
date of disposition; or
(iii) a transfer pursuant to the power described in subsection (2)
of section 9;
(d) a redemption of his shares by the company pursuant to section 81;
and
(e) an arrangement, if permitted by the court.
(2) A member who desires to exercise his entitlement under subsection (1)
must give to the company, before the meeting of members at which the action is
submitted to a vote, or at the meeting but before the vote, written objection to
the action; but an objection is not required from a member to whom the company
did not give notice of the meeting in accordance with this Ordinance or where
the proposed action is authorized by written consent of members without a
meeting.
(3) An objection under subsection (2) must include a statement that the
member proposes to demand payment for his shares if the action is taken.
(4) Within 20 days immediately following the date on which the vote of
members authorizing the action is taken, or the date on which written consent of
members without a meeting is obtained, the company must give written notice of
the authorization or consent to each member who gave written objection or from
whom written objection was not required, except those members who voted for, or
consented to in writing, the proposed action.
<PAGE> 77
(5) A member to whom the company was required to give notice who elects to
dissent must, within 20 days immediately following the date on which the notice
referred to in subsection (4) is given, give to the company a written notice of
his decision to elect to dissent, stating
(a) his name and address;
(b) the number and classes or series of shares in respect of which he
dissents; and
(c) a demand for payment of the fair value of his shares;
and a member who elects to dissent from a merger under section 77 must give
to the company a written notice of his decision to elect to dissent within
20 days immediately following the date on which the copy of the plan or
merger or an outline thereof is given to him in accordance with section 77.
(6) A member who dissents must do so in respect of all shares that he holds
in the company.
(7) Upon the giving of a notice of election to dissent, the member to whom
the notice relates ceases to have any of the rights of a member except the right
to be paid the fair value of his shares.
(8) Within 7 days immediately following the date of the expiration of the
period within which members may give their notices of election to dissent, or
within 7 days immediately following the date on which the proposed action is put
into effect, whichever is later, the company or, in the case of a merger or
consolidation, the surviving company or the consolidated company, must make a
written offer to each dissenting member to purchase his shares at a specified
price that the company determines to be their fair value; and if, within 30 days
immediately following the date on which the offer is made, the company making
the offer and the dissenting member agree upon the price to be paid for his
shares, the company shall pay to the member the amount in money upon the
surrender of the certificates representing his shares.
(9) If the company and a dissenting member fail, within the period of 30
days referred to in subsection (8), to agree on the price to be paid for the
shares owned by the member, within 20 days immediately following the date on
which the period of 30 days expires, the following shall apply:
(a) the company and the dissenting member shall each designate an
appraiser;
(b) the 2 designated appraisers together shall designate a third
appraiser;
(c) the 3 appraisers shall fix the fair value of the shares owned by
the dissenting member as of the close of business on the day prior to the
date on which the vote of members authorizing the action was taken or the
date on which written consent of members without a meeting was obtained,
excluding any appreciation or depreciation directly or indirectly induced
by the action or its proposal, and that value is binding on the company and
the dissenting member for all purposes; and
(d) the company shall pay to the member the amount in money upon the
surrender by him of the certificates representing his shares.
(10) Shares acquired by the company pursuant to subsection (8) or (9) shall
be cancelled but if the shares are shares of a surviving company, they shall be
available for reissue.
(11) The enforcement by a member of his entitlement under this section
excludes the enforcement by the member of a right to which he might otherwise be
entitled by virtue of his holding shares, except that this section does not
exclude the right of the member to institute proceedings to obtain relief on the
ground that the action is illegal.
(12) Only subsections (1) and (8) to (11) shall apply in the case of a
redemption of shares by a company pursuant to the provisions of Section 81 and
in such case the written offer to be made to the dissenting member pursuant to
subsection (8) shall be made within 7 days immediately following the direction
given to a company pursuant to Section 81 to redeem its shares.
<PAGE> 78
Facsimile copies of the Letter of Transmittal, properly completed and duly
elected, will be accepted. The Letter of Transmittal and certificates evidencing
Units and any other required documents should be sent or delivered by each
Holder or such Holder's broker, dealer, commercial bank, trust company or other
nominee to the Depositary at one of its addresses set forth below.
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
American Stock Transfer American Stock Transfer American Stock Transfer
& Trust Company & Trust Company & Trust Company
6201 15th Avenue 6201 15th Avenue 40 Wall Street, 46th Floor
Third Floor, Inside Delivery Third Floor, Inside Delivery New York, New York
Brooklyn, New York 11219 Brooklyn, New York 11219
</TABLE>
By Facsimile Transmission:
(718) 234-5001
For confirmation:
(718) 921-8222
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent. Holders may also contact brokers, dealers, commercial banks
or trust companies for assistance concerning the Offer.
The Information Agent for the Offer is:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 Commerce Road
Carlstadt, New Jersey 07072-2586
(201) 896-1900 (call collect)
or
Call Toll-Free (888) 463-6242
The Dealer Manager for the Offer is:
ROBERTSON, STEPHENS & COMPANY LLC
555 California Street
San Francisco, California 94104
Call Toll-Free (800) 357-8435
<PAGE> 1
EXHIBIT (a)(2)
<PAGE> 2
LETTER OF TRANSMITTAL
TO TENDER UNITS
EACH UNIT CONSISTING OF ONE SHARE OF CALLABLE COMMON STOCK
OF
NEOZYME II CORPORATION
AND
ONE CALLABLE WARRANT TO PURCHASE
TWO SHARES OF GENERAL DIVISION COMMON STOCK
AND
0.135 SHARE OF TISSUE REPAIR DIVISION COMMON STOCK
OF
GENZYME CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED SEPTEMBER 27, 1996
BY
NEOZYME II ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY
OF
GENZYME CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON MONDAY, OCTOBER 28, 1996, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
American Stock Transfer & Trust American Stock Transfer & Trust American Stock Transfer & Trust
Company Company Company
6201 15th Avenue 6201 15th Avenue 40 Wall Street, 46th Floor
Third Floor, Inside Delivery Third Floor, Inside Delivery New York, NY
Brooklyn, NY 11219 Brooklyn, NY 11219
</TABLE>
By Facsimile Transmission
(718) 234-5001
For Confirmation:
(718) 921-8222
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE
NUMBER OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID
DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE
SPACE PROVIDED THEREFOR AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH
BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD
BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE> 3
This Letter of Transmittal is to be completed by holders (the "Holders") of
Units (as defined below) if certificates representing the Callable Common Stock
(as defined in the Offer to Purchase) of Neozyme II Corporation and the Callable
Warrants (as defined in the Offer to Purchase) of Genzyme Corporation included
in the Units ("Certificates") are to be forwarded herewith pursuant to the
procedures set forth in the Offer to Purchase dated September 27, 1996 (the
"Offer to Purchase") under "THE TENDER OFFER -- Section 3. Procedures for
Accepting the Offer and Tendering Units."
Holders whose Certificates are not immediately available or who cannot
deliver their Certificates and all other documents required hereby to the
Depositary on or prior to the Expiration Date (as defined in the Offer to
Purchase) may tender their Units according to the guaranteed delivery procedures
set forth in the Offer to Purchase under "THE TENDER OFFER -- Section 3.
Procedures for Accepting the Offer and Tendering Units." See Instruction 2
hereto.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
DESCRIPTION OF CERTIFICATES SUBMITTED
- -------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE(S) AND UNIT(S) TENDERED
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S)
APPEAR(S) (ATTACH ADDITIONAL SIGNED LIST, IF NECESSARY)
ON CERTIFICATE(S)) SEE INSTRUCTION 3
- -------------------------------------------------------------------------------------------------------------
CERTIFICATE NUMBER
TOTAL NUMBER
OF UNITS
CALLABLE REPRESENTED NUMBER OF
COMMON CALLABLE BY UNITS
STOCK WARRANTS CERTIFICATE(S) TENDERED*
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
TOTAL UNITS................................
- ----------------------------------------------------
* Unless otherwise indicated, all Units represented by Certificates delivered to the Depositary will be
deemed to have been tendered. See Instruction 4.
- ----------------------------------------------------
</TABLE>
/ / CHECK HERE IF UNITS ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
(PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY):
Name(s) of Registered Holder(s):
Window Ticket Number (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution that Guaranteed Delivery:
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
<PAGE> 4
Ladies and Gentlemen:
The undersigned hereby tenders to Neozyme II Acquisition Corp. (the
"Purchaser"), a British Virgin Islands ("BVI") international business company,
and a wholly owned subsidiary of Genzyme Corporation ("Genzyme"), a
Massachusetts corporation, the above described units (the "Units"), each unit
consisting of one share of callable common stock, par value $1.00 per share, of
Neozyme II Corporation (the "Company"), a BVI international business company,
and one callable warrant to purchase two shares of General Division common
stock, par value $0.01 per share, and 0.135 share of Tissue Repair Division
common stock, par value $0.01 per share, of Genzyme, pursuant to the Purchaser's
offer to purchase all of the outstanding Units at a purchase price of $45.00 per
Unit, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated September 27,
1996 and in this Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"), receipt of each of
which is hereby acknowledged. The undersigned understands that the Purchaser
reserves the right to transfer or assign, in whole or from time to time in part,
to one or more of its affiliates, the right to purchase all or any portion of
the Units tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of the Units
tendered herewith in accordance with the terms and subject to the conditions of
the Offer, including, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment, the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Purchaser all right, title
and interest in and to all of the Units that are being tendered hereby and any
and all dividends or other securities issued or issuable in respect thereof and
rights declared, paid or distributed in respect of such Units on or after
September 20, 1996 (collectively, "Distributions"), and irrevocably appoints the
Depositary the true and lawful agent and attorney-in-fact of the undersigned
with respect to such Units and all Distributions with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with an
interest) to (a) deliver such Certificates, together with appropriate evidences
of transfer and authenticity, to, or upon the order of, the Purchaser upon
receipt by the Depositary, as the undersigned's agent, of the purchase price,
(b) present such Units and all Distributions for transfer on the books of the
Company and (c) receive all benefits and otherwise exercise all rights of record
and beneficial ownership of such Units and all Distributions, all in accordance
with the terms and subject to the conditions of the Offer.
The undersigned hereby irrevocably appoints Henri A. Termeer, David J.
McLachlan and Peter Wirth, and each of them, as attorneys-in-fact and proxies of
the undersigned, each with full power of substitution, to the full extent of the
undersigned's rights with respect to the Units tendered by the undersigned and
accepted for payment and paid for by the Purchaser and all Units and other
securities issued in Distributions in respect of such Units which the
undersigned is entitled to vote at any meeting of Holders (whether annual or
special and whether or not an adjourned or postponed meeting) or consent in lieu
of any such meeting or otherwise. This power of attorney and proxy shall be
considered irrevocable and coupled with an interest in the tendered Units. Such
appointment will be effective when, and only to the extent that, the Purchaser
accepts such Units for payment and deposits the purchase price therefor with the
Depositary. Upon such deposit, all prior powers of attorney and proxies given by
the undersigned at any time with respect to such Units (and all other securities
issued in Distributions in respect of such Units) will be revoked without
further action, and no subsequent powers of attorney or proxies may be given nor
any subsequent written consents executed by the undersigned (and, if given or
executed, will not be deemed effective by the undersigned with respect thereto).
Upon such deposit by the Purchaser, the designees of the Purchaser will, with
respect to such Units, be empowered to exercise all voting and other rights of
the undersigned as they in their sole discretion may deem proper at any annual
or special meeting of the Company's stockholders or any adjournment or
postponement thereof, by written consent in lieu of any such meeting or
otherwise. The Purchaser reserves the right to require that, in order for Units
to be deemed validly tendered, immediately upon the Purchaser's payment for such
Units, the Purchaser must be able to exercise full voting and other rights of a
record and beneficial owner with respect to such Units, including, without
limitation, voting at any meeting of stockholders or by written consent in lieu
of any such meeting.
<PAGE> 5
The undersigned hereby represents and warrants that (a) the undersigned has
full power and authority to tender, sell, assign and transfer the Units tendered
hereby and all Distributions and (b) when the Units are accepted for payment by
the Purchaser, the Purchaser will acquire good, marketable and unencumbered
title to the Units and to all Distributions, free and clear of all liens,
restrictions, charges and encumbrances, and the same will not be subject to any
adverse claim. The undersigned, upon request, shall execute and deliver any
additional documents deemed by the Depositary or the Purchaser to be necessary
or desirable to complete the sale, assignment and transfer of the Units tendered
hereby. In addition, the undersigned shall promptly remit and transfer to the
Depositary for the account of the Purchaser all Distributions in respect of the
Units tendered hereby on or after September 20, 1996, accompanied by appropriate
documentation of transfer; and, pending such remittance or appropriate assurance
thereof, the Purchaser shall be, subject to applicable law, entitled to all
rights and privileges as record and beneficial owner of each such Distribution
and may withhold the entire purchase price of Units tendered hereby or deduct
from the purchase price the amount or value of such Distribution, as determined
by the Purchaser in its sole discretion.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned.
Except as otherwise provided in the Offer to Purchase, tenders of Units
made pursuant to the Offer are irrevocable. Units tendered pursuant to the Offer
may be withdrawn at any time on or prior to the Expiration Date (as defined in
the Offer to Purchase) and, unless theretofore accepted for payment by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after
November 25, 1996. See "THE TENDER OFFER -- Section 4. Withdrawal Rights" in the
Offer to Purchase.
The undersigned understands that tenders of Units pursuant to any of the
procedures described in the Offer to Purchase under "THE TENDER OFFER -- Section
3. Procedures for Accepting the Offer and Tendering Units" and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer. The Purchaser's acceptance of such Units for
payment will constitute a binding agreement between the undersigned and the
Purchaser upon the terms and subject to the conditions set forth in the Offer.
The undersigned understands that the Offer is conditioned upon, among other
things set forth in the Purchase Agreement (as defined in the Offer to
Purchase), there being validly tendered and not withdrawn prior to the
expiration of the Offer that number of Units which constitutes at least a
majority of the Units outstanding (the "Minimum Condition"); provided that, the
Minimum Condition may be waived by the Purchaser under certain circumstances
described in the Offer to Purchase under "SPECIAL FACTORS -- Section 6. The
Purchase Agreement; Appraisal Rights."
The undersigned understands that, under certain circumstances set forth in
the Offer to Purchase, the Purchaser may terminate or amend the Offer or may not
be required to accept for payment any of the Units tendered herewith.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price of all Units purchased and issue
or return any Certificate(s) for Units not tendered or not purchased in the
name(s) of the registered holder(s) appearing above under "Description of
Certificates Submitted." Similarly, unless otherwise indicated herein under
"Special Delivery Instructions," please mail the check for the purchase price of
all Units purchased and return any Certificate(s) for Units not tendered or not
purchased (and accompanying documents, as appropriate) to the address(es) of the
registered holder(s) appearing under "Description of Certificates Submitted." In
the event that "Special Delivery Instructions" and "Special Payment
Instructions" are both completed, please issue the check for the purchase price
and return any Certificate(s) for Units not tendered or not purchased in the
name(s) of, and deliver such check and return such Certificate(s) for Units to,
the person(s) so indicated. The undersigned recognizes that the Purchaser has no
obligation pursuant to the "Special Payment Instructions" to transfer any Units
from the name(s) of the registered holder(s) thereof if the Purchaser does not
accept for payment any of the Units tendered hereby.
<PAGE> 6
- ------------------------------------------------------------
- ------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if
Certificate(s) evidencing Units
not tendered or not purchased or
the check for the purchase price
of Units purchased are to be
issued in the name of someone
other than the registered holder
shown above.
Issue: / / Check / / Certificates to:
Name:
----------------------------
(Please Print)
Address:
---------------------------------
---------------------------------
(Include Zip Code)
---------------------------------
(Tax Identification or Social
Security No.)
(See Substitute Form W-9 below)
- ------------------------------------------------------------
- ------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if
Certificate(s) evidencing Units
not tendered or not purchased or
the check for the purchase price
of Units purchased are to be
mailed to someone other than the
registered holder or to the
registered holder at an address
other than that shown above.
Mail: / / Check / / Certificates to:
Name:
--------------------------
(Please Print)
Address:
---------------------------------
---------------------------------
(Include Zip Code)
<PAGE> 7
IMPORTANT
UNIT HOLDERS: SIGN HERE AND COMPLETE SUBSTITUTE FORM W-9 BELOW
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Holder(s)
Dated:
--------------------------, 1996
(Must be signed by registered holder(s) exactly as name(s) appear(s) on the
Certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other acting in a fiduciary or
representative capacity, please provide the following information. See
Instruction 5.)
Name(s):
- --------------------------------------------------------------------------------
(Please Print)
Capacity (full title):
---------------------------------------------------------
Address:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone No.:
---------------------------------------------------
Tax Identification or Social Security Number:
----------------------------------
(See Substitute Form W-9 Below)
GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
----------------------------------------------------------
Name:
--------------------------------------------------------------------------
(Please Type or Print)
Title:
-------------------------------------------------------------------------
Name of Firm:
------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone No.:
---------------------------------------------------
Dated:
--------------------------, 1996
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) of Units tendered herewith, unless such holder(s) has
(have) completed either the box entitled "Special Payment Instructions" or the
box entitled "Special Delivery Instructions" above, or (b) if such Unit(s) are
tendered for the account of a firm which is a commercial bank, broker, dealer,
credit union, savings association or other entity which is a member in good
standing of the Securities Transfer Agents Medallion Program, the Stock
Exchanges' Medallion Program or the New York Stock Exchange, Inc. Medallion
Signature Program (each of the foregoing being referred to as an "Eligible
Institution"). In all other cases, all signatures on this Letter of Transmittal
must be guaranteed by an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed by Holders if Certificates are to be forwarded
herewith pursuant to the procedures set forth in the Offer to Purchase under
"THE TENDER OFFER -- Section 3. Procedures for Accepting the Offer and Tendering
Units." In order for Units to be validly tendered pursuant to the Offer, this
Letter of Transmittal (or a facsimile hereof), properly completed and duly
executed, together with any required signature guarantees and any other
documents required by this Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the front cover hereof prior to
the Expiration Date (as defined in the Offer to Purchase) and either (i)
Certificates representing tendered Units must be received by the Depositary at
such address prior to the Expiration Date or (ii) the guaranteed delivery
procedures described in the following sentence must be complied with. Holders
whose Certificates are not immediately available or who cannot deliver their
Certificates and all other required documents to reach the Depositary or or
prior to the Expiration Date may tender their Units by properly completing and
duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed
delivery procedures set forth in the Offer to Purchase under "THE TENDER
OFFER -- Section 3. Procedures for Accepting the Offer and Tendering Units."
Pursuant to such procedure: (i) such tender must be made by or through an
Eligible Institution; (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by the Purchaser,
must be received by the Depositary prior to the Expiration Date; and (iii) the
Certificates representing all tendered Units, in proper form for transfer by
delivery, together with this Letter of Transmittal (or a facsimile hereof),
properly completed and duly executed, with any required signature guarantees and
any other documents required by this Letter of Transmittal, must be received by
the Depositary within three Nasdaq National Market trading days after the date
of execution of such Notice of Guaranteed Delivery. A trading day is any day on
which the Nasdaq National Market is open for business.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, CERTIFICATES AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE SOLE OPTION AND RISK OF THE TENDERING HOLDER
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Units will be purchased. All tendering Holders, by execution of this
Letter of Transmittal (or a facsimile hereof), waive any right to receive any
notice of the acceptance of their Units for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Certificates Submitted" is inadequate, the Certificate numbers and/or the number
of Units and any other required information should be listed on a separate
signed schedule attached hereto and referenced in the "Description of
Certificates Submitted" box.
4. PARTIAL TENDERS. If fewer than all the Units evidenced by any
Certificate submitted to the Depositary herewith are to be tendered hereby, fill
in the number of Units which are to be tendered hereby in the box entitled
"Number of Units Tendered". In such cases, new Certificate(s) evidencing the
remainder of the Units that were evidenced by the Certificate(s) delivered to
the Depositary herewith but not tendered hereby, will be sent to the person(s)
signing this Letter of Transmittal, unless otherwise provided in the box
entitled "Special Delivery Instructions," as soon as practicable after the
expiration or termination of the Offer. All Units evidenced by Certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
<PAGE> 9
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Units
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Certificate(s) without alteration, enlargement or any change
whatsoever.
If any of the Units tendered hereby are owned of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the tendered Units are registered in the names of different
holders, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of such
Certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Units tendered hereby, no endorsements of Certificates or separate stock powers
are required, unless payment is to be made to, or Certificates for Units not
tendered or not purchased are to be issued in the name of, a person other than
the registered holder(s), in which case the Certificate(s) evidencing the Units
tendered hereby must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name(s) of the registered holder(s) appear(s)
on such Certificate(s). Signatures on such Certificates and stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Certificate(s) tendered hereby, the Certificate(s)
evidencing such Units must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered holder(s)
appear on such Certificate(s). Signature(s) on such Certificate(s) and stock
powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any Certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
the Purchaser of such person's authority so to act must be submitted.
6. TRANSFER TAXES. Except as set forth in this Instruction 6, the Purchaser
will pay or cause to be paid any transfer taxes with respect to the transfer and
sale of Units to it or its order pursuant to the Offer. If, however, payment of
the purchase price of any Units is to be made to, or if Certificate(s)
evidencing Units not tendered or not purchased are to be issued in the name of,
any person other than the registered holder(s), the amount of any transfer taxes
(whether imposed on the registered holder(s), or such person or otherwise)
payable on account of the transfer to such other person will be deducted from
the purchase price unless satisfactory evidence of the payment of such taxes, or
an exemption therefrom, is submitted.
EXCEPT AS SET FORTH IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) EVIDENCING THE UNITS
TENDERED HEREBY.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Units tendered hereby is to be issued in the name of, or
Certificate(s) evidencing Units not tendered or not purchased are to be issued
or returned to, a person other than the registered holder or if such check or
such Certificate(s) is to be returned to a person other than the signer of this
Letter of Transmittal or to the signer of this Letter of Transmittal but at an
address other than that shown in this Letter of Transmittal, the appropriate
boxes on this Letter of Transmittal must be completed.
8. WAIVER OF CONDITIONS. Subject to the terms of the Purchase Agreement (as
defined in the Offer to Purchase), the conditions to the Offer may be waived by
the Purchaser, in whole or in part, at any time and from time to time in its
sole discretion.
9. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Information Agent or the
Dealer Manager at their respective addresses or telephone numbers set forth
below. Additional copies of the Offer to Purchase, this Letter of Transmittal
and the Notice of Guaranteed Delivery may be obtained from the Information Agent
or from brokers, dealers, commercial banks or trust companies at the Purchaser's
expense.
<PAGE> 10
10. SUBSTITUTE FORM W-9. Under U.S. federal income tax law, a Holder whose
tendered Units are accepted for payment is required to provide the Depositary
with such Holder's correct taxpayer identification number ("TIN") on Substitute
Form W-9 below and to certify whether such Holder is subject to backup
withholding of federal income tax. If a tendering Holder has been notified by
the Internal Revenue Service ("IRS") that such Holder is subject to backup
withholding, such Holder must cross out item 2 of the Certification box (Part
III) of the Substitute Form W-9, unless such Holder has since been notified by
the IRS that such Holder is no longer subject to backup withholding. Failure to
provide the information on the Substitute Form W-9 may subject the tendering
Holder to 31% federal income tax withholding on the payment of the purchase
price of all Units purchased from such Holder. If the Depositary is not provided
with the correct TIN (e.g., Social Security number or employer identification
number), the IRS may subject the Holder or other payee to a $50 penalty.
Certain Holders are not subject to these backup withholding and reporting
requirements. Exempt recipients, such as corporations, are also requested to
provide their TIN and check the "Exempt" box in Part IV. Foreign individuals or
entities must submit a Form W-8, signed under penalties of perjury, attesting to
their foreign status. A Form W-8 can be obtained from the Depositary. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute From W-9" for more instructions.
IF BACKUP WITHHOLDING APPLIES, THE DEPOSITARY IS REQUIRED TO WITHHOLD 31%
OF ANY PAYMENTS MADE TO THE HOLDER OR OTHER PAYEE. BACKUP WITHHOLDING IS NOT AN
ADDITIONAL TAX. RATHER, THE TAX LIABILITY OF PERSONS SUBJECT TO BACKUP
WITHHOLDING WILL BE REDUCED BY THE AMOUNT OF TAX WITHHELD. IF WITHHOLDING
RESULTS IN AN OVERPAYMENT OF TAXES, A REFUND MAY BE OBTAINED FROM THE IRS.
The "Awaiting TIN" box in Part IV of the Substitute Form W-9 may be checked
if the tendering Holder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the "Awaiting TIN" box in Part
IV is checked, the Holder or other payee must also complete the Certificate of
Awaiting Taxpayer Identification Number below in order to avoid backup
withholding. If the "Awaiting TIN" box in Part IV is checked and the Certificate
of Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% of all payments made unless a properly certified TIN is provided to
the Depositary within 60 days.
The Holder is required to give the Depositary the TIN of the record owner
of the Units or of the last transferee appearing on the transfers attached to,
or endorsed on, the Units. If the Units are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s) has been
lost, destroyed or stolen, the Holder should promptly notify the Depositary. The
Holder will then be instructed as to the steps that must be taken in order to
replace the Certificate(s). This Letter of Transmittal and related documents
cannot be processed until the procedures for replacing lost, destroyed or stolen
Certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR FACSIMILE HEREOF, PROPERLY
COMPLETED AND DULY EXECUTED TOGETHER WITH CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED
DELIVERY, MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE.
<PAGE> 11
SUBSTITUTE FORM W-9 - Department of the Treasury, Internal Revenue Service,
Payer's Request for Taxpayer Identification Number
PLEASE PROVIDE YOUR SOCIAL SECURITY NUMBER OR OTHER TAXPAYER IDENTIFICATION
NUMBER ON THIS SUBSTITUTE FORM W-9 AND CERTIFY THEREIN THAT YOU ARE NOT SUBJECT
TO BACKUP WITHHOLDING. FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. For
assistance in completing this form, see the enclosed Instructions for Substitute
FORM W-9 or call the Depositary at (718) 921-8200.
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Name(s) as shown above of registered owners of Certificate(s) (if joint ownership, list first and circle the name of the
person or entity whose taxpayer identification number you enter in Part I below).
- -----------------------------------------------------------------------------------------------------------------------------
Business Name (sole proprietors, see enclosed Instructions
for Substitute FORM W-9)
- -----------------------------------------------------------------------------------------------------------------------------
Address:
- -----------------------------------------------------------------------------------------------------------------------------
Part I - PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION NUMBER Social Security Number OR Employer Identification Number:
IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING
BELOW.
---------------------------------
(If awaiting TIN, write "Applied For")
- -----------------------------------------------------------------------------------------------------------------------------
Part II - Payees exempt from backup withholding, please see the enclosed Instructions for Substitute FORM W-9 -Request for
Taxpayer Identification Number and Certification.
- -----------------------------------------------------------------------------------------------------------------------------
Part III - Certification. Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued
to me), and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have not been notified
by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS. You must cross out item (2) above if you have been notified by the IRS that you are currently
subject to backup withholding because of underreporting interest or dividends on your tax return.
- -----------------------------------------------------------------------------------------------------------------------------
PART IV -
SIGNATURE: ---------------------------------------------- Awaiting TIN / /
DATE: ----------------------------------------------------- Exempt / /
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE "AWAITING TIN" BOX IN PART IV OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a Taxpayer Identification Number, 31% of all reportable
payments made to me may be withheld until I provide a Taxpayer Identification
Number with required certifications, which should be provided within 60 days.
Signature: Dated:
---------------------------- ----------------
<PAGE> 12
The Information Agent for the Offer is:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 Commerce Road
Carlstadt, New Jersey 07072-2586
Call Toll-Free (888) 463-6242
or
(201) 896-1900 (call collect)
The Dealer Manager for the Offer is:
ROBERTSON, STEPHENS & COMPANY LLC
555 California Street
San Francisco, California 94104
(800) 357-8435
September 27, 1996
<PAGE> 1
EXHIBIT (A)(3)
<PAGE> 2
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING UNITS, EACH UNIT CONSISTING OF
ONE SHARE OF CALLABLE COMMON STOCK
OF
NEOZYME II CORPORATION
AND
ONE CALLABLE WARRANT TO PURCHASE
TWO SHARES OF GENERAL DIVISION COMMON STOCK
AND
0.135 SHARE OF TISSUE REPAIR DIVISION COMMON STOCK
OF
GENZYME CORPORATION
TO
NEOZYME II ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY
OF
GENZYME CORPORATION
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
---------------
This Notice of Guaranteed Delivery or one substantially in the form hereof
must be used to tender units (the "Units"), each Unit consisting of one share of
callable common stock, par value $1.00 per share, of Neozyme II Corporation, a
British Virgin Islands ("BVI") international business company, and one callable
warrant to purchase two shares of General Division common stock, par value $.01
per share, and 0.135 share of Tissue Repair common stock, par value $.01 per
share, of Genzyme Corporation, a Massachusetts corporation, pursuant to the
Offer (as defined below) if (i) certificates for Units are not immediately
available or (ii) the certificates for Units and all other required documents
cannot be delivered to American Stock Transfer & Trust Company (the
"Depositary") prior to the Expiration Date (as defined in the Offer to
Purchase). This instrument may be delivered by hand or transmitted by facsimile
transmission, overnight courier or mail to the Depositary. See "THE TENDER
OFFER -- Section 3. Procedures for Accepting the Offer and Tendering Units" in
the Offer to Purchase.
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
American Stock Transfer & Trust American Stock Transfer & Trust American Stock Transfer & Trust
Company Company Company
6201 15th Avenue 6201 15th Avenue 40 Wall Street, 46th Floor
Third Floor, Inside Delivery Third Floor, Inside Delivery New York, NY
Brooklyn, NY 11219 Brooklyn, NY 11219
By Facsimile Transmission:
(718) 234-5001
For Confirmation:
(718) 921-8222
</TABLE>
- --------------------------------------------------------------------------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED IN THE LETTER OF TRANSMITTAL)
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX IN THE LETTER OF TRANSMITTAL.
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to Neozyme II Acquisition Corp., a BVI
international business company and a wholly owned subsidiary of Genzyme
Corporation, a Massachusetts corporation, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated September 27, 1996 (the
"Offer to Purchase") and the related Letter of Transmittal (which, together with
any amendments or supplements thereto, collectively constitute the "Offer"),
receipt of each of which is hereby acknowledged, the number of Units indicated
below pursuant to the guaranteed delivery procedures set forth in the Offer to
Purchase under "THE TENDER OFFER -- Section 3. Procedures for Accepting the
Offer and Tendering Units."
<TABLE>
<S> <C>
Number of Units Tendered: Signature(s)
----------------------- ------------------------------------
Certificate No(s).
(if available): Name(s) of Record Holders:
- ------------------------------------------------ ------------------------------------------------
- ------------------------------------------------ ------------------------------------------------
Dated: ------------------, 1996 (Please Type or Print)
Address
------------------------------------------------
Zip Code
Daytime Area Code and Tel. No(s).
---------------
</TABLE>
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
<PAGE> 4
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
The undersigned, a firm which is a commercial bank, broker, dealer, credit
union, savings association or other entity which is a member in good standing of
the Securities Transfer Agents Medallion Program, the Stock Exchanges' Medallion
Program or the New York Stock Exchange Medallion Signature Guarantee Program
hereby guarantees delivery to the Depositary, at one of its addresses set forth
above, of certificates representing the Callable Common Stock (as defined in the
Offer to Purchase) of Neozyme II Corporation and the Callable Warrants (as
defined in the Offer to Purchase) of Genzyme Corporation included in the Units
("Certificates") tendered hereby in proper form for transfer, with delivery of a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) with any required signature guarantees, and any other documents
required by the Letter of Transmittal, within three trading days after the date
of execution of this Notice of Guaranteed Delivery, as described in Instruction
2 of the Letter of Transmittal. A trading day is any day on which the Nasdaq
National Market is open for business.
The Eligible Institution (as defined in the Offer to Purchase under "THE
TENDER OFFER -- Section 3. Procedures for Accepting the Offer and Tendering
Units") that completes this form must communicate the guarantee to the
Depositary and must deliver the Letter of Transmittal and Certificates to the
Depositary within the time period shown herein. Failure to do so could result in
financial loss to such Eligible Institution.
<TABLE>
<S> <C>
--------------------------------- -------------------------------------
Name of Firm Authorized Signature
--------------------------------- -------------------------------------
Address Name
--------------------------------- -------------------------------------
Zip Code Title
Dated: ------------------------, 1996
---------------------------------
Area Code and Tel. No.
</TABLE>
NOTE: DO NOT SEND CERTIFICATES WITH THIS NOTICE OF GUARANTEED DELIVERY.
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
EXHIBIT (a)(4)
<PAGE> 2
ROBERTSON
STEPHENS &
COMPANY
OFFER TO PURCHASE FOR CASH ALL OUTSTANDING UNITS,
EACH UNIT CONSISTING OF ONE SHARE OF CALLABLE COMMON STOCK
OF
NEOZYME II CORPORATION
AND
ONE CALLABLE WARRANT TO PURCHASE
TWO SHARES OF GENERAL DIVISION COMMON STOCK
AND
0.135 SHARE OF TISSUE AND REPAIR DIVISION COMMON STOCK
OF
GENZYME CORPORATION
AT
$45.00 NET PER UNIT
BY
NEOZYME II ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY
OF
GENZYME CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON MONDAY, OCTOBER 28, 1996, UNLESS THE OFFER IS EXTENDED.
To Brokers, Dealers, Commercial Banks, September 27, 1996
Trust Companies and Other Nominees:
We have been appointed by Neozyme II Acquisition Corp. (the "Purchaser"), a
British Virgin Islands ("BVI") international business company and a wholly owned
subsidiary of Genzyme Corporation ("Genzyme"), a Massachusetts corporation, to
act as Dealer Manager in connection with the Purchaser's offer to purchase all
of the outstanding units (the "Units"), each Unit consisting of one share of
callable common stock, par value $1.00 per share, of Neozyme II Corporation (the
"Company"), a BVI international business company, and one callable warrant to
purchase two shares of General Division common stock, par value $0.01 per share,
and 0.135 share of Tissue Repair Division common stock, par value $0.01 per
share, of Genzyme, at a price of $45.00 per Unit, net to the seller in cash,
without interest thereon, and subject to the conditions set forth in the Offer
to Purchase dated September 27, 1996 (the "Offer to Purchase") and in the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer") enclosed herewith.
THE OFFER IS CONDITIONED ON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST A
MAJORITY OF THE UNITS OUTSTANDING. IF LESS THAN A MAJORITY OF THE UNITS
OUTSTANDING ARE VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF
THE OFFER, THE PURCHASER MAY ELECT TO AMEND AND EXTEND THE OFFER TO ELIMINATE
THIS CONDITION. IN THAT EVENT, DURING THE PERIOD THAT THE OFFER IS EXTENDED THE
COMPANY SHALL, IN ACCORDANCE WITH APPLICABLE LAWS AND THE PURCHASE AGREEMENT,
SOLICIT THE APPROVAL OF THE HOLDERS OF THE SHARES FOR THE SECOND STEP
TRANSACTION AS DESCRIBED BELOW AND IN THE OFFER TO PURCHASE. ALTERNATIVELY, THE
PURCHASER MAY ELECT TO TERMINATE THE OFFER AND, PROMPTLY THEREAFTER, REQUEST
THAT THE COMPANY SOLICIT THE APPROVAL OF THE HOLDERS OF THE SHARES FOR THE
SECOND STEP TRANSACTION. IF THE PURCHASER DOES NOT MAKE EITHER ELECTION,
GENZYME, THE PURCHASER OR THE COMPANY MAY TERMINATE THE PURCHASE AGREEMENT.
555 CALIFORNIA STREET SAN FRANCISCO 94104 415-781-9700
INVESTMENT BANKERS MEMBER OF ALL MAJOR EXCHANGES
A LIMITED LIABILITY COMPANY
<PAGE> 3
For your information and for forwarding to your clients for whom you hold
Units registered in your name or in the name of your nominees are copies of the
following documents:
1. Offer to Purchase, dated September 27, 1996.
2. The Letter of Transmittal for Units (for your use and for the
information of your clients).
3. Letter to holders (the "Holders") of Units from Paul Edwards,
President and Treasurer of the Company, together with the Company's
Solicitation/Recommendation Statement on Schedule 14D-9.
4. Notice of Guaranteed Delivery (to be used to accept the Offer if
certificates evidencing the Callable Common Stock of the Company
and the Callable Warrants of Genzyme included in the Units
("Certificates") are not immediately available or time will not
permit all required documents (as set forth in the Offer to
Purchase under THE TENDER OFFER -- INTRODUCTION) to be delivered to
American Stock Transfer & Trust Company (the "Depositary") prior to
the Expiration Date (as defined in the Offer to Purchase).
5. Letter which may be sent to your clients for whose accounts you
hold Units registered in your name or in the name of your nominee,
with space provided for obtaining such clients' instructions with
regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. Return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MONDAY, OCTOBER 28, 1996, UNLESS THE
OFFER IS EXTENDED.
In all cases, payment for Units tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
Certificates, (ii) a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, and (iii)
any other documents required by the Letter of Transmittal.
If a Holder desires to tender Units pursuant to the Offer and such Holder's
Certificates are not immediately available or time will not permit all required
documents to be delivered to the Depositary prior to the Expiration Date, such
Holder may tender such Units by following the guaranteed delivery procedures
specified in the Offer to Purchase under the "THE TENDER OFFER -- Section 3.
Procedures for Accepting the Offer and Tendering Units".
Neither Genzyme nor the Purchaser will pay any fees or commissions to any
broker, dealer or any other person in connection with the solicitation of
tenders of Units pursuant to the Offer (other than to the Dealer Manager,
Corporate Investor Communications, Inc. (the "Information Agent") and the
Depositary, as described in the Offer to Purchase). The Purchaser will, however,
upon request, reimburse you for customary mailing and handling expenses incurred
by you in forwarding any of the enclosed materials to your clients.
The Purchaser will pay or cause to be paid any transfer taxes payable on
the transfer of Units to the Purchaser pursuant to the Offer, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
the Dealer Manager or the Information Agent, at their respective addresses and
telephone numbers set forth on the back cover of the Offer to Purchase.
Additional copies of the enclosed material may be obtained from the
undersigned at (800) 357-8435 or by calling the Information Agent at (888)
463-6242, or collect at (201) 896-1900, or from brokers, dealers, commercial
banks or trust companies.
Very truly yours,
Robertson, Stephens & Company LLC
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS AN AGENT OF GENZYME, THE PURCHASER, THE COMPANY, THE
DEALER MANAGER, THE DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY
OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR
USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER
THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE> 1
EXHIBIT (A)(5)
<PAGE> 2
OFFER TO PURCHASE FOR CASH ALL OUTSTANDING UNITS,
EACH UNIT CONSISTING OF ONE SHARE OF CALLABLE COMMON STOCK
OF
NEOZYME II CORPORATION
AND
ONE CALLABLE WARRANT TO PURCHASE
TWO SHARES OF GENERAL DIVISION COMMON STOCK
AND
0.135 SHARE OF TISSUE REPAIR DIVISION COMMON STOCK
OF
GENZYME CORPORATION
AT
$45.00 NET PER UNIT
BY
NEOZYME II ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY
OF
GENZYME CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON MONDAY, OCTOBER 28, 1996, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated September 27,
1996 (the "Offer to Purchase") and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer") in connection with the offer by Neozyme II Acquisition Corp. (the
"Purchaser"), a British Virgin Islands ("BVI") international business company
and a wholly-owned subsidiary of Genzyme Corporation ("Genzyme"), a
Massachusetts corporation, to purchase all outstanding units (the "Units"), each
Unit consisting of one share of callable common stock, par value $1.00 per
share, of Neozyme II Corporation (the "Company"), a BVI international business
company, and one callable warrant to purchase two shares of General Division
common stock, par value $0.01 per share, and 0.135 share of Tissue Repair
Division common stock, par value $0.01 per share, of Genzyme, at a purchase
price of $45.00 per Unit, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer.
We are the holder of record of Units held by us for your account. A TENDER
OF SUCH UNITS CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER UNITS HELD BY US FOR YOUR
ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Units held by us for your account, pursuant to the
terms and subject to the conditions set forth in the Offer.
Your attention is directed to the following:
1. The tender price is $45.00 per Unit, net to the seller in cash,
without interest thereon.
2. The Offer and withdrawal rights will expire at 5:00 p.m., New York
City time, on Monday, October 28, 1996, unless the Offer is extended.
3. The Board of Directors of the Company, based upon, among other
things, the unanimous recommendation of a special committee of the Board
consisting of the directors of the Company who are not officers or
directors of Genzyme, unanimously has determined that each of the Offer and
the Second Step Transaction (as defined in the Offer to Purchase) is fair
to, and in the best interests of, the holders ("Holders") of the Units, has
approved the Offer and the Second Step Transaction and recommends that the
Holders accept the Offer and tender their Units pursuant to the Offer.
<PAGE> 3
4. The Offer is made for all of the outstanding Units.
5. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the expiration of the Offer
that number of Units which constitutes at least a majority of the Units
outstanding. If less than a majority of the Units outstanding are validly
tendered and not withdrawn prior to the expiration of the Offer, the
Purchaser may elect to amend and extend the Offer to eliminate this
condition. In that event, during the period that the Offer is extended the
Company shall, in accordance with applicable laws and the Purchase
Agreement, solicit the approval of the holders of the Shares for the Second
Step Transaction as described below and in the Offer to Purchase.
Alternatively, the Purchaser may elect to terminate the Offer and, promptly
thereafter, request that the Company solicit the approval of the holders of
the Shares for the Second Step Transaction. If the Purchaser does not make
either election, Genzyme, the Purchaser or the Company may terminate the
Purchase Agreement.
6. Tendering Holders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter
of Transmittal, transfer taxes on the purchase of Units by the Purchaser
pursuant to the Offer.
7. In all cases, payment for Units tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by American
Stock Transfer & Trust Company (the "Depositary") of (i) certificates
representing the Callable Common Stock of the Company and the Callable
Warrants of Genzyme included in the Units ("Certificates"), (ii) the Letter
of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees and (iii) any other
documents required by the Letter of Transmittal.
The Offer is being made solely pursuant to the Offer to Purchase and the
related Letter of Transmittal and is being made to all holders of Units. The
Purchaser is not aware of any state where the making of the Offer is prohibited
by administrative or judicial action pursuant to any valid state statute. If the
Purchaser becomes aware of any valid state statute prohibiting the making of the
Offer or the acceptance of Units pursuant thereto, the Purchaser will make a
good faith effort to comply with any such state statute. If, after such good
faith effort, the Purchaser cannot comply with such state statute, the Offer
will not be made to, nor will tenders be accepted from or on behalf of, the
Holders in such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of the Purchaser by the Dealer
Manager (as defined in the Offer to Purchase) or one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of the Units held by us for your
account, please so instruct us by completing, executing and returning to us the
instruction form contained in this letter. An envelope in which to return your
instructions to us is enclosed. If you authorize the tender of your Units, all
such Units will be tendered unless otherwise specified in such instruction form.
YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT
A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
<PAGE> 4
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH ALL OUTSTANDING UNITS,
EACH UNIT CONSISTING OF ONE SHARE OF CALLABLE COMMON STOCK
OF
NEOZYME II CORPORATION
AND
ONE CALLABLE WARRANT TO PURCHASE
TWO SHARES OF GENERAL DIVISION COMMON STOCK AND
0.135 SHARE OF TISSUE REPAIR DIVISION COMMON STOCK
OF
GENZYME CORPORATION
The undersigned acknowledge(s) receipt of your letter enclosing the Offer
to Purchase dated September 27, 1996 and the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer") in connection with the offer by Neozyme II Acquisition
Corp., a British Virgin Islands ("BVI") international business company and
wholly owned subsidiary of Genzyme Corporation ("Genzyme"), a Massachusetts
corporation, to purchase all of the outstanding units (the "Units"), each Unit
consisting of one share of callable common stock, par value $1.00 per share, of
Neozyme II Corporation, a BVI international business company, and one callable
warrant to purchase two shares of General Division common stock, par value $0.01
per share, and 0.135 share of Tissue Repair Division common stock, par value
$0.01 per share, of Genzyme.
This will instruct you to tender the number of Units indicated below (or,
if no number is indicated below, all Units) that are held by you for the account
of the undersigned, upon the terms and subject to the conditions set forth in
the Offer.
Number of Units to be Tendered*: ________________
Dated: __________________ , 1996
SIGN HERE
Signature(s):
------------------------------------------------
Please type or print name(s):
--------------------------------
Address(es):
-------------------------------------------------
Area Code and
Telephone Number:
--------------------------------------------
Tax Identification or
Social Security Number(s):
-----------------------------------
- ---------------
* Unless otherwise indicated, it will be assumed that all of the Units held by
us for your account are to be tendered.
<PAGE> 1
EXHIBIT (a) (6)
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9
IMPORTANT INFORMATION AND INSTRUCTIONS FOR THE ENCLOSED SUBSTITUTE FORM W-9
(REQUEST FOR TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION)
The summary provided below was as of a recent date and is subject to change
without notice. Holders of Units are encouraged to read carefully the following
Instructions for Substitute FORM W-9 -- Request for Taxpayer Identification
Number and Certification and to consult with their own tax advisors for more
detailed information.
PURPOSE OF FORM. The Depositary is required to obtain your Taxpayer
Identification Number (TIN) and to report income paid to you to the IRS. Use the
Substitute Form W-9 to give your correct TIN to the Depositary and (1) to
certify the TIN you are giving is correct (or you are waiting for a number to be
issued), (2) to certify you are not subject to backup withholding, or (3) to
claim exemption from backup withholding if you are an exempt payee. Giving your
correct TIN and making the appropriate certifications will prevent payments from
the Depositary from being subject to backup withholding. If you are subject to
backup withholding, the Depositary is required to withhold and pay to the IRS
31% of payments made to you.
HOW TO GET A TIN. If you do not have a TIN, apply for one immediately. To apply,
get Form SS-5, Application for a Social Security Number Card (for individuals),
from your local office of the Social Security Administration, or Form SS-4,
Application for Employer Identification Number (for businesses and all other
entities), from your local IRS office. If you do not have a TIN, write "Applied
For" in the space for the TIN in Part I, sign and date the form, and give it to
the Depositary. Generally, you will then have 60 days to get a TIN and give it
to the Depositary. If the Depositary does not receive your TIN within 60 days,
backup withholding, if applicable, will begin and continue until you furnish
your TIN. NOTE: Writing "Applied For" on the form means that you have already
applied for a TIN or that you intend to apply for one soon. As soon as you
receive your TIN, complete another Form W-9, include your TIN, sign and date the
form, and give it to the Depositary.
PENALTIES. You are subject to a penalty of $50 for each failure to furnish your
correct TIN to the Depositary unless your failure is due to reasonable cause and
not to willful neglect. If, with no reasonable basis, you make a false statement
that results in no backup withholding, you are subject to a $500 penalty.
Willfully falsifying certifications or affirmations may subject you to criminal
penalties, including fines and/or imprisonment.
WHAT NAME AND TIN TO GIVE THE DEPOSITARY. If you are an individual, you must
generally enter the name shown on your social security card, and your correct
TIN is your social security number (SSN). However, if you have changed your last
name, for instance, due to marriage, without informing the Social Security
Administration of the name change, please enter your first name, the last name
shown on your social security card, and your new last name. Enter your SSN in
Part I. If you are a sole proprietor, you must enter your individual name. You
may also enter your business name or "doing business as" name on the business
name line. Enter your name as shown on your social security card and business
name as it was used to apply for your Employer Identification Number ("EIN") on
Form SS-4. You may enter either your SSN or EIN as your correct TIN in Part I.
Other holders of Units, please refer to the table below.
NAME AND TIN TO ENTER ON FORM W-9.
<TABLE>
<CAPTION>
FOR THIS TYPE OF
SHAREHOLDER: ENTER NAME AND SSN OF:
- ---------------------------- ------------------------
<S> <C>
1. Individual The individual
2. Two or more individuals The actual owner or, if
joint, the first
individual on the
certificate(*)
3. Custodian account of a The minor(**)
minor (Uniform Gift to
Minors Act)
4. a. A revocable savings The grantor-trustee(*)
trust (grantor is
also trustee)
b. So-called trust The actual owner(*)
account that is not a
legal or valid state
law trust
5. Sole proprietorship The owner(***)
6. Sole proprietorship The owner(***)
7. A valid trust, estate, Legal entity(****)
or pension trust
8. Corporate The corporation
9. Association, club, The organization
religious, charitable,
educational, or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered The broker or nominee
nominee
</TABLE>
- ---------------
* List first and circle the name of the person whose number you furnish.
** Circle the minor's name and furnish the minor's SSN.
*** You must show your individual name, but you may also enter your business
or "doing business as" name. You may use either your SSN or TIN.
**** List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the TIN of
<PAGE> 3
the personal representative or trustee unless the legal entity itself is
not designated as a registered owner.)
Note: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING. Certain payees are exempt from backup
withholding and information reporting. Individuals (including sole proprietors)
are not exempt. The following is a list of payees who are exempt from backup
withholding and for which no information reporting is required by the
Depositary. If you are an exempt payee, you should still complete the Substitute
Form W-9 to avoid possible erroneous backup withholding. Enter your correct TIN
in Part I, write "Exempt" in Part II, and sign and date the form.
LIST OF EXEMPT PAYEES
(1) A corporation.
(2) An organization exempt from tax under section 501(a), an Individual
Retirement Account ("IRA"), or a custodial account under section 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
(6) An international organization or any of its agencies or instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures Trading
Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the Investment
Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A person registered under the Investment Advisers Act of 1940 who regularly
acts as a broker.
If you are a nonresident alien or a foreign entity not subject to backup
withholding, you must give the Depositary a completed Form W-8 -- Certificate of
Foreign Status to avoid backup withholding.
INSTRUCTIONS FOR PART III -- CERTIFICATION. If the Unit certificates are in more
than one name or are not in the name of the actual owner, only the person whose
TIN is shown in Part I should sign.
PRIVACY ACT NOTICE. Section 6109 of the Internal Revenue Code requires you to
give your correct TIN to persons who must file information returns with the IRS
to report interest, dividends, and certain other income paid to you, mortgage
interest you paid, the acquisition or abandonment of secured property,
cancellation of debt, or contributions you made to an IRA. The IRS uses the
numbers for identification purposes and to help verify the accuracy of your tax
return. You must provide your TIN whether or not you are required to file a tax
return. Payers must generally withhold 31% of taxable interest, dividend, and
certain other payments to a payee who does not give a TIN to a payer. Certain
penalties also may apply.
<PAGE> 1
Exhibit (a)(9)
FOR IMMEDIATE RELEASE Genzyme Contact: Neozyme II Contact:
September 27, 1996 ---------------- -------------------
Cheryl Greenhouse Dennis J. Purcell
671-252-7570 Hambrecht & Quist LLC
212-207-1552
GENZYME COMMENCES TENDER OFFER FOR ACQUISITION OF NEOZYME II
CAMBRIDGE, Mass. -- Genzyme Corp. announced today that it has
commenced, through a wholly-owned subsidiary, a cash tender offer for all of
the outstanding units of Neozyme II Corp. (Nasdaq:NIIUF) for $45 per unit. The
tender offer is being made pursuant to an agreement entered into by Genzyme and
Neozyme II announced on September 23.
Each Neozyme II unit consists of one share of Neozyme II callable
common stock and one callable warrant to purchase two shares of Genzyme General
Division common stock (Nasdaq:GENZ) and 0.135 share of Genzyme Tissue Repair
Division common stock (Nasdaq:GENZL).
Genzyme's obligation to purchase units in the tender offer is subject
to the satisfaction or waiver of certain conditions, including the tender of at
least a majority of the outstanding units.
The offer and withdrawal rights will expire after 5 p.m., New York City
time, on Monday, October 28, 1996, unless the offer is extended. The information
agent for the offer is Corporate Investor Communications, who can be reached at
1-888-463-6242. Robertson, Stephens & Company LLC is the dealer manager for the
offer.
Under the agreement, if the tender offer is successfully completed,
a second step transaction will be effected in which the Neozyme II unit
holders who have not tendered their units will be entitled to receive
$29 in cash for each share of callable common stock included in the
untendered units. The callable warrants included in the untendered
units will remain outstanding after the second-step transaction.
The board of directors of Neozyme II, on the recommendation
of a special committee of the board consisting of the directors of
Neozyme II who are not officers or directors of Genzyme, has approved
the tender offer and the second-step transaction, having determined
that the offer and transaction are fair to and in the best interests
of the unit holders of Neozyme II. The board has recommended that
unit holders of Neozyme II accept the offer and tender their units
pursuant to the offer.
Neozyme II was formed in 1992 to conduct research,
development, and clinical testing of products for the treatment of
cystic fibrosis under contract with Genzyme.
One of the world's top five biotechnology companies, Genzyme
focuses on developing innovative products and services for major
unmet medical needs. The company's General Division develops and
markets pharmaceuticals, genetic diagnostic services, and
therapeutic, diagnostic, and surgical products. Its Tissue Repair
Division is a leading developer of biological products for the
treatment of cartilage damage, severe burns, and chronic skin ulcers.
# # #
Genzyme's releases are on the World Wide Web at
http://www.prnewswire.com. They are also available from Genzyme's
fax-on-demand service at 1-800-436-1443 within the United States or
1-201-521-1080 outside the United States.
<PAGE> 1
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Units. The Offer is made solely by the Offer to Purchase dated September
27, 1996 and the related Letter of Transmittal and is made to all holders of
Units. The Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Units pursuant thereto, the
Purchaser will make a good faith effort to comply with such state statute. If,
after such good faith effort, the Purchaser cannot comply with such state
statute, the Offer will not be made to, nor will tenders be accepted from or on
behalf of the holders of, Units in such state. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by Robertson, Stephens & Company LLC or one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING UNITS, EACH UNIT CONSISTING OF
ONE SHARE OF CALLABLE COMMON STOCK
OF
NEOZYME II CORPORATION
AND
ONE CALLABLE WARRANT TO PURCHASE
TWO SHARES OF GENERAL DIVISION COMMON STOCK
AND 0.135 SHARE OF TISSUE REPAIR DIVISION COMMON STOCK
OF
GENZYME CORPORATION
AT
$45.00 NET PER UNIT
BY
NEOZYME II ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY
OF
GENZYME CORPORATION
Neozyme II Acquisition Corp. (the "Purchaser"), a British Virgin Islands
("BVI") international business company and a wholly owned subsidiary of Genzyme
Corporation ("Genzyme"), a Massachusetts corporation, is offering to purchase
all outstanding units (the "Units"), each consisting of one share of callable
common stock, par value $1.00 per share (the "Shares"), of Neozyme II
Corporation (the "Company"), a BVI international business company, and one
callable warrant (the "Callable Warrants") to purchase two shares of General
Division common stock, par value $.01 per share, and 0.135 share of Tissue
Repair Division common stock, par value $.01 per share, of Genzyme at a purchase
price of $45.00 per Unit, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated September 27, 1996 (the "Offer to Purchase") and in the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
constitute the "Offer"). Following the Offer, the Purchaser intends to effect a
second step transaction as described below, pursuant to which holders of Shares
(other than as described below) will receive $29.00 per Share in cash, without
interest thereon, and any Callable Warrants included in the untendered Units
will remain outstanding.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
MONDAY, OCTOBER 28, 1996, UNLESS THE OFFER IS EXTENDED.
<PAGE> 2
THE OFFER IS CONDITIONED ON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST A
MAJORITY OF THE UNITS OUTSTANDING. IF LESS THAN A MAJORITY OF THE UNITS
OUTSTANDING ARE VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF
THE OFFER, THE PURCHASER MAY ELECT TO AMEND AND EXTEND THE OFFER TO ELIMINATE
THIS CONDITION. IN THAT EVENT, DURING THE PERIOD THAT THE OFFER IS EXTENDED, THE
COMPANY SHALL, IN ACCORDANCE WITH APPLICABLE LAWS AND THE PURCHASE AGREEMENT,
SOLICIT THE APPROVAL OF THE HOLDERS OF THE SHARES FOR THE SECOND STEP
TRANSACTION AS DESCRIBED BELOW AND IN THE OFFER TO PURCHASE. ALTERNATIVELY, THE
PURCHASER MAY ELECT TO TERMINATE THE OFFER AND, PROMPTLY THEREAFTER, REQUEST
THAT THE COMPANY SOLICIT THE APPROVAL OF THE HOLDERS OF THE SHARES FOR THE
SECOND STEP TRANSACTION. IF THE PURCHASER DOES NOT MAKE EITHER ELECTION,
GENZYME, THE PURCHASER OR THE COMPANY MAY TERMINATE THE PURCHASE AGREEMENT.
The Offer is being made pursuant to a Purchase Agreement dated as of
September 20, 1996 (the "Purchase Agreement") among Genzyme, the Purchaser and
the Company. The Purchase Agreement provides that, among other things, as soon
as practicable after the purchase of Units pursuant to, or in certain
circumstances upon the termination of, the Offer, and the satisfaction of the
other conditions contained in the Purchase Agreement and in accordance with the
applicable provisions of the BVI International Business Companies Ordinance,
1984 (the "BVI Law"), the Purchaser will cause a transaction by which Genzyme
will, directly or indirectly, acquire all of the Shares included in the
untendered Units (the "Second Step Transaction"). If the Offer is consummated
and 90% or more of the Units are tendered and accepted, the Purchaser will
either (i) effect a merger of the Company into the Purchaser or (ii) cause the
Company to redeem all Shares included in the untendered Units. If the Offer is
consummated but less than 90% of the Units are tendered and accepted, or if,
pursuant to the Purchase Agreement, the Offer is terminated or amended and the
requisite approval of the Company's shareholders for the Second Step Transaction
is obtained, then the Second Step Transaction will be effected as a merger of a
wholly owned subsidiary of the Purchaser with and into the Company. Regardless
of the form of the Second Step Transaction, the consideration to be received as
a result of the Second Step Transaction by holders of Shares included in the
untendered Units (other than Genzyme, the Purchaser or the Company or any direct
or indirect subsidiary of any of them and holders, if any, who shall have
demanded and perfected their appraisal rights under the applicable provisions of
the BVI Law) will be $29.00 per Share in cash, without interest. Any Callable
Warrants included in the untendered Units will remain outstanding following the
Second Step Transaction. The purpose of the Offer and the Second Step
Transaction is to enable Genzyme, through its wholly owned subsidiary, to
acquire the entire equity interest in the Company.
THE BOARD OF DIRECTORS OF THE COMPANY, BASED UPON, AMONG OTHER THINGS, THE
UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE OF THE BOARD CONSISTING OF THE
DIRECTORS OF THE COMPANY WHO ARE NOT OFFICERS OR DIRECTORS OF GENZYME,
UNANIMOUSLY HAS DETERMINED THAT EACH OF THE OFFER AND THE SECOND STEP
TRANSACTION IS FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF THE UNITS,
HAS APPROVED THE OFFER AND THE SECOND STEP TRANSACTION AND RECOMMENDS THAT THE
HOLDERS OF THE UNITS ACCEPT THE OFFER AND TENDER THEIR UNITS PURSUANT TO THE
OFFER.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment and thereby purchased Units validly tendered and not properly
withdrawn if, as and when the Purchaser gives oral or written notice to American
Stock Transfer & Trust Company (the "Depositary") of the Purchaser's acceptance
for payment of such Units pursuant to the Offer. Upon the terms and subject to
the conditions of the Offer, payment for Units so accepted for payment pursuant
to the Offer will be made by deposit of the aggregate purchase price therefor
with the Depositary, which will act as agent for tendering holders of Units
("Holders") for the purpose of receiving payment from the Purchaser and
transmitting such payment to Holders whose Units have been accepted for payment.
UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE
2
<PAGE> 3
PRICE FOR UNITS BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE
OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. In all cases, payment for Units
tendered and accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of (i) certificates representing the Shares and
the Callable Warrants included in the Units ("Unit Certificates") pursuant to
the procedures set forth in the Offer to Purchase under "THE TENDER
OFFER -- Section 3. Procedures for Accepting the Offer and Tendering Units,"
(ii) the Letter of Transmittal (or a facsimile thereof), properly completed and
duly executed, with any required signature guarantee and (iii) any other
documents required by the Letter of Transmittal. Book entry transfer procedures
are not available to Holders.
The Purchaser expressly reserves the right, in its sole discretion (but
subject to the terms and conditions of the Purchase Agreement), at any time and
from time to time, to extend the period during which the Offer is open for any
reason, including the failure to satisfy any of the conditions specified in the
Offer to Purchase under "THE TENDER OFFER -- Section 9. Certain Conditions of
the Offer," and thereby delay acceptance for payment of, or payment for, any
Units, by giving oral or written notice of such extension to the Depositary. Any
such extension will be followed as promptly as practicable by a public
announcement thereof, such announcement to be made no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
expiration date of the Offer. During any such extension, all Units previously
tendered and not properly withdrawn will remain subject to the Offer, subject to
the rights of a tendering Holder to withdraw such Holder's Units.
Tenders of Units made pursuant to the Offer are irrevocable, except that
such Units may be withdrawn at any time prior to 5:00 p.m., New York City time,
on Monday, October 28, 1996 (or the latest time and date at which the Offer, if
extended by the Purchaser, shall expire) and, unless theretofore accepted for
payment by the Purchaser pursuant to the Offer, may also be withdrawn at any
time after November 25, 1996. In order for a withdrawal to be effective, a
written, telegraphic or facsimile transmission notice of withdrawal must be
timely received by the Depositary at one of its addresses set forth on the back
cover of the Offer to Purchase. Any such notice of withdrawal must specify the
name of the person who tendered the Units to be withdrawn, the number of Units
to be withdrawn and the name of the registered holder of such Units, if
different from that of the person who tendered such Units. If Unit Certificates
to be withdrawn have been delivered or otherwise identified to the Depositary,
then, prior to the physical release of such Unit Certificates, the tendering
Holder must also submit the serial numbers shown on such Unit Certificates to
the Depositary and the signatures on the notice of withdrawal must be guaranteed
by an Eligible Institution (as defined in the Offer to Purchase under "THE
TENDER OFFER -- Section 3. Procedures for Accepting the Offer and Tendering
Units"), unless such Units have been tendered for the account of an Eligible
Institution. All questions as to the form and validity (including the time of
receipt) of any notice of withdrawal will be determined by the Purchaser, in its
sole discretion, whose determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has elected to disseminate the Offer to the Holders. The Offer
to Purchase and the related Letter of Transmittal will be mailed to record
Holders and will be furnished to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the Company's list of Holders, for subsequent transmittal to
beneficial owners of Units.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Questions and requests for assistance or for additional copies of the Offer
to Purchase and the related Letter of Transmittal and other tender offer
materials may be directed to the Information Agent or the Dealer Manager as set
forth below, and copies will be furnished promptly at the Purchaser's expense.
No fees or
3
<PAGE> 4
commissions will be paid to brokers, dealers or other persons (other than the
Information Agent or the Dealer Manager) for soliciting tenders of Units
pursuant to the Offer.
The Information Agent for the Offer is:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 Commerce Road
Carlstadt, New Jersey 07072-2586
Call Toll Free (888) 463-6242
Bankers and Brokers Call (201) 896-1900
The Dealer Manager for the Offer is:
ROBERTSON, STEPHENS & COMPANY LLC
555 California Street
San Francisco, California 94104
(800) 357-8435
September 27, 1996
4
