<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 1998.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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GENZYME CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MASSACHUSETTS 06-1047163
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
ORGANIZATION)
</TABLE>
ONE KENDALL SQUARE, CAMBRIDGE, MASSACHUSETTS 02139 (617) 252-7500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
PETER WIRTH
EXECUTIVE VICE PRESIDENT AND CHIEF LEGAL OFFICER
GENZYME CORPORATION
ONE KENDALL SQUARE
CAMBRIDGE, MASSACHUSETTS 02139
(617) 252-7500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH COPIES TO:
JOHN L. WHITLOCK, ESQ.
PALMER & DODGE LLP
ONE BEACON STREET
BOSTON, MASSACHUSETTS 02108
(617) 573-0100
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
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PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER UNIT OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
5 1/4% Convertible Subordinated Notes
Due 2005............................. $250,000,000 100% $250,000,000 $73,750.00
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General Division Common Stock, $0.01
per share............................ 6,313,131(2) -- -- $0.00(3)
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(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(o).
(2) Plus such additional indeterminate number of shares of Genzyme General
Division Common Stock as shall be required for issuance upon conversion of
the Notes being registered hereunder due to an adjustment in the conversion
price. Includes associated purchase rights which currently are evidenced by
certificates for shares of Genzyme General Division Common Stock and
automatically trade with such shares.
(3) Pursuant to Rule 457(i), there is no filing fee with respect to the shares
of Genzyme General Division Common Stock issuable upon conversion of the
Notes because no additional consideration will be received in connection
with the exercise of the conversion privilege.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO CHANGE, COMPLETION OR AMENDMENT
WITHOUT NOTICE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE
PROSPECTUS IS DELIVERED IN FINAL FORM.
SUBJECT TO COMPLETION, DATED , 1998
[GENZYME LOGO]
$250,000,000 PRINCIPAL AMOUNT OF
5 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2005
6,313,131 SHARES OF GENZYME GENERAL DIVISION COMMON STOCK
This Prospectus relates to the offer and sale of $250,000,000 aggregate
principal amount of 5 1/4% Convertible Subordinated Notes Due 2005 (the "Notes")
of Genzyme Corporation (the "Company"), a Massachusetts corporation, issued to
the initial purchasers of the Notes (the "Initial Purchasers") in a private
placement consummated in May 1998, and the offer and sale of 6,313,131 shares of
Genzyme General Division Common Stock, $0.01 par value per share (the "GGD
Stock"), currently issuable upon conversion of such Notes plus such additional
indeterminate number of shares of GGD Stock as may become issuable upon
conversion of the Notes due to adjustments in the conversion price (the
"Conversion Shares"). The Notes and the Conversion Shares may be offered from
time to time for the accounts of beneficial holders of the Notes or Conversion
Shares named herein or in supplements to this Prospectus (the "Selling
Securityholders"). See "PLAN OF DISTRIBUTION."
The Notes are convertible, at any time at or before maturity, unless
previously redeemed, into shares of GGD Stock, at a conversion price of $39.60
per share, subject to adjustment in certain events. Interest on the Notes is
payable semi-annually on June 1 and December 1 of each year, commencing on
December 1, 1998. The Notes mature on June 1, 2005. The Notes are not redeemable
by the Company prior to June 10, 2001. Thereafter, the Notes are redeemable at
the option of the Company, in whole or in part, at the redemption prices set
forth in this Prospectus, plus accrued interest. Upon a Fundamental Change (as
defined herein), each holder of Notes has the right, subject to the rights of
holders of Senior Indebtedness (as defined herein), to require the Company to
repurchase all or a portion of such holder's Notes at a purchase price equal to
100% of the principal amount thereof, plus accrued interest. See "DESCRIPTION OF
NOTES -- Repurchase at Option of Holder Upon a Fundamental Change." The Notes
are unsecured obligations of the Company subordinated to all existing and future
Senior Indebtedness. The Indenture does not restrict the incurrence of
indebtedness, including Senior Indebtedness, by the Company or its subsidiaries.
See "DESCRIPTION OF NOTES -- Subordination." The Notes do not provide for a
sinking fund.
The GGD Stock is traded on the Nasdaq National Market under the symbol
"GENZ." On July , 1998, the closing per share price of GGD Stock as reported
by Nasdaq was $ per share. The Notes have been designated for trading in the
Private Offerings, Resales and Trading through Automated Linkages ("PORTAL")
Market. Notes resold pursuant to the Registration Statement (of which this
Prospectus is a part) will no longer be eligible for trading in the PORTAL
Market.
The Notes and the Conversion Shares may be offered by the Selling
Securityholders from time to time in open-market or privately-negotiated
transactions, or by a combination of such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices. The Selling Securityholders may
effect such transactions to or through brokers-dealers, and such brokers-dealers
may receive compensation in the form of discounts, concessions or commissions
from the Selling Securityholders, the purchasers of the securities or both
(which compensation to a particular broker-dealer might be in excess of
customary commissions). See "THE SELLING SECURITYHOLDERS" and "PLAN OF
DISTRIBUTION."
The Company will not receive any of the proceeds from the sale of the Notes
or Conversion Shares. The Company, however, has agreed to bear certain expenses
in connection with the registration of the Notes and Conversion Shares. The
Company has also agreed to indemnify the Selling Shareholders against certain
liabilities, including certain liabilities under the Securities Act of 1933, as
amended (the "Securities Act").
SEE "RISK FACTORS" BEGINNING ON PAGE 4 HEREIN FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
<PAGE> 3
THE COMPANY
GENERAL
Genzyme is a biotechnology company that develops innovative products and
services for major unmet medical needs. Genzyme has three divisions: Genzyme
General Division ("Genzyme General"), which develops and markets therapeutic and
surgical products and diagnostic services and products; Genzyme Tissue Repair
Division ("Genzyme Tissue Repair" or "GTR"), which develops and markets
biological products for the treatment of cartilage damage, severe burns, chronic
skin ulcers and neurodegenerative diseases; and Genzyme Molecular Oncology
Division ("Genzyme Molecular Oncology" or "GMO"), which was formed in June 1997
in connection with the acquisition of PharmaGenics, Inc. ("PharmaGenics") and
develops gene-based approaches to cancer therapy through genomics, gene therapy
and a small molecule drug discovery program. Genzyme has three outstanding
series of common stock, each of which is intended to reflect the value and track
the performance of one of Genzyme's three divisions: Genzyme General Division
Common Stock, Genzyme Tissue Repair Division Common Stock ("GTR Stock") and
Genzyme Molecular Oncology Division Common Stock ("GMO Stock"). GGD Stock and
GTR Stock are listed on the Nasdaq National Market under the symbols "GENZ" and
"GENZL," respectively. GMO Stock is not yet publicly traded.
For purposes of financial statement presentation, all of the Company's
programs, products, assets and liabilities are allocated to Genzyme General,
Genzyme Tissue Repair or Genzyme Molecular Oncology. Notwithstanding this
allocation, Genzyme continues to hold title to all of the assets and is
responsible for all of the liabilities allocated to each of the divisions.
Holders of GGD Stock, GTR Stock and GMO Stock have no specific claim against the
assets attributed to the division whose performance is associated with the
series of stock they hold. Liabilities or contingencies of any division that
affect Genzyme's resources or financial condition could affect the financial
condition or results of operations of all three divisions.
For additional information concerning Genzyme and its businesses, please
refer to the documents listed under "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
RECENT DEVELOPMENTS
Sale of Research Products Business
On July 1, 1998, Genzyme sold the primary assets of its research products
business to TECHNE Corporation for approximately $24.8 million in cash, $17.0
million of TECHNE common stock and estimated royalties over the next five years
of approximately $23.7 million. The gain from the sale of aproximately $20
million after taxes, excluding royalties, will be recorded in the third quarter.
Royalty income will be recorded as earned. This business, which was part of
Genzyme's diagnostics products unit, consisted of a product line of over 350
recombinant proteins, antibodies and human, mouse and rat ELISA research kits.
Genzyme generated approximately $15 million in revenue from this product line
during the year ended December 31, 1997.
FDA Advisory Committee Thyrogen(R) Hormone Recommendation
On May 15, 1998, an advisory committee to the U.S. Food and Drug
Administration (the "FDA") recommended approval of Genzyme General's Thyrogen(R)
recombinant human thyroid stimulating hormone for use in the evaluation of
patients being tested for thyroid cancer metastases. Recognizing that diagnostic
testing with Thyrogen(R) hormone is not as sensitive as testing after patients
have been withdrawn from their thyroid hormone supplements, the FDA's
Endocrinologic and Metabolic Drugs Advisory Committee voted 8-3 to recommend
approval of Thyrogen(R) hormone for use in conducting thyroid scanning and
thyroglobulin testing in a broad group of patients who, in the judgment of
treating physicians, would benefit from the avoidance of hypothyroidism. The
panel also voted 11-0 to recommend approval of Thyrogen(R) hormone for use in
patients who otherwise would be examined solely with a serum thyroglobulin test
without undergoing withdrawal from hormone supplements. In addition, the panel
unanimously recommended approval of Thyrogen(R) hormone for use with patients
who, for medical reasons, cannot be withdrawn from hormone
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supplements, or who cannot raise their own thyroid stimulating hormone levels
adequately. On June 15, 1998, the FDA notified Genzyme that it had extended to
September 15, 1998 the deadline for taking action on Genzyme's new drug
application for Thyrogen(R) hormone. The advisory committee's recommendation
will be considered by the FDA in its final review of Genzyme General's new drug
application for Thyrogen(R) hormone. The recommendation is not binding on the
FDA.
GTR Long-Term Financing Plan
Genzyme Corporation recently established a long-term financing plan to
provide up to $66 million for the continued development of Genzyme Tissue
Repair's product portfolio and research and development programs. As part of the
long-term financing plan, Genzyme's Board of Directors (the "Genzyme Board")
increased the amount of the equity line of credit available from Genzyme General
to Genzyme Tissue Repair from $12 million to $50 million and Genzyme Tissue
Repair sold a manufacturing facility to Genzyme General for approximately $16
million in cash. Under the terms of the equity line, Genzyme Tissue Repair may
draw down funds as needed on a quarterly basis in exchange for GTR Designated
Shares, as defined under "DESCRIPTION OF GENZYME CAPITAL STOCK -- GTR Designated
Shares and GMO Designated Shares."
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RISK FACTORS
Statements made in this Prospectus relating to plans for sales and
marketing, product development, dividend policy, the timing of regulatory
approvals, or that otherwise relate to future periods, are forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934 (the "Exchange Act"). When used in
this Prospectus, the words "anticipates," "expects," "intends" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to a number of risks and uncertainties. Actual results could differ
materially from those anticipated in the forward-looking statements as a result
of certain risks described below or elsewhere in this Prospectus (including the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, as amended (the "1997 10-K"), and other documents incorporated herein by
reference). Such risks should be considered carefully in evaluating an
investment in the Notes or GGD Stock.
RISKS RELATED TO GENZYME AND THE GENERAL DIVISION
The Notes are convertible only into shares of GGD Stock. The following risk
factors relating to Genzyme General, as well as the Company generally, should be
considered carefully in contemplating an investment in the Notes or GGD Stock.
Dependence on Cerezyme(R) Enzyme and Ceredase(R) Enzyme Sales
Genzyme General's results of operations are highly dependent upon the sales
of Cerezyme(R) enzyme and Ceredase(R) enzyme. Sales of Cerezyme(R) enzyme and
Ceredase(R) enzyme totaled $332.7 million for the year ended December 31, 1997
and $93.5 million for the three months ended March 31, 1998, representing 63%
and 67%, respectively, of Genzyme General's product revenue for such periods.
Genzyme produces Ceredase(R) enzyme from an extract of human placental
tissue supplied by a French company that is the only significant commercial
source of this material. The current supply available is not sufficient to
produce enough Ceredase(R) enzyme to supply all known patients. To address
supply constraints, Genzyme developed Cerezyme(R) enzyme, a recombinant form of
the enzyme. Patients receiving Ceredase(R) enzyme are being converted to
Cerezyme(R) enzyme; however, Genzyme General will continue to manufacture
Ceredase(R) enzyme until the process of patient conversion is completed. Any
disruption in the supply or manufacturing process of Cerezyme(R) enzyme may have
a material adverse effect on revenue. In addition, Genzyme General may be
required to record a charge to earnings for the equipment used for and the
inventory of Ceredase(R) enzyme remaining upon completion of the patient
conversion process, and, if the conversions proceed more rapidly than
anticipated, the remaining inventory of Ceredase(R) enzyme and the corresponding
charge to earnings could be material.
Future Capital Needs
Although Genzyme currently has substantial cash resources, it has committed
to utilize a portion of such funds for certain purposes, such as (i) continuing
the development and completing the market introduction in the U.S. and Europe of
its line of biomaterial products based on hyaluronic acid for use in limiting
the formation of post-operative adhesions (the "Sepra Products"), (ii) continued
marketing of Carticel(TM) autologous cultured chondrocytes and developing,
producing and marketing other products through GTR and (iii) making certain
payments to third parties in connection with strategic collaborations.
Genzyme had approximately $255.2 million in cash, cash equivalents and
short and long-term investments (excluding investments in equity securities) at
March 31, 1998 ($498.6 million when adjusted for the proceeds received by the
Company from the initial sale of the Notes). As of March 31, 1998, approximately
$113.0 million was outstanding under Genzyme's $225.0 million revolving credit
facility with a group of commercial banks, $95.0 million of which was allocated
to Genzyme General and $18.0 million of which was allocated to GTR. Amounts
borrowed under this facility are payable on November 15, 1999. Genzyme's cash
resources will be diminished upon repayment of amounts borrowed, plus accrued
interest, under this credit facility. In addition, in February 1997 Genzyme
privately placed a note with an aggregate principal amount of $13.0 million,
which is convertible into shares of GTR Stock (the "GTR Note"), to fund GTR's
operations
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and in August 1997 Genzyme privately placed an aggregate principal amount of
$20.0 million of debentures convertible into GMO Stock (the "GMO Debentures") to
fund GMO's operations. Pursuant to the terms of both the GTR Note and the GMO
Debentures, the holders will, in some circumstances, receive cash from Genzyme.
To the extent cash is used to pay the principal and accrued interest on the GTR
Note or GMO Debentures, the Company's cash reserves will also be diminished. As
a result of these commitments and contingencies, Genzyme may have to obtain
additional financing which could take the form of Senior Indebtedness, to which
the Notes would be subordinated. There can be no assurance that any such
additional financing will be available on favorable terms, if at all.
Risks Inherent in International Operations
Foreign operations of Genzyme accounted for 36% of consolidated net sales
in 1997 as compared to 35% in each of 1996 and 1995. In addition, Genzyme has
direct investments in a number of subsidiaries in foreign countries (primarily
in Europe and Japan). Financial results of Genzyme could be adversely affected
by fluctuations in foreign exchange rates. Fluctuations in the value of foreign
currencies affect the dollar value of Genzyme's net investment in foreign
subsidiaries, with these fluctuations being included in a separate component of
stockholders' equity. Operating results of foreign subsidiaries are translated
into U.S. dollars at average monthly exchange rates. For the year ended December
31, 1997, the impact of such transactions on operating results was not
significant; however, Genzyme reported a cumulative foreign currency translation
amount of $12.4 million in stockholders' equity as a result of foreign currency
adjustments, and there can be no assurance that the Company will not incur
additional adjustments in future periods. In addition, the U.S. dollar value of
transactions based in foreign currency (collections on foreign sales or payments
for foreign purchases) also fluctuates with exchange rates. The largest foreign
currency exposure results from activity in Dutch guilders, British pounds,
French francs, German marks, Spanish pesetas, Italian lira and Japanese yen.
Genzyme has not hedged net foreign investments in the past, although it may
engage in hedging transactions to manage and reduce its foreign exchange risk,
subject to certain restrictions imposed by the Genzyme Board. There can be no
assurance that Genzyme's attempts to manage its foreign currency exchange risk
will be successful.
Uncertainty Regarding Patents and Protection of Proprietary Technology
Genzyme's success depends, to a large extent, on its ability to maintain a
competitive technological position in its product areas. Proprietary rights
relating to Genzyme's products and services are protected from unauthorized use
by third parties only to the extent that they are covered by patents or are
maintained in confidence as trade secrets. Genzyme has filed for patents and has
rights to numerous patents and patent applications worldwide. While certain of
Genzyme's patents have been allowed or issued, there can be no assurance that
these allowed and issued patents or additional patents allowed or issued to
Genzyme will effectively protect the proprietary technology of Genzyme. In
addition, patent litigation is widespread in the biotechnology industry and it
is not possible to predict how any such litigation will affect Genzyme.
No consistent policy has emerged from the U.S. Patent and Trademark Office
regarding the breadth of claims allowed in biotechnology patents and, therefore,
the degree of future protection for Genzyme's proprietary rights is uncertain.
The allowance of broader claims may increase the incidence and cost of patent
interference proceedings in the U.S. and the risk of infringement litigation in
the U.S. and abroad. Conversely, the allowance of narrower claims, while
reducing the risk of infringement, may limit the value of Genzyme's proprietary
rights under its patents, licenses and pending patent applications.
Genzyme attempts to monitor the patent filings of its competitors in an
effort to guide the design and development of its products to avoid
infringement. Notwithstanding these efforts, there can be no assurance that the
patents issued or licensed to Genzyme will remain free of challenge by third
parties. In addition, patent applications filed by third parties may, if issued,
cover the Company's products and services as ultimately developed, which could
have an adverse impact on the Company's results of operations in amounts that
cannot presently be determined. Genzyme may, depending on the final formulation
of such products and services, need to acquire licenses to, or contest the
validity of, such patents. For example, Genzyme may need
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<PAGE> 7
to acquire patent rights from third parties that cover particular diagnostic
and/or therapeutic gene sequences or that cover aspects of adjuvant therapies
such as compositions of matter or methods of use related to the administration
of cytokines as immunostimulants in combination with a cancer therapy. In gene
therapy, Genzyme may need to license a number of patents covering different
elements of the technique, such as those relating to a particular viral or
non-viral vector or methods for its delivery. The extent to which Genzyme may
need to license such rights or contest the validity of such patents depends on
the scope and validity of such patents and ultimately on the final design or
formulation of its products and services under development. The cost and ability
to license any such rights and the likelihood of successfully contesting the
validity of such patents are uncertain.
Genzyme has also relied upon trade secrets, proprietary know-how and
continuing technological innovation to develop and maintain its competitive
position. There can be no assurance that others will not independently develop
such know-how or otherwise obtain access to Genzyme's technology. While
Genzyme's employees, consultants and corporate partners with access to
proprietary information are generally required to enter into confidentiality
agreements, there can be no assurance that these agreements will be honored.
Certain of Genzyme's consultants have developed portions of Genzyme's
proprietary technology at their respective universities or in governmental
laboratories. There can be no assurance that such universities or governmental
authorities will not assert rights to intellectual property arising out of
university or government based research conducted by such consultants.
Regulation by Government Agencies
The production and sale of health care products and provision of health
care services are highly regulated. In particular, human therapeutic and
diagnostic products are subject to pre-marketing approval by the FDA and
comparable agencies in foreign countries. The process of obtaining these
approvals varies according to the nature and use of the product and can involve
lengthy and detailed laboratory and clinical testing, sampling activities and
other costly and time-consuming procedures. Regulation of Genzyme General
products and services could also limit Genzyme General's reimbursement for its
products and services and otherwise materially affect the results of operations
of Genzyme General. Additional regulatory regimes, in the U.S. and
internationally, affect the Company's work in gene therapy and the provision of
cancer diagnostic services. There can be no assurance that any of the required
regulatory approvals will be granted on a timely basis, if at all.
Certain of Genzyme's products, including Cerezyme(R) enzyme and Ceredase(R)
enzyme, have been designated as orphan drugs under the Orphan Drug Act, which
provides incentives to manufacturers to develop and market drugs for rare
diseases. The Orphan Drug Act generally entitles the first developer that
receives FDA marketing approval for an orphan drug to a seven-year exclusive
marketing period in the United States for that product. Legislation has been
periodically introduced in recent years, however, to amend the Orphan Drug Act.
Such legislation has generally been directed to shortening the period of
automatic market exclusivity and granting certain market rights to simultaneous
developers of a drug. The effect on Genzyme of any amendments ultimately adopted
cannot be assessed at this time.
No Assurance of Commercial Success of the Sepra Products
In August 1996, Genzyme received marketing approval from the FDA for
Seprafilm(R) bioresorbable membrane and commenced commercial sales of
Seprafilm(R) bioresorbable membrane in the U.S. on behalf of Genzyme Ventures
II. The successful commercialization of Seprafilm(R) bioresorbable membrane and
other Sepra Products will depend on many factors, including: (i) the content and
timing of decisions made by the FDA and other regulatory authorities, (ii)
market acceptance of the Sepra Products by surgeons and hospitals
administrators, (iii) Genzyme General's ability to deploy its sales force to
market the Sepra Products, (iv) Genzyme General's ability to supply sufficient
product to meet market demand, (v) the number and relative efficacy of
competitive products that may subsequently enter the market and (vi) the degree
to which third party reimbursement is available for the Sepra Products. There
can be no assurance that Genzyme General will be successful in its efforts to
commercialize the Sepra Products and Genzyme General may cease
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development of one or more of the Sepra Products at any time if demand proves
inadequate. In January 1998, Genzyme announced that it had discontinued
development of Sepracoat(TM) coating solution for the U.S. market.
Technology Transferred to Genzyme Development Partners, L.P. ("GDP")
Genzyme organized GDP, a special purpose research and development entity,
and transferred technology and commercial rights to the Sepra Products that
Genzyme previously had under development. Genzyme has an option to purchase the
limited partnership interests in GDP under certain circumstances. It is
uncertain at this time whether Genzyme will exercise this option. If Genzyme
does not exercise this option, it will have limited rights in revenues generated
from the sale of GDP's products. If Genzyme does exercise this option, it will
be required to make substantial cash payments or to issue shares of GGD Stock,
or both. Cash payments will diminish Genzyme's capital resources. Payments in
GGD Stock could result in dilution to holders of GGD Stock and could negatively
affect the market price of such stock.
Uncertainty Regarding Success of Clinical Trials and Other Risks in Product
Development
Several of Genzyme's products are currently in or will require clinical
trials to test safety and efficacy in humans for various conditions. There can
be no assurance that Genzyme will not encounter problems in clinical trials that
will cause it to delay or suspend these clinical trials. In addition, there can
be no assurance that such clinical testing, if completed, will ultimately show
these products to be safe and efficacious.
Product development involves a high degree of risk, and returns to
investors are dependent upon successful development of Genzyme's products. There
can be no assurance that development of any product will be successfully
completed or that FDA approval of any of Genzyme's products under development
will be obtained.
Rapid Technological Change
The field of biotechnology is expected to continue to undergo significant
and rapid technological change. Although Genzyme General will seek to expand its
technological capabilities in order to remain competitive, there can be no
assurance that research and discoveries by others will not render Genzyme
General's products or services obsolete.
Third Party Reimbursement and Health Care Cost Containment Initiatives
A majority of Genzyme General's revenues are attributable directly or
indirectly to payments received from third party payers, including government
health administration authorities and private health insurers. Significant
uncertainty exists as to the reimbursement status of newly approved health care
products, and third party payers are increasingly challenging the prices charged
for health care products and services. Third party payers are also increasingly
attempting to contain health care costs by limiting both coverage and the level
of reimbursement for new therapeutic products and by refusing in some cases to
provide coverage for uses of approved products for disease indications for which
the FDA has not granted marketing approval. There can be no assurance that third
party insurance coverage will be available for any new products or services
developed by Genzyme General. If adequate coverage and reimbursement are not
provided by government and other third party payers for Genzyme General's
products and services, its results of operations may be materially adversely
affected.
In addition, Congress has from time to time discussed the possible
implementation of broad based health care cost containment measures. While these
discussions have not led to the enactment of any specific health care cost
containment legislation, it is possible that health care measures will again be
proposed in Congress. The effects on Genzyme General of any such measures that
are ultimately adopted cannot be predicted at this time.
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Product Liability and Limitations of Insurance
The Company may be subject to product liability claims in connection with
the use or misuse of its products during testing or after commercialization.
While the Company has taken, and continues to take, what it believes are
appropriate precautions, there can be no assurance that Genzyme General will
avoid significant liability exposure. Genzyme has only limited amounts of
product liability insurance and there can be no assurance that such insurance
will provide sufficient coverage against any or all potential product liability
claims. If Genzyme attempts to obtain additional insurance in the future, there
can be no assurance that it will be able to do so on acceptable terms, if at
all, or that such insurance will provide adequate coverage against claims
asserted.
Year 2000
Many computer systems experience problems handling dates beyond the year
1999. Therefore, some computer hardware and software will need to be modified
prior to the year 2000 in order to remain functional. The Company is assessing
the internal readiness of its computer systems for handling the year 2000. The
Company expects to implement successfully the systems and programming changes
necessary to address year 2000 issues, and does not believe that the cost of
such actions will have a material adverse effect on the Company's results of
operations or financial condition. There can be no assurance, however, that
there will not be a delay in, or increased costs associated with, the
implementation of such changes, and the Company's inability to implement such
changes could have an adverse effect on future results of operations.
RISKS RELATED TO THE SECURITIES
An investment in the Notes or Conversion Shares involves a high degree of
risk. Accordingly, the following risk factors should be considered carefully in
contemplating such an investment.
Future Capital Needs
See "-- Risks Related to Genzyme and the General Division -- Future Capital
Needs." If future financing is needed and available, Genzyme may elect to obtain
such financing in the form of Senior Indebtedness, to which the Notes would be
subordinated.
Subordination
The Notes are general, unsecured obligations of the Company, subordinated
in right of payment to all existing and future Senior Indebtedness of the
Company. Under the Indenture, generally, the Company is not permitted to pay the
principal of, or premium, if any, or interest on or repurchase, redeem or
otherwise retire any Notes in the event of a default in the payment of any
principal of, premium, if any, or interest on any Senior Indebtedness of the
Company when it becomes due and payable, whether at maturity or at a date fixed
for prepayment or by acceleration or otherwise, unless and until such payment
default has been cured or waived or shall have ceased to exist, or, in the event
of certain other defaults with respect to Senior Indebtedness, until the earlier
of the date on which such default has been cured or waived or shall have ceased
to exist, or the 179th day after notice of such default is given. In addition,
the Notes are effectively subordinated to all of the creditors of the Company's
subsidiaries, including trade creditors. As of March 31, 1998, the Company and
its subsidiaries had an aggregate of $135,913,000 of consolidated indebtedness
and other obligations that would have effectively ranked senior to the Notes.
The Indenture does not restrict the incurrence of Senior Indebtedness or other
indebtedness by the Company or any of its subsidiaries. See "DESCRIPTION OF
NOTES -- Subordination."
Upon any distribution of the assets of the Company pursuant to any
insolvency, bankruptcy, dissolution, winding up, liquidation or reorganization,
the payment of the principal of and interest on the Notes will be subordinated
to the extent provided in the Indenture to the prior payment in full of all
Senior Indebtedness. In addition, the Company may not repurchase any Notes in
certain circumstances involving a Fundamental Change if at such time the
subordination provision of the Indenture would prohibit the Company from making
payments of principal in respect of the Notes.
8
<PAGE> 10
Limitations on Repurchase of Notes Upon a Fundamental Change
In the event of a Fundamental Change, each holder of Notes will have the
right, at the holder's option, to require the Company to repurchase all or any
part of such holder's Notes. If a Fundamental Change were to occur, there can be
no assurance that the Company would be able to pay the repurchase price for all
Notes tendered. The Company's revolving credit agreement contains, and any
future credit agreements or other agreements relating to the other indebtedness
to which the Company becomes a party may contain, restrictions on or
prohibitions of such repurchases. In the event a Fundamental Change occurs at a
time when the Company is prohibited from purchasing Notes, the Company could
seek the consent of its lenders to the purchase of the Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company would remain
prohibited from purchasing Notes. In such case, the Company's failure to
repurchase the Notes would constitute an Event of Default under the Indenture
whether or not such repurchase is permitted by the subordination provisions of
the Indenture. Any such default may, in turn, cause a default under Senior
Indebtedness of the Company. Moreover, the occurrence of a Fundamental Change in
and of itself may constitute an event of default under Senior Indebtedness of
the Company. As a result, in each case, any repurchase of the Notes would,
absent a waiver, be prohibited under the subordination provisions of the
Indenture until the Senior Indebtedness is paid in full. See "DESCRIPTION OF
NOTES -- Subordination" and "RISK FACTORS -- Risks Related to the
Notes -- Subordination."
The term "Fundamental Change" is limited to certain specified transactions
and may not include other events that might adversely affect the financial
condition of the Company, nor would the requirement that the Company offer to
repurchase the Notes upon a Fundamental Change necessarily afford holders of the
Notes protection in the event of a highly leveraged transaction, reorganization,
merger or similar transaction involving the Company. See "DESCRIPTION OF NOTES."
Increased Leverage
The sale of the Notes increased the ratio of the Company's total debt to
total capitalization from 14%, at March 31, 1998, to 28% on a pro forma basis.
As a result of this increased leverage, the Company's principal and interest
obligations increased substantially. The degree to which the Company is
leveraged could adversely affect the Company's ability to obtain additional
financing for working capital, acquisitions or other purposes and could make it
more vulnerable to economic downturns and competitive pressures. The Company's
increased leverage could also adversely affect its liquidity, as a substantial
portion of available cash from operations may have to be applied to meet debt
service requirements and, in the event of a cash shortfall, the Company could be
forced to reduce other expenditures and forego potential acquisitions to be able
to meet such requirements.
Absence of Public Market for the Notes
There is no existing public market for the Notes and there can be no
assurance as to the liquidity of any market that may develop for the Notes, the
ability of the holders to sell their Notes or the price at which holders of the
Notes may be able to sell their Notes. Future trading prices of the Notes will
depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results, the price of the GGD Stock and the
market for similar securities. The Notes have been designated for trading in the
PORTAL Market; however, the Company has not applied, and does not intend to
apply, for listing of the Notes on any securities exchange. Furthermore, Notes
resold pursuant to this Registration Statement will no longer be eligible for
trading in the PORTAL Market.
Volatility of Prices; Absence of Dividends
The market prices for Genzyme's securities have been volatile. Factors such
as announcements of technological innovations or new commercial products by
Genzyme or its competitors, governmental regulation, patent or proprietary
rights developments, public concern as to the safety or other implications of
biotechnology products and industry and market conditions in general may have a
significant impact on the
9
<PAGE> 11
market price of Genzyme's securities, including the Notes and the GGD Stock. No
cash dividends have been paid to date on GGD Stock, nor does Genzyme General
anticipate paying cash dividends on such stock in the foreseeable future.
RISKS RELATED TO GENZYME TRACKING STOCK
Prior to June 18, 1997, Genzyme had outstanding two classes of common
stock, GGD Stock and GTR Stock. Effective June 18, 1997, the GGD Stock and GTR
Stock were redesignated as separate series of a single class of common stock and
a new series of the same class of common stock, GMO Stock, was issued. As a
result, Genzyme currently has three series of common stock outstanding: GGD
Stock, GTR Stock and GMO Stock, which are intended to reflect the value and
track the performance of Genzyme's three operating divisions: Genzyme General,
GTR and GMO. The Notes are convertible only into shares of GGD Stock.
Accordingly, prospective purchasers of the Notes should carefully consider the
following factors in evaluating an investment in the Notes.
Stockholders of One Company; Financial Impacts on One Division Could Affect
the Others
Genzyme General, GTR and GMO are each divisions of Genzyme. Notwithstanding
the allocation of Genzyme's products and programs among divisions for financial
statement presentation purposes and allocation of equity interests, Genzyme
continues to hold title to all of the assets and is responsible for all of the
liabilities allocated to each of its divisions. Holders of each series of
Genzyme common stock have no specific claim against the assets attributed for
financial statement presentation purposes to the division whose performance is
associated with the series of stock they hold. Liabilities or contingencies of
any division that affect Genzyme's resources or financial condition could affect
the financial condition or results of operations of the other divisions.
Prospective purchasers of the Notes should, therefore, read Genzyme's
consolidated financial statements in conjunction with the financial statements
of Genzyme General, which are included in the 1997 10-K and the Company's
Quarterly Reports on Form 10-Q incorporated herein by reference. See "CERTAIN
DOCUMENTS INCORPORATED BY REFERENCE."
No Rights or Additional Duties With Respect to the Divisions; Potential
Conflicts
Holders of each series of Genzyme common stock have only the rights of
stockholders of Genzyme and, except in limited circumstances, do not have any
rights specifically related to the division to which such series of common stock
relates.
The existence of separate series of common stock may give rise to occasions
when the interests of holders of each series of Genzyme common stock may diverge
or appear to diverge. Although Genzyme is aware of no precedent concerning the
manner in which Massachusetts law would be applied to the duties of a board of
directors in the context of multiple series of common stock with divergent
interests, Genzyme believes, based on the advice of counsel, that a
Massachusetts court would hold that a board of directors owes an equal duty to
all stockholders regardless of class or series and does not have separate or
additional duties to any group of stockholders. That duty is the fiduciary duty
to act in good faith and in a manner it reasonably believes to be in the best
interests of the corporation. Genzyme has been advised that, under Massachusetts
law, a good faith determination by a disinterested and adequately informed board
of directors that an action is in the best interests of the corporation, taking
into account the interests of the holders of each series of common stock and the
alternatives reasonably available, should represent an appropriate defense to
any challenge by or on behalf of the holders of any series of common stock that
such action could have a disparate effect on different series of common stock.
However, a Massachusetts court hearing a case involving such a challenge may
decide to apply principles of Massachusetts law other than those described
above, or may develop new principles of Massachusetts law, in order to decide
such a case.
Disproportionate ownership interests of members of the Genzyme Board in any
series of common stock or disparities in the value of such stock could create or
appear to create potential conflicts of interest when directors are faced with
decisions that could have different implications for each series of common
stock. Nevertheless, Genzyme believes that a director would be able to discharge
his or her fiduciary responsibilities
10
<PAGE> 12
even if his or her interests in shares of such series were disproportionate or
had disparate values. The Genzyme Board may also from time to time establish one
or more committees to review matters presented to it that raise conflict issues,
which committee(s) would report to the full Genzyme Board on such matters.
No Additional Separate Voting Rights
Holders of each series of Genzyme common stock vote together as a single
class on all matters as to which common stockholders generally are entitled to
vote (including the election of directors). Except in certain limited
circumstances provided under Massachusetts law, in Genzyme's Restated Articles
of Organization (the "Genzyme Charter"), and in the management and accounting
policies adopted by the Genzyme Board, holders of each series of common stock
have no right to vote on matters separately. Accordingly, except in limited
circumstances, holders of shares of one series of common stock could not bring a
proposal to a vote of the holders of that series of common stock only, but would
be required to bring any proposal to a vote of all common stockholders.
On all matters as to which common stockholders generally are entitled to
vote, each share of GGD Stock has one vote, each share of GTR Stock has, through
December 31, 1998, .33 vote and each share of GMO Stock has, through December
31, 1998, .25 vote. On January 1, 1999 and on January 1 every two years
thereafter, the number of votes to which each share of GTR Stock and GMO Stock
is entitled will be adjusted to equal the ratio of the Fair Market Value (as
defined herein) of one share of GTR Stock and GMO Stock, respectively, to the
Fair Market Value of one share of GGD Stock as of such date. Fair Market Value
as of any date means the average of the daily closing prices as reported by the
Nasdaq National Market (or the appropriate exchange or other market on which
such shares are then traded) for the 20 consecutive trading days commencing on
the 30th trading day prior to such date. In the event such closing prices are
unavailable, Fair Market Value will be determined by the Genzyme Board.
Certain matters as to which the holders of common stock are entitled to
vote may involve a divergence or the appearance of a divergence in the interests
of holders of each series of Genzyme common stock. If, when a stockholder vote
is taken on any matter as to which a separate vote by each series is not
required and the holders of any series of common stock would have more than the
number of votes required to approve any such matter, the holders of that series
would control the outcome of the vote on such matter. Holders of GGD Stock, GTR
Stock and GMO Stock currently have approximately 91.1%, 7.7% and 1.2%,
respectively, of the total voting power of Genzyme. As a result, on matters
which are submitted to a vote of common stockholders, the preferences of the
holders of GGD Stock are likely to dominate and determine the outcome of such
vote unless and until the relative number of shares outstanding and/or the
market value of each series of Genzyme common stock materially changes. See
"DESCRIPTION OF GENZYME CAPITAL STOCK -- Voting Rights."
Exchange of GTR Stock and GMO Stock
The Genzyme Board can, in its sole discretion, determine to exchange shares
of GTR Stock and GMO Stock for cash or shares of GGD Stock (or any combination
thereof) at a 30% premium over Fair Market Value of the GTR Stock or GMO Stock
at any time. In addition, following a disposition of all or substantially all of
the assets of GTR or GMO, the shares of GTR Stock or GMO Stock, as the case may
be, are subject to mandatory exchange by Genzyme for cash and/or shares of GGD
Stock at a 30% premium over Fair Market Value of such series of common stock as
determined by the trading prices during a specified period prior to public
announcement of the disposition. Consequently, holders of GTR Stock and GMO
Stock may receive a greater or lesser premium for their shares than any premium
paid by a third party buyer of all or substantially all of the assets of GTR or
GMO. See "Management and Accounting Policies Governing the Relationship of
Genzyme Divisions -- Open Market Purchases of Shares of Common Stock" set forth
in Exhibit 99.1 to the 1997 10-K.
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<PAGE> 13
No Adjustment to Liquidating Distributions
In the event of a voluntary or involuntary dissolution, liquidation or
winding up of the affairs of Genzyme (other than pursuant to a merger, business
combination or sale of substantially all assets), holders of outstanding shares
of each series of Genzyme common stock would receive the assets, if any,
remaining for distribution to common stockholders on a per share basis in
proportion to the respective per share liquidation units of such series. [On
June 30, 1998,] each share of GGD Stock had 100 liquidation units, each share of
GTR Stock had 58 liquidation units and each share of GMO Stock had 25
liquidation units. Because the liquidation units will not be adjusted to reflect
changes in the relative market value or performance of each of the divisions of
Genzyme, the per share liquidating distribution to a holder of GGD Stock, GTR
Stock or GMO Stock is not likely to correspond to the value of the assets of
Genzyme General, GTR or GMO, respectively, at the time of a dissolution,
liquidation or winding up of Genzyme.
Management and Accounting Policies Subject to Change
The Genzyme Board has adopted certain management and accounting policies
applicable to the preparation of the financial statements of the divisions of
Genzyme, the allocation of corporate expenses, assets and liabilities and other
accounting matters, the reallocation of assets between divisions and other
matters. These policies may, except as stated therein, be modified or rescinded
in the sole discretion of the Genzyme Board without the approval of Genzyme's
stockholders, subject to the Genzyme Board's fiduciary duty to all holders of
Genzyme's capital stock. The Genzyme Board may also adopt additional policies
depending upon the circumstances. See "Management and Accounting Policies
Governing the Relationship of Genzyme Divisions" set forth in Exhibit 99.1 to
the 1997 10-K.
Non-Compete Policy
The Genzyme Board has adopted a policy providing that the Company will not
develop products and services outside of GTR or GMO that compete with products
and services being developed or sold by GTR or GMO, other than through joint
ventures in which GTR or GMO participates. For a discussion of this and other
matters regarding policies relating to the divisions, see "Management and
Accounting Policies Governing the Relationship of Genzyme Divisions" set forth
in Exhibit 99.1 to the 1997 10-K.
Use of Operating Losses by Other Genzyme Divisions
Genzyme's management and accounting policies provide that to the extent any
division of Genzyme is unable to utilize its operating losses or other projected
tax benefits to reduce its current or deferred income tax expense, such losses
or benefits may be reallocated to another division on a quarterly basis for
financial reporting purposes. Accordingly, although the actual payment of taxes
is a corporate liability of Genzyme as a whole, separate financial statements
will be prepared for each division and any losses that cannot be utilized by a
division will be allocated among the profitable divisions rather than carried
forward to reduce the future tax liability of the division generating the
losses. This could result in a division with losses (such as GTR and GMO
currently) being charged a greater portion of the total corporate tax liability
and reporting lower earnings after taxes in the future than would have been the
case if such division had retained its losses or other benefits in the form of a
net operating loss carryforward. See "Management and Accounting Policies
Governing the Relationship of Genzyme Divisions" set forth in Exhibit 99.1 to
the 1997 10-K.
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<PAGE> 14
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges is calculated by dividing (x) the
sum of (i) net income (loss) before income taxes and extraordinary credits and
(ii) fixed charges (excluding capitalized interest), by (y) fixed charges. Fixed
charges consist of interest (expensed and capitalized), amortization of debt
issuance costs and conversion features, and the estimated interest portion of
rent expense. The Company's consolidated ratio of earnings to fixed charges for
the fiscal years ended December 31, 1994, 1995 and 1997 were 2.6x, 3.5x and
2.3x, respectively; and the consolidated ratio of earnings to fixed charges for
the three months ended March 31, 1998 was 2.1x. The ratio of earnings to fixed
charges is not presented for the years ended December 31, 1993 and 1996 because
in such years fixed charges exceeded earnings (as set forth above) by $17.4
million and $72.3 million, respectively, due primarily to (i) in 1993, charges
for in-process research and development of $49.0 million and charges for
goodwill impairment and restructuring costs of $26.5 million and (ii) in 1996,
charges for in-process research and development of $130.6 million.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Notes or the
shares of GGD Common Stock offered hereby.
13
<PAGE> 15
CAPITALIZATION
The following table sets forth cash, cash equivalents, short- and long-term
investments and capitalization of the Company as of March 31, 1998, actual and
as adjusted for the initial sale of the Notes:
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
-------------------------
ACTUAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT PAR VALUE)
<S> <C> <C>
Cash, cash equivalents, short- and long-term
investments(1)............................................ $ 255,182 $ 498,632
========== ==========
Long-term debt less current maturities:
Revolving credit facility(2)................................ $ 113,000 $ 113,000
Convertible subordinated notes offered hereby............... -- 250,000
Other long-term debt........................................ 22,233 22,233
Convertible debentures, net(3).............................. 31,285 31,285
---------- ----------
Total long-term debt less current maturities........... 166,518 416,518
Stockholders' equity(4):
Genzyme General Division Common Stock, $.01 par value
200,000,000 shares authorized; 78,387,907 issued.......... 784 784
Genzyme Tissue Repair Division Common Stock, $.01 par value
40,000,000 shares authorized; 20,145,650 issued and
outstanding............................................... 201 201
Genzyme Molecular Oncology Division Common Stock, $.01 par
value 40,000,000 shares authorized; 3,928,572 issued and
outstanding............................................... 39 39
Additional paid-in capital -- Genzyme General............... 905,601 905,601
Additional paid-in capital -- Genzyme Tissue Repair......... 171,259 171,259
Additional paid-in capital -- Genzyme Molecular Oncology.... 34,545 34,545
Treasury stock -- at cost Genzyme General Division Common
Stock, 106,358 shares..................................... (901) (901)
Accumulated deficit......................................... (68,562) (68,562)
Foreign currency translation adjustments.................... (13,147) (13,147)
Unrealized net gains on investments......................... 1,776 1,776
---------- ----------
Total stockholders' equity............................. 1,031,595 1,031,595
---------- ----------
Total capitalization.............................. $1,198,113 $1,448,113
========== ==========
</TABLE>
- ---------------
(1) Cash, cash equivalents, short- and long-term investments excludes
investments in equity securities.
(2) This credit line is with a group of banks and allows borrowing by the
Company up to $225.0 million (the "Revolving Credit Facility"). As of March
31, 1998, Genzyme had $113.0 million outstanding under the Revolving Credit
Facility.
(3) In February 1997, GTR raised $13.0 million (before fees and expenses)
through the private placement of a 5% convertible note (the "GTR Note") due
February 27, 2000 to an affiliate of Credit Suisse First Boston Corporation.
The GTR Note is convertible into shares of GTR Stock, at the option of the
holder, at a discount to the market price for such shares. In the first
quarter of 1997, GTR recorded $11.5 million of proceeds attributed to the
value of the debt and $1.5 million attributed to the value of the conversion
feature (recorded as an increase to division equity). The debt will be
accreted to its $13.0 million face value by a charge to interest expense of
$1.5 million over the term of the initial 15 month conversion period. As of
March 31, 1998, GTR had accreted $1.4 million of the value of the conversion
feature.
In August 1997, GMO raised $20.0 million (before offering discounts and
expenses) through the private placement of 6% convertible debentures (the
"GMO Debentures") due August 28, 2002. The GMO Debentures are convertible
into shares of GMO Stock, at the option of the holders, beginning on the
91st day after the effective date of a registration statement covering the
initial public offering of GMO Stock
14
<PAGE> 16
(the "GMO IPO") at a discount to the market price for such shares. In the
third quarter of 1997, GMO recorded $16.5 million of proceeds attributed to
the value of the debt and $3.5 million attributed to the value of the
conversion feature (recorded as an increase to division equity). The debt
will be accreted to its $20.0 million face value by a charge to the interest
expense of $3.5 million over the term of the initial 15 month conversion
period. As of March 31, 1998, GMO had accreted $1.1 million of the value of
the conversion feature.
If the effective date of the GMO IPO does not occur before August 29, 1998,
at the holders' option, the GMO Debentures may be exchanged for 5%
convertible debentures (the "GGD Debentures") due 2003. If the GMO IPO is
completed before August 29, 1998 but the aggregate proceeds from the
offering are less than $15.0 million or GMO's market capitalization is below
$90.0 million, at the holders' option, 50% of the GMO Debentures may be
exchanged for the GGD Debentures. The exchange option must be exercised
within 30 business days of the event triggering the right of exchange. The
GGD Debentures, if issued, will be convertible at the option of the holder
at any time prior to maturity into shares of GGD Stock at a 13% premium to
the average closing bid price of GGD Stock as reported by the Nasdaq
National Market for the five trading days immediately preceding the issue
date.
(4) Excludes (i) 12,683,417 shares of GGD Stock reserved for issuance upon
exercise of outstanding stock options and warrants, (ii) 2,711,188 and
833,774 outstanding shares of GTR Stock reserved for issuance upon exercise
of outstanding stock options and GTR Designated Shares (as defined herein),
respectively, and (iii) 870,305 and 6,000,000 shares of GMO Stock reserved
for issuance upon exercise of outstanding stock options and GMO Designated
Shares (as defined herein), respectively.
15
<PAGE> 17
DESCRIPTION OF REVOLVING CREDIT FACILITY
In November 1996, Genzyme refinanced its existing $215.0 million line of
credit with a Revolving Credit Facility made available through a group of
commercial banks administered by Fleet National Bank. Under the terms of the
Revolving Credit Facility, Genzyme may request loans up to a maximum aggregate
principal amount outstanding at any time of $225.0 million. Amounts drawn under
this facility may be allocated to Genzyme General, GTR or GMO. As of March 31,
1998, Genzyme had $113.0 million of debt outstanding under the Revolving Credit
Facility, which had been allocated $95.0 million to Genzyme General and $18.0
million to GTR. Amounts borrowed under the Revolving Credit Facility are payable
on November 15, 1999. In December 1996, Genzyme entered into an interest rate
swap contract (the "Interest Rate Swap Contract") to effectively convert the
variable interest rate on $100.0 million of borrowings under the Revolving
Credit Facility to fixed interest rates. Net payments made or received under the
Interest Rate Swap Contract are recorded as interest expense.
The Revolving Credit Facility imposes certain financial covenants and other
restrictions that, among other things, require Genzyme to maintain certain
levels of earnings, liquidity and leverage ratios and limit Genzyme's and its
subsidiaries' ability to (i) incur additional indebtedness, (ii) incur liens on
their property, (iii) make certain investments, (iv) engage in certain sales of
assets, (v) engage in acquisitions that do not meet specified criteria and (vi)
enter into certain transactions of merger or consolidation. If Genzyme defaults
on the covenants, the Revolving Credit Facility is payable on demand. In
connection with the offering of the Notes, the Revolving Credit Facility was
amended to permit the issuance of the Notes.
The stock of Genzyme Securities Corporation is pledged as collateral for
the Revolving Credit Facility.
Amounts borrowed under the Revolving Credit Facility bear interest at LIBOR
plus an applicable margin pursuant to the terms and conditions defined in the
credit agreement As of March 31, 1998, the interest rate on amounts outstanding
under the Revolving Credit Facility was approximately 6.06%. Genzyme pays a
commitment fee ranging from .15% to .375% on the unused portion of the Revolving
Credit Facility.
Amounts owed under the Revolving Credit Facility represent Senior
Indebtedness, as defined in the Indenture relating to the Notes.
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<PAGE> 18
DESCRIPTION OF NOTES
The Notes were issued under an Indenture dated as of May 22, 1998 (the
"Indenture"), between the Company and State Street Bank and Trust Company, as
Trustee (the "Trustee"). A copy of the Indenture is included as an exhibit to
the Registration Statement of which this Prospectus forms a part. The statements
under this caption relating to the Indenture and the Notes are summaries and do
not purport to be complete. Such summaries make use of certain terms defined in
the Indenture and are qualified in their entirety by express reference to the
Indenture. The terms of the Notes include those made a part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended. For purposes of this
section, the term "Company" means only Genzyme Corporation and not its
subsidiaries.
GENERAL
The Notes are general unsecured obligations of the Company limited to an
aggregate principal amount of $250,000,000. The Notes bear interest at an annual
rate of 5 1/4%, mature on June 1, 2005 (unless earlier redeemed at the option of
the Company, converted into GGD Stock at the option of the holder or repurchased
by the Company at the option of the holder upon a Fundamental Change) and are
subordinated obligations of the Company. Interest is payable semiannually, on
June 1 and December 1, commencing December 1, 1998, to the registered holders of
record on the preceding May 15 and November 15, respectively. Interest is
calculated on the basis of a 360-day year of twelve 30-day months. Although the
Notes are general obligations of the Company, principal and interest is paid
from funds allocated for financial statement presentation purposes to Genzyme
General. Holders of the Notes have no specific claim against the assets
attributable to Genzyme General.
See "-- Book-Entry; Delivery and Form" for information regarding the form,
documents and mechanics for transferring the Notes.
The Indenture contains no restrictions on the payment of dividends or the
repurchase of securities of the Company or any financial covenants. The
Indenture contains no covenants or other provisions to afford protection to
holders of Notes in the event of a highly leveraged transaction or a change in
control of the Company except to the extent described under "-- Repurchase at
Option of Holder Upon a Fundamental Change."
CONVERSION RIGHTS
The Notes are convertible at their principal amount into GGD Stock at any
time prior to the business day prior to redemption or the business day prior to
maturity, in whole or from time to time in part (in denominations of $1,000 and
integral multiples thereof), at the option of the holder thereof, initially at a
conversion price of $39.60, subject to adjustment as described below.
The right of conversion attaching to any Note may be exercised (a) if such
Note is represented by a Global Note, by book-entry transfer to the conversion
agent (which will initially be the Trustee) through the facilities of DTC, or
(b) if such Note is represented by a definitive Note, by delivery of such Note
at the specified office of the conversion agent, accompanied, in either case, by
a duly signed and completed notice of conversion and appropriate endorsements
and transfer documents if required by the Conversion Agent. The conversion date
is the date on which the Note and all of the items required for conversion have
been so delivered and the requirements for conversion have been met. A holder
delivering a Note for conversion is required to pay any taxes or duties payable
in respect of the issue or delivery of the GGD Stock upon conversion in a name
other than that of the holder.
The conversion privilege and price is subject to adjustment upon the
occurrence of certain events, including (i) the issuance of capital stock of the
Company as a dividend (or other distribution) on the GGD Stock, (ii) the
distribution to all holders of GGD Stock of rights or warrants entitling them to
subscribe for or purchase GGD Stock at less than the current market price (as
defined in the Indenture) on the record date for such issuance, (iii)
subdivisions, combinations and certain reclassifications of GGD Stock, (iv)
certain distributions to all holders of GGD Stock of cash, debt securities (or
other evidence of indebtedness) or other
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<PAGE> 19
assets (excluding dividends or distributions described in clauses (i) or (ii)
above or (v) below), (v) a dividend or other distribution consisting exclusively
of cash to all holders of GGD Stock, excluding (A) cash dividends that do not
exceed the per share amount of the immediately preceding regular cash dividend
(as adjusted to reflect any of the events referred to in clauses (i) through
(vi) of this sentence) and (B) cash dividends to the extent that the annualized
per share amount thereof does not exceed 15% of the current market price of GGD
Stock as of the trading day immediately preceding the date of declaration of
such dividend; and (vi) payment to holders of GGD Stock in respect of a tender
or exchange offer (other than an odd-lot offer) by the Company or any subsidiary
of the Company for GGD Stock at a price in excess of 110% of the current market
price of GGD Stock on the last date tenders or exchanges may be made pursuant to
such tender or exchange offer.
No adjustment in the conversion price is required unless such adjustment
would require a change of at least 1% in the conversion price then in effect;
provided that any adjustment that would otherwise be required to be made shall
be carried forward and taken into account in any subsequent adjustment. The
Company from time to time may voluntarily reduce the conversion price for a
period of at least twenty days. Fractional shares of GGD Stock will not be
issued upon conversion, but, in lieu thereof, the Company will issue a check for
the current market value of such fractional shares rounded to the nearest cent
based upon the market price of the GGD Stock. No payment or adjustment will be
made for interest accrued on a converted Note or for dividends or distributions
on any GGD Stock issued upon conversion of any Note.
Subject to the rights of holders of the Notes described below under
"-- Repurchase at Option of Holder Upon a Fundamental Change," if the Company
consolidates with or merges into, or transfers or leases all or substantially
all of its assets to, any person, or is a party to a merger that reclassifies or
changes its outstanding GGD Stock, the holder of each Note then outstanding
shall after such consolidation, merger, transfer or lease have the right to
convert such Note into the kind and amount of shares of securities, cash or
other assets that such holder would have been entitled to receive upon such
consolidation, merger, transfer or lease if such holder had held the GGD Stock
issuable upon the conversion of such Note immediately prior to such
consolidation, merger, transfer or lease (assuming, in a case in which the
Company's stockholders may exercise rights of election, that a holder of Notes
would not have exercised any rights of election as to the stock, other
securities or other property or assets receivable in connection therewith and
received per share the kind and amount received per share by a plurality of
nonelecting shares).
REDEMPTION AT THE COMPANY'S OPTION
The Notes may not be redeemed prior to June 10, 2001 and are redeemable,
subject to the subordination provisions described below, on such date and
thereafter at the option of the Company, as a whole or from time to time in
part, at the following prices (expressed as percentages of the principal amount)
plus accrued interest to, but not including, the redemption date: 102.63% if
redeemed on or before May 31, 2002 and thereafter as follows if redeemed during
the 12-month period beginning on June 1 of the years set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2002............................................ 101.75%
2003............................................ 100.88%
2004............................................ 100.00%
</TABLE>
Notice of redemption at the Company's option will be mailed at least 30
days, but not more than 60 days, before the redemption date to the address of
each holder of Notes to be redeemed as set forth in the note register. If fewer
than all the Notes are to be redeemed, selection of Notes for redemption will be
made by the Trustee by lot, or in its discretion, on a pro rata basis (unless
the Company specifically directs the Trustee otherwise) in integral multiples of
$1,000. If any Notes are to be redeemed in part only, the notice of redemption
relating to such Notes shall state the portion of the principal amount to be
redeemed. In that case, new Notes in principal amount equal to the unredeemed
portion thereof will be issued in the name of the holder thereof upon surrender
to the Trustee of the original Notes.
No sinking fund is provided for the Notes.
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<PAGE> 20
REPURCHASE AT OPTION OF HOLDER UPON A FUNDAMENTAL CHANGE
If a Fundamental Change occurs, each holder of Notes has the right, at the
holder's option, to require the Company to repurchase all of such holder's
Notes, or any portion thereof that is an integral multiple of $1,000, on the
date (the "Repurchase Date") selected by the Company that is not less than ten
nor more than 30 days after the Final Surrender Date (as defined below), at a
price equal to 100% of the principal amount of the Notes, plus accrued interest
to the Repurchase Date.
The Company may not purchase any Note pursuant to the preceding paragraph
at any time when the subordination provisions of the Indenture otherwise would
prohibit the Company from making payments of principal in respect of the Notes.
Unless the Company shall previously have called for redemption of all of
the Notes, within 30 days after the occurrence of a Fundamental Change, the
Company is obligated to deliver to the Trustee and mail (or cause the Trustee to
mail) to all holders of record of the Notes a notice (the "Company Notice")
describing, among other things, the occurrence of such Fundamental Change and of
the repurchase right arising as a result thereof. The Company must cause a copy
of the Company Notice to be published in a newspaper of general circulation in
the Borough of Manhattan, The City of New York. To exercise the repurchase
right, a holder of Notes must, on or before the date which is, subject to any
contrary requirements of applicable law, 60 days after the date of mailing of
the Company Notice (the "Final Surrender Date"), give irrevocable written notice
of the holder's exercise of such right and surrender the Notes (if such Note is
represented by a Global Note, by book-entry transfer to the conversion agent
through the facilities of DTC) with respect to which the right is being
exercised, duly endorsed for transfer to the Company, at any place where
principal is payable. The submission of such notice together with such Notes
pursuant to the exercise of a repurchase right will be irrevocable on the part
of the holder (unless the Company fails to repurchase the Notes on the
repurchase date) and the right to convert the Notes will expire upon such
submission.
The term "Fundamental Change" means any of the following:
(i) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) becoming the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act) of Voting Shares (as defined below)
of the Company entitled to exercise more than 50% of the total voting power
of all outstanding Voting Shares of the Company (including any right to
acquire Voting Shares that are not then outstanding of which such person or
group is deemed the beneficial owner); or
(ii) a change in the Board of Directors of the Company in which the
individuals who constituted the Board of Directors of the Company at the
beginning of the two-year period immediately preceding such change
(together with any other director whose election by the Board of Directors
of the Company or whose nomination for election by the shareholders of the
Company was approved by a vote of at least two-thirds of the directors then
in office who either were directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the directors then in office; or
(iii) any consolidation of the Company with, or merger of the Company
into, any other person, any merger of another person into the Company, or
any sale or transfer of all or substantially all of the assets of the
Company to another person (other than (a) a merger which does not result in
any reclassification, conversion, exchange or cancellation of outstanding
shares of GGD Stock, (b) a merger which is effected solely to change the
jurisdiction of incorporation of the Company or (c) any consolidation with
or merger of the Company into a wholly owned subsidiary of the Company, or
any sale or transfer by the Company of all or substantially all of its
assets to one or more of its wholly owned subsidiaries, in any one
transaction or a series of transactions, provided, in any such case, that
the resulting corporation or each such subsidiary assumes or guarantees the
Company's obligations under the Notes, provided, however, that a
Fundamental Change shall not occur with respect to any such transaction if
either (i) the last sale price of the GGD Stock for any five trading days
during the ten trading days immediately preceding the public announcement
by the Company of such transaction is at least equal to 105% of the
conversion price in effect on such trading day or (ii) the consideration in
such transaction to the holders of GGD
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<PAGE> 21
Stock consists of cash, securities that are, or immediately upon issuance
will be, listed on a national securities exchange or quoted on the Nasdaq
National Market, or a combination of cash and such securities, and the
aggregate fair market value of such consideration (which, in the case of
such securities, shall be equal to the average of the last sale prices of
such securities during the ten consecutive trading days commencing with the
sixth trading day following consummation of the transaction) is at least
105% of the conversion price in effect on the date immediately preceding
the closing date of such transaction.
"Voting Shares" is defined to mean all outstanding shares of any class or
series (however designated) of capital stock entitled to vote generally in the
election of members of the Board of Directors and includes, without limitation,
the GGD Stock, the GTR Stock and the GMO Stock.
The right to require the Company to repurchase the Notes as a result of the
occurrence of a Fundamental Change could create an event of default under
existing or future Senior Indebtedness of the Company, as a result of which any
repurchase could, absent a waiver, be blocked by the subordination provisions of
the Notes. See "-- Subordination." Failure by the Company to repurchase the
Notes when required will result in an Event of Default (as defined below) with
respect to the Notes whether or not such repurchase is permitted by the
subordination provisions.
The holders' repurchase right upon the occurrence of a Fundamental Change
could, in certain circumstances, make more difficult or discourage a potential
takeover of the Company and, thus, removal of incumbent management. The
Fundamental Change repurchase right, however, is not the result of management's
knowledge of any specific effort to accumulate shares of GGD Stock or to obtain
control of the Company by means of a merger, tender offer, solicitation or
otherwise. Instead, the Fundamental Change purchase feature is a standard term
contained in other similar debt offerings and the terms of such feature have
resulted from negotiations between the Company and the Initial Purchasers.
The Company could in the future enter into certain transactions, including
highly leveraged recapitalizations, that would not constitute a Fundamental
Change and would, therefore, not provide the holders with the protection of
requiring the Company to repurchase the Notes.
Rule l3e-4 under the Exchange Act requires the dissemination of certain
information to securityholders in the event of an issuer tender offer and may
apply in the event that the repurchase option becomes available to holders of
the Notes. The Company will comply with this rule to the extent applicable at
that time.
SUBORDINATION
The payment of the principal of, and premium, if any, and interest on, the
Notes is subordinated in right of payment to the extent set forth in the
Indenture to the prior payment in full of amounts then due on all Senior
Indebtedness, as defined in the Indenture. In addition, the Notes are
effectively subordinated in right of payment to third party indebtedness of the
Company's subsidiaries. As of March 31, 1998, the Company and its subsidiaries
had an aggregate of $135,913,000 of consolidated indebtedness and other
obligations that would have ranked senior to the Notes. Upon the maturity of
Senior Indebtedness, whether by acceleration or otherwise, or any distribution
of assets of the Company resulting from any liquidation, dissolution, winding
up, reorganization or any insolvency proceedings of the Company, the holders of
all Senior Indebtedness will be entitled to receive payment in full before the
holders of the Notes will be entitled to receive any payment of the principal
of, or premium, if any, or interest on, the Notes. Upon the happening of a
default or event of default in the payment of the principal, premium, if any, or
interest on the Senior Indebtedness, then, unless such default or event of
default has been cured or waived or shall have ceased to exist, no payment shall
be made by the Company with respect to the principal, premium, if any, or
interest on (or otherwise in respect of) the Notes or to acquire any of the
Notes. Upon the happening of a default or event of default in respect of the
Senior Indebtedness (other than a default or event of default in payment of the
principal, premium, if any, or interest on the Senior Indebtedness) and if the
Trustee and the Company receives a notice of such default or event of default
from the holders of the Senior Indebtedness or their representative (a "Payment
Blockage Notice"), then no payment shall be made by the Company with respect to
the principal, premium, if any, or interest on (or otherwise in respect of) the
Notes until the earlier of (i) the date on which such default or
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<PAGE> 22
event of default shall have been cured or waived or shall have ceased to exist
or (ii) the 179th day after the date of such receipt of such Payment Blockage
Notice. No more than one Payment Blockage Notice shall be effective during any
365 consecutive day period. No such default or event of default that existed
upon first delivery of any Payment Blockage Notice shall be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default or event of
default shall have been cured or waived for a period of 180 consecutive days.
See "RISK FACTORS -- Risks Related to the Notes -- Subordination" and
"-- Limitations on Repurchase of Notes Upon a Fundamental Change." By reason of
such subordination, in the event of insolvency, holders of the Notes may recover
less, ratably, than other creditors of the Company.
"Senior Indebtedness" is defined to mean: (a) the principal of, interest
(including interest during bankruptcy and similar proceedings) on and any other
amounts owing with respect to (i) any indebtedness of the Company, now or
hereafter outstanding, in respect of borrowed money (other than the Notes), (ii)
any indebtedness of the Company, now or hereafter outstanding evidenced by a
bond, note, debenture, capitalized lease, letter of credit reimbursement
agreement or other similar instrument, (iii) any other written obligation of the
Company, now or hereafter outstanding. to pay money issued or assumed as all or
part of the consideration for the acquisition of property, assets or securities
and (iv) any guaranty or endorsement (other than for collection or deposit in
the ordinary course of business) or discount with recourse of, or other
agreement (contingent or otherwise) to purchase, repurchase or otherwise
acquire, to supply or advance funds or to become liable with respect to
(directly or indirectly), any indebtedness or obligation of any person of the
type referred to in the preceding subclauses (i), (ii) and (iii) now or
hereafter outstanding and (b) any refundings, renewals or extensions of any
indebtedness or other obligation described in clause (a); unless, in the case of
any of the foregoing, the instrument, lease or other document creating or
evidencing the same expressly provides that such indebtedness or obligation by
its terms is not senior in right of payment to the Notes. The Indenture does not
contain any limitation or restriction on the issuance of Senior Indebtedness or
other indebtedness or securities of the Company or its subsidiaries.
The Indenture permits the Trustee and any paying agent to become a creditor
of the Company and to own Notes and does not preclude the Trustee or any such
paying agent from enforcing its rights as a creditor, including rights as a
holder of Senior Indebtedness. See "-- Concerning the Trustee."
In the event that any holder of Notes receives any payment or distribution
of assets of the Company of any kind in contravention of the subordination
provisions of the Indenture in respect of the Notes before all Senior
Indebtedness is paid in full, then such payment or distribution will be held by
the recipient in trust for the benefit of holders of Senior Indebtedness of the
Company and shall pay it over to them as their interests may appear.
Any right of the Company to receive assets of any of its subsidiaries upon
their liquidation or reorganization (and the consequent right of the holders of
the Notes to participate in these assets) will be effectively subordinated to
the claims of that subsidiary's creditors (including trade creditors), except to
the extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinate
to any security interests in the assets of such subsidiary and any indebtedness
of such subsidiary senior to that held by the Company and would be subject to
judicial power to subordinate the Company's claim to those of other creditors of
such subsidiary in certain cases.
The Company is obligated to pay reasonable compensation to the Trustee and
to indemnify the Trustee against any losses, liabilities or expenses incurred by
it in connection with its duties under the Indenture. The Trustee's claims for
such payments will be senior to those of holders of the Notes in respect of all
funds collected or held by the Trustee.
EVENTS OF DEFAULT AND NOTICE THEREOF
The following are Events of Default: (a) a default in the payment of any
interest on any Note continues for 30 days or more after such payment is due,
whether or not such payment is prohibited by the subordination provisions of the
Indenture, (b) a default in the payment of principal of or premium, if any, on
any Note or of the repurchase price in respect of any Note when due, whether or
not such payment is prohibited by the subordination provisions of the Indenture,
(c) a default in the performance of any other covenant or
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<PAGE> 23
agreement of the Company in the Indenture that continues for 60 days after
written notice to the Company by the Trustee or the holders of at least 25% in
principal amount of outstanding Notes, (d) failure by the Company to make any
payment when due, including any applicable grace period, in respect of
indebtedness for borrowed money of the Company, which payment is in an amount in
excess of $20.0 million, (e) default by the Company with respect to any
indebtedness for borrowed money of the Company, which default results in
acceleration of any such indebtedness which is in an amount in excess of $20.0
million, and (f) certain events of bankruptcy, insolvency or reorganization.
If an Event of Default shall occur and be continuing and if it is known to
the Trustee, the Trustee is required to mail to each holder of the Notes a
notice of the Event of Default within 90 days after such default occurs. Except
in the case of a default in payment of the principal of or premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as the
Trustee in good faith determines that withholding the notice is in the interests
of the holders of the Notes.
If an Event of Default shall occur and be continuing, the Trustee or the
holders of not less than 25% in principal amount of outstanding Notes may
declare the principal of, and accrued interest on, all the Notes to be due and
payable immediately. If the Event of Default relates to bankruptcy, insolvency
or reorganization, the Notes shall automatically become due and payable
immediately, subject to applicable law.
Holders of the Notes may not enforce the Indenture or Notes except as
provided in the Indenture. Subject to the provisions of the Indenture relating
to the duties of the Trustee in case an Event of Default shall occur and be
continuing, the Trustee will be under no obligation to exercise any of the
rights or powers under the Indenture at the request or direction of any holders
of the Notes, unless the holders shall have offered the Trustee indemnity
reasonably satisfactory to it. Subject to the indemnification provisions and
certain limitations contained in the Indenture, the holders of a majority in
principal amount of the Notes at the time outstanding will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee. Those holders may, in certain cases, waive any default except a default
in payment of principal of, or premium, if any, or interest on, any Note or a
failure to comply with certain provisions of the Indenture relating to
conversion of the Notes.
The Company is required to furnish the Trustee annually with a certificate
as to its compliance with the conditions and covenants provided for in the
Indenture.
DISCHARGE
The Indenture provides that the Company may terminate its obligations under
the Indenture at any time by delivering all outstanding Notes to the Trustee for
cancellation if the Company has paid all sums payable by it under the Indenture.
At any time within one year before the maturity of the Notes or the redemption
of all the Notes, the Company may terminate its substantive obligations under
the Indenture, other than its obligations to pay the principal of, and interest
on, the Notes, by depositing with the Trustee money or U.S. Government
obligations sufficient to pay all remaining indebtedness on the Notes when due.
MERGER AND CONSOLIDATION
The Company may not consolidate or merge with or into, or sell, lease,
convey or otherwise dispose of all or substantially all of its assets to,
another corporation, person or entity unless (i) the Company is the surviving
person or the successor or transferee is a corporation organized under the laws
of the United States, any state thereof or the District of Columbia, or a
corporation or comparable legal entity organized under the laws of a foreign
jurisdiction and whose equity securities are listed on a national securities
exchange in the United States or authorized for quotation on the Nasdaq National
Market, (ii) the successor assumes all the obligations of the Company under the
Notes and the Indenture (except under certain circumstances, conversion
obligations) and enters into a supplemental indenture and (iii) after such
transaction no Event of Default exists.
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<PAGE> 24
MODIFICATION AND WAIVER
Subject to certain exceptions, supplements of and amendments to the
Indenture or the Notes may be made by the Company and the Trustee with the
consent of the holders of not less than a majority in aggregate principal amount
of the outstanding Notes and any existing default or compliance with any
provisions may be waived with the consent of the holders of a majority in
aggregate principal amount of the outstanding Notes. Without the consent of any
holders of the Notes, the Company and the Trustee may amend or supplement the
Indenture or the Notes to cure any ambiguity, defect or inconsistency, to
provide for the assumption of the Company's obligations to holders of the Notes
and to make certain changes with respect to conversion rights in case of a
merger or acquisition otherwise in compliance with the Indenture or to make any
change that does not materially adversely affect the rights of any holder of the
Notes. Without the consent of the holders of each Note affected thereby, an
amendment, supplement or waiver may not (a) change the stated maturity date of
the principal of, or interest on, any Note, or adversely affect the right to
convert any Note, (b) reduce the principal amount or repurchase price of, or
interest or premium, if any, on, any Note, (c) change the currency for payment
of principal of, or interest on, any Note, (d) impair the right to institute
suit for the enforcement of any payment on or with respect to any Note, (e)
modify the subordination provisions of the Indenture in a manner adverse to the
holders, (f) reduce the above stated percentage of outstanding Notes necessary
to amend or supplement the Indenture or waive defaults or compliance or (g)
modify (with certain exceptions) any provisions of the Indenture relating to
modification and amendment of the Indenture or waiver of compliance with
conditions and defaults thereunder.
CONCERNING THE TRUSTEE
State Street Bank and Trust Company, the Trustee under the Indenture, has
been appointed by the Company as the initial paying agent, conversion agent and
registrar ("Registrar") with regard to the Notes. The Company and its
subsidiaries may maintain deposit accounts and conduct other banking
transactions with the Trustee or its affiliates in the ordinary course of
business, and the Trustee and its affiliates may from time to time in the future
provide the Company with banking and financial services in the ordinary course
of their business.
In case an Event of Default shall occur (and shall not be cured) and
holders of the Notes have notified the Trustee, the Trustee will be required to
exercise its powers with the degree of care and skill that a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs. Subject to such provisions, the Trustee is under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
of the holders of Notes, unless the holders shall have offered to the Trustee
indemnity reasonably satisfactory to it.
GOVERNING LAW
The Indenture and Notes are governed by and construed in accordance with
the laws of the State of New York, without giving effect to such State's
conflicts of law principles.
BOOK-ENTRY; DELIVERY AND FORM
The Depository Trust Company ("DTC") will act as securities Depositary for
the Notes. The Notes have been issued in fully registered form, without coupons,
in denominations of $1,000 principal amount and multiples thereof. The Notes are
evidenced by the Global Notes deposited with the trustee as custodian for DTC
and registered in the name of Cede & Co. as DTC's partnership nominee. Record
ownership of the Global Notes may be transferred, in whole or in part, only to
another nominee of DTC or to a successor of DTC or its nominee. Interests in the
Global Note will trade in DTC's Same-Day Funds Settlement System and secondary
market trading activity in such interests will therefore settle in immediately
available funds, subject in all cases to the rules and procedures of DTC and its
participating organizations ("Participants").
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTE WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE. THE LAWS OF SOME STATES
REQUIRE
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<PAGE> 25
THAT CERTAIN PERSONS TAKE PHYSICAL DELIVERY IN DEFINITIVE FORM OF SECURITIES
THAT THEY OWN. CONSEQUENTLY, THE ABILITY TO TRANSFER BENEFICIAL INTERESTS IN A
GLOBAL NOTE TO SUCH PERSONS MAY BE LIMITED TO THAT EXTENT. BECAUSE DTC CAN ACT
ONLY ON BEHALF OF THE PARTICIPANTS, WHICH IN TURN ACT ON BEHALF OF THE INDIRECT
PARTICIPANTS AND CERTAIN BANKS, THE ABILITY OF A PERSON HAVING BENEFICIAL
INTERESTS IN A GLOBAL NOTE TO PLEDGE SUCH INTERESTS TO PERSONS OR ENTITIES THAT
DO NOT PARTICIPATE IN THE DTC SYSTEM, OR OTHERWISE TAKE ACTIONS IN RESPECT OF
SUCH INTERESTS, MAY BE AFFECTED BY THE LACK OF A PHYSICAL CERTIFICATE EVIDENCING
SUCH INTERESTS.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its Participants deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants" include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain custodial relationships with Direct
Participants, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.
Purchases of Notes within the DTC system must be made by or through Direct
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each actual purchaser of each Note ("Beneficial Owner") is
in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the Beneficial
Owners purchased Notes. Transfers of ownership interests in the Notes are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Notes, except in the event that use of the
book-entry system for the Notes is discontinued.
To facilitate transfers, all Notes deposited by Participants with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
Notes with DTC and their registration in the name of Cede & Co. effect no change
in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of
the Notes; DTC's records reflect only the identity of the Direct Participants to
whose accounts such Notes are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the Notes. If less than all of the Notes are being redeemed, DTC's current
practice is to determine by lot the amount of the interest of each Direct
Participant to be redeemed.
Although voting with respect to the Notes is limited to the holders of
record of the Notes, in those instances in which a vote is required, neither DTC
nor Cede & Co. will itself consent or vote with respect to Notes. Under its
usual procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the
Trustee as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts such Notes are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
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<PAGE> 26
Payments of principal of and any premium and interest on the Notes will be
made by the Trustee to Cede & Co., as DTC's partnership nominee. DTC's practice
is to credit Direct Participants' accounts on the relevant payment date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participant and not of DTC or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
distributions to DTC is the responsibility of the Trustee, disbursement of such
payments to Direct Participants shall be the responsibility of DTC, and
disbursements of such payments to the Beneficial Owners is the responsibility of
Direct and Indirect Participants.
DTC may discontinue providing its services as securities Depositary with
respect to any of the Notes at any time by giving reasonable notice to the
Company. In the event that a successor securities Depositary is not obtained,
definitive certificates representing such Notes are required to be printed or
delivered. The Company, at its option, may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor Depositary).
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be accurate, but the
Company assumes no responsibility for the accuracy thereof. The Company has no
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
A Global Note is exchangeable for definitive Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depository for the Global Note and the Company thereupon
fails to appoint a successor depository or (y) has ceased to be a clearing
agency registered under the Exchange Act, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Notes in certificated form or (iii) there shall have occurred and be continuing
a Default or an Event of Default with respect to the Notes. In all cases,
certificated Notes delivered in exchange for any Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of DTC (in accordance with its
customary procedures).
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal
income tax considerations relevant to holders of the Notes and shares of GGD
Stock issuable upon conversion of the Notes. This discussion is based on the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
promulgated thereunder, Internal Revenue Service ("IRS") rulings and judicial
decisions now in effect, all of which are subject to change (possibly with
retroactive effect) or to different interpretations. This discussion does not
purport to deal with all aspects of United States federal income taxation that
may be relevant to a particular investor's decision to purchase the Notes or
acquire shares of GGD Stock issuable upon conversion of the Notes, and it is not
intended to be wholly applicable to all categories of investors, some of which
(such as dealers in securities, banks, insurance companies, tax-exempt
organizations and persons holding the Notes as a position in a "straddle",
hedge, conversion transaction or otherwise as an integrated investment) may be
subject to special rules. In addition, this discussion is limited to persons
that purchase the Notes pursuant to this Prospectus and hold the Notes and will
hold GGD shares as "capital assets" within the meaning of Section 1221 of the
Code.
PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE GGD STOCK.
As used herein, the term "United States Holder" means a beneficial owner of
the Notes that is, for United States federal income tax purposes, (i) a citizen
or resident (as defined in Section 7701(b) of the Code) of the United States,
(ii) a corporation, partnership or other entity created or organized in or under
the laws of the United States or political subdivision thereof, (iii) an estate
the income of which is subject to United States federal income taxation
regardless of its source, or (iv) a trust whose administration is subject to the
primary supervision of a United States court and which has one or more United
States persons who have the authority to control all substantial decisions of
the trust. A "Non-United States Holder" is any holder of Notes that is not a
United States Holder.
UNITED STATES HOLDERS
PAYMENT OF INTEREST
Interest on a Note generally will be includable in the income of a United
States Holder as ordinary income at the time such interest is received or
accrued, in accordance with such United States Holder's regular method of
accounting for United States federal income tax purposes.
CONVERSION OF NOTES INTO GGD STOCK
In general, a United States Holder will not recognize income, gain or loss
upon a conversion of the Notes into shares of GGD Stock except with respect to
cash received in lieu of a fractional share of GGD Stock. Such holder's adjusted
tax basis in the GGD Stock received on conversion of a Note will equal the
holders's adjusted tax basis in the Note at the time of conversion, reduced by
the portion of the adjusted tax basis of the Note allocated to any fractional
share of GGD Stock exchanged for cash. A United States Holder's holding period
in the GGD Stock received on conversion of Notes will include the period during
which the converted Notes were held.
Cash received in lieu of a fractional share of GGD Stock upon conversion of
a Note will be treated as a payment in exchange for the fractional share of GGD
Stock. Accordingly, the receipt of cash in lieu of a fractional share of GGD
Stock generally will result in capital gain or loss, measured by the difference
between the cash received for the fractional share and the United States
Holder's adjusted tax basis in the fractional share interest.
The conversion price of the Notes is subject to adjustment under certain
circumstances. See "DESCRIPTION OF NOTES -- Conversion Rights." Section 305 of
the Code and the Treasury Regulations issued thereunder may treat the United
States Holders of the Notes as having received a constructive distribution,
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taxable as ordinary income to the extent of the Company's current and
accumulated earnings and profits, if and to the extent that certain adjustments
in the conversion price, or failure to make such an adjustment, that may occur
in limited circumstances (particularly an adjustment to reflect a taxable
dividend to holders of GGD Stock) increase the proportionate interest of a
holder of Notes in the fully diluted GGD Stock, whether or not such holder ever
exercises its conversion privilege. Generally, a United States Holder's tax
basis in a Note will be increased by the amount of any such constructive
dividend.
The Company believes that the GGD Stock should be treated as common stock
of the Company. United States Holders should be aware, however, that there are
no United States federal income tax regulations, court decisions or published
IRS rulings bearing directly on the characterization of the GGD Stock. In
addition, the IRS has announced that it will not issue any advance rulings
regarding the United States federal income tax consequences of stock such as the
GGD Stock that has certain voting and liquidation rights in an issuing
corporation, but whose dividend rights are determined by reference to the
earnings and profits of a segregated portion of the issuing corporation's
assets. It is possible that the IRS might take the position that the GGD Stock
represents property other than stock of the Company, with the result that (i) a
portion of the purchase price of the Notes could be allocated to the conversion
right, potentially resulting in the Notes being issued with original issue
discount, and (ii) the conversion of Notes into shares of GGD Stock would be a
taxable transaction.
MARKET DISCOUNT
Under the market discount rules, if a United States Holder purchases a Note
at market discount (i.e., at a price below its principal amount) in excess of a
statutorily-defined de minimis amount and thereafter recognizes gain upon a
disposition or retirement of the Note, then the lesser of the gain recognized or
the portion of the market discount that accrued on a straight-line basis (or, if
elected, on a constant interest rate basis) generally will be treated as
ordinary income at the time of the disposition. Any accrued market discount not
previously taken into income prior to a conversion of a Note, however, should
(under Treasury Regulations not yet issued) carry over to the GGD Stock received
on conversion and be treated as ordinary income upon a subsequent disposition of
such GGD Stock to the extent of any gain recognized on such disposition. In
addition, absent an election to include market discount in income as it accrues,
a United States Holder of a market discount debt instrument may be required to
defer a portion of any interest expense that otherwise may be deductible on any
indebtedness incurred or maintained to purchase or carry such debt instrument
until the holder disposes of the debt instrument in a taxable transaction.
AMORTIZABLE BOND PREMIUM
If a United States Holder of a Note acquires a Note at a cost that is in
excess of its principal amount, the United States Holder may elect under Section
171 of the Code to amortize the excess cost (as an offset to interest income) on
a constant interest rate basis over the term of such Note. (If a smaller
amortization allowance would result, the amortization is determined instead by
reference to an earlier call date and price.) If the United States Holder makes
an election to amortize bond premium, the tax basis of all such holder's Notes
will be reduced by the allowable bond premium amortization. The amortization
election would apply to all debt instruments held or subsequently acquired by
the electing purchaser and cannot be revoked without permission from the
Service. On conversion of a Note into shares of GGD Stock, no additional
amortization of any bond premium would be allowed, and any remaining premium
would be added to the United States Holder's basis in the GGD stock received.
SALE, EXCHANGE OR RETIREMENT OF NOTES
Each United States Holder of Notes generally will recognize gain or loss
upon the sale, exchange, redemption, repurchase, retirement or other disposition
of the Notes (not including a conversion of the Notes into GGD Stock) equal to
the difference (if any) between (i) the amount of cash and the fair market value
of any property received (except to the extent that such cash or other property
is attributable to the payment of accrued interest not previously included in
income, which amount will be taxable as ordinary income) and (ii) such holder's
adjusted tax basis in those Notes (including any market discount previously
included in
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<PAGE> 29
income by the holder). Each United States Holder of GGD Stock into which the
Notes are converted, in general, will recognize gain or loss upon the sale,
exchange or other disposition of the GGD Stock measured under rules similar to
those described in the preceding sentence for the Notes. Any such gain or loss
recognized on the sale, exchange, repurchase, retirement or other disposition of
a Note or share of GGD Stock should generally be capital gain or loss (except as
discussed under "-- Market Discount" above), and would be subject to tax at the
short-term, mid-term or long-term capital gain tax rate, depending on the period
for which the Notes are held. A United States Holder's initial tax basis in a
Note will be the purchase price paid therefor. The deductibility of capital
losses is subject to limitation.
DISTRIBUTIONS
Distributions, if any, made on any GGD Stock received upon conversion of
the Notes generally will be includable in the income of a United States Holder
as ordinary income to the extent of the Company's current and accumulated
earnings and profits. Such distributions may be eligible for the
dividends-received deduction in the case of United States Holders that are
domestic corporations, subject to applicable limitations.
To the extent that the amount of any distribution exceeds the Company's
current and accumulated earnings and profits, the distribution first will be
treated as a tax-free return of capital until the United States Holder's
adjusted basis in the GGD Stock is reduced to zero, and the balance in excess of
adjusted basis will be taxed as capital gain.
INFORMATION REPORTING AND BACKUP WITHHOLDING
A United States Holder of Notes or GGD Stock may be subject to backup
withholding at a rate of 31% with respect to certain reportable payments,
including interest payments, dividend payments and, under certain circumstances,
principal payments on the Notes or proceeds of the sale of the Notes or the GGD
Stock. These backup withholding rules apply if the holder, among other things,
(i) fails to furnish a social security number or other taxpayer identification
number ("TIN") certified under penalties of perjury within a reasonable time
after the request therefor, (ii) furnishes an incorrect TIN, (iii) fails to
report properly interest or dividends or (iv) under certain circumstances, fails
to provide a certified statement, signed under penalties of perjury, that the
TIN furnished is the correct number and that such holder is not subject to
backup withholding. A United States Holder who does not provide the Company with
its correct TIN also may be subject to penalties imposed by the IRS. Any amount
withheld from a payment to a United States Holder under the backup withholding
rules is creditable against such holder's United States federal income tax
liability, provided the required information is furnished to the IRS. Backup
withholding will not apply, however, with respect to payments made to certain
holders, including corporations and tax-exempt organizations, provided their
exemption from backup withholding is properly established.
The Company will report to the United States Holders of Notes and GGD Stock
and to the IRS the amount of any reportable payments for each calendar year and
the amount of tax withheld, if any, with respect to such payments.
NON-UNITED STATES HOLDERS
PAYMENT OF INTEREST
Generally, interest income of a Non-United States Holder that is not
effectively connected with a United States trade or business or attributable to
a permanent establishment in the United States will be subject to a withholding
tax at a 30% rate (or, if applicable, a lower treaty rate). However, interest
paid on a Note by the Company or any Paying Agent to a Non-United States Holder
will qualify for the "portfolio interest exemption" and therefore, subject to
the discussion of backup withholding below, will not be subject to United States
federal income tax or withholding tax, provided that (i) the Non-United States
Holder does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the Company entitled to vote, (ii) the
Non-United States Holder is not a controlled foreign corporation that is related
to the Company actually or constructively through stock ownership, (iii) the
Non-United States
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<PAGE> 30
Holder is not a bank which acquired the Notes in consideration for an extension
of credit made pursuant to a loan agreement entered into in the ordinary course
of business and (iv) either (a) the beneficial owner of the Note, under
penalties of perjury, provides the Company or its agent with a Form W-8 (or a
suitable substitute form) that includes its name and address and certifies that
it is not a United States person or (b) a securities clearing organization,
bank, or other financial institution that holds customers' securities in the
ordinary course of its trade or business certifies to the Company or its agent,
under penalties of perjury, that such a Form W-8 (or a suitable substitute)
statement has been received by it from the Non-United States Holder or a
qualifying intermediary and furnishes to the Company or its agent a copy
thereof.
Recently adopted Treasury regulations (the "Withholding Regulations") will
change the methods for satisfying the certification requirement described in
clause (iv) above. The Withholding Regulations also will require, in the case of
Notes held by a foreign partnership that (i) this certification generally be
provided by the partners rather than by the foreign partnership and (ii) the
foreign partnership provide certain information, including a United States
employer identification number. A look-through rule would apply in the case of
tiered partnerships. The Withholding Regulations are effective for payments made
after December 31, 1999.
A Non-United States Holder will generally be subject to tax in the same
manner as a United States corporation or resident with respect to interest
income if it is effectively connected with the conduct of trade or business in
the United States (or is attributable to a permanent establishment in the United
States, if a tax treaty applies). Such income received by a Non-United States
Holder that is a corporation may in certain circumstances be subject to an
additional "branch profits tax" at a 30% rate or, if applicable, a lower treaty
rate.
To claim the benefit of a tax treaty or to claim exemption from withholding
because the income is effectively connected to a U.S. trade or business, the
Non-United States Holder must provide a properly executed Form 1001 or 4224, as
applicable, prior to the payment of interest. Under the Withholding Regulations,
the Non-United States Holder would need to provide a properly executed Form W-8
in either instance.
SALE, EXCHANGE OR RETIREMENT OF NOTES
A Non-United States Holder generally will not be subject to United States
federal income tax or withholding tax on gain realized on the sale or exchange
of Notes unless (i) the Non-United States Holder is an individual who was
present in the United States for 183 days or more during the taxable year and to
whom such gain is U.S. source, (ii) the gain is effectively connected with the
conduct of a trade or business of the holder in the United States (or is
attributable to a permanent establishment in the United States, if a tax treaty
applies), (iii) the Non-United States Holder is subject to tax pursuant to the
provisions of the Code applicable to certain United States expatriates or, (iv)
under certain circumstances, which the Company does not expect to be applicable,
the Note is a "United States real property interest," within the meaning of
section 897 of the Code.
CONVERSION OF NOTES INTO GGD STOCK
In general, no United States federal income tax or withholding tax will be
imposed upon the conversion of a Note into GGD Stock by a Non-United States
Holder, except with respect to the receipt of cash in lieu of fractional shares
by Non-United States Holders upon conversion of a Note, where any of the
conditions described above under "Non-United States Holders -- Sale, Exchange or
Retirement of Notes" is satisfied.
SALE OR EXCHANGE OF GGD STOCK
A Non-United States Holder will generally not be subject to United States
federal income tax or withholding tax on the sale or exchange of GGD Stock
unless any of the conditions above under "Non-United States Holders -- Sale,
Exchange or Retirement of Notes" is satisfied.
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DIVIDENDS ON THE GGD STOCK
Under current Treasury Regulations, dividends paid on shares of GGD Stock
held by a Non-United States Holder and not effectively connected with the
conduct of a trade or business in the United States (or attributable to a
permanent establishment in the United States) by such holder will generally be
subject to United States withholding tax at a rate of 30%, or such lower rate as
may be provided by an applicable tax treaty, but generally will not be subject
to any additional information reporting or backup withholding.
Except to the extent that an applicable tax treaty otherwise provides, a
Non-United States Holder will be subject to tax in the same manner as a United
States Holder on dividends paid that are effectively connected with the conduct
of a trade or business in the United States by the Non-United States Holder (or
is attributable to a permanent establishment in the United States, if a tax
treaty applies). If such Non-United States Holder is a foreign corporation, it
may also be subject to a United States "branch profits tax" on such effectively
connected income at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
Under the Withholding Regulations, effective for payments made after
December 31, 1999, a holder who is not a United States person who wishes to
claim the benefit of an applicable tax treaty rate will be required to satisfy
applicable certification requirements. In the case of GGD Stock held by a
foreign partnership, the Withholding Regulations will require that (i) this
certification generally be provided by the partners rather than by the foreign
partnership and (ii) the foreign partnership provide certain information,
including a United States employer identification number. A look-through rule
would apply in the case of tiered partnerships.
DEATH OF A NON-UNITED STATES HOLDER
A Note held by an individual who is not a citizen or resident of the United
States at the time of death will not be includable in the decedent's gross
estate for United States estate tax purposes, provided that such holder or
beneficial owner did not at the time of death actually or constructively own 10%
or more of the combined voting power of all classes of stock of the Company
entitled to vote, and provided that, at the time of death, payments with respect
to such Note would not have been effectively connected with the conduct by such
Non-United States Holder of a trade or business within the United States.
GGD Stock actually or beneficially held (other than through a foreign
corporation) by a Non-United States Holder at the time of his or her death (or
previously transferred subject to certain retained rights or powers or
transferred by gift within three years of death) will be subject to United
States federal estate tax unless otherwise provided by an applicable estate tax
treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
United States information reporting requirements and backup withholding tax
will not apply to payments on a Note to a Non-United States Holder if the
statement described in "Non-United States Holders -- Payment of Interest" is
duly provided by such Holder, provided that the payor does not have actual
knowledge that the Holder is a United States person.
Under current Treasury Regulations, information reporting requirements and
backup withholding tax will not apply to any payment of the proceeds of the sale
of a Note or any payment of the proceeds of the sale of GGD Stock effected
outside the United States by a foreign office of a "broker" (as defined in
applicable Treasury Regulations), unless such broker is (i) a United States
person, (ii) a foreign person that derives 50% or more of its gross income for
certain periods from activities that are effectively connected with the conduct
of a trade or business in the United States or (iii) a controlled foreign
corporation for United States federal income tax purposes. Payment of the
proceeds of any such sale effected outside the United States by a foreign office
of any broker that is described in (i), (ii) or (iii) of the preceding sentence
will not be subject to backup withholding tax, but will be subject to
information reporting requirements unless such broker has documentary evidence
in its records that the beneficial owner is a Non-United States Holder and
certain other conditions are met, or the beneficial owner otherwise establishes
an exemption. Payment of the proceeds of any such sale
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<PAGE> 32
to or through the United States office of a broker is subject to information
reporting and backup withholding requirements, unless the beneficial owner of
the Note provides the statement described in "Non-United States
Holders -- Payment of Interest" or otherwise establishes an exemption.
If paid to an address outside the United States, dividends on GGD Stock
held by a Non-United States Holder will generally not be subject to the
information reporting and backup withholding requirements described in this
section, provided that the payor does not have actual knowledge that the Holder
is a United States person. However, under the Withholding Regulations, dividend
payments made after December 31, 1999 will be subject to information reporting
and backup withholding unless applicable certification requirements are
satisfied. See the discussion above with respect to rules applicable to foreign
partnerships under the Withholding Regulations.
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DESCRIPTION OF GENZYME CAPITAL STOCK
The following descriptions are qualified in their entirety by reference to
the Genzyme Charter which is an exhibit to the Registration Statement of which
this Prospectus forms a part.
INTRODUCTION
Genzyme is authorized to issue 390 million shares of common stock, of which
200 million shares have been designated GGD Stock, 40 million shares have been
designated GTR Stock, 40 million shares have been designated GMO Stock and 110
million shares remain undesignated as to series. In addition, Genzyme is
authorized to issue 10 million shares of preferred stock. Each designated series
of Genzyme common stock has the voting powers, qualifications and rights
described below.
DIVIDENDS
Genzyme has never paid any cash dividends on shares of its capital stock.
Genzyme currently intends to retain its earnings to finance future growth and,
therefore, does not anticipate paying any cash dividends on Genzyme common stock
in the foreseeable future.
Dividends on each series of Genzyme common stock may be declared and paid
only out of the lesser of funds of Genzyme legally available therefor and the
Available GGD Dividend Amount (with respect to the GGD Stock), the Available GTR
Dividend Amount (with respect to the GTR Stock) or the Available GMO Dividend
Amount (with respect to the GMO Stock)(each term as defined below). Under the
Massachusetts Business Corporation Law (the "MBCL"), the payment of dividends is
permitted if the corporation is not insolvent, the dividend payment does not
render the corporation insolvent, and the dividend payment does not violate the
corporation's articles of organization. Subject to such limitations, the Genzyme
Board may, in its sole discretion, declare and pay dividends exclusively on any
series of Genzyme common stock, in equal or unequal amounts, notwithstanding the
amounts available for the payment of dividends on each series, the respective
voting and liquidation rights of each series, the amounts of prior dividends
declared on each series or any other factor.
As stated above, in addition to the statutory limitations under the MBCL,
dividends on the GGD Stock, the GTR Stock and the GMO Stock are limited to an
amount not in excess of the Available GGD Dividend Amount, the Available GTR
Dividend Amount or the Available GMO Dividend Amount, respectively. The
"Available Dividend Amount" with respect to a particular series of Genzyme
common stock is defined to mean generally the greater of
(i) the excess of
(a) the greater of
(X) the fair value of the net assets allocated to the division
represented by such series of Genzyme common stock and
(Y) an amount equal to stockholders' equity allocated to such
division as of June 30, 1994, in the case of the GGD Stock and the GTR
Stock, and September 30, 1996, in the case of the GMO Stock, increased
or decreased, as appropriate, to reflect, after such date
(1) the net income or loss of such division,
(2) any dividends or other distributions (including by
reclassification or exchange) declared or paid with respect to, or
repurchases or issuances of, any shares of capital stock attributed
to such division, but excluding dividends or other distributions paid
in shares of capital stock attributed to such division to the holders
thereof and
(3) any other adjustments to the stockholders' equity of such
division made in accordance with generally accepted accounting
principles, over
(b) the aggregate par value of all outstanding shares of capital stock
attributed to such division and
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(ii) the amount legally available for the payment of dividends determined
in accordance with Massachusetts law applied as if such division were a separate
corporation.
EXCHANGE OF GTR STOCK AND GMO STOCK
The GTR Stock or the GMO Stock may be exchanged for any combination of cash
and/or GGD Stock upon the terms described below. Genzyme cannot predict the
impact on the market prices of each series of Genzyme common stock of its
ability to effect such exchanges.
OPTIONAL EXCHANGE. The Genzyme Board may at any time exchange all
outstanding shares of GTR Stock or GMO Stock for any combination of cash and/or
GGD Stock having a Fair Market Value equal to 130% of the Fair Market Value of
the GTR Stock or GMO Stock, as the case may be, such Fair Market Value being
determined by the trading prices during a specified period prior to the first
public announcement by Genzyme of such exchange.
The foregoing provision allows Genzyme the flexibility to redeem all
outstanding shares of GTR Stock and/or GMO Stock and leave outstanding one or
two series of Genzyme common stock that would, collectively, represent the
residual equity interest in all of Genzyme's businesses. The optional exchange
could be exercised at any future time if the Genzyme Board determined that,
under the facts and circumstances then existing, an equity structure consisting
of three series of common stock was no longer in the best interests of all of
Genzyme's stockholders. Such exchange may be completed, however, at a time that
is disadvantageous to the holders of a particular series of Genzyme common
stock. The right of the Genzyme Board to exchange at any time all outstanding
shares of GTR Stock or GMO Stock for any combination of cash and/or GGD Stock
having a Fair Market Value equal to 130% of the Fair Market Value of the GTR
Stock or the GMO Stock does not preclude the Genzyme Board from making an offer
to exchange such shares on terms other than those provided in the Genzyme
Charter. Although any alternative offer would be subject to acceptance by
holders of the shares to be exchanged, such offer could be made on terms less
favorable than those provided in the Genzyme Charter. See "RISK FACTORS -- Risks
Related to Genzyme Tracking Stock -- No Rights or Additional Duties With Respect
to the Divisions; Potential Conflicts."
MANDATORY EXCHANGE. In the event of the disposition, in one transaction or
a series of related transactions, by Genzyme of all or substantially all of the
properties and assets allocated to GTR or GMO (other than in connection with the
sale by Genzyme of all or substantially all of its properties and assets) to any
person, entity or group (other than (i) a wholly-owned subsidiary of Genzyme or
(ii) any entity formed at the direction of Genzyme in connection with obtaining
financing for the programs or products of GTR or GMO, as the case may be),
Genzyme will be required to exchange each outstanding share of GTR Stock or GMO
Stock for any combination of cash and/or GGD Stock having a Fair Market Value
equal to 130% of the Fair Market Value of GTR Stock or GMO Stock, as the case
may be, as determined by the trading prices during a specified period prior to
the first public announcement by Genzyme of such disposition. See "RISK
FACTORS -- Risks Related to Genzyme Tracking Stock -- Exchange of GTR Stock and
GMO Stock."
VOTING RIGHTS
Holders of shares of each series of Genzyme common stock vote together as a
single class on all matters as to which common stockholders generally are
entitled to vote (including the election of directors). On all such matters,
each share of GGD Stock has one vote, each share of GTR Stock has, through
December 31, 1998, .33 vote, and each share of GMO Stock has, through December
31, 1998, .25 vote. Holders of outstanding GGD Stock, GTR Stock and GMO Stock
currently have approximately 91.1%, 7.7% and 1.2%, respectively, of the total
voting power of Genzyme. On January 1, 1999 and on each January 1 every two
years thereafter, the number of votes to which each share of GTR Stock and GMO
Stock is entitled will be adjusted to equal the ratio of the Fair Market Value
of one share of GTR Stock or GMO Stock, as the case may be, to the Fair Market
Value of one share of GGD Stock as of such date. If no shares of GGD Stock are
outstanding on such date, then all other series of Genzyme common stock
outstanding on such date will have a number of votes such that each share of the
series of common stock that has the highest Fair Market Value per share on such
date (the "Base Series") will have one vote, and each share of each other series
of outstanding common
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stock will have the number of votes determined according to the immediately
preceding sentence, treating, for such purpose, the Base Series as the GGD Stock
in such sentence.
The voting rights of the GTR Stock and the GMO Stock will be appropriately
adjusted so as to avoid dilution in the aggregate voting rights of any series of
Genzyme common stock in the event the outstanding shares of any series are
subdivided (by stock split, reclassification or otherwise) or combined (by
reverse stock split, reclassification or otherwise), or in the event of the
issuance of shares of any series as a dividend or a distribution to holders of
shares of such series. If shares of only one series of Genzyme common stock are
outstanding, or if shares of any series of Genzyme common stock are entitled to
vote separately as a class, each share of that series would have one vote.
The relative voting rights of each series of Genzyme common stock are
adjusted from time to time as described above so that a holder's voting rights
may more closely reflect the market value of such holder's equity investment in
Genzyme. Adjustments in the relative voting rights of each class of Genzyme
common stock may influence an investor interested in acquiring and maintaining a
fixed percentage of Genzyme's voting power to acquire such percentage of all
series of Genzyme common stock, and will limit the ability of investors in one
series to acquire for the same consideration relatively greater or lesser voting
power per share than investors in the other series. To the extent the relative
market values of each series of Genzyme common stock change prior to the first
such adjustment or in between any adjustments, however, an investor in one
series of Genzyme common stock may acquire relatively more or less voting power
for the same consideration when compared with investors in another series of
Genzyme common stock.
In addition to voting together as a single class of stock, the Genzyme
Charter requires the approval by the holders of the affected series of Genzyme
common stock at a meeting at which a quorum is present and the votes cast in
favor of the proposal exceed those cast against to:
(i) allow any proceeds from the disposition of the properties or
assets allocated to any division to be used in the business of the other
division without fair compensation,
(ii) allow any properties or assets allocated to any division to be
used in the business of another division or for the declaration or payment
of any dividend or distribution on any series of Genzyme common stock not
attributed to such division without fair compensation,
(iii) issue shares of any series of Genzyme common stock without
allocating the proceeds of such issuance to the division represented by
such series of Genzyme common stock (provided, however, that Genzyme may
without such approval issue GTR Designated Shares and GMO Designated
Shares),
(iv) change the rights or preferences of any series of Genzyme common
stock so as to affect the series adversely or
(v) effect any merger or business combination involving Genzyme as a
result of which (a) the holders of all series of Genzyme common stock shall
no longer own, directly or indirectly, at least fifty percent (50%) of the
voting power of the surviving corporation and (b) the holders of all series
of Genzyme common stock do not receive the same form of consideration,
distributed among such holders in proportion to the market capitalization
of each series of Genzyme common stock as of the date of the first public
announcement of such merger or business combination.
In addition to the voting rights provided in the Genzyme Charter, the
approval of the holders of a majority of the outstanding shares of each series
of Genzyme common stock, voting together as a single class, is required under
the current MBCL to approve any amendment to the articles of organization that
would alter or change the powers, preferences or special rights of the shares of
such series so as to affect them adversely. The MBCL does not currently provide
for any other separate voting rights for a series of common stock. Consequently,
because most matters brought to a stockholder vote will only require the
approval of a majority of all of Genzyme's outstanding capital stock entitled to
vote on such matters (including all series of common stock) voting together as a
single class and because the holders of GGD Stock will initially have more than
the number of votes required to approve any such matter, such holders would be
in a position to control the
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<PAGE> 36
outcome of the vote on such a matter. See "RISK FACTORS -- Risks Related to
Genzyme Tracking Stock -- No Additional Separate Voting Rights."
LIQUIDATION RIGHTS
In the event of a voluntary or involuntary dissolution, liquidation or
winding up of the affairs of Genzyme, after Genzyme has satisfied or made
provision for its debts and obligations and for payment to the holders of shares
of any series of capital stock having preferential rights to receive
distributions of the net assets of Genzyme, the holders of Genzyme common stock
are entitled to receive the net assets, if any, remaining for distribution to
common stockholders on a per share basis in proportion to the respective per
share liquidation units of such series and will have no direct claim against any
particular assets of Genzyme or any of its subsidiaries. [On June 30, 1998,]
each share of GGD Stock had 100 liquidation units, each share of GTR Stock had
58 liquidation units and each share of GMO Stock had 25 liquidation units. The
liquidation units of the GTR Stock and the GMO Stock will be appropriately
adjusted so as to avoid dilution in the aggregate liquidation rights of any
series in the event the outstanding shares of any series are subdivided (by
stock split, reclassification or otherwise) or combined (by reverse stock split,
reclassification or otherwise), or in the event of the issuance of shares of any
series as a dividend or a distribution to holders of shares of that series, but
will not otherwise be adjusted. A merger or business combination involving
Genzyme or a sale of all or substantially all of the assets of Genzyme will not
be treated as a liquidation. Genzyme may not, however, without approval by the
holders of the GTR Stock and the GMO Stock voting as separate series of stock,
effect any merger or business combination involving Genzyme as a result of which
(i) the holders of all series of Genzyme common stock shall no longer own,
directly or indirectly, at least fifty percent of the voting power of the
surviving corporation and (ii) the holders of each series of Genzyme common
stock do not receive the same form of consideration, distributed among such
holders in proportion to the market capitalization of each series of common
stock as of the date of the first public announcement of such merger or business
combination.
GTR DESIGNATED SHARES AND GMO DESIGNATED SHARES
GTR Designated Shares and GMO Designated Shares are authorized shares of
GTR Stock and GMO Stock, respectively, which are not issued and outstanding, but
which the Genzyme Board may from time to time issue, sell or otherwise
distribute without allocating the proceeds or other benefits of such issuance,
sale or distribution to GTR or GMO, respectively. The shares of GTR Stock and
GMO Stock that are issuable with respect to the GTR Designated Shares and the
GMO Designated Shares, respectively, are not outstanding shares of GTR Stock or
GMO Stock, are not eligible to receive dividends and cannot be voted by Genzyme.
As of December 31, 1997, there were 885,053 GTR Designated Shares,
representing a potential 5.6% equity interest in GTR. The number of GTR
Designated Shares from time to time will be:
(i) adjusted as appropriate to reflect subdivisions (by stock split or
otherwise) and combinations (by reverse stock split or otherwise) of the
GTR Stock and dividends or distributions of shares of GTR Stock to holders
of GTR Stock and other reclassifications of GTR Stock;
(ii) decreased by (a) the number of any shares of GTR Stock issued by
Genzyme, the proceeds of which are allocated to Genzyme General, (b) the
number of any shares of GTR Stock issued upon the exercise or conversion of
securities convertible into GTR Stock that are attributed to Genzyme
General and (c) the number of any shares of GTR Stock issued by Genzyme as
a dividend or distribution or by reclassification, exchange or otherwise to
holders of GGD Stock; and
(iii) increased by (a) the number of any outstanding shares of GTR
Stock repurchased by Genzyme, the consideration for which was allocated to
Genzyme General, (b) one for each $10.00 reallocated from Genzyme General
to GTR from time to time in satisfaction of the purchase option of Genzyme
General set forth in section 4.18 of the Agreement and Plan of
Reorganization among Genzyme, Phoenix Acquisition Corporation and
BioSurface Technology, Inc. dated as of July 25, 1994, up to a maximum $30
million, and (c) the number of shares of GTR Stock equal to the fair value
(as
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<PAGE> 37
determined by the Genzyme Board) of assets or properties allocated to
Genzyme General that are reallocated to GTR (other than reallocations that
represent sales at fair value between such divisions or reallocations
described in clause (b) above) divided by the Fair Market Value of one
share of GTR Stock as of the date of such reallocation.
The Genzyme Charter prohibits the taking of any action which would have the
effect of reducing the number of GTR Designated Shares to a number which is less
than zero.
As of December 31, 1997, there were 6,000,000 GMO Designated Shares,
representing a potential 60.4% equity interest in GMO. The number of GMO
Designated Shares from time to time will be:
(i) adjusted as appropriate to reflect subdivisions (by stock split or
otherwise) and combinations (by reverse stock split or otherwise) of the
GMO Stock and dividends or distributions of shares of GMO Stock to holders
of GMO Stock and other reclassifications of GMO Stock;
(ii) decreased by (a) the number of any shares of GMO Stock issued by
Genzyme, the proceeds of which are allocated to Genzyme General, (b) the
number of any shares of GMO Stock issued upon the exercise or conversion of
securities convertible into GMO Stock that are attributed to Genzyme
General and (c) the number of any shares of GMO Stock issued by Genzyme as
a dividend or distribution or by reclassification, exchange or otherwise to
holders of GGD Stock; and
(iii) increased by
(a) the number of any outstanding shares of GMO Stock repurchased
by Genzyme, the consideration for which was allocated to Genzyme
General;
(b) the number of shares of GMO Stock equal to the fair value (as
determined by the Genzyme Board) of assets or properties allocated to
Genzyme General that are reallocated to GMO (other than reallocations
that represent sales at fair value between such divisions) divided by
the Fair Market Value of one share of GMO Stock as of the date of such
reallocation;
(c) with respect to amounts drawn under an equity line of credit
approved by the Genzyme Board providing for the allocation of up to $25
million in cash from Genzyme General to GMO (the "GMO Equity Line"), a
number equal to the sum of the quotients obtained by dividing (A) the
amount of each advance under the GMO Equity Line by (B) $7.00 plus or
minus a daily proration of the difference between the price to the
public in the GMO IPO at $7.00, assuming straight line appreciation or
depreciation in the value of the GMO Stock over the period from the
closing date of the acquisition of PharmaGenics, Inc. to the closing
date of the GMO IPO; and, thereafter, upon each advance made under the
GMO Equity Line, a number equal to the quotient obtained by dividing (X)
the amount of each such advance by (Y) the Fair Market Value of the GMO
Stock on the date of such advance; or
(d) the number of shares of GMO Stock into which the Genzyme Board
elects to convert the promissory note dated February 10, 1997 issued by
PharmaGenics, Inc. to Genzyme.
The Genzyme Charter prohibits the taking of any action which would have the
effect of reducing the number of GMO Designated Shares to a number which is less
than zero.
Whenever additional shares of any series of common stock are issued and
sold by Genzyme, Genzyme will identify (i) the number of such shares issued and
sold for the account of the division to which they relate, the proceeds of which
will be allocated to and reflected in the financial statements of such division
and (ii) the number of such shares issued and sold from the GTR Designated
Shares or the GMO Designated Shares, which shall reduce the number of GTR
Designated Shares or GMO Designated Shares, as the case may be, and the proceeds
of which may be used for any proper corporate purpose. In the event Genzyme
repurchases outstanding shares of GTR Stock or GMO Stock, it will identify the
number of shares that are repurchased for consideration that was allocated to
Genzyme General and the number of GTR Designated Shares or GMO Designated Shares
may increase accordingly.
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<PAGE> 38
DETERMINATIONS BY THE GENZYME BOARD
Any determination made by the Genzyme Board in good faith under any of the
provisions described above will be final and binding on all stockholders of
Genzyme.
"ANTI-TAKEOVER" PROVISIONS
CONTRACTUAL MEASURES. The Genzyme Charter and the By-Laws of Genzyme (the
"By-Laws") contain provisions that could discourage potential takeover attempts
and prevent stockholders from changing Genzyme's management, including
authorization of the Genzyme Board to issue shares of common stock and preferred
stock in series, enlarge the size of the Genzyme Board and fill any vacancies on
the Genzyme Board, and restrictions on the ability of stockholders to call a
special meeting of stockholders, bring business before an annual meeting and
nominate candidates for election as directors. Genzyme also has agreements with
certain officers containing change of control provisions.
In addition, Genzyme has a stockholder rights plan. Under this plan, each
outstanding share of GGD Stock, GTR Stock and GMO Stock also represents a right
that, under certain circumstances, may trade separately from the GGD Stock, GTR
Stock and GMO Stock, respectively. The rights, which are not currently
exercisable, under certain circumstances will permit their holders (other than
an acquiror) to purchase at a favorable price large amounts of GGD Stock, GTR
Stock and GMO Stock or securities of a successor to Genzyme with the result that
an acquiror's interest in Genzyme would be substantially diluted. The
description and terms of the rights are set forth in an Amended and Restated
Rights Agreement between Genzyme and American Stock Transfer and Trust Company
as Rights Agent.
BUSINESS COMBINATION STATUTE. The Massachusetts "Business Combination"
statute provides that, if a person acquires 5% or more of the stock of a
Massachusetts corporation without the approval of its board of directors (an
"interested stockholder"), he or she may not engage in certain transactions with
the corporation for a period of three years. There are certain exceptions to
this prohibition; for example, if the board of directors approves the
acquisition of stock or the transaction prior to the time that the person became
an interested stockholder, or if the interested stockholder acquires 90% of the
voting stock of the corporation (excluding voting stock owned by directors who
are also officers and certain employee stock plans) in one transaction, or if
the transaction is approved by the board of directors and by the affirmative
vote of two-thirds of the outstanding voting stock which is not owned by the
interested stockholder, the prohibition does not apply.
Genzyme is subject to the Massachusetts Business Combination statute unless
it elects not to be governed by the statute in the Genzyme Charter or the
By-Laws. Genzyme has not made such election and does not currently intend to
make such an election.
CONTROL SHARE ACQUISITION STATUTE. The Massachusetts "Control Share
Acquisition" statute provides that a person (the "acquiror") who makes a bona
fide offer to acquire, or acquires, shares of stock of a corporation that when
combined with shares already owned, would increase the acquiror's ownership to
at least 20%, 33 1/3% or a majority of the voting stock of the corporation, must
obtain the approval of a majority in interest of the shares held by all
stockholders, excluding shares held by the acquiror and the officers and inside
directors of the corporation, in order to vote the shares acquired. The statute
does not require the acquiror to consummate the purchase before the stockholder
vote is taken.
The Control Share Acquisition statute permits a Massachusetts corporation
to elect not to be governed by these provisions by including such an election in
its articles of incorporation or by-laws. The By-Laws contain a provision
pursuant to which Genzyme elected not to be governed by the Massachusetts
Control Share Acquisition statute. However, if at a future date the Genzyme
Board determines that it is in the best interests of Genzyme and its
stockholders that Genzyme be governed by the statute, the By-Laws may be amended
to permit it to be governed by such statute. Any such amendment, however, would
apply only to acquisitions crossing the thresholds which occur after the
effective date of such amendment.
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<PAGE> 39
RIGHTS OF CERTAIN HOLDERS
The holders of an aggregate of 3,163,032 shares of Genzyme capital stock
are entitled to certain registration rights with respect to such shares.
Notwithstanding the existence of these rights, all of such shares, if held by
nonaffiliates of the Company, are eligible for unrestricted resale under the
Securities Act.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer and Trust Company is the registrar and transfer
agent for each series of Genzyme common stock.
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<PAGE> 40
MANAGEMENT AND ACCOUNTING POLICIES GOVERNING
THE RELATIONSHIP OF GENZYME DIVISIONS
The Genzyme Board has adopted certain policies to govern the management of
Genzyme General, GTR and GMO. A description of these policies can be found in
Exhibit 99.1 to the 1997 10-K, which is incorporated herein by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." Except as otherwise provided
in the policies, the Genzyme Board may further modify or rescind the policies in
its sole discretion without approval of the stockholders, subject only to the
Genzyme Board's fiduciary duty to Genzyme's stockholders. The Genzyme Board may
also adopt additional policies depending upon the circumstances. Any
determination of the Genzyme Board to modify or rescind the policies, or to
adopt additional policies, including any such decision that would have disparate
impacts upon holders of the common stock representing the three divisions, would
be governed by the principles of Massachusetts law discussed under "RISK
FACTORS -- Risks Related to Genzyme Tracking Stock -- No Rights or Additional
Duties With Respect to the Divisions; Potential Conflicts." In addition,
generally accepted accounting principles require that any change in policy be
preferable (in accordance with such principles) to the previous policy.
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<PAGE> 41
SELLING SECURITYHOLDERS
The Company issued and sold the Notes to Credit Suisse First Boston
Corporation, Cowen & Company and Goldman, Sachs & Co. (the "Initial Purchasers")
on May 22, 1998 pursuant to a private placement exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) thereof. The Notes
were sold by the Initial Purchasers in transactions exempt from the registration
requirements of the Securities Act, to persons reasonably believed by such
Initial Purchasers to be "qualified institutional buyers" (as defined in Rule
144A under the Securities Act). The Registration Statement of which the
Prospectus is a part has been filed pursuant to Rule 415 under the Securities
Act to afford the Selling Securityholders the opportunity to sell Notes and
Conversion Shares in public transactions rather than pursuant to exemptions from
the registration requirements of the Securities Act.
The following table sets forth information concerning the aggregate
principal amount of Notes beneficially owned by each Selling Securityholder, as
of , 1998, and the number of shares of GGD Stock
issuable upon conversion of Notes held thereby, which may be offered from time
to time pursuant to this Prospectus. Other than their ownership of such
securities, none of the Selling Securityholders has had any material
relationship with the Company within the past three years. The table below has
been prepared on the basis of the information furnished to the Company by DTC
and/or by or on behalf of the Selling Securityholders. Any or all of the Notes
or shares of GGD Stock listed below may be offered for sale by the Selling
Securityholders from time to time.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT UNDERLYING SHARES OF PERCENTAGE OF
OF NOTES GGD STOCK OR GGD STOCK
BENEFICIALLY PERCENTAGE ADDITIONAL SHARES OF OUTSTANDING
OWNED THAT OF NOTES GGD STOCK THAT AFTER THE
NAME(1) MAY BE SOLD OUTSTANDING MAY BE SOLD(2) OFFERING(3)
------- ---------------- ----------- -------------------- -------------
<S> <C> <C> <C> <C>
................................. $
Unnamed holders of Notes or any
future transferees, pledgees,
donees or successors of or from
such unnamed holders(4)........
</TABLE>
- ---------------
(1) The Selling Securityholders and the amount of Notes held by them are set
forth herein as of July , 1998 and will be updated as required.
(2) Assumes conversion of the full amount of Notes held by such holder at the
initial rate of 25.2525 shares of GGD Sock per $1,000 in principal amount of
Notes. The conversion rate and the number of shares of GGD Stock issuable
upon conversion of the Notes are subject to adjustment under certain
circumstances. See "DESCRIPTION OF NOTES -- Conversion Rights." Accordingly,
the number of shares of GGD Stock issuable upon conversion of the Notes may
increase or decrease from time to time. Under the terms of the Indenture,
fractional shares will not be issued upon conversion of the Notes; cash will
be paid in lieu of fractional shares, if any.
(3) Based upon shares of GGD Stock outstanding as of
, 1998, treating as outstanding the total number
of shares of GGD Stock shown as being issuable upon the assumed conversion
by the named Selling Securityholder of the full amount of such Selling
Securityholder's Notes but not assuming the conversion of the Notes of any
other Selling Securityholder.
(4) Assumes that the unnamed holders of the Notes or any future transferees,
pledgees, donees or successors of or from any such unnamed holder do not
beneficially own any GGD Stock other than the GGD Stock issuable upon
conversion of the Notes at the initial conversion rate. No such unnamed
holder may offer Notes pursuant to this Prospectus until such unnamed holder
is included as a Selling Securityholder in a supplement to this Prospectus
in accordance with the Registration Rights Agreements (as defined in "PLAN
OF DISTRIBUTION").
Because the Selling Securityholders may, pursuant to this Prospectus, offer
all or some portion of the Notes and GGD Stock they presently hold or, with
respect to the GGD Stock, have the right to acquire upon conversion of such
Notes, no estimate can be given as to the amount of the Notes and GGD Stock that
will be
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<PAGE> 42
held by the Selling Securityholders upon termination of any such sales. In
addition, the Selling Securityholders identified above may have sold,
transferred or otherwise disposed of all or a portion of their Notes and GGD
Stock since the date on which they provided the information regarding their
Notes and GGD Stock, in transactions exempt from the registration requirements
of the Securities Act.
Only Selling Securityholders identified above who have complied with the
conditions to being included as Selling Securityholders under the Registration
Rights Agreement and who beneficially own the Notes and the GGD Stock set forth
opposite each such Selling Securityholder's name in the foregoing table on the
effective date of the Registration Statement may sell such Notes and GGD Stock
pursuant to this Prospectus. The Company may from time to time, in accordance
with the Registration Rights Agreement, include additional Selling
Securityholders in supplements to this Prospectus.
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<PAGE> 43
PLAN OF DISTRIBUTION
In connection with the sale of Notes to the Initial Purchasers, the Company
agreed pursuant to a Registration Rights Agreement (the "Registration Rights
Agreement"), to file with the Commission the Registration Statement of which
this Prospectus forms a part. The Registration Statement covers resales of the
Notes and the Conversion Shares (the "Registrable Securities") by the Selling
Securityholders. The Company has agreed to use its reasonable best efforts to
keep the Registration Statement effective until two years from its effective
date (or such earlier date when the Selling Securityholders have sold the
Registrable Securities or are able to sell all such securities immediately
without restriction pursuant to Rule 144(k) under the Securities Act or any
successor rule thereto or otherwise). The Company is permitted to suspend the
use of this Prospectus during certain periods of time. If the Registration
Statement ceases to be effective or usable (subject to certain exceptions
described in the Registration Rights Agreement), additional interest, at the
rate of 0.5% per annum, may accrue on the Notes. The Registration Rights
Agreement provides that holders of at least 25% of the then outstanding Notes
may elect to have one underwritten offering of the Notes. The managing
underwriter(s) for any such offering must be selected by holders of a majority
of the Notes to be included in the underwritten offering and must be reasonably
acceptable to the Company. The specific provisions relating to the registration
rights described above are contained in the Registration Rights Agreement, and
the foregoing summary is qualified in its entirety by the provisions of such
agreement which is included as an exhibit to the Registration Statement.
Sales of the Notes and the Conversion Shares may be effective by or for the
account of the Selling Securityholders from time to time in transactions (which
may include block transactions in the case of the Conversion Shares) on any
exchange or market on which such securities are listed or quoted, in negotiated
transactions, through a combination of such methods of sale, or otherwise, at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to prevailing market prices, or at negotiated prices.
The Selling Securityholders may effect such transactions by selling the Notes or
Conversion Shares directly to purchasers, to or through broker-dealers who may
purchase Notes or Conversion Shares as principals and thereafter sell the Notes
or Conversion Shares, through a combination of such methods of sale, or
otherwise. Broker-dealers engaged by Selling Securityholders may receive
compensation in the form of discounts, concessions or commissions from the
Selling Securityholders, the purchasers of the Notes or Conversion Shares for
whom such broker-dealers may act as agents or to whom they may sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions).
The Selling Securityholders and any broker-dealers, agents or underwriters
that participate with the Selling Securityholders in the distribution of the
Notes or Conversion Shares may be deemed to be "underwriters" within the meaning
of the Securities Act. Any commissions paid or any discounts or concessions
allowed to any such persons, and any profits received on the resale of the Notes
or Conversion Shares offered hereby may be deemed to be underwriting commissions
or discounts under the Securities Act.
To the extent required, the Company will amend or supplement this
Prospectus to disclose material arrangements regarding the plan of distribution.
If, for example, pursuant to the terms of the Registration Rights Agreement, the
Note holders elect to sell Registrable Securities in an underwritten offering, a
prospectus supplement accompanying this Prospectus will set forth, to the extent
required, the aggregate principal amount of Notes and number of Conversion
Shares being offered, the name or names of the Selling Securityholders, and the
terms of the offering, including the name or names of the underwriters, any
discounts, concessions or commissions and other terms constituting compensation
from the Selling Securityholders, and any discounts, concessions or commissions
allowed or reallowed or paid to dealers. In such an underwritten offering, the
Notes and/or Conversion Shares will be acquired by the underwriters for their
own account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The Notes and/or Conversion
Shares may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. In connection with such a sale of Notes and/or
Conversion Shares, the underwriters may receive compensation from the Selling
Securityholders in the form of underwriting discounts or commissions and may
also receive commissions from purchasers of the Notes and/or Conversion Shares
for whom they may act as agent. Underwriters may sell the Notes and/or
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<PAGE> 44
Conversion Shares to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agents. Unless otherwise set forth in the prospectus supplement relating
thereto, the obligations of any underwriters to purchase the Notes and/or
Conversion Shares will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all such Notes and/or Conversion
Shares if any are purchased. Underwriters may be entitled under agreements with
the Company to indemnification against certain civil liabilities, including
liabilities under the Securities Act, or to contribution with respect to
payments which such agents, dealers or underwriters may be required to make in
respect thereof. Such underwriters may engage in transactions with, or perform
services for, the Company for customary compensation.
Pursuant to the Registration Rights Agreement, the Company has agreed to
pay certain expenses incident to the offer and sale of the Notes and Conversion
Shares offered by the Selling Securityholders hereby, including the fees of one
counsel to the Selling Securityholders. The Selling Securityholders, however,
will pay any underwriting discounts and selling commissions. The Company has
agreed to indemnify the Selling Securityholders against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
the Selling Securityholders may be required to make in respect thereof.
To comply with the securities laws of certain jurisdictions, the Notes and
Conversion Shares offered hereby may need to be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Notes or the Conversion Shares may be limited
in its ability to engage in market activities with respect to such Notes or
Conversion Shares. Each Selling Securityholder, for example, will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, which provisions may limit the timing of purchase and sales of any
of the Notes and Conversion Shares by the Selling Securityholder. The foregoing
may affect the marketability of the Notes and Conversion Shares.
The Company's outstanding GGD Stock is included for quotation for trading
on the Nasdaq National Market, and application has been made to include for
quotation the shares of GGD Stock issuable upon conversion of the Notes on
Nasdaq. The Notes have been designated for trading in the PORTAL Market;
however, the Company has not applied, and does not intend to apply, for listing
of the Notes on any securities exchange. Furthermore, Notes resold pursuant to
this Registration Statement will no longer be eligible for trading in the PORTAL
Market. No assurance can be given that there will be a market for the Notes sold
pursuant to this Prospectus, or that if such market does develop, that it will
continue to provide holders of such Notes with liquidity for such investment or
will continue for the duration the Notes are outstanding.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Company by Palmer & Dodge LLP, Boston, Massachusetts, counsel for the Company.
EXPERTS
The consolidated balance sheets of Genzyme as of December 31, 1996 and 1997
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1997
included in Genzyme's Annual Report on Form 10-K for the year ended December 31,
1997, as amended, and the financial statement schedule appearing therein,
incorporated by reference into this Prospectus, have been incorporated herein in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The combined balance sheets of Genzyme General and GTR as of December 31,
1996 and 1997, and the related combined statements of operations and cash flows
for each group for each of the three years in the period ended December 31, 1997
included in Genzyme's Annual Report on Form 10-K for the year ended December 31,
1997, as amended, and the financial statement schedule appearing therein, have
also been
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<PAGE> 45
incorporated herein in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The combined balance sheets of GMO as of December 31, 1996 and 1997, and
the related combined statements of operations and cash flows for each of the
three years in the period ended December 31, 1997 included in Genzyme's Annual
Report on Form 10-K for the year ended December 31, 1997, as amended, have also
been incorporated herein in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of that firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
Genzyme is subject to the informational requirements of the Exchange Act,
and, in accordance therewith, files periodic reports, proxy statements and other
information with the Commission. Reports, proxy and information statements filed
pursuant to Sections 14(a) and 14(c) of the Exchange Act and other information
filed with the Commission, as well as copies of the Registration Statement, can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, and at the following Regional Offices of the Commission: Midwest
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60611;
and Northeast Regional Office, 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material can also be obtained at prescribed rates
from the Public Reference Section of the Commission at its principal office at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. Such material
may also be accessed electronically by means of the Commission's home page on
the Internet at http://www.sec.gov.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act. This Prospectus omits
certain of the information contained in the Registration Statement in accordance
with the rules and regulations of the Commission. Reference is hereby made to
the Registration Statement and related exhibits for further information with
respect to the Company, its Notes and the Conversion Shares. Statements
contained herein concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Genzyme incorporates herein by reference the following documents previously
filed with the Commission (File No. 0-14680) pursuant to the Exchange Act: (i)
its Annual Report on Form 10-K for the fiscal year ended December 31, 1997, as
amended by its Form 10-K/A filed with the Commission on April 27, 1998; (ii) its
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998; and (iii)
its Current Report on Form 8-K, dated May 19, 1998; (iv) the description of GGD
Stock and GGD Stock Purchase Rights contained in Genzyme's Registration
Statement on Form 8-A filed with the Commission on June 18, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
termination of the offering made hereby shall be deemed to be incorporated in
this Prospectus by reference and to be a part hereof from the respective dates
of the filing of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document which also is,
or is deemed to be, incorporated by reference herein, modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the written or oral
request of any such person, a copy of any and all of the documents referred to
above which have been or may be incorporated in this Prospectus by reference,
other than exhibits to such documents which are not specifically incorporated by
reference into such documents. Requests for such copies should be directed to
the executive offices of the Company, One Kendall Square, Cambridge,
Massachusetts 02139, Attention: Shareholder Services, telephone (617) 252-7526.
44
<PAGE> 46
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY INITIAL PURCHASER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE NOTES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
The Company............................ 2
Risk Factors........................... 4
Ratio of Earnings to Fixed Charges..... 13
Use of Proceeds........................ 13
Capitalization......................... 14
Description of Revolving Credit
Facility............................. 16
Description of Notes................... 17
Certain Federal Income Tax
Considerations....................... 26
Description of Genzyme Capital Stock... 32
Management and Accounting Policies
Governing the Relationship of Genzyme
Divisions............................ 39
Selling Securityholders................ 40
Plan of Distribution................... 42
Legal Matters.......................... 43
Experts................................ 43
Available Information.................. 44
Incorporation of Certain Documents by
Reference............................ 44
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
[GENZYME LOGO]
$225,000,000
5 1/4% CONVERTIBLE
SUBORDINATED NOTES DUE 2005
6,313,131 SHARES OF
GENERAL DIVISION COMMON STOCK
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 47
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be borne by Genzyme in connection with this offering of
Notes and Conversion Shares are estimated as follows:
<TABLE>
<S> <C>
SEC registration fee........................................ $ 73,750
Printing Expenses........................................... 50,000
Accounting fees and expenses................................ 2,500
Legal fees and expenses..................................... 15,000
Transfer Agent and Registrar fees........................... 0
Miscellaneous expenses...................................... 750
--------
Total............................................. $142,000
========
</TABLE>
All of the above figures, except the SEC registration fee, are estimates.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 67 of chapter 156B of the Massachusetts Business Corporation Law
grants Genzyme the power to indemnify any director, officer, employee or agent
to whatever extent permitted by Genzyme's Amended and Restated Articles of
Organization, By-Laws or a vote adopted by the holders of a majority of the
shares entitled to vote thereon, unless the proposed indemnitee has been
adjudicated in any proceeding not to have acted in good faith in the reasonable
belief that his or her actions were in the bet interests of Genzyme or, to the
extent that the matter for which indemnification may include payment by Genzyme
of expenses incurred in defending a civil or criminal action or proceeding in
advance of the final disposition of such action or proceeding, upon receipt of
an undertaking by the person indemnified to repay such payment if he or she
shall be adjudicated to be not entitled to indemnification under the statute.
Article VI of Genzyme's By-Law provides that Genzyme shall, to the extent
legally permissible, indemnify each person who may serve or who has served at
any time as a director or officer of Genzyme or of any of its subsidiaries, or
who at the request of Genzyme may serve or at any time has served as a director,
officer or trustee of, or in a similar capacity with, another organization or an
employee benefit plan, against all expenses and liabilities (including counsel
fees, judgments, fines, excise taxes, penalties and amounts payable in
settlements) reasonably incurred by or imposed upon such person in connection
with any threatened, pending or completed action, suit or other proceeding,
whether civil, criminal, administrative or investigative, in which he or she may
become involved by reason of his or her serving or having served in such
capacity (other than a proceeding voluntarily initiated by such person unless he
or she is successful on the merits, the proceeding was authorized by Genzyme or
the proceeding seeks a declaratory judgment regarding his or her own conduct);
provided that no indemnification shall be provided for any such person with
respect to any matter as to which he or she shall have been finally adjudicated
in any proceeding not to have acted in good faith in the reasonable belief that
his or her action was in the best interests of the corporation or, to the extent
such matter relates to service with respect to any employee benefit plan, in the
best interests of the participants or beneficiaries of such employee of such
employee benefit plan; and provided, further, that as to any matter disposed of
by a compromise payment by such person, pursuant to a consent decree or
otherwise, the payment and indemnification thereof have been approved by the
corporation, which approval shall not unreasonably be withheld, or by a court of
competent jurisdiction. Such indemnification shall include payment by Genzyme of
expenses incurred in defending a civil or criminal action or proceeding in
advance of the final disposition of such action or proceeding, upon receipt of
an undertaking by the person indemnified to repay such payment if he or she
shall be adjudicated to be not entitled to indemnification under Article VI,
which undertaking may be accepted without regard to the financial ability of
such person to me repayment.
II-1
<PAGE> 48
The indemnification provided for in Article VI is a contract right inuring
to the benefit of the directors, officers and other entitled to indemnification.
In addition, the indemnification is expressly not exclusive of any other rights
to which such director, officer of other person may be entitled by contract or
otherwise under law, and inures to the benefit of the heirs, executors and
administrators of such a person.
Genzyme also has in place agreements with certain officers and directors
which affirm Genzyme's obligation to indemnify them to the fullest extent
permitted by law and contain various procedural and other provisions which
expand the protection afforded by Genzyme's By-Laws.
Section 13(b)(1 1/2) of chapter 156B of the Massachusetts Business
Corporation Law provides that a corporation may, in its articles of
organization, eliminate a director's personal liability to the corporation and
its stockholders for monetary damages for breaches of fiduciary duty, except in
circumstances involving (i) a breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
unauthorized distributions and loans to insiders and (iv) transaction from which
the director derived an improper personal benefit. Article VI.C.5. of Genzyme's
Amended and Restated Articles of Organization provides that no director shall be
personally liable to Genzyme or its stockholders for monetary damages for any
breach of fiduciary duty as a director, except to the extent that such
exculpation is not permitted under the Massachusetts Business Corporation Law as
in effect when such liability is determined.
ITEM 16. EXHIBITS
See Exhibit Index immediately following signature page.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high value and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) To include any material information with respect to the plan
of distribution to previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the Registration Statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the
Exchange Act that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-2
<PAGE> 49
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 of Regulation S-X at the start
of any delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)(3) of the
Securities Act need not be furnished, provided, that the registrant
includes in the prospectus, by means of a post-effective amendment,
financial statements required pursuant to this paragraph (a)(4) and other
information necessary to ensure that all other information in the
prospectus is at least as current as the date of those financial
statements. Notwithstanding the foregoing, with respect to registration
statements on Form F-3, a post-effective amendment need not be filed to
include financial statements and information required by Section 10(a)(3)
of the Securities Act or Rule 3-19 of Regulation S-X if such financial
statements and information are contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated in the Form F-3.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of any employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this registration statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions referred to in Item 15 hereof, or
otherwise, the registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 50
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cambridge, Commonwealth of Massachusetts, on July 21,
1998.
GENZYME CORPORATION
By: /s/ DAVID J. MCLACHLAN
------------------------------------
David J. McLachlan,
Executive Vice President
Finance and Chief Financial Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Genzyme Corporation, hereby
severally constitute and appoint each of Henri A. Termeer and David J. McLachlan
our true and lawful attorneys, with full power to them in any and all
capacities, to sign any amendments to this Registration Statement on Form S-3
(including pre- and post-effective amendments), and any related Rule 462(b)
registration statement or amendment thereto, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ HENRI A. TERMEER Director and Principal Executive July 21, 1998
- --------------------------------------------------- Officer
Henri A. Termeer
/s/ DAVID J. MCLACHLAN Principal Financial and July 21, 1998
- --------------------------------------------------- Accounting Officer
David J. McLachlan
/s/ CONSTANTINE E. ANAGNOSTOPOULOS Director July 17, 1998
- ---------------------------------------------------
Constantine E. Anagnostopoulos
/s/ DOUGLAS A. BERTHIAUME Director July 21, 1998
- ---------------------------------------------------
Douglas A. Berthiaume
/s/ HENRY E. BLAIR Director July 21, 1998
- ---------------------------------------------------
Henry E. Blair
/s/ ROBERT J. CARPENTER Director July 21, 1998
- ---------------------------------------------------
Robert J. Carpenter
/s/ CHARLES L. COONEY Director July 21, 1998
- ---------------------------------------------------
Charles L. Cooney
/s/ HENRY R. LEWIS Director July 17, 1998
- ---------------------------------------------------
Henry R. Lewis
</TABLE>
II-4
<PAGE> 51
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
4.1 Restated Articles of Organization of Genzyme, as amended.
Filed as Exhibit 1 to Genzyme's Registration Statement on
Form 8-A filed with the Commission on June 18, 1997, and
incorporated herein by reference.
4.2 By-laws of Genzyme. Filed as Exhibit 3.2 to Genzyme's Form
8-K dated December 31, 1991 (File No. 0-14680), and
incorporated herein by reference.
4.3 Indenture, dated as of May 22, 1998, between Genzyme and
State Street Bank and Trust Company, as Trustee, including
the form of Note. Filed herewith.
4.4 Registration Rights Agreement, dated as of May 19, 1998,
among Genzyme, Credit Suisse First Boston Corporation,
Goldman, Sachs & Co. and Cowen & Company. Filed herewith.
4.5 Purchase Agreement, dated as of May 19, 1998, among Genzyme,
Credit Suisse First Boston Corporation, Goldman, Sachs & Co.
and Cowen & Company. Filed herewith.
4.6 Series Designation for Genzyme Molecular Oncology Division
Common Stock, $.01 par value. Filed as Exhibit 2 to
Genzyme's Registration Statement on Form 8-A filed with the
Commission on June 18, 1997, and incorporated herein by
reference.
4.7 Series Designation for the Series A, Series B and Series C
Junior Participating Preferred Stock, $.01 par value, of
Genzyme. Filed as Exhibit 3 to Genzyme's Registration
Statement on Form 8-A filed with the Commission on June 18,
1997, and incorporated herein by reference.
4.8 Amended and Restated Rights Agreement dated as of June 12,
1997 between Genzyme and American Stock Transfer and Trust
Company. Filed as Exhibit 5 to Genzyme's Registration
Statement on Form 8-A filed with the Commission on June 18,
1997, and incorporated herein by reference.
4.9 Specimen Callable Warrant to purchase Genzyme Common Stock
issued to shareholders of Neozyme II. Filed as Exhibit 28.6
to Genzyme's Form 10-Q for the quarter ended March 31,1992,
and incorporated herein by reference.
4.10 Warrant issued to Richard Warren, Ph.D. Filed as Exhibit 4
to the Form 8-K of IG Laboratories, Inc. dated October 11,
1990 (File No. 0-18439), and incorporated herein by
reference.
4.11 Genzyme Common Stock Purchase Warrant No. A-1 dated July 31,
1997 issued to Canadian Medical Discoveries Fund, Inc.
("CMDF"). Filed as Exhibit 10.2 to Genzyme's Form 10-Q for
the quarter ended September 30, 1997, and incorporated
herein by reference.
4.12 Genzyme Common Stock Purchase Warrant No. A-2 dated July 31,
1997 issued to CMDF. Filed as Exhibit 10.3 to Genzyme's Form
10-Q for the quarter ended September 30, 1997, and
incorporated herein by reference.
4.13 Genzyme Common Stock Purchase Warrant No. A-3 dated July 31,
1997 issued to CMDF. Filed as Exhibit 10.3 to Genzyme's Form
10-Q for the quarter ended September 30, 1997, and
incorporated herein by reference.
4.14 Registration Rights Agreement dated as of July 31, 1997 by
and between Genzyme and CMDF. Filed as Exhibit 10.1 to
Genzyme's Form 10-Q for the quarter ended September 30,
1997, and incorporated herein by reference.
4.15 Genzyme Molecular Oncology Division Convertible Debenture
dated August 29, 1997, including a schedule with respect
thereto filed pursuant to Instruction 2 to Item 601 of
Regulation S-K. Filed as Exhibit 10.6 to Genzyme's Form 10-Q
for the quarter ended September 30, 1997, and incorporated
herein by reference.
4.16 Form of Genzyme General Division Convertible Debenture.
Filed as Exhibit 10.7 to Genzyme's Form 10-Q for the quarter
ended September 30, 1997, and incorporated herein by
reference.
4.17 Registration Rights Agreement dated as of August 29, 1997 by
and among Genzyme and the entities listed on the signature
pages thereto. Filed as Exhibit 10.8 to Genzyme's Form 10-Q
for the quarter ended September 30, 1997, and incorporated
herein by reference.
4.18 Warrant Agreement between Genzyme and Comdisco, Inc. Filed
as Exhibit 10.22 to a Form 10 of PharmaGenics, Inc.
("PharmaGenics") (File No. 0-20138), and incorporated herein
by reference.
</TABLE>
II-5
<PAGE> 52
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
4.19 Form of Genzyme Corporation Convertible Note dated February
28, 1997 issued to Credit Suisse First Boston (Hong Kong)
Ltd. ("CSFB"). Filed as Exhibit 4.14 to Genzyme's Form
10-K/A for the year ended December 31, 1997 filed with the
Commission on April 27, 1998, and incorporated herein by
reference.
4.20 Registration Rights Agreement dated February 27, 1997 by and
between Genzyme and CSFB. Filed as Exhibit 4.15 to Genzyme's
Form 10-K/A for the year ended December 31, 1997 filed with
the Commission on April 27, 1998, and incorporated herein by
reference.
5.1 Opinion of Palmer & Dodge LLP. Filed herewith.
12.1 Statements regarding Computation of Ratio of Earnings to
Fixed Charges. Filed herewith.
23.1 Consent of PricewaterhouseCoopers LLP, independent
accountants to Genzyme Corporation. Filed herewith.
23.2 Consent of Palmer & Dodge LLP (included in Exhibit 5.1
hereto).
24.1 Power of Attorney (included on signature page).
25.1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, on Form T-1 of State
Street Bank and Trust Company. Filed herewith.
</TABLE>
- ---------------
* To be filed by amendment or incorporated by reference in connection with any
underwritten offering.
II-6
<PAGE> 1
EXHIBIT 4.3
GENZYME CORPORATION
and
STATE STREET BANK AND TRUST COMPANY,
as Trustee
------------------
INDENTURE
Dated as of May 22, 1998
------------------
5-1/4% Convertible Subordinated Notes Due 2005
<PAGE> 2
CROSS-REFERENCE TABLE
Trust Indenture Indenture
Act Section Section
----------- -------
Section 310(a)(1).................................................. 8.10
(a)(2).................................................... 8.10
(a)(3).................................................... N.A.
(a)(4).................................................... N.A.
(a)(5).................................................... N.A.
(b)....................................................... 8.08; 8.10
(c)....................................................... N.A.
Section 311(a)...................................................... 8.11
(b)....................................................... 8.11
(c)....................................................... N.A.
Section 312(a) ..................................................... 2.05
(b)....................................................... 13.03
(c)....................................................... 13.03
Section 313(a)...................................................... 8.06
(b)(1).................................................... N.A.
(b)(2).................................................... 8.06
(c)....................................................... 8.06
(d)....................................................... 8.06
Section 314(a)..................................................... 5.02; 5.03
(b)....................................................... N.A.
(c)(1).................................................... 13.04
(c)(2).................................................... 13.04
(c)(3).................................................... N.A.
(d)....................................................... N.A.
(e)....................................................... 13.05
(f)....................................................... N.A.
Section 315(a)..................................................... 8.01(b)
(b)....................................................... 8.05
(c)....................................................... 8.01(a)
(d)....................................................... 8.01(c)
(e)....................................................... 7.11
Section 316(a)(last sentence)....................................... 2.09
(a)(1)(A)................................................. 7.05
(a)(1)(B)................................................. 7.04
(a)(2).................................................... N.A.
(b)....................................................... 7.07
(c)....................................................... N.A.
Section 317(a)(1)................................................... 7.08
(a)(2).................................................... 7.09
(b)....................................................... 2.04
Section 318(a)..................................................... 13.01
- ----------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
Article Section Heading Page
- ------- ------- ------- ----
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE
1.01. Definitions.............................................. 1
1.02. Other Definitions........................................ 4
1.03. Incorporation by Reference of Trust Indenture Act........ 5
1.04. Rules of Construction.................................... 5
ARTICLE 2. THE SECURITIES
2.01. Form and Dating......................................... 6
2.02. Execution and Authentication............................ 6
2.03. Registrar, Paying Agent, Conversion
Agent, New York Presenting Agent and
Securities Custodian.................................. 7
2.04. Payment on Securities; Paying Agent to
Hold Money in Trust................................... 8
2.05. Securityholder Lists.................................... 9
2.06. Transfer and Exchange................................... 9
2.07. Replacement Securities.................................. 13
2.08. Outstanding Securities.................................. 13
2.09. Treasury Securities..................................... 13
2.10. Temporary Securities.................................... 14
2.11. Cancellation............................................ 14
2.12. Defaulted Interest...................................... 14
2.13. CUSIP Numbers........................................... 14
ARTICLE 3. REDEMPTION
3.01. Notices to Trustee...................................... 15
3.02. Selection of Securities to Be Redeemed.................. 15
3.03. Notice of Redemption.................................... 15
3.04. Effect of Notice of Redemption.......................... 17
3.05. Deposit of Redemption Price............................. 17
3.06. Securities Redeemed in Part............................. 17
ARTICLE 4. REPURCHASE OF SECURITIES AT THE OPTION OF THE
HOLDERS UPON A FUNDAMENTAL CHANGE
4.01. Repurchase upon Fundamental Change...................... 17
4.02. Notices, Etc............................................ 18
4.03. Exercising Repurchase Right............................. 18
4.04. Certain Definitions..................................... 19
-i-
<PAGE> 4
Article Section Heading Page
- ------- ------- ------- ----
ARTICLE 5. COVENANTS
5.01. Payment of Securities................................... 21
5.02. SEC Reports............................................. 22
5.03. Compliance Certificate.................................. 22
5.04. Corporate Existence..................................... 22
5.05. Notice of Defaults...................................... 23
5.06. Further Instruments and Acts............................ 23
5.07. Resale of Certain Securities; Reporting Issuer.......... 23
5.08. Registration Rights..................................... 23
ARTICLE 6. SUCCESSORS
6.01. When Company May Merge, Etc............................. 25
ARTICLE 7. DEFAULTS AND REMEDIES
7.01. Events of Default....................................... 26
7.02. Acceleration............................................ 27
7.03. Other Remedies.......................................... 28
7.04. Waiver of Past Defaults................................. 28
7.05. Control by Majority..................................... 28
7.06. Limitation on Suits..................................... 29
7.07. Rights of Holders to Receive Payment.................... 29
7.08. Collection Suit by Trustee.............................. 30
7.09. Trustee May File Proofs of Claim........................ 30
7.10. Priorities.............................................. 30
7.11. Undertaking for Costs................................... 31
ARTICLE 8. TRUSTEE
8.01. Duties of Trustee....................................... 31
8.02. Rights of Trustee....................................... 32
8.03. Individual Rights of Trustee............................ 33
8.04. Trustee's Disclaimer.................................... 33
8.05. Notice of Defaults...................................... 33
8.06. Reports by Trustee to Holders........................... 34
8.07. Compensation and Indemnity.............................. 34
8.08. Replacement of Trustee.................................. 35
8.09. Successor Trustee, Agents by Merger, Etc................ 36
8.10. Eligibility; Disqualification........................... 36
8.11. Preferential Collection of Claims Against Company....... 37
ARTICLE 9. DISCHARGE OF INDENTURE
9.01. Termination of Company's Obligations.................... 37
9.02. Application of Trust Money.............................. 38
-ii-
<PAGE> 5
Article Section Heading Page
- ------- ------- ------- ----
9.03. Repayment to Company.................................... 38
9.04. Indemnity for Government Obligations.................... 39
9.05. Reinstatement........................................... 39
ARTICLE 10. AMENDMENTS, SUPPLEMENTS AND WAIVERS
10.01. Without Consent of Holders.............................. 39
10.02. With Consent of Holders................................. 40
10.03. Compliance with Trust Indenture Act..................... 41
10.04. Revocation and Effect of Consents....................... 41
10.05. Notation on or Exchange of Securities................... 41
10.06. Trustee to Sign Amendments, Etc......................... 41
ARTICLE 11. CONVERSION
11.01. Conversion Privilege.................................... 42
11.02. Conversion Procedure.................................... 43
11.03. Fractional Shares....................................... 44
11.04. Taxes on Conversion..................................... 44
11.05. Company to Provide Stock................................ 44
11.06. Adjustment for Change in Capital Stock.................. 45
11.07. Adjustment for Rights Issue............................. 45
11.08. Adjustment for Certain Distributions.................... 46
11.09. Adjustment for All Cash Distribution.................... 47
11.10. Adjustment for Tender or Exchange Offer................. 48
11.11. Current Market Price.................................... 50
11.12. When Adjustment May Be Deferred......................... 50
11.13. When No Adjustment Required............................. 50
11.14. Notice of Adjustment.................................... 51
11.15. Voluntary Reduction..................................... 51
11.16. Notice of Certain Transactions.......................... 51
11.17. Provisions in Case of Consolidation,
Merger of the Company or
Transfer or Lease..................................... 52
11.18. Company Determination Final............................. 53
11.19. Trustee's Disclaimer.................................... 53
ARTICLE 12. SUBORDINATION
12.01. Agreement to Subordinate................................ 53
12.02. Certain Definitions..................................... 53
12.03. Liquidation; Dissolution; Bankruptcy.................... 54
12.04. Company Not to Make Payments with
Respect to Securities in Certain
Circumstances......................................... 55
12.05. Acceleration of Securities.............................. 56
12.06. When Distribution Must Be Paid Over..................... 56
12.07. Notice by Company....................................... 56
12.08. Subrogation............................................. 56
12.09. Relative Rights......................................... 56
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<PAGE> 6
Article Section Heading Page
- ------- ------- ------- ----
12.10. Subordination May Not Be Impaired by Company............ 57
12.11. Distribution or Notice to Representative................ 57
12.12. Rights of Trustee and Paying Agent...................... 57
ARTICLE 13. MISCELLANEOUS
13.01. Trust Indenture Act Controls............................ 59
13.02. Notices................................................. 59
13.03. Communications by Holders with Other Holders............ 60
13.04. Certificate and Opinion as to Conditions Precedent...... 60
13.05. Statements Required in Certificate or Opinion........... 60
13.06. Rules by Trustee and Agents............................. 61
13.07. Legal Holidays.......................................... 61
13.08. Governing Law........................................... 61
13.09. No Recourse Against Others.............................. 61
13.10. Successors.............................................. 61
13.11. Counterpart Originals................................... 62
13.12. Severability............................................ 62
SIGNATURES
APPENDIX 1 RULE 144A/REGULATION S APPENDIX
EXHIBIT A - FORM OF GLOBAL SECURITY
EXHIBIT B - FORM OF DEFINITIVE SECURITY
- ----------
Note: This Table of Contents shall not, for any purpose, be deemed to be a part
of the Indenture.
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<PAGE> 7
INDENTURE dated as of May 22, 1998, between GENZYME CORPORATION, a Massachusetts
corporation (the "Company"), and State Street Bank and Trust Company, a
Massachusetts banking corporation (the "Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Company's 5-1/4% Convertible
Subordinated Notes Due 2005 (the "Securities"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Affiliate" means any person, directly or indirectly, controlling or
controlled by or under direct or indirect common control with the Company. For
the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent, Conversion Agent, New York
Presenting Agent or Co-Registrar.
"Beneficial Holder" means each participant in the Depository who holds
an interest in a Security as indicated in the Participants List (provided,
however, that the Trustee shall be under no duty to make any inquiry regarding
the accuracy of the Participants List).
"Board of Directors" or "Board" means the Board of Directors of the
Company or any duly authorized committee of the Board.
"Company" means the party named as such above. until a successor
replaces it pursuant to the applicable provisions hereof and thereafter means
the successor.
"Default" means any event which is, or after notice or passage of time
would be, an Event of Default.
<PAGE> 8
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"Depository" means, with respect to the Securities issuable or issued
in whole or in part in global form, the person specified in Section 2.03 as the
Depository with respect to the Securities, until a successor shall have been
appointed and become such pursuant to the applicable provisions of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
"Genzyme General" means Genzyme Corporation's General Division.
"GMO Stock" means shares of the series designated as Genzyme Molecular
Oncology Division Common Stock of the Company.
"GTR Stock" means shares of the series designated as Genzyme Tissue
Repair Division Common Stock of the Company.
"Holder" or "Securityholder" means the person in whose name a Security
is registered on the Registrar's books.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Officer" means the Chairman, the President, any Executive or Senior
Vice President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers. See
Sections 13.04 and 13.05.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company. See Sections 13.04 and 13.05.
"Over-Allotment Option" means the option granted by the Company to the
Initial Purchasers to purchase up to $25,000,000 aggregate principal amount of
additional Securities pursuant to the Purchase Agreement, dated May 19, 1998,
between such parties.
"Participants List" means the position listings showing persons that
have a beneficial interest in the Securities evidenced by the Security in global
form held by the Depository and the amount of such interest, but only to the
extent that a copy thereof is furnished by the Depository to the Trustee.
<PAGE> 9
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"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof and, for purposes of Article 4, shall have the additional meaning set
forth in Section 4.04(c).
"Quoted Prices" of the GGD Stock means the last sale price regular way
or, in case no such sale takes place on such day, the average of the closing bid
and asked prices regular way, in either case on the New York Stock Exchange
Composite Tape, or, if the GGD Stock is not listed or admitted to trading on
such Exchange, on the national securities exchange in or nearest the City of New
York on which the GGD Stock is listed or admitted to trading, or if the GGD
Stock is not listed or admitted to trading on any national securities exchange,
the last sale price regular way or, in case no such sale takes place on such
day, the average of the highest reported bid and lowest reported asked prices as
furnished by the National Association of Securities Dealers, Inc. through Nasdaq
or a similar organization if Nasdaq is no longer reporting such information, or
if on any such Trading Day the GGD Stock is not quoted by any such organization,
the average of the highest reported bid and lowest reported asked prices as
available in any other over-the-counter market, or if on such Trading Day the
GGD Stock is not reported in any such market, the fair value of a share of GGD
Stock on such day, as determined in good faith by, and evidenced by a resolution
of, the Board of Directors.
"Record Date," for purposes of Section 11.07, has the meaning set forth
in such Section and, for purposes of Section 11.08, has the meaning set forth in
such Section.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities described above issued, authenticated
and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means State Street Bank and Trust Company, as
custodian with respect to the Securities in global form, or any successor entity
thereto.
"Subsidiary" means a corporation, a majority of the voting stock of
which is owned, directly or indirectly, by the
<PAGE> 10
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Company or by one or more Subsidiaries, or by the Company and one or more other
Subsidiaries.
"TIA" means the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 and as in effect on the date of this Indenture,
except to the extent any amendment to the Trust Indenture Act expressly provides
for application of the Trust Indenture Act as in effect on another date.
"Trading Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday other than any day on which securities are not traded on the principal
exchange or market on which the securities in question are traded.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"Trustee" means the party named as such above until a successor
replaces it pursuant to the applicable provisions hereof and thereafter means
the successor.
SECTION 1.02. Other Definitions.
Defined
Term In Section
- ---- ----------
"Agent Members" ................................................... App. 1
"Bankruptcy Law" .................................................. 7.01
"Capital Stock".................................................... 4.04
"Company Notice" .................................................. 4.02
"Conversion Agent" ................................................ 2.03
"Current Market Price" ............................................ 11.11
"Custodian" ....................................................... 7.01
"Event of Default" ................................................ 7.01
"Exchange Act" .................................................... 4.04
"Expiration Time".................................................. 11.10
"Final Surrender Date" ............................................ 4.03
"Fundamental Change" .............................................. 4.04
"GGD Stock" ....................................................... 11.01
"Global Security".................................................. App. 1
"Initial Purchasers"............................................... App. 1
"Legal Holiday" ................................................... 13.07
"New York Presenting Agent" ....................................... 2.03
"Paying Agent" .................................................... 2.03
"Purchase Agreement"............................................... App. 1
"Purchased Shares" ................................................ 11.10
<PAGE> 11
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"QIB".............................................................. App. 1
"Registrar" ....................................................... 2.03
"Registration Default"............................................. 5.08
"Registration Rights Agreement".................................... App. 1
"Regulation S"..................................................... App. 1
"Representative" .................................................. 12.02
"Repurchase Date" ................................................. 4.03
"Repurchase Price" ................................................ 4.01
"Rule 144A"........................................................ App. 1
"Senior Indebtedness" ............................................. 12.02
"Shelf Registration Statement"..................................... 12.02
"Transfer Restricted Securities"................................... App. 1
"U.S. Government Obligations" ..................................... 9.01
"Voting Shares" ................................................... 4.04
provided, that whenever the definition contained in such section limits its
application to the term as used in specific sections, the foregoing shall not be
deemed to expand the application of such definition to the term as used in any
section other than such specific sections.
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.04. Rules of Construction. Unless the context otherwise
requires:
<PAGE> 12
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(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2.
THE SECURITIES
SECTION 2.01. Form and Dating. Certain provisions relating to the
Securities are set forth in Appendix 1, the Rule 144A/Regulation S Appendix,
attached hereto (the "Appendix"), which is hereby incorporated in and expressly
made part of this Indenture. The Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A with respect to
Securities in global form or Exhibit B with respect to Securities in definitive
form which are hereby incorporated in and expressly made a part of this
Indenture.
In the limited circumstances described herein, the global Security may
be exchanged for definitive certificated Securities substantially in the form of
Exhibit B.
The Securities shall be issued without coupons and only in
denominations of $1,000 or any integral multiple thereof. Payment of principal
of and premium, if any, and interest on any Security in either global or
definitive form shall be made to the Holder thereof.
SECTION 2.02. Execution and Authentication. Two Officers shall sign the
Securities on behalf of the Company by manual or facsimile signature. The
Company's seal shall be reproduced on the Securities.
<PAGE> 13
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If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The Trustee's signature shall be conclusive evidence
that the Security has been authenticated under this Indenture.
The Trustee shall authenticate and make available for delivery
Securities for original issue in an aggregate principal amount of $225,000,000
upon a Company order without any further action by the Company; provided,
however, that in the event that the Company sells any Securities pursuant to the
Over-Allotment Option, then the Trustee shall authenticate and deliver
Securities for original issue in an aggregate principal amount of $225,000,000
plus up to an additional $25,000,000 aggregate principal amount of the
Securities sold pursuant to the Over-Allotment Option upon a Company order
without any further action by the Company. The aggregate principal amount of the
Securities outstanding at any time may not exceed the amount set forth in the
foregoing sentence, subject to the proviso set forth therein, except as provided
in Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so, other than upon original issuance or
pursuant to Section 2.07. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent. An authenticating agent has
the same rights as an Agent to deal with the Company or an Affiliate.
SECTION 2.03. Registrar, Paying Agent, Conversion Agent, New York
Presenting Agent and Securities Custodian. The Company shall maintain an office
or agency where Securities may be presented for registration of transfer or
exchange (the "Registrar"), an office or agency where Securities may be
presented for payment (the "Paying Agent") and an office or agency where
Securities may be presented for conversion (the "Conversion Agent"). The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may appoint one or more Co-Registrars, one or more
additional Paying Agents and one or more additional Conversion Agents. The
Company may act as Registrar, Paying Agent, Conversion Agent or Co-Registrar.
The term "Paying Agent" includes any additional paying agent; the term
"Conversion Agent" includes any additional conversion agent. The Company shall
notify the
<PAGE> 14
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Trustee of the name and address of any Agent not a party to this Indenture and
shall give the Trustee at least thirty days' notice prior to changing the
Registrar, Paying Agent or Conversion Agent. If the Company fails to maintain a
Registrar, Paying Agent or Conversion Agent, the Trustee shall act as such. The
Company initially appoints the Trustee as Paying Agent, Registrar and Conversion
Agent.
If there is not at least one of each such Registrar or Co-Registrar,
Paying Agent and Conversion Agent located in the Borough of Manhattan, the City
of New York, the Company shall also maintain an office in the Borough of
Manhattan, the City of New York where the securities may be presented for
purposes of transfer and exchange, payment and conversion (the "New York
Presenting Agent"). The Company initially appoints State Street Bank and Trust
Company, having an office at 61 Broadway, New York, New York 10006, to serve as
New York Presenting Agent.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depository with respect to the Securities in global form.
The Company initially appoints State Street Bank and Trust Company to
act as Securities Custodian with respect to the Securities in global form.
SECTION 2.04. Payment on Securities; Paying Agent to Hold Money in
Trust. (a) Subject to the following provisions, no later than 11:00 a.m. on the
due date of principal of and premium, if any, and interest on the Securities,
the Company will pay to the Paying Agent in immediately available funds the
amounts, in money of the United States that at the time of payment is legal
tender for payment of public or private debts, in the manner, at the times and
for the purposes set forth herein and in the text of the Securities, and the
Company hereby authorizes and directs the Paying Agent from funds so paid to it
to make or cause to be made payment of the principal of and premium, if any, and
interest on the Securities set forth herein and in the text of the Securities.
The Paying Agent will make payment, from the funds furnished by the Company, of
the principal of and premium, if any, and interest on the Securities by check
drawn upon a bank in the city in which the Paying Agent's principal office is
located, or make payment by wire transfer upon terms acceptable to the Paying
Agent.
<PAGE> 15
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(b) Interest on a Security (other than defaulted interest) shall be
paid on each interest payment date to the Holder thereof at the close of
business on the relevant record date specified in the Securities. Principal of
and premium, if any, on Securities shall be payable only against presentation
and surrender thereof at the principal office of the Paying Agent, unless the
Company shall have otherwise instructed the Trustee in writing.
(c) The Company shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent will hold in trust for the benefit of
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of or premium, if any, or interest on the Securities, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. If the Company acts as Paying
Agent, it shall segregate the money held by it for the payment of principal of
and premium, if any, and interest on the Securities and hold it as a separate
trust fund. The Company shall provide ten days prior written notice to the
Trustee that it is to act as Paying Agent with respect to such payment and the
Trustee may rely on such notice. The Company at any time may require a Paying
Agent to pay all money held by the Paying Agent to the Trustee. Upon doing so
the Paying Agent shall have no further liability for the money so paid.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee not less than five days
prior to each interest payment date and at such other times as the Trustee may
request in writing a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange. (a) The transfer and exchange of
Securities in global form shall be effected through the Depository, in
accordance with this Indenture and the procedures of the Depository therefor.
When definitive Securities are presented to the Registrar with a request to
register the transfer of such definitive Securities or to exchange such
definitive Securities for an equal principal amount of definitive Securities of
other authorized denominations, the Registrar shall register the transfer or
make the exchange as requested if its requirements for such
<PAGE> 16
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transaction are met; provided, however, that the definitive Securities
surrendered for transfer or exchange shall be duly endorsed or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Registrar, duly executed by the Holder thereof or his attorney, duly authorized
in writing; provided, further, that, with respect to any Securities offered and
sold in reliance on the provisions of Regulation S under the Securities Act, the
Registrar shall not register the transfer nor make the exchange of any such
Securities surrendered for transfer or exchange, respectively, other than in
accordance with the provisions of Regulation S under the Securities Act,
pursuant to registration under the Securities Act or pursuant to an available
exemption from registration.
To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee (or an authenticating agent appointed pursuant to
Section 2.02) shall authenticate and deliver definitive Securities at the
Registrar's request. No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax or other governmental charge payable in connection with
any registration of transfer or exchange (other than any such transfer taxes or
similar governmental charge payable upon exchanges or transfers pursuant to
Sections 2.10, 3.06, 4.03, 10.05 or 11.02). The Registrar shall not be required
to register the transfer of or exchange any definitive Security selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
(b) Notwithstanding any other provisions of this Indenture (other than
the provisions set forth in subsection (c) of this Section), a Security in
global form may not be transferred as a whole except by the Depository to a
nominee of the Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(c) In the event that a Global Security is exchanged for Securities in
definitive registered form pursuant to Sec-
<PAGE> 17
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tion 2.4 of Appendix 1 or Section 2.10 of the Indenture, prior to the
effectiveness of a Shelf Registration Statement with respect to such Securities,
such Securities may be exchanged only in accordance with such procedures as are
substantially consistent with the provisions of this Section 2.06 (including the
certification requirements set forth on the reverse of the Securities intended
to ensure that such transfers comply with Rule 144A or Regulation S, as the case
may be) and such other procedures as may from time to time be adopted by the
Company.
(d) If at any time the Depository for the Securities notifies the
Company that it is unwilling or unable to continue as Depository for the
Securities, the Company may appoint a successor Depository with respect to the
Securities. If a successor Depository for the Securities is not appointed by the
Company within 90 days after the Company receives such notice, the Company will
execute, and the Trustee, upon receipt of an Officers' Certificate for the
authentication and delivery of definitive Securities, will authenticate and
deliver, Securities in definitive form, in an aggregate principal amount equal
to the principal amount of the Securities in global form, in exchange for such
Securities in global form.
The Company may at any time and in its sole discretion determine that
the Securities issued in the form of global Securities shall no longer be
represented by such global Securities. In such event the Company will execute,
and the Trustee, upon receipt of an Officers' Certificate for the authentication
and delivery of definitive Securities, will authenticate and deliver, Securities
in definitive form in an aggregate principal amount equal to the principal
amount of the Securities in global form, in exchange for such Securities in
global form.
If a definitive Security is issued in exchange for any portion of a
global Security after the close of business at the office or agency where such
exchange occurs on any record date and before the opening of business at such
office or agency on the next succeeding interest payment date, interest will not
be payable on such interest payment date in respect of such definitive Security,
but will be payable on such interest payment date only to the person to whom
interest in respect of such portion of such global Security is payable in
accordance with the provisions of this Indenture.
Definitive Securities issued in exchange for a Security in global form
pursuant to this Section 2.06 shall be registered in such names and in such
authorized denominations as
<PAGE> 18
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the Depository, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. Upon execution and
authentication, the Trustee shall deliver such definitive Securities to the
Persons in whose names such Securities are so registered.
(e) A definitive Security may not be exchanged by the Holder for a
beneficial interest in Securities in global form except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a definitive
Security, duly endorsed or accompanied by appropriate instruments of exchange or
transfer, as the case may be, in form satisfactory to the Trustee, together with
(i) certification in the form set forth on the reverse of the Security that such
definitive Security is being transferred to a QIB in accordance with Rule 144A
and (ii) written instructions directing the Trustee to make, or to direct the
Securities Custodian to make, an adjustment on its books and records with
respect to such global Security to reflect an increase in the aggregate
principal amount of Securities represented thereby, such instructions to include
information regarding the Depository account to be credited with such increase,
unless the Company shall no longer maintain global securities, then the Trustee
shall cancel such definitive Security and cause, or direct the Securities
Custodian to cause, in accordance with the standing instructions and procedures
existing between the Depository and the Securities Custodian, the aggregate
principal amount of Securities represented by the Security in global form to be
increased accordingly.
(f) At such time as all interests in a Security in global form have
either been exchanged for definitive Securities, redeemed, converted,
repurchased or cancelled, such Security in global form shall be cancelled by the
Trustee in accordance with the standing procedures and instructions existing
between the Depository and the Securities Custodian. At any time prior to such
cancellation, if any interest in a global Security is exchanged for definitive
Securities, redeemed, converted, repurchased or cancelled, the principal amount
of Securities represented by such Security in global form shall, in accordance
with the standing procedures and instructions existing between the Depository
and the Securities Custodian, be reduced and an endorsement shall be made on
such Security in global form, by the Trustee or the Securities Custodian, at the
direction of the Trustee, to reflect such reduction.
Neither the Company nor the Registrar shall be required (i) to issue,
register the transfer of or exchange Securities during a period beginning at the
opening of business fifteen days before the day of any selection of Securities
for redemption under Section 3.02 and ending at the close of business
<PAGE> 19
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on the day of selection, or (ii) to register the transfer or exchange of any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 2.07. Replacement Securities. If the Holder of a Security
claims that the Security has been lost, destroyed or wrongfully taken, or if a
mutilated Security is surrendered to the Trustee, the Company shall issue and
the Trustee shall authenticate a replacement Security if the Trustee's
requirements are met. If an indemnity bond is required by the Trustee or the
Company, such bond must be sufficient, in the judgment of both the Trustee and
the Company, to protect the Company, the Trustee, any Agent or any
authenticating agent from any loss which any of them may suffer if a Security is
replaced. The Company may charge for its expenses incurred in replacing a
Security.
Every replacement Security shall be an additional obligation of the
Company.
SECTION 2.08. Outstanding Securities. The Securities outstanding at any
time are all Securities authenticated by the Trustee (or an authenticating agent
appointed pursuant to Section 2.02) except for those cancelled by the Trustee,
those delivered to the Trustee for cancellation, those reductions in the
interests in a global Security effected by the Trustee hereunder, and those
described in this Section as not outstanding.
A Security does not cease to be outstanding because the Company or an
Affiliate holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If Securities are considered paid under Section 5.01, they cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.09. Treasury Securities. In determining whether the Holders
of the required principal amount of Securities have concurred in any direction,
waiver or consent, Securities owned by the Company or an Affiliate shall be
<PAGE> 20
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disregarded, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee knows are so owned shall be so disregarded.
SECTION 2.10. Temporary Securities. Until definitive Securities are
ready for delivery, the Company may prepare and execute and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Every temporary Security shall
be executed by the Company and authenticated by the Trustee, and registered by
the Registrar, upon the conditions, and with like effect, as a definitive
Security. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate definitive Securities in exchange for temporary Securities.
SECTION 2.11. Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar, Paying Agent and
Conversion Agent shall promptly forward to the Trustee any Securities
surrendered to them for registration of transfer, exchange, payment or
conversion. The Trustee shall cancel all Securities surrendered for registration
of transfer, exchange, payment, conversion or cancellation and may destroy
cancelled Securities and deliver a certificate of such destruction to the
Company, unless the Company directs the Trustee to deliver cancelled Securities
to the Company. The Company may not issue new Securities to replace Securities
that it has paid or delivered to the Trustee for cancellation or that any
Securityholder has converted pursuant to Article 11.
SECTION 2.12. Defaulted Interest. If the Company defaults in a payment
of interest on the Securities, it shall pay the defaulted interest in any lawful
manner not inconsistent with the requirements of any securities exchange on
which the Securities are listed. It may pay the defaulted interest, plus any
interest payable on the defaulted interest, to the Persons who are
Securityholders on a subsequent special record date. The Company shall fix the
record date and payment date for the payment of any defaulted interest. At least
15 days before the record date, the Company shall mail to each Securityholder
and the Trustee a notice that states the record date, payment date and amount of
interest to be paid.
SECTION 2.13. CUSIP Numbers. The Company in issuing the Securities may
use "CUSIP" numbers (if then generally in
<PAGE> 21
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use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption
as a convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company will promptly notify the Trustee of any
change in the CUSIP numbers.
ARTICLE 3.
REDEMPTION
SECTION 3.01. Notices to Trustee. If the Company wishes to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee of the redemption date and the principal amount of Securities to be
redeemed at least 45 days before the redemption date.
SECTION 3.02. Selection of Securities to Be Redeemed. If less than all
the Securities are to be redeemed, the Trustee shall select the Securities to be
redeemed by lot, or in its discretion, on a pro rata basis from Securities
outstanding and not previously called for redemption (unless the Company
specifically directs the Trustee otherwise), in such manner as the Trustee shall
deem fair and appropriate. The Trustee shall make the selection (and provide the
Company with written notice of such selection) at least 30 days but not more
than 60 days before the redemption date. Securities and portions of them the
Trustee selects for redemption shall be in amounts of $1,000 or integral
multiples of $1,000. In the event that the Trustee is not the Registrar, the
Registrar shall provide to the Trustee such information as the Trustee may
reasonably request to implement the selection. Provisions of this Indenture that
apply to Securities called for redemption also apply to portions of Securities
called for redemption.
SECTION 3.03. Notice of Redemption. At least 30 days but not more than
60 days before a redemption date, the Company shall mail a notice of redemption
to the Trustee and each Holder whose Securities are to be redeemed.
<PAGE> 22
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The notice shall identify the Securities (including CUSIP numbers, if
any) to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the conversion price;
(4) the name and address of the Paying Agent and Conversion
Agent;
(5) that Securities called for redemption may be converted at
any time before the close of business on the business day immediately
preceding the redemption date;
(6) that Holders who want to convert Securities must satisfy
the requirements set forth in paragraph 8 of the Securities;
(7) that Securities called for redemption must be surrendered
to the Paying Agent in order to collect the redemption price;
(8) that interest on Securities called for redemption ceases
to accrue on and after the redemption date (unless funds in the
requisite amount are not paid or made available for payment on that
date), and the amount of interest accrued on the Securities called for
redemption up to but not including the redemption date;
(9) if less than all of any Security is to be redeemed, the
principal amount of such Security to be redeemed;
(10) the CUSIP number, if any, printed on the Securities being
redeemed; and
(11) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Securities.
Upon ten days prior notice to the Trustee, the Company may request that
the Trustee mail the notice of redemption (prepared by the Company) in the
Company's name and at its expense.
<PAGE> 23
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SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption
is mailed, Securities called for redemption, unless theretofore converted into
GGD Stock pursuant to the terms of this Indenture, shall become due and payable
on the redemption date at the redemption price. Upon surrender to the Paying
Agent, such Securities shall be paid at the redemption price, plus accrued
interest to the redemption date; provided, however, that any regular semi-annual
payment of interest becoming due on the redemption date shall be payable to the
Holder of any such Security as provided in paragraph 2 of the Securities.
SECTION 3.05. Deposit of Redemption Price. No later than 11:00 a.m. on
the redemption date, the Company shall deposit in immediately available funds
with the Paying Agent money sufficient to pay the redemption price of and
interest accrued to the redemption date on all Securities to be redeemed on that
date other than Securities or portions thereof called for redemption on that
date which have been delivered by the Company to the Trustee for cancellation.
The Paying Agent shall return to the Company any money not required for that
purpose because of conversion of Securities.
SECTION 3.06. Securities Redeemed in Part. Upon surrender to the
Trustee of a Security that is redeemed in part, the Company shall execute and
the Trustee shall authenticate for the Holder a new Security equal in principal
amount to the unredeemed portion of the Security surrendered.
ARTICLE 4.
REPURCHASE OF SECURITIES AT THE OPTION OF THE
HOLDERS UPON A FUNDAMENTAL CHANGE
SECTION 4.01. Repurchase upon Fundamental Change. The Company covenants
and agrees that, in the event that there occurs a Fundamental Change (as defined
in Section 4.04(d) hereof), each Holder will have the right, at such Holder's
option, to require the Company to repurchase all, or any portion that is an
integral multiple of $1,000, of such Holder's Securities on the Repurchase Date
(as defined in Section 4.03 below) selected as provided below at a repurchase
price (the "Repurchase Price") which is equal to 100% of the principal amount of
such Securities plus accrued interest to the Repurchase Date.
<PAGE> 24
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SECTION 4.02. Notices, Etc. Unless the Company shall have theretofore
called for redemption all the outstanding Securities, on or before the 30th day
after the occurrence of a Fundamental Change, the Company shall deliver to the
Trustee, and the Company shall, or, if so requested by the Company upon ten
days' prior written notice, the Trustee shall, in the name of the Company and at
its expense, mail to each Holder at such Holder's address appearing in the
Securities Register a written notice (the "Company Notice") describing the
occurrence of the Fundamental Change and of the repurchase right set forth
herein arising as a result thereof, as well as stating the final date by which
the Securities must be surrendered for repurchase, the conversion price then in
effect, the Repurchase Date, the Repurchase Price and the procedure which the
Holder must follow to elect repurchase. The Company shall also cause a copy of
such notice of the repurchase right to be published in a newspaper of general
circulation in the Borough of Manhattan, The City of New York.
No failure of the Company to give the foregoing notices or defect
therein shall limit any Holder's right to exercise a repurchase right or affect
the validity of the proceedings for the repurchase of Securities.
SECTION 4.03. Exercising Repurchase Right. (a) To elect repurchase of
any Securities or portion thereof, the Holder will be required to surrender, on
or before the Final Surrender Date (as defined below), (i) in the case of global
Securities, to the Conversion Agent by book-entry delivery of the interest in
the Security in global form to be repurchased, or (ii) in the case of definitive
Securities, at any place where principal is payable, such Security duly endorsed
or assigned to the Company or in blank, in any event together with written
notice of the Holder's election to have the Company repurchase all or any $1,000
portion of such Security specified in such notice. Election of repurchase by a
Holder shall be irrevocable (unless the Company defaults in payment of the
repurchase price for the Securities on the repurchase date) and the right to
convert the Securities as to which such Holder has made such election shall
expire when such Securities are so surrendered (unless the Company defaults in
payment of the repurchase price for the Securities on the repurchase date and
such election is revoked). "Final Surrender Date" shall mean the date which is,
subject to any contrary requirements of applicable law, 60 days after the date
of mailing of the Company Notice. "Repurchase Date" shall mean the date selected
by the Company for the repurchase of the Securities that is not
<PAGE> 25
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less than 10 and not more than 30 days after the Final Surrender Date.
(b) In the event a repurchase right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid the Repurchase
Price in cash to the Holder on the Repurchase Date; provided, however, that
installments of interest that mature on or prior to the Repurchase Date shall be
payable in cash to the Holders of such Securities, registered as such at the
close of business on the relevant record date specified in the Securities
according to the terms and provisions of Article 2.
(c) If any Security surrendered for repurchase shall not be so paid on
the Repurchase Date, the principal amount which is payable at maturity shall,
until the Repurchase Price (as calculated at the date of payment) is paid,
continue to bear interest from the Repurchase Date at the rate borne by the
Security and each such Security shall continue to remain convertible into Common
Stock until said Repurchase Price shall have been paid to the Holder or duly
provided for by deposit with the Paying Agent in immediately available funds
without restriction.
(d) Any Security which is to be repurchased only in part shall be
surrendered to the Trustee (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder without service charge, a new
Security or Securities, of any authorized denomination as requested by such
Holder in aggregate principal amount equal to and in exchange for the
unrepurchased portion of the principal of the Security so surrendered.
SECTION 4.04. Certain Definitions. For purposes of this Article:
(a) The term "Capital Stock" shall mean capital stock of the
Company that does not rank prior, as to the payment of dividends or as
to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, to shares of
capital stock of any other class of the Company;
(b) The term "Fundamental Change" shall mean any of the
following:
<PAGE> 26
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(i) a "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")),
becoming the "beneficial owner" (as defined in Rule l3d-3
under the Exchange Act) of Voting Shares (as defined below) of
the Company entitled to exercise more than 50% of the total
voting power of all outstanding Voting Shares of the Company
(including any right to acquire Voting Shares that are not
then outstanding of which such person or group is deemed the
beneficial owner); or
(ii) a change in the Board of Directors in
which the individuals who constituted the Board of Directors
at the beginning of the two-year period immediately preceding
such change (together with any other director whose election
by the Board of Directors or whose nomination for election by
the shareholders of the Company was approved by a vote of at
least two-thirds of the directors then in office who either
were directors at the beginning of such period or whose
election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the
directors then in office; or
(iii) any consolidation of the Company with,
or merger of the Company into, any other Person, any merger of
another Person into the Company, or any sale or transfer of
all or substantially all of the assets of the Company to
another Person (other than (x) a merger which does not result
in any reclassification, conversion, exchange or cancellation
of outstanding shares of GGD Stock, (y) a merger which is
effected solely to change the jurisdiction of incorporation of
the Company or (z) any consolidation with or merger of the
Company into a wholly-owned subsidiary of the Company, or any
sale or transfer by the Company of all or substantially all of
its assets to one or more of its wholly-owned subsidiaries, in
any one transaction or a series of transactions, provided, in
any such case, that the resulting corporation or each such
subsidiary assumes or guarantees the Company's obligations
under the Securities); provided, however, that a Fundamental
Change shall not occur with respect to any such transaction if
either (i) the last sale price of the GGD Stock for any five
Trading Days during the ten Trading Days immediately preceding
the public announcement by the Company of
<PAGE> 27
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such transaction is at least equal to 105% of the conversion
price in effect on such Trading Day or (ii) the consideration
in such transaction to the holders of GGD Stock consists of
cash, securities that are, or immediately upon issuance will
be, listed on a national securities exchange or quoted on the
Nasdaq National Market, or a combination of cash and such
securities, and the aggregate fair market value of such
consideration (which, in the case of such securities, shall be
equal to the average of the last sale prices of such
securities during the ten consecutive Trading Days commencing
with the sixth Trading Day following consummation of the
transaction) is at least 105% of the conversion price in
effect on the date immediately preceding the closing date of
such transaction;
(c) The term "Person" shall include any syndicate or group
which would be deemed to be a "person" under Section 13(d)(3) of the
Exchange Act as in effect on the date of the original execution of this
Indenture; and
(d) The term "Voting Shares" shall mean all outstanding shares
of any class or series (however designated) of Capital Stock entitled
to vote generally in the election of members of the Board of Directors
and includes, without limitation, the GGD Stock, the GTR Stock and the
GMO Stock.
ARTICLE 5.
COVENANTS
SECTION 5.01. Payment of Securities. The Company shall pay the
principal of and premium, if any, and interest on, and Repurchase Price, if any,
of the Securities on the dates and in the manner provided in the Securities and
this Indenture. Principal, premium, if any, Repurchase Price, if any, and
interest shall be considered paid on the date due if the Paying Agent (other
than the Company) holds on that date money sufficient to pay all principal,
premium, if any, and interest then due and that is immediately available on such
date for payment to the Holders and that is not subject to restriction
including, but not limited to, the restrictions set forth in Article 12 hereof.
<PAGE> 28
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The Company shall pay interest on overdue principal and premium, if
any, at the rate per annum borne by the Securities; it shall pay interest on
overdue installments of interest at the same rate per annum to the extent
lawful.
SECTION 5.02. SEC Reports. The Company shall file with the Trustee
within 15 days after the Company is required to file them with the SEC copies of
the annual reports and the information, documents and other reports (or copies
of such portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act (as defined in Section 4.04).
Notwithstanding that the Company may not be required to remain subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall file with the SEC (unless the SEC will not accept such a filing) and
provide the Trustee and Securityholders with the annual reports and the
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections, such information, documents and other reports to be so filed and
provided at the times specified for the filing of such information, documents
and reports under such Sections. The Company also shall comply with the other
provisions of TIA Section 314(a).
SECTION 5.03. Compliance Certificate. The Company shall deliver to the
Trustee within 120 days after the end of each fiscal year of the Company a brief
certificate from the principal executive officer, principal financial officer or
principal accounting officer as to his or her knowledge of the Company's
compliance with all conditions and covenants under this Indenture. For purposes
of this Section 5.03, such compliance shall be determined without regard to any
period of grace or requirement of notice provided under this Indenture. The
first certificate pursuant to this Section shall be for the year ending on
December 31, 1998.
SECTION 5.04. Corporate Existence. Subject to Article 6, the Company
will do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence, rights (charter and statutory) and
franchise; provided, however, that the Company shall not be required to preserve
any such right or franchise if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the
<PAGE> 29
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Company and that the loss thereof is not disadvantageous in any material respect
to the Holders.
SECTION 5.05. Notice of Defaults. In the event that the Company fails
to make any payment in an amount in excess of $20,000,000 when due, after any
applicable grace period, in respect of indebtedness for borrowed money of the
Company or if indebtedness for borrowed money of the Company in an amount in
excess of $20,000,000 is accelerated because of the occurrence of any default
under such indebtedness, the Company will promptly give written notice to the
Trustee of such failure or acceleration, as the case may be, or of the
occurrence of an event which, with the giving of notice or the passage of time,
or both, would entitle the holder or holders of such indebtedness to declare
such indebtedness due and payable before its maturity.
SECTION 5.06. Further Instruments and Acts. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
SECTION 5.07. Resale of Certain Securities. During the period beginning
on the last date of original issuance of the Securities and ending on the date
that is two years from such date, the Company will not, and will use its best
efforts not to permit any of its "affiliates" (as defined under Rule 144 under
the Securities Act or any successor provision thereto) to, resell (x) any
Securities which constitute "restricted securities" under Rule 144 or (y) any
securities into which the Securities have been converted under this Indenture
which constitute "restricted securities" under Rule 144, that in either case
have been reacquired by any of them. The Trustee shall have no responsibility in
respect of the Company's performance of its agreement in the preceding sentence.
SECTION 5.08. Registration Rights. The Company agrees that the Holders
(and any Person that has a beneficial interest in a Security) from time to time
of Transfer Restricted Securities are entitled to the benefits of the
Registration Rights Agreement executed by the Company. Pursuant to the
Registration Rights Agreement the Company will, at its cost, (a) use its
reasonable best efforts to file within 60 days after the first date of original
issuance of the Securities a Registration Statement on Form S-3 (a "Shelf
Registration Statement") covering resales of the Securities and
<PAGE> 30
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the GGD Stock issuable upon the conversion pursuant to Rule 415 under the
Securities Act, (b) use its reasonable best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act no
later than 120 days after the first date of original issuance of the Securities
and (c) use its reasonable best efforts to keep the Shelf Registration Statement
effective after its effective date until the date which is the earliest of (i)
the second anniversary of the effective date of the Shelf Registration
Statement, (ii) such time as all the Securities or GGD Stock issuable upon
conversion thereof (the "Registrable Securities") have been sold pursuant to the
Shelf Registration Statement, transferred pursuant to Rule 144 under the
Securities Act or otherwise transferred in a manner that results in such
securities not being subject to transfer restrictions under the Securities Act
and the absence of a need for a restrictive legend regarding registration under
the Securities Act, and (iii) such time as all of the Registrable Securities
held by non-affiliates of the Company are eligible for sale pursuant to Rule
144(k) under the Securities Act or any successor rule or regulation thereto. The
Company will, in the event a Shelf Registration Statement is filed, among other
things, provide to each Holder from whom such Shelf Registration Statement was
filed copies of the prospectus which is a part of the Shelf Registration
Statement, notify each such Holder when the Shelf Registration Statement has
become effective, and take certain other actions as are required to permit
unrestricted resales of the Securities and the GGD Stock issuable upon the
conversion thereof by such Holders to third parties.
If (i) on or prior to the 60th day after the first date of original
issuance of the Securities, the Shelf Registration Statement has not been filed
with the Commission; (ii) on or prior to the 120th day after the first date of
original issuance of the Securities, the Shelf Registration Statement has not
been declared effective by the Commission; or (iii) after the Shelf Registration
Statement has been declared effective, such Shelf Registration Statement ceases
to be effective or usable (subject to certain exceptions described in the
Registration Rights Agreement) in connection with resales of Securities and the
GGD Stock issuable upon the conversion thereof in accordance with and during the
periods specified in the Registration Rights Agreement (each such event referred
to in clauses (i) through (iii), a "Registration Default"), additional interest
will accrue on the Securities over and above the rate set forth in the title of
the Securities, from and including the date on which any such Registration
Default shall occur to but excluding the date on which all Registration De-
<PAGE> 31
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faults have been cured, at the rate of 0.25% per annum for a Registration
Default pursuant to clause (i) above, and at a rate of 0.5% per annum for a
Registration Default pursuant to clauses (ii) and (iii). The Company will have
no other liabilities for monetary damages with respect to its registration
obligations; provided, however, that in the event the Company breaches, fails to
comply with or violates certain provisions of the Registration Rights Agreement,
the Holders shall be entitled to, and the Company shall not oppose the granting
of, equitable relief, including injunction and specific performance.
ARTICLE 6.
SUCCESSORS
SECTION 6.01. When Company May Merge, Etc. The Company shall not
consolidate or merge with or into, or sell, lease, convey or otherwise dispose
of all or substantially all of its assets to, any Person unless:
(1) the Company is the surviving person or that Person is a
corporation organized under the laws of the United States, any state
thereof or the District of Columbia or a corporation or comparable
legal entity organized under the laws of a foreign jurisdiction and
whose equity securities are listed on a national securities exchange in
the United States or authorized for quotation on the Nasdaq National
Market;
(2) that Person assumes by supplemental indenture executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Securities and this Indenture,
except that it need not assume the obligations of the Company as to
conversion of Securities if pursuant to Section 11.15 the Company or
another Person enters into a supplemental indenture obligating it to
deliver securities, cash or other assets upon conversion of Securities;
(3) immediately after giving effect to such transaction, no
Default shall have occurred and be continuing; and
(4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stat-
<PAGE> 32
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ing that such consolidation, merger, transfer or lease and such
supplemental indenture comply with this Article and that all conditions
precedent herein provided for related to such transaction have been
complied with.
The surviving, transferee or lessee corporation shall be the successor
Company, but the predecessor Company in the case of a transfer or lease shall
not be released from the obligation to pay the principal amount or Repurchase
Price of and premium, if any, and interest on the Securities.
ARTICLE 7.
DEFAULTS AND REMEDIES
SECTION 7.01. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest (including
additional interest as provided in Section 5.08) on any Security when
the same becomes due and payable and the Default continues uncured for
a period of 30 days, whether or not such payment is prohibited or
restricted by the provisions of Article 12;
(2) the Company defaults in the payment of (A) principal of or
premium, if any, on any Security when the same becomes due and payable,
whether at maturity, upon redemption or otherwise, or (B) the
Repurchase Price in respect of any Security when due, in either case
whether or not such payment is prohibited or restricted by the
provisions of Article 12;
(3) the Company fails to comply with any of its other
covenants or agreements set forth in this Indenture and the Default
continues for the period and after the notice specified below;
(4) the Company fails to make any payment when due, including
any applicable grace period, in respect of indebtedness for borrowed
money of the Company, which payment is in an amount in excess of
$20,000,000, or the Company defaults with respect to any indebtedness
for borrowed money of the Company, which default results in
acceleration of any such indebtedness which is in an amount of in
excess of $20,000,000;
<PAGE> 33
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(5) the Company pursuant to or within the meaning of any
Bankruptcy Law (as defined below):
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian (as
defined below) of it or for all or substantially all of its
property; or
(D) makes a general assignment for the benefit of its
creditors; or
(6) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company in an
involuntary case;
(B) appoints a Custodian of the Company or for all or
substantially all of its property; or
(C) orders the liquidation of the Company,
and the order or decree remains unstayed and in effect for 90
consecutive days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
A Default under clause (3) above is not an Event of Default until the
Trustee or, subject to Section 2.09, the Holders of at least 25% in principal
amount of the Securities notify the Company in writing of the Default and the
Company does not cure the Default within 60 days after receipt of the notice.
The notice must specify the Default, demand that it be remedied and state that
the notice is a "Notice of Default". When a Default is cured, it ceases to
exist.
SECTION 7.02. Acceleration. If any Event of Default described in
Section 7.01(1) through (4) occurs and is continuing, the Trustee, by written
notice to the Company, or, subject to Section 2.09, the Holders of at least 25%
in aggregate principal amount of the outstanding Securities, by
<PAGE> 34
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written notice to the Company and the Trustee, may declare the principal of and
accrued interest on all Securities to be due and payable. Upon such declaration
such principal and interest shall be due and payable immediately. If any Event
of Default described in Section 7.01(5) or (6) occurs the principal of and
accrued interest on all Securities shall automatically become due and payable,
without any action required of the Trustee or the Holders. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
rescind an acceleration and its consequences if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration, if the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction, and
if all payments (including fees and expenses) due to the Trustee have been paid.
SECTION 7.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal or the Repurchase Price of or premium, if any, or interest on the
Securities or to enforce the performance of any provision of the Securities or
this Indenture.
The Trustee may maintain a proceeding even if the Trustee does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. To the extent
permitted by law. no remedy is exclusive of any other remedy and all remedies
are cumulative.
SECTION 7.04. Waiver of Past Defaults. Subject to Section 2.09, the
Holders of a majority in aggregate principal amount of the Securities by written
notice to the Trustee may waive an existing Default and its consequences except
a Default in the payment of the principal of or premium, if any, or interest on
any Security or a Default under Article 11. When a Default is waived, it is
cured and ceases to exist. This Section 7.04 shall be in lieu of TIA Section
316(a)(1)(B), and TIA Section 316(a)(1)(B) is hereby expressly excluded from
this Indenture and Section, as permitted by the TIA.
SECTION 7.05. Control by Majority. Subject to Section 2.09, the Holders
of a majority in aggregate principal amount of the Securities may direct the
time, method and place of conducting any proceeding for any remedy available to
the
<PAGE> 35
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Trustee or exercising any trust or power conferred on it. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture, is
unduly prejudicial to the rights of another Securityholder, or would expose the
Trustee to liability or expense for which it has not been offered reasonably
satisfactory indemnity. This Section 7.05 shall be in lieu of TIA Section
316(a)(1)(A), and TIA Section 316(a)(1)(A) is hereby expressly excluded from
this Indenture and Section, as permitted by the TIA.
SECTION 7.06. Limitation on Suits. A Securityholder may pursue any
remedy with respect to this Indenture or the Securities only if:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense to
be, or which may be, incurred by the Trustee in pursuing the remedy;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of a majority in
principal amount of the Securities do not give the Trustee a direction
inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the rights of another
Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 7.07. Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
the principal of and premium, if any, and interest on the Security on or after
the respective due dates expressed in the Security, and to convert such Security
in accordance with Article 11, or to bring suit for the enforcement of any such
payment on or after such respective due dates and such right to convert, is
absolute and unconditional and shall not be impaired or affected without the
consent of the Holder.
<PAGE> 36
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SECTION 7.08. Collection Suit by Trustee. If an Event of Default
specified in Section 7.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as Trustee of an express trust against the
Company for the whole amount of principal, premium, if any, Repurchase Price, if
any, and interest remaining unpaid together with interest on overdue principal
and premium, if any, and on the principal amount of any Security for which the
Repurchase Price is overdue, and, to the extent that payment of such interest is
lawful, interest on overdue installments of interest, in each case at the rate
per annum set forth in the title of the Securities.
SECTION 7.09. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceeding relative to the Company, its creditors or its
property.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceedings.
SECTION 7.10. Priorities. If the Trustee collects any money or property
pursuant to this Article 7, it shall pay out the money or property in the
following order:
First: to the Trustee for amounts due under Section 8.07 or
any other provision of this Indenture;
Second: to holders of Senior Indebtedness to the extent
required by Article 12;
Third: to Securityholders for amounts due and unpaid on the
Securities for principal, premium, if any, Repurchase Price, if any,
and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for
principal, premium, if any, Repurchase Price, if any, and interest,
respectively; and
Fourth: to the Company.
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The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 7.10.
SECTION 7.11 Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 7.07, or a suit by a Holder or
Holders of more than 10% in aggregate principal amount of the Securities then
outstanding.
ARTICLE 8.
TRUSTEE
SECTION 8.01. Duties of Trustee. (a) If to the knowledge of the Trustee
an Event of Default has occurred and is continuing, the Trustee shall exercise
such of the rights and powers vested in it by this Indenture and use the same
degree of care and skill in their exercise as a prudent person would exercise or
use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture, but need not verify the accuracy of the contents
thereof.
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(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b)
of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 7.05; and
(4) no provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
it.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree with the Company. Money held in trust by
the Trustee need not be segregated from other funds except to the extent
required by law and need not be invested except as agreed to by the Trustee.
SECTION 8.02. Rights of Trustee. Subject to Section 8.01:
(a) the Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document;
(b) before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee
shall not be liable for any action
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it takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel;
(c) the Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed
with due care;
(d) the Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or
within its rights or powers;
(e) the Trustee may consult with counsel reasonably acceptable
to the Trustee, which may be counsel to the Company, and the advice of
such counsel as to matters of law shall be full and complete
authorization and protection in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel;
(f) The Trustee shall not be bound to ascertain or inquire as
to the performance or observance of any covenants, conditions or
agreements on the part of the Company under this Indenture; but the
Trustee may require of the Company full information and advice as to
the performance of the covenants, conditions and agreements aforesaid;
and
(g) the Trustee shall not be required to give any bond or
surety in respect of the execution of its trusts and powers or in
respect of this Indenture.
SECTION 8.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or an Affiliate with the same rights the
Trustee would have if it were not Trustee. Any Agent may do the same with like
rights.
SECTION 8.04. Trustee's Disclaimer. The Trustee makes no representation
as to the validity or adequacy of this Indenture or the Securities, shall not be
accountable for the Company's use of the proceeds from the sale of the
Securities or the use or application of any money received by any Paying Agent
other than the Trustee, and shall not be responsible for any statement in the
Securities other than the Trustee's certificate of authentication.
SECTION 8.05. Notice of Defaults. If a Default occurs and is continuing
and if it is known to the Trustee, the
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Trustee shall mail to each Securityholder, at the name and address which appear
in the Securities Register, a notice of the Default within 90 days after the
Default occurs. Except in the case of a Default in payment of the principal of
or premium, if any, or interest on any Security, the Trustee may withhold the
notice if and so long as its board of directors, the executive committee, or a
trust committee of its directors and/or responsible officers in good faith
determines that withholding the notice is in the interests of Securityholders.
The Trustee shall not be deemed to have notice of any Default or Event of
Default other than as described in clauses (1) or (2) of Section 7.01 unless it
shall have received written notice thereof from the Company or any
Securityholder, or a Trust Officer has actual knowledge thereof. The foregoing
sentence of this Section 8.05 shall be in lieu of the proviso to TIA Section
315(b), and such proviso to TIA Section 315(b) is hereby expressly excluded from
this Indenture and Section, as permitted by the TIA.
SECTION 8.06. Reports by Trustee to Holders. If required by TIA Section
313(a), within 60 days after each April 1 beginning with the April 1 following
the date of this Indenture, the Trustee shall mail to each Securityholder a
report dated as of such April 1 that complies with TIA Section 313(a). The
Trustee also shall comply with TIA Section 313(b), (c) and (d).
A copy of each such report at the time of its mailing to
Securityholders shall also be mailed to the Company and shall be filed with the
SEC and each stock exchange, if any, on which the Securities are listed.
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or of any delisting thereof.
SECTION 8.07. Compensation and Indemnity. The Company shall from time
to time pay to the Trustee reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee, within 45
days after receiving request therefor, for all reasonable out-of-pocket
disbursements, fees and expenses incurred by the Trustee in connection with the
performance of its duties under this Indenture, including without limitation
those incurred in connection with the enforcement of any remedy hereunder or the
interpretation of any provision hereunder.
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Such expenses may include the reasonable compensation and out-of-pocket expenses
of the Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability incurred by it in connection with this Indenture.
The Trustee shall promptly notify the Company of any claim for which the Trustee
may seek indemnity, including costs and expenses of defending itself against any
claim for liability arising from the exercise or performance of any of its
powers or duties hereunder.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through its negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal of,
premium, if any, and interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 7.01(5) or (6) occurs, the expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
Notwithstanding any provision hereof to the contrary, the Trustee's
lien shall not be subordinated to that of Senior Indebtedness.
SECTION 8.08. Replacement of Trustee. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Securities may remove the Trustee by so
notifying the Trustee and the Company. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 8.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
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(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 8.10, any Securityholder or
Beneficial Holder may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the retiring
Trustee shall transfer all property held by it as Trustee to the successor
Trustee (subject to the lien provided for in Section 8.07), the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Securityholders.
SECTION 8.09. Successor Trustee, Agents by Merger, Etc. If the Trustee
or any Agent consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee or
Agent, as the case may be.
SECTION 8.10. Eligibility; Disqualification. This Indenture shall
always have a Trustee who satisfies the requirement of TIA Sections
310(a)(1) and 310(a)(5). The Trustee (or in the case of a corporation included
in a bank holding company system, the related bank holding company) shall have a
combined
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capital and surplus of at least $100,000,000 as set forth in its most recent
published annual report of condition. In addition, if the Trustee is a
corporation included in a bank holding company system, the Trustee,
independently of such bank holding company, shall meet the capital requirements
of TIA Section 310(a)(2). The Trustee shall comply with TIA Section 310(b).
SECTION 8.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 9.
DISCHARGE OF INDENTURE
SECTION 9.01. Termination of Company's Obligations. The Company may
terminate all of its obligations under this Indenture if:
(a) (1) the Securities mature within one year or
all of them are to be called for redemption
(and the Securities are redeemable) within one
year and arrangements satisfactory to the
Trustee are made with respect to the giving of
the notice of redemption; and
(2) the Company irrevocably deposits in trust with
the Trustee money or U.S. Government
Obligations sufficient to pay, when due, the
principal of and premium, if any, and interest
on the Securities to maturity or redemption, as
the case may be. The Company may make such
deposit only during the one-year period
referred to in paragraph (1) above and only if
Article 12 permits it; or
(b) all securities previously authenticated and delivered
(other than destroyed, lost or stolen Securities which have been
replaced or paid or Securities for whose payment money or securities
have theretofore been held in trust and thereafter repaid to the
Company, as provided in Section 9.03) have been delivered to the
Trustee for cancellation and the Company has paid all sums payable by
it hereunder.
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However, the obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07,
5.01, 8.07, 8.08, 9.03, 9.04 and 9.05 and in Article 11 shall survive until the
Securities are no longer outstanding. Thereafter the obligations in Sections
8.07, 9.03 and 9.04 shall survive.
After a termination of the Company's obligations in accordance with
this Section, the Trustee upon request shall acknowledge in writing the
discharge of the Company's obligations under this Indenture except for those
surviving obligations specified above.
In order to have money available on a payment date to pay principal of
and premium, if any, or interest on the Securities, the U.S. Government
Obligations shall be payable as to principal or interest on or before such
payment date in such amounts as will provide the necessary money.
"U.S. Government Obligations" means direct obligations of the United
States of America for the payment of which the full faith and credit of the
United States of America is pledged and which are not callable at the issuer's
option.
SECTION 9.02. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to Section
9.01. It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal of and premium, if any, and interest on the Securities.
Money and securities so held in trust are not subject to Article 12.
SECTION 9.03. Repayment to Company. The Trustee and the Paying Agent
shall promptly pay to the Company upon request any excess money or securities
held by them at any time.
Subject to the requirements of applicable law, the Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of principal or premium, if any, or interest that remains unclaimed
for two years; provided, however, that, before being required to make any such
repayment, the Trustee or such Paying Agent shall, if the Company so requests
and at the expense of the Company, cause to be published once a week for two
successive weeks, in each case on any day of the week, in an authorized
newspaper in the Borough of Manhattan, The City of New York, or mail to each
such Holder, a notice (in such form as may be deemed appropriate by such Trustee
or Paying Agent) that said monies remain
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unclaimed and that, after a date named therein, which shall not be less than 30
days from the date of such publication or mailing, any unclaimed balance of said
monies then remaining will be returned to the Company. After payment to the
Company, Securityholders entitled to the money must look to the Company for
payment as general creditors unless an applicable abandoned property law
designates another Person.
SECTION 9.04. Indemnity for Government Obligations. The Company shall
pay and shall indemnify the Trustee and each Securityholder against any tax, fee
or other charge imposed on or assessed against deposited U.S. Government
Obligations or the principal and interest received on such obligations.
SECTION 9.05. Reinstatement. If the Trustee is unable to apply any
money or United States Government Obligations in accordance with Section 9.01 by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 9.01 until such time as the Trustee is permitted to apply
all such money or United States Government Obligations in accordance with
Section 9.01; provided, however, that if the Company has made any payment of
interest on or principal of any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or United States
Government Obligations held by the Trustee.
ARTICLE 10.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders. The Company and the Trustee
may amend or supplement this Indenture or the Securities without the consent of
any Securityholder:
(1) to cure any ambiguity, defect or inconsistency herein or in the
Securities;
(2) to comply with Section 6.01;
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(3) to make any change that does not materially adversely affect the
rights of any Securityholder; or
(4) to make provision with respect to the conversion rights of Holders
pursuant to the requirements of Section 11.17.
SECTION 10.02. With Consent of Holders. The Company and the Trustee may
amend or supplement this Indenture or the Securities with the written consent of
the Holders of at least a majority in aggregate principal amount of the
Securities, and the Holders of a majority in aggregate principal amount of the
Securities may waive compliance by the Company with any provision of this
Indenture or the Securities. However, without the consent of each Securityholder
affected, an amendment, supplement or waiver under this Section may not:
(1) change the stated maturity date of the principal of, or interest
on, any Security or adversely affect the right of a Holder to convert any
Security;
(2) reduce the principal amount or Repurchase Price of, or premium, if
any, or interest on, any Security;
(3) change the currency for payment of principal of, or interest on,
any Security;
(4) impair the right to institute suit for the enforcement of any
payment on or with respect to any Security;
(5) make any change in Article 12 that adversely affects the rights of
any Securityholder;
(6) reduce the principal amount of Securities whose Holders must
consent to an amendment or supplement of this Indenture or the waiver of
defaults or compliance hereunder; or
(7) make any change in Section 7.04, 7.07 or this 10.02 (second
sentence).
An amendment under this Section may not make any change that adversely
affects the rights under Article 12 of any holder of an issue of Senior
Indebtedness unless the holders of the issue pursuant to its terms consent to
the change.
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It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof. The Company may establish, by delivery of an Officers' Certificate to
the Trustee, a record date for determining Securityholders of record entitled to
give any consent or waiver.
After an amendment or supplement under this Section becomes effective,
the Company shall mail to Securityholders a notice briefly describing the
amendment or supplement. Any failure of the Company to mail any such notice, or
any defect therein, shall not, however, in any way impair or affect the validity
of any supplemental indenture.
SECTION 10.03. Compliance with Trust Indenture Act. Every amendment to
or supplement of this Indenture or the Securities shall comply with the TIA as
then in effect.
SECTION 10.04. Revocation and Effect of Consents. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Holder of a
Security is a continuing consent by the Holder and every subsequent Holder of a
Security or portion of a Security that evidences the same debt as the consenting
Holder's Security, even if notation of the consent is not made on any Security.
However, any such Holder or subsequent Holder may revoke the consent as to such
Security or portion of a Security if a Trust Officer of the Trustee receives the
notice of revocation before the date the amendment, supplement or waiver becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Securityholder. Notwithstanding the
foregoing, if a record date has been established for the purpose of determining
Securityholders entitled to consent, such written notice of revocation must be
signed by the Securityholder of record as of the record date or his duly
appointed proxy.
SECTION 10.05. Notation on or Exchange of Securities. The Trustee may
place an appropriate notation relating to an amendment, supplement or waiver on
any Security thereafter authenticated. The Company in exchange for all
Securities may issue, and the Trustee shall authenticate, new Securities that
reflect the amendment, supplement or waiver.
SECTION 10.06. Trustee to Sign Amendments, Etc. In executing, or
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or Section
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11.15 or the modifications thereby of the trusts created by this Indenture, the
Trustee shall be entitled to receive, and (subject to Section 8.01) shall be
fully protected in relying upon, an Opinion of Counsel and an Officers'
Certificate stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture.
The Trustee shall sign any amendment or supplement authorized pursuant
to this Article if the amendment or supplement does not adversely affect the
rights of the Trustee. If the amendment or supplement does adversely affect the
Trustee's rights, the Trustee may, but need not, sign it.
ARTICLE 11.
CONVERSION
SECTION 11.01. Conversion Privilege. A Holder of a Security may convert
it into fully paid and non-assessable shares of GGD Stock at any time during the
period and subject to the terms stated herein and in paragraph 8 of the
Securities. The number of shares issuable upon conversion of a Security is
determined by dividing the principal amount to be converted by the conversion
price in effect on the conversion date, and rounding the result to the nearest
1/l00th of a share, with 500/1,000 of a share to be rounded up.
The initial conversion price is stated in paragraph 8 of the
Securities. The conversion price is subject to adjustment as provided in this
Article 11.
A Holder may convert a portion of a Security if the portion is $1,000
or a whole multiple of $1,000. Provisions of this Indenture that apply to
conversion of all of a Security also apply to conversion of a portion of it.
"GGD Stock" means shares of the series designated as Genzyme General
Division Common Stock of the Company as it exists at the date of this Indenture
or shares of any class or series resulting from any reclassification or
reclassifications thereof and which have no preference in respect of dividends
or of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which are not subject to any
required redemption by the Company.
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SECTION 11.02. Conversion Procedure. To convert a Security a Holder
must satisfy the requirements set forth in paragraph 8 of the Securities. The
date on which the Holder satisfies all those requirements in respect of a
Security is the conversion date of that Security. As soon as practical on or
after the conversion date, the Company shall deliver through the Conversion
Agent a certificate for the number of full shares of GGD Stock issuable upon the
conversion of that Security and a check for any fractional share. The person in
whose name the certificate is registered shall be treated as a shareholder of
record on and after the conversion date.
No payment or adjustment will be made for accrued interest on a
converted Security (other than the payment of interest to the Holder of a
Security at the close of business on a record date pursuant to Section 2.04(b)
hereof), or for dividends or distributions on any GGD Stock issued upon
conversion of any Security.
If a Holder converts more than one Security at the same time, the
number of full shares issuable upon the conversion shall be based on the total
principal amount of the Securities converted.
If GGD Stock is to be issued in the name of a Person other than the
Holder thereof, and the restrictions on transfer of such Security set forth in
the first paragraph of the face of the Security remain in effect, the Holder
must provide certification regarding compliance with the restrictions on
transfer, by executing an assignment in the form attached to the Security.
If the restrictions on transfer of a Security set forth in the first
paragraph on the face of the Security remain in effect, all shares of GGD Stock
delivered upon conversion thereof shall be subject to such restrictions on
transfer and shall bear a restrictive legend substantially in the form of such
paragraph.
Upon surrender of a Security that is converted in part, the Company
shall execute and the Trustee shall authenticate for the Holder a new Security
equal in principal amount to the unconverted portion of the Security
surrendered.
If the last day on which a Security may be converted is a Legal Holiday
in a place where a Conversion Agent is located, the Security may be surrendered
to that Conversion Agent on the next succeeding business day that is not a Legal
Holiday
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with the same force and effect as if surrendered on such last day.
Upon receiving notice of the conversion of an interest in a Security in
global form, the Trustee or the Securities Custodian, at the direction of the
Trustee, shall make a notation on such Security in global form as to the
reduction in the principal amount represented thereby, subject to the terms of
the standing agreements with and procedures of the Depository.
SECTION 11.03. Fractional Shares. The Company will not issue a
fractional share of GGD Stock upon conversion of a Security. Instead the Company
will deliver to the converting Securityholder its check for the current market
value of the fractional share. The current market value of a fraction of a share
is determined by multiplying the current market price of a full share by the
fraction, and rounding the result to the nearest cent, with .5 cents to be
rounded up.
For purposes of this Section, the current market price of a share of
GGD Stock is the Quoted Price of the GGD Stock on the last Trading Day prior to
the conversion date.
SECTION 11.04. Taxes on Conversion. If a Holder of a Security converts
it, the Company shall pay any documentary, stamp or similar issue or transfer
tax due on the issue of shares of GGD Stock upon the conversion. However, the
Holder shall pay any such tax which is due because the shares are issued in a
name other than such Holder's.
SECTION 11.05. Company to Provide Stock. The Company shall reserve at
all times and keep available, free from preemptive rights, out of its authorized
but unissued GGD Stock, enough shares of GGD Stock to permit the conversion of
the Securities.
All shares of GGD Stock which may be issued upon conversion of the
Securities shall be fully paid and nonassessable.
The Company shall endeavor to comply with all applicable securities
laws regulating the offer and delivery of shares of GGD Stock upon conversion of
Securities and shall endeavor to list such shares on each national securities
exchange on which the GGD Stock is listed, or to have such shares approved for
quotation on the Nasdaq National Market or other over-the-counter market on
which the GGD Stock is traded.
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SECTION 11.06. Adjustment for Change in Capital Stock. If the Company:
(1) issues any shares of its capital stock as a dividend (or other
distribution) on its GGD Stock;
(2) subdivides its outstanding shares of GGD Stock into a greater
number of shares;
(3) combines its outstanding shares of GGD Stock into a smaller number
of shares; or
(4) issues by reclassification of its GGD Stock any shares of its
capital stock,
then the conversion privilege and the conversion price in effect
immediately prior to such action shall be adjusted so that the Holder of a
Security thereafter converted will receive the number of shares of capital stock
of the Company that would have been received (and if there is more than one
class or series of such capital stock, then shares of each class or series in
the same proportions that would have been received) upon consummation of such
action by a Holder of the number of shares of GGD Stock into which such Security
might have been converted immediately prior to such action, with the aggregate
conversion price to be divided evenly among the shares to be issued upon
conversion thereof.
The adjustment described in the preceding paragraph shall become
effective immediately after the record date in the case of a dividend or
distribution and immediately after the effective date in the case of a
subdivision, combination or reclassification.
If, after an adjustment, a Holder of a Security may receive shares of
two or more classes or series of capital stock of the Company upon conversion of
such Security, the Company shall determine the allocation of the adjusted
conversion price between or among such classes or series of capital stock. After
such allocation, the conversion privilege and the conversion price of each class
of capital stock shall thereafter be subject to adjustment on terms comparable
to those applicable to GGD Stock in this Article.
SECTION 11.07. Adjustment for Rights Issue. If the Company distributes
any rights or warrants to all holders of its GGD Stock entitling them to
subscribe for or purchase shares of GGD Stock at a price per share less than the
current
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market price per share (as defined in Section 11.11), then, on the Record Date
(as defined in this Section 11.07), the conversion price shall be adjusted in
accordance with the formula:
O + (N x P)
AC = CC x M
-----------
O + N
where:
AC = the adjusted conversion price.
CC = the current conversion price.
O = the number of shares of GGD Stock outstanding on the
Record Date.
N = the number of additional shares of GGD Stock offered.
P = the offering price per share of the additional
shares.
M = the current market price per share of GGD Stock on
the Record Date (as defined in this Section 11.07).
The adjustment shall become effective immediately after the record date
for the determination of shareholders entitled to receive such rights or
warrants (for purposes of this Section 11.07 only, the "Record Date").
SECTION 11.08. Adjustment for Certain Distributions. Subject to the
last paragraph of this Section 11.08, if the Company distributes to all holders
of its GGD Stock any cash, debt securities (or other evidences of indebtedness)
or other assets (excluding dividends or distributions for which adjustment is
required to be made under Sections 11.06, 11.07 or 11.09), the conversion price
shall be reduced in accordance with the following formula:
AC = CC x M - P
-----
M
where:
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AC = the adjusted conversion price.
CC = the current conversion price.
M = the current market price per share of GGD Stock on
the Record Date (as defined in this Section 11.08).
P = the aggregate fair market value on the Record Date
(as defined in this Section 11.08) (as determined in
good faith by the Board of Directors and set forth in
a certified resolution filed with the Trustee) of the
cash, debt securities (or other evidences of
indebtedness) or other assets distributed applicable
to one share of GGD Stock.
The adjustment shall become effective immediately after the record date
for the determination of shareholders entitled to receive such distribution (for
purposes of this Section 11.08 only, the "Record Date").
No adjustment will be made with respect to this Section 11.08 if, in
lieu of such adjustment, the holders of the Securities, upon conversion, will be
entitled to receive, in addition to the shares of GGD Stock into which such
Securities are convertible, the kind and amount of cash, debt securities (or
other evidences of indebtedness) or other assets comprising the distribution
that such holders would have received had they converted their Securities
immediately prior to the Record Date (as defined in this Section 11.08). In
addition, no adjustment will be made in the event that the then fair market
value (as so determined) of the cash, debt securities (or other evidences of
indebtedness) or other assets so distributed applicable to one share of GGD
Stock is equal to or greater than the current market price per share of the GGD
Stock, in which case, in lieu of such adjustment, adequate provision shall be
made so that each holder of Securities shall have the right to receive upon
conversion the amount of cash, debt securities (or other evidences of
indebtedness) or other assets such holder would have received had such holder
converted each Security on the Record Date (as defined in this Section 11.08).
SECTION 11.09. Adjustment for All Cash Distribution. Subject to the
last two paragraphs of this Section 11.09, if the Company shall pay or make a
dividend or other distribution consisting exclusively of cash to all holders of
its GGD Stock,
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the conversion price shall be reduced in accordance with the following formula:
AC = CC x M - C
-----
M
where:
AC = the adjusted conversion price.
CC = the current conversion price.
M = the current market price per share of GGD Stock on
the date fixed for payment of such distribution.
C = the amount of cash so distributed and not excluded
(as provided below) applicable to one share of GGD
Stock.
The adjustment shall become effective immediately prior to the opening
of business on the day following the date fixed for payment of such
distribution.
For the purposes of this Section 11.09, (A) the portion of regular cash
dividends on the GGD Stock that does not exceed the per share amount of the
immediately preceding regular cash dividend on the GGD Stock (as adjusted to
reflect any of the events referred to in Sections 11.06, 11.07, 11.08, 11.09 and
11.10) shall be excluded and (B) the portion of such regular cash dividends on
the GGD Stock, to the extent that the annualized per share amount thereof does
not exceed 15% of the current market price per share of the GGD Stock as of the
trading day immediately preceding the date of declaration of such dividend,
shall be excluded.
No adjustment will be made in the event that the amount of cash so
distributed applicable to one share of GGD Stock is equal to or greater than the
current market price per share of the GGD Stock, in which case, in lieu of such
adjustment, adequate provision shall be made so that each Securityholder shall
have the right to receive upon conversion the amount of cash such Holder would
have received had such Holder converted each Security immediately prior to the
record date for the distribution of the cash.
SECTION 11.10. Adjustment for Tender or Exchange Offer. Subject to the
last paragraph of this Section 11.10, in
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the event that a tender or exchange offer (other than an odd-lot offer) made by
the Company or any subsidiary of the Company for all or a portion of the GGD
Stock shall expire and such tender or exchange offer (including any amendment in
effect immediately prior to the expiration thereof) shall require the payment to
stockholders of consideration per share of GGD Stock having a fair market value
(as determined in good faith by the Board of Directors and set forth in a
certified resolution filed with the Trustee) that, as of the last time (the
"Expiration Time") tenders or exchanges may be made pursuant to such tender or
exchange offer, exceeds 110% of the current market price per share of GGD Stock
at the Expiration Time, the conversion price shall be reduced in accordance with
the following formula:
AC = CC x O x M
-----------
P + (T x M)
where:
AC = the adjusted conversion price.
CC = the current conversion price.
O = the number of shares of GGD Stock outstanding
(including any tendered or exchanged shares) at the
Expiration Time.
P = the fair market value of the aggregate consideration
payable to shareholders of GGD Stock based on the
acceptance (up to any maximum specified in the terms
of the tender or exchange offer) of all shares of GGD
Stock validly tendered or exchanged and not withdrawn
as of the Expiration Time (the shares of GGD Stock so
accepted, up to any such maximum, being referred to
as the "Purchased Shares").
T = the number of shares of GGD Stock outstanding (less
any Purchased Shares) on the Expiration Time.
M = the current market price per share of GGD Stock at
the Expiration Time.
<PAGE> 56
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The adjustment shall become effective immediately prior to the opening
of business on the day following the Expiration Time.
In the event that the Company or its subsidiary, if applicable, is
permanently prevented by applicable law from effecting any such purchases or all
such purchases are rescinded, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such tender or exchange
offer had not been made.
SECTION 11.11. Current Market Price. For purposes of Sections 11.07,
11.08, 11.09 and 11.10, the current market price per share of GGD Stock on any
date is the average of the Quoted Prices of the GGD Stock for five consecutive
Trading Days selected by the Company commencing not more than 20 Trading Days
before, and ending not later than, the earlier of the date in question and the
Trading Day before the "ex" date, if any, with respect to the issuance or
distribution requiring such computation. The term "'ex' date," when used with
respect to any issuance or distribution, means the first Trading Day on which
the GGD Stock trades regular way in the market from which the Quoted Price is
then to be determined without the right to receive such issuance or
distribution.
SECTION 11.12. When Adjustment May Be Deferred. No adjustment in the
conversion price need be made unless the adjustment would require an increase or
decrease of at least 1% in the conversion price then in effect. Any adjustments
which are not made shall be carried forward and taken into account in any
subsequent adjustment.
All calculations under this Article shall be made to the nearest cent
or to the nearest 1/100th of a share, as the case may be, with .005 cents and
500/1,000 of a share to be rounded up.
SECTION 11.13. When No Adjustment Required. No adjustment need be made
for rights to purchase Common Stock pursuant to a Company plan for reinvestment
of dividends or interest.
No adjustment need be made for a change in the par value (including a
change to no par value) of the Common Stock.
To the extent the Securities become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
<PAGE> 57
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Notwithstanding any provision to the contrary in this Indenture, no
adjustment shall be made in the conversion price which would have the effect of
reducing the conversion price below the par value of the Common Stock.
SECTION 11.14. Notice of Adjustment. Whenever the conversion price is
adjusted, the Company shall promptly mail to Securityholders a notice of the
adjustment and file with the Trustee a certificate from the Company's
independent public accountant briefly stating the facts requiring the adjustment
and the manner of computing it. In the absence of manifest error, such
certificate shall be presumptive evidence that the adjustment is correct.
SECTION 11.15. Voluntary Reduction. The Company from time to time may
reduce the conversion price by any amount for any period of time if the period
is at least 20 days and if the reduction is irrevocable during the period.
Notwithstanding any provision to the contrary in this Indenture, the reduction
of the conversion price pursuant to this Section 11.15 shall not require the
consent of the Trustee or any Securityholder.
Whenever the conversion price is reduced, the Company shall mail to
Securityholders and the Trustee a notice of the reduction. The Company shall
mail the notice at least 15 days before the date the reduced conversion price
takes effect. The notice shall state the reduced conversion price and the period
during which it will be in effect.
A reduction of the conversion price is deemed not to be in effect for
purposes of calculating adjustments pursuant to Sections 11.06 through 11.10.
SECTION 11.16. Notice of Certain Transactions. If:
(1) the Company takes any action which would require an adjustment in
the conversion price pursuant to Section 11.08 but, in lieu of such
adjustment, the Securityholders are entitled to participate therein (as
described in the last paragraph of Section 11.08);
(2) the Company takes any action that would require a supplemental
indenture pursuant to Section 11.17; or
(3) there is a dissolution or liquidation of the Company,
<PAGE> 58
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the Company shall mail to Securityholders and the Trustee a notice stating the
record date for any such distribution or the effective date of any such
subdivision, combination, reclassification, consolidation, merger, transfer,
lease, liquidation or dissolution. The Company shall mail the notice at least 15
days before such date. Failure to mail the notice or any defect in it shall not
affect the validity of any transaction referred to in clause (1), (2) or (3) of
this Section.
SECTION 11.17. Provisions in Case of Consolidation, Merger of the
Company or Transfer or Lease. If the Company is a party to a consolidation or
merger or a transfer or lease of all or substantially all of its assets not
prohibited by Section 6.01 or a merger which reclassifies or changes its
outstanding GGD Stock, the Person formed by such consolidation or resulting from
such merger or which assumes or leases such assets shall enter into a
supplemental indenture.
The supplemental indenture shall provide that the Holder of a Security
may convert it into the kind and amount of securities, cash or other assets
receivable upon the consolidation, merger, transfer or lease by a holder (other
than any party to such transaction or any of its affiliates) of the number of
shares of GGD Stock into which such Security might have been converted
immediately before the effective date of such transaction, assuming such holder
of GGD Stock failed to exercise his rights of election, if any, as to the kind
or amount of securities, cash or other property receivable upon such
consolidation, merger, transfer or lease (provided that, if the kind or amount
of securities, cash or other property receivable upon such consolidation,
merger, transfer or lease is not the same for each share of GGD Stock held
immediately prior to such consolidation, merger, transfer or lease by others
than the parties to such transaction or their affiliates and in respect of which
such rights of election shall not have been exercised ("non-electing share"),
then for the purposes of this Section the kind and amount of securities, cash
and other property receivable upon such consolidation, merger, transfer or lease
by each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares). The
supplemental indenture shall provide for adjustments which shall be as nearly
equivalent as may be practical to the adjustments provided for in this Article.
If the issuer of securities deliverable upon conversion of Securities is an
affiliate of the surviving, transferee or lessee corporation, that issuer shall
join in the supplemental indenture. The successor Company shall mail to each
Securityholder a notice briefly describing the supplemental indenture.
<PAGE> 59
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If this Section applies to a particular event, Section 11.06 shall not
apply to such event.
SECTION 11.18. Company Determination Final. Subject to compliance with
the terms of this Indenture (including without limitation Section 11.14) and of
the Securities, any determination which the Company or its Board of Directors
must make pursuant to Section 11.03, 11.06, 11.08, 11.10, 11.11 or 11.12 shall
be conclusive.
SECTION 11.19. Trustee's Disclaimer. The Trustee has no duty to
determine when an adjustment under this Article should be made, how it should be
made or what it should be. The Trustee has no duty to determine the market price
or market value of any fractional or other share. The Trustee has no duty to
determine whether any provisions of a supplemental indenture under Section 11.17
are correct. The Trustee makes no representation as to the validity or value of
any securities or assets issued upon conversion of the Securities. The Trustee
shall not be responsible for the Company's failure to comply with this Article.
Each Conversion Agent other than the Company shall have the same protection
under this Section as the Trustee.
ARTICLE 12.
SUBORDINATION
SECTION 12.01. Agreement to Subordinate. The Company agrees, and each
Securityholder by accepting a Security agrees, that the indebtedness evidenced
by the Securities is subordinated in right of payment, to the extent and in the
manner provided in this Article, to the prior payment in full of all Senior
Indebtedness, and that the subordination is for the benefit of the holders of
Senior Indebtedness.
SECTION 12.02. Certain Definitions.
"Senior Indebtedness" means:
(a) the principal of, interest (including, to the extent permitted by
applicable law, interest on or after the commencement of a proceeding
referred to in clauses (5) or (6) of Section 7.01 whether or not
representing an allowed claim in such proceeding) on and any other amounts
owing with respect to (i) any indebtedness of the Company,
<PAGE> 60
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now or hereafter outstanding, in respect of borrowed money (other than
the Securities), (ii) any indebtedness of the Company, now or hereafter
outstanding, evidenced by a bond, note, debenture, capitalized lease,
reimbursement obligation with respect to any letter of credit or other
similar instrument, (iii) any other written obligation of the Company, now
or hereafter outstanding, to pay money issued or assumed as all or part of
the consideration for the acquisition of property, assets or securities and
(iv) any guaranty or endorsement (other than for collection or deposit in
the ordinary course of business) or discount with recourse of, or other
agreement (contingent or otherwise) to purchase, repurchase or otherwise
acquire, to supply or advance funds or to become liable with respect to
(directly or indirectly), any indebtedness or obligation of any person of
the type referred to in the preceding subclauses (i), (ii) and (iii) now or
hereafter outstanding; and
(b) any refundings, renewals or extensions of any indebtedness or other
obligation described in clause (a) of this Section 12.02.
Notwithstanding the foregoing, if, by the terms of the instrument
creating or evidencing any indebtedness or obligation referred to in clauses (a)
and (b) above, it is expressly provided that such indebtedness or obligation is
not senior in right of payment to the Securities, such indebtedness or
obligation shall not be included as Senior Indebtedness.
"Representative" means the indenture trustee or other trustee, agent or
representative for an issue of Senior Indebtedness.
SECTION 12.03. Liquidation; Dissolution; Bankruptcy. Upon any
distribution to creditors of the Company in a liquidation, dissolution or
winding up of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property:
(1) holders of Senior Indebtedness shall be entitled to receive payment
in full, in cash or in a manner satisfactory to the holders of such Senior
Indebtedness, of all Senior Indebtedness before Securityholders shall be
entitled to receive any payments of principal of or premium, if any, or
interest on Securities; and
<PAGE> 61
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(2) until the Senior Indebtedness is paid in full in cash or in a
manner satisfactory to the holders of such Senior Indebtedness, any distribution
to which Securityholders would be entitled but for this Article shall be made to
holders of Senior Indebtedness as their interests may appear, except that
Securityholders may receive securities that are subordinated to Senior
Indebtedness to at least the same extent as the Securities.
A distribution may consist of cash, securities or other property.
SECTION 12.04. Company Not to Make Payments with Respect to Securities
in Certain Circumstances. (a) Upon the maturity of any Senior Indebtedness by
lapse of time, acceleration or otherwise, all principal thereof, premium, if
any, and interest thereon and any other amounts owing in respect thereof shall
first be paid in full, or such payment duly provided for in cash or in a manner
satisfactory to the holders of such Senior Indebtedness, before any payment is
made on account of the principal of or premium, if any, or interest on the
Securities or to acquire any of the Securities.
(b) Upon the happening of a default or event of default in the payment
of the principal, premium, if any, or interest on the Senior Indebtedness, then,
unless such default or event of default has been cured or waived or shall have
ceased to exist, no payment shall be made by the Company with respect to the
principal, premium, if any, or interest on (or otherwise in respect of) the
Securities or to acquire any of the Securities.
(c) Upon the happening of a default or event of default in respect of
the Senior Indebtedness (other than a default or event of default in payment of
the principal, premium, if any, or interest on the Senior Indebtedness) and if
the Trustee and the Company receives a notice of such default or event of
default from the holders of the Senior Indebtedness or their Representative (a
"Payment Blockage Notice"), then no payment shall be made by the Company with
respect to the principal, premium, if any, or interest on (or otherwise in
respect of) the Securities until the earlier of (i) the date on which such
default or event of default shall have been cured or waived or shall have ceased
to exist or (ii) the 179th day after the date of such receipt of such Payment
Blockage Notice. No more than one Payment Blockage Notice shall be effective for
purposes of this section during any 365 consecutive day period. For purposes of
this paragraph, no such default or event of de-
<PAGE> 62
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fault that existed upon first delivery of any Payment Blockage Notice shall be,
or be made, the basis for a subsequent Payment Blockage Notice unless such
default or event of default shall have been cured or waived for a period of 180
consecutive days.
SECTION 12.05. Acceleration of Securities. If payment of the Securities
is accelerated because of an Event of Default, the Company shall promptly notify
holders of Senior Indebtedness of the acceleration.
SECTION 12.06. When Distribution Must Be Paid Over. If a distribution
is made to Securityholders that, because of this Article, should not have been
made to them, the Securityholders who receive the distribution shall hold it in
trust for holders of Senior Indebtedness and pay it over to them as their
interests may appear.
SECTION 12.07. Notice by Company. The Company shall promptly notify the
Trustee and the Paying Agent of any facts known to the Company that would cause
a payment of principal of or premium, if any, or interest on the Securities to
violate this Article.
SECTION 12.08. Subrogation. After all Senior Indebtedness is paid in
full and until the Securities are paid in full, Securityholders shall be
subrogated to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness to the extent that distributions
otherwise payable to the Securityholders have been applied to the payment of
Senior Indebtedness. A distribution made under this Article to holders of Senior
Indebtedness which otherwise would have been made to Securityholders is not, as
between the Company and Securityholders, a payment by the Company on Senior
Indebtedness.
SECTION 12.09. Relative Rights. This Article defines the relative
rights of Securityholders and holders of Senior Indebtedness. Nothing in this
Indenture shall:
(1) impair, as between the Company and Securityholders, the obligation
of the Company, which is absolute and unconditional, to pay principal of
and premium, if any, and interest on the Securities in accordance with
their terms;
<PAGE> 63
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(2) affect the relative rights of Securityholders and creditors of the
Company, other than holders of Senior Indebtedness; or
(3) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness to receive distributions otherwise payable to
Securityholders.
If the Company fails because of this Article to pay principal of or
premium, if any, or interest on a Security on the due date, such failure shall
nevertheless be deemed a Default.
SECTION 12.10. Subordination May Not Be Impaired by Company. No right
of any holder of Senior Indebtedness to enforce the subordination of the
indebtedness evidenced by the Securities shall be impaired by any act or failure
to act by the Company or by its failure to comply with the terms of this
Indenture.
SECTION 12.11. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness,
the distribution may be made and the notice given to their Representative.
SECTION 12.12. Rights of Trustee and Paying Agent. Notwithstanding any
provisions of this Indenture to the contrary, the Trustee and any Paying Agent
may continue to make payments on the Securities and shall not at any time be
charged with knowledge of the existence of any facts which would prohibit the
making of such payments until it receives written notice (received by a Trust
Officer, in the case of the Trustee) reasonably satisfactory to it that payments
may not be made under this Article and, prior to the receipt of any such notice,
the Trustee, subject to the provisions of Section 8.01, and any Agent shall be
entitled to assume conclusively that no such facts exist. The Company, an Agent,
a Representative or a holder of Senior Indebtedness may give the notice. If an
issue of Senior Indebtedness has a Representative, only the Representative (or
any Representative, if more than one) may give the notice with respect to such
Senior Indebtedness.
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself to be a holder of Senior
Indebtedness (or a Representative) to establish that such notice has been given
by a holder of Senior
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Indebtedness (or a Representative), and shall be entitled to rely on any written
notice by a Person representing himself to be a holder of Senior Indebtedness to
the effect that such issue of Senior Indebtedness has no Representative.
Except as provided in Section 9.02, any deposit of monies by the
Company with the Trustee or any Paying Agent (whether or not in trust) for the
payment of the principal of or premium, if any, or interest on, or Repurchase
Price, if any, of any Securities shall be subject to the provisions of this
Article 12, except that if, at least three business days prior to the date on
which by the terms of this Indenture any such monies may become payable for any
purpose (including, without limitation, the payment of, principal of, or
premium, if any, or interest on any Security), the Trustee shall not have
received with respect to such monies the notice provided for in this Section
12.12, then the Trustee shall have full power and authority to receive such
monies and to apply the same to the purpose for which they were received and
shall not be affected by any notice to the contrary which may be received by it
within three business days prior to or on or after such date. This Section shall
be construed solely for the benefit of the Trustee and Paying Agent and shall
not otherwise affect the rights of holders of Senior Indebtedness. In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Article 12, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of the Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article 12, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive payment.
The Trustee shall not be deemed to owe any fiduciary duty to holders of
Senior Indebtedness by virtue of the provisions of this Article 12. The
Trustee's responsibilities to the holders of Senior Indebtedness are limited to
those set forth in this Article and no implied covenants or obligations shall be
read into this Indenture. The Trustee shall not become liable to the holders of
Senior Indebtedness if it makes a payment prohibited by this Article in good
faith.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have
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if it were not Trustee. Any Agent may do the same with like rights.
SECTION 12.13. Effectuation of Subordination by Trustee. Each Holder of
Securities, by acceptance thereof, authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article and appoints the Trustee his
attorney-in-fact for any and all such purposes.
ARTICLE 13.
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies, or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 13.02. Notices. Any notice or communication to the Company or
the Trustee by the other shall be duly given if in writing and delivered in
person or by overnight courier or mailed by first class mail or transmitted by
telephone facsimile transmission (and receipt confirmed) addressed as follows:
If to the Company: Genzyme Corporation
One Kendall Square
Cambridge, Massachusetts 02139
Attention: Chief Financial Officer
Facsimile: (617) 252-7852
If to the Trustee: State Street Bank and Trust
Company
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust
Administration
Facsimile: (617) 667-5372
With a copy to:
Peabody & Arnold
50 Rowes Wharf
Boston, Massachusetts 02110
<PAGE> 66
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The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication to a Securityholder shall be mailed by
first-class mail to his address as shown on the register kept by the Registrar.
Failure to mail a notice or communication to a Securityholder or any defect in
it shall not affect its sufficiency with respect to other Securityholders. If
the Company mails a notice or communication to Securityholders, it shall mail a
copy to the Trustee and each Agent at the same time.
If a notice or communication is delivered, mailed or transmitted in the
manner provided above within the time prescribed, it is duly given, whether or
not the addressee receives it.
SECTION 13.03. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person shall
have the protection of TIA Section 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture (other than pursuant to Section 5.03) shall
include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
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(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, such examination
or investigation as is necessary to enable him to express an informed
opinion as to whether or not such covenant or condition has been complied
with; and
(4) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 13.06. Rules by Trustee and Agents. The Trustee may make
reasonable rules for action by or a meeting of Securityholders. The Registrar,
Paying Agent, New York Presenting Agent and Conversion Agent may each make
reasonable rules and set reasonable requirements for its respective functions.
SECTION 13.07. Legal Holidays. A "Legal Holiday" is a Saturday, Sunday
or a day on which banking institutions in either New York, New York or in
Boston, Massachusetts are not required to be open. If a payment date is a Legal
Holiday at a place of payment, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If a regular record date is a Legal Holiday, the record date
shall not be affected.
SECTION 13.08. Governing Law. The laws of the State of New York shall
govern this Indenture and the Securities without regard to principles of
conflicts of law.
SECTION 13.09. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Securityholder by accepting a Security waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.
SECTION 13.10. Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
<PAGE> 68
-62-
SECTION 13.11. Counterpart Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
SECTION 13.12. Severability. In case any provision in this Indenture or
in the Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, and a Holder shall have no claim therefor against
any party hereto.
<PAGE> 69
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the date first written above.
GENZYME CORPORATION
By: /s/ Henri A. Termeer
------------------------------------
Name: Henri A. Termeer
Title: President and Chief
Executive Officer
STATE STREET BANK AND TRUST COMPANY
By: /s/ Gerald R. Wheeler
------------------------------------
Name: Gerald R. Wheeler
Title: Vice President
<PAGE> 70
APPENDIX 1
RULE 144A/REGULATION S APPENDIX FOR OFFERINGS TO QUALIFIED
INSTITUTIONAL BUYERS PURSUANT TO RULE 144A AND TO CERTAIN
PERSONS IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S
CERTAIN PROVISIONS RELATING TO THE SECURITIES
1. Definitions.
1.1 Definitions.
For the purposes of this Appendix the following terms shall
have the meanings indicated below:
"Depository" means The Depository Trust Company, its nominees
and their respective successors.
"Initial Purchasers" means Credit Suisse First Boston
Corporation, Cowen & Company and Goldman, Sachs & Co.
"Purchase Agreement" means the Purchase Agreement dated May
19, 1998, by and among the Company and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registration Rights Agreement" means the Registration Rights
Agreement dated May 15, 1998, by and among the Company and the Initial
Purchasers.
"Securities" means the 5-1/4% Convertible Subordinated Notes
Due 2005, issued under this Indenture on or about the date hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a
Global Security (as appointed by the Depository), or any successor person
thereto and shall initially be the Trustee.
"Shelf Registration Statement" means the registration
statement issued by the Company, in connection with the offer and sale of
Securities, pursuant to the Registration Rights Agreement.
<PAGE> 71
-2-
"Transfer Restricted Securities" means each Security until (i)
the date on which such Note has been effectively registered under the Securities
Act and disposed of in accordance with the Resale Shelf Registration Statement
or (ii) the date on which such Note is distributed to the public pursuant to
Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under
the Securities Act.
1.2 Other Definitions.
<TABLE>
<CAPTION>
Term Defined in Section:
---- ------------------
<S> <C>
"Agent Members"........................... 2.1(b)
"Global Security"......................... 2.1(a)
"Regulation S"............................ 2.1(c)
"Rule 144A"............................... 2.1(a)
</TABLE>
2. The Securities.
2.1 Form and Dating.
The Securities are being offered and sold by the Company
pursuant to the Purchase Agreement.
(a) Global Securities. Securities offered and sold to a QIB in
reliance on Rule 144A under the Securities Act ("Rule 144A") as provided in the
Purchase Agreement, shall be issued initially in the form of one or more
permanent global Securities in definitive, fully registered form without
interest coupons set forth in Exhibit A to the Indenture with the global
securities legend on Exhibit A to the Indenture and restricted securities legend
set forth in Section 2.2 (each, a "Global Security"), which shall be deposited
on behalf of the purchasers of the Securities represented thereby with the
Trustee, at its New York office, as custodian for the Depository (or with such
other custodian as the Depository may direct), and registered in the name of the
Depository or a nominee of the Depository, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the Global Securities may from time to time be increased or decreased
by adjustments made on the records of the Trustee and the Depository or its
nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply
only to a Global Security deposited with or on behalf of the Depository.
<PAGE> 72
-3-
The Company shall execute and the Trustee shall, in accordance
with this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depository for such
Global Security or Global Securities or the nominee of such Depository and (b)
shall be delivered by the Trustee to such Depository or pursuant to such
Depository's instructions or held by the Trustee as custodian for the
Depository.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depository or by the Trustee as the
custodian of the Depository or under such Global Security, and the Depository
may be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depository or impair, as between the Depository and its Agent Members, the
operation of customary practices of such Depository governing the exercise of
the rights of a holder of a beneficial interest in any Global Security.
(c) Certificated Securities. Except as provided in this
Section 2.1 or Section 2.2 or 2.4, owners of beneficial interests in Global
Securities will not be entitled to receive physical delivery of certificated
Securities. Securities offered and sold in reliance on Regulation S under the
Securities Act ("Regulation S") as provided in the Purchase Agreement shall be
issued initially in the form of one or more certificated Securities in
definitive, fully registered form without interest coupons, as set forth in
Exhibit B to the Indenture, with the restricted securities legend set forth in
Section 2.2(a), which shall be duly executed by the Company and authenticated by
the Trustee as provided in the Indenture. Upon transfer of such definitive
Securities to a QIB, such definitive Securities will, unless the restricted
securities legend on such Global Security has previously been removed, be
exchanged for an interest in the Global Security pursuant to the provisions of
Section 2.06 of the Indenture.
2.2 Legend.
(a) Except as permitted by the following paragraphs (b) and
(c), each Security certificate evidencing a Transfer Restricted Security (and
all Securities issued in exchange
<PAGE> 73
-4-
therefor or in substitution thereof) shall bear a legend in substantially the
following form:
"THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY AND THE COMMON
STOCK ISSUABLE UPON CONVERSION THEREOF MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS
HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY AND THE COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT
(A) THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON CONVERSION THEREOF
MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i)
INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (ii) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (iii) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE
144 THEREUNDER (IF AVAILABLE), OR (iv) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i)
THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY
AND THE COMMON STOCK, ISSUABLE UPON CONVERSION THEREOF FROM IT, OF THE
RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."
(b) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act, or after the second
anniversary of the original issuance date of the Security (or such earlier date
after which the Security may be freely transferred without registration under
the Securities Act or without being subject to transfer restrictions pursuant to
the Securities Act, as may be
<PAGE> 74
-5-
provided in Rule 144(k) under the Securities Act (or any successor provision
thereto) or otherwise) the Registrar shall permit the Holder thereof to exchange
such Transfer Restricted Security for a certificated Security that does not bear
the legend set forth above and rescind any restriction on the transfer of such
Transfer Restricted Security, if the Holder certifies in writing to the
Registrar that its request for such exchange was made in reliance on Rule 144
(such certification to be in the form set forth on the reverse of the Security).
(c) After a transfer of any Securities during the period of
the effectiveness of a Shelf Registration Statement with respect to such
Securities, as the case may be, all requirements pertaining to legends on such
Security will cease to apply, the requirements requiring any such Security
issued to certain Holders be issued in global form will cease to apply, and a
certificated Security without legends will be available to the transferee of the
Holder of such Securities upon exchange of such transferring Holder's
certificated Security or directions to transfer such Holder's interest in the
Global Security, as applicable.
2.3 Assignment.
Whenever any certification is required to be given to evidence
compliance with certain restrictions relating to assignment of Transfer
Restricted Securities, the Assignment Form set forth in Exhibit 1 hereto shall
be used in lieu of the Assignment Form attached to the Form of Securities set
forth in Exhibit A or Exhibit B.
2.4 Certificated Securities.
(a) A Global Security deposited with the Depository or with
the Trustee as custodian for the Depository pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount of
such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.2 and (i) the Depository notifies the Company
that it is unwilling or unable to continue as Depository for such Global
Security or if at any time such Depository ceases to be a "clearing agency"
registered under the Securities Exchange Act of 1934, as amended, and a
successor depositary is not appointed by the Company within 90 days after such
notice, or (ii) the Company, in its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of certificated Securities under
this Indenture.
<PAGE> 75
-6-
(b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section shall be surrendered by the Depository
to the Trustee located in the Borough of Manhattan, The City of New York, to be
so transferred, in whole or from time to time in part, without charge, and the
Trustee shall authenticate and deliver, upon such transfer of each portion of
such Global Security, an equal aggregate principal amount of certificated
Securities of authorized denominations. Any portion of a Global Security
transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 and any integral multiple thereof and
registered in such names as the Depository shall direct. Any certificated
Security delivered in exchange for an interest in the Global Security shall,
except as otherwise provided by Section 2.2, bear the restricted securities
legend set forth in Section 2.2(a).
(c) Subject to the provisions of Section 2.4(b), the
registered Holder of a Global Security may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of either of the events
specified in Section 2.4(a), the Company will promptly make available to the
Trustee a reasonable supply of certificated Securities in definitive, fully
registered form without interest coupons.
<PAGE> 76
EXHIBIT 1
TO
RULE 144A/REGULATION S APPENDIX 1
[For use with Transfer Restricted Securities]
ASSIGNMENT FORM
To assign this Security or, in the event of conversion, shares of
Genzyme General Division Common Stock, fill in the form below:
I or we assign and transfer this Security or, shares of Genzyme General
----
Division Common Stock, to
- --------------------------------------------------------------------------------
(Insert assignee's social security
or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint agent to
----------------------------------------------
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Date: Your signature:
-------------------------- --------------------------------
(Sign exactly as your name
appears on the face of
this Security)
Signature Guaranteed:
----------------------------------------------------------
In connection with any transfer of any of the Securities evidenced by
this certificate occurring prior to the expiration of the period referred to in
Rule 144(k) under the Securities Act after the later of the date of original
issuance of such Securities and the last date, if any, on which such Securities
are owned by the Company or any Affiliate of the Company, the undersigned
confirms that such Securities are being transferred in accordance with its
terms:
<PAGE> 77
PAGE 2 of EXHIBIT 1
TO
RULE 144A/REGULATION S APPENDIX 1
[Check One]
(1) / / to the Company or a Subsidiary thereof; or
(2) / / to a "qualified institutional buyer" (as defined in Rule 144A
under the Securities Act of 1933, as amended) that purchases
for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer
is being made in reliance on Rule 144A, in each case pursuant
to and in compliance with Rule 144A under the Securities Act
of 1933; or
(3) / / outside the United States to a "foreign person" in compliance
with Rule 904 of Regulation S under the Securities Act of
1933, as amended; or
(4) / / pursuant to an effective registration statement under the
Securities Act of 1933, as amended; or
(5) / / pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
/ / The transferee is an Affiliate of the Company.
Unless one of the items above is checked, the Trustee will refuse to register
any of the Notes evidenced by this certificate in the name of any person other
than the registered Holder thereof; provided, however, that if item (3) or (5)
is checked, the Company or the Trustee may require, prior to registering any
such transfer of the Notes, in their sole discretion, such written legal
opinions, certifications (including an investment letter in the case of box (3)
or (5)) and other information as the Trustee or the Company have reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act of 1933, as amended.
If none of the foregoing items are checked, the Trustee or Registrar
shall not be obligated to register this Note in the name of any person other
than the Holder hereof unless
<PAGE> 78
PAGE 3 of EXHIBIT 1
TO
RULE 144A/REGULATION S APPENDIX 1
and until the conditions to any such transfer of registration set forth herein
and in Section 2.06 of the Indenture shall have been satisfied.
Dated: Signed:
----------------------- ----------------------------------
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee:
-----------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the Company and the
transferor are relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:
----------------------- ----------------------------------
NOTICE: To be executed by
an executive officer
<PAGE> 79
EXHIBIT A
FORM OF SECURITY IN GLOBAL FORM
(Face of Security)
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
No. $__________
CUSIP No.
GENZYME CORPORATION
5-1/4% Convertible Subordinated Note Due 2005
Genzyme Corporation, a Massachusetts corporation, promises to pay to
or registered assigns, the principal sum of
Dollars on June 1, 2005. The aggregate amount of outstanding Securities
represented hereby may from time to time be reduced or increased to reflect
exchanges by means of notations on the Schedule of Exchanges for Definitive
Securities on the reverse hereof.
Interest Payment Dates: June 1 and December 1.
Record Dates: May 15 and November 15.
A-1
<PAGE> 80
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Dated:
GENZYME CORPORATION
By:
----------------------------------
By:
----------------------------------
Authenticated:
STATE STREET BANK AND TRUST COMPANY
as Trustee
By:
--------------------------------
Authorized Signer
A-2
<PAGE> 81
(Reverse of Security)
GENZYME CORPORATION
5-1/4% Convertible Subordinated Note Due 2005
1. INTEREST.
GENZYME CORPORATION (the "Company"), a Massachusetts corporation,
promises to pay interest on the principal amount of this Security at the rate of
5-1/4% per annum. The Company will pay interest semi-annually on June 1 and
December 1 each year, commencing on December 1, 1998 to holders of Securities at
the close of business on the relevant record dates specified above. Interest on
the Securities will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from May 22, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT.
The Company will pay interest on the Securities (except defaulted
interest) to the persons who are registered holders of Securities at the close
of business on the May 15 or November 15 next preceding the interest payment
date (including Securities that are cancelled after the record date and on or
before the interest payment date). Holders must surrender Securities to a Paying
Agent to collect principal and any premium payments. The Company will pay
principal, premium, if any, and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT, REGISTRAR, CONVERSION AGENT.
Initially, State Street Bank and Trust Company (the "Trustee") will act
as Paying Agent, Registrar and Conversion Agent. The Company may change any
Paying Agent, Registrar, Conversion Agent or co-registrar by giving notice to
the Trustee. The Company may act as Paying Agent, Registrar, Conversion Agent or
co-registrar.
4. INDENTURE.
The Company issued this Security as one of a duly authorized issue of Notes of
the Company designated as its 5-1/4% Convertible Subordinated Notes Due 2005
(the "Securities") under an Indenture dated as of May 22, 1998 (the
"Indenture"), between the Company and the Trustee. The terms of the Securities
include those stated in the Indenture. The Securities are subject to
A-3
<PAGE> 82
all such terms, and Securityholders are referred to the Indenture for a
statement of such terms. Terms used herein that are defined in the Indenture
shall have the respective meanings assigned thereto in the Indenture. The
Securities are general unsecured obligations of the Company limited to
$225,000,000 in aggregate principal amount ($250,000,000 if the Over-Allotment
Option is exercised in full).
5. OPTIONAL REDEMPTION.
The Securities may not be redeemed prior to June 10, 2001, and are
redeemable, subject to the subordination provisions described below, on such
date and thereafter at the option of the Company, as a whole or from time to
time in part, at the following prices (expressed as percentages of the principal
amount) plus accrued interest to, but not including, the redemption date:
102.63% if redeemed on or before May 31, 2002 and thereafter if redeemed during
the 12-month period beginning on the dates indicated below:
<TABLE>
<CAPTION>
Year Percentage
<S> <C>
2002 101.75%
2003 100.88%
2004 100.00%
</TABLE>
No sinking fund is provided for the Securities.
6. REDEMPTION AT OPTION OF HOLDER UPON A FUNDAMENTAL CHANGE.
If a Fundamental Change (as defined below) occurs, each holder of
Securities shall have the right, at the holder's option, to require the Company
to repurchase all of such holder's Securities, or any portion thereof that is an
integral multiple of $1,000, on the date (the "Repurchase Date") selected by the
Company that is not less than 10 nor more than 30 days after the Final Surrender
Date (as defined below), at a price equal to 100% of the principal amount
thereof, plus accrued interest to the Repurchase Date (the "Repurchase Price").
Unless the Company shall have theretofore called for redemption all the
outstanding Securities, on or before the 30th day after the occurrence of a
Fundamental Change, the Company is obligated to mail or cause the Trustee to
mail to all holders of record of the Securities a notice (the "Company Notice")
describing, among other things, the occurrence of such Fundamental Change and of
the repurchase right arising as a result thereof. The Company must deliver a
copy of the Company Notice to the Trustee and cause a copy of such notice to be
published in a newspaper of general circulation in the Borough of Manhattan, The
City of New York. To exercise the repurchase
A-4
<PAGE> 83
right, a holder of Securities must surrender, on or before the date which,
subject to any contrary requirements of applicable law, is 60 days after the
date of mailing of the Company Notice (the "Final Surrender Date") the
Securities with respect to which the right is being exercised, which, in the
case of definitive Securities, must be duly endorsed for transfer to the
Company.
The term "Fundamental Change" shall mean any of the following:
(i) a "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended)
becoming the "beneficial owner" (as defined in Rule l3d-3 under such
Act) of Voting Shares (as defined below) of the Company entitled to
exercise more than 50% of the total voting power of all outstanding
Voting Shares of the Company (including any right to acquire Voting
Shares that are not then outstanding of which such person or group is
deemed the beneficial owner); or
(ii) a change in the Board of Directors in which the
individuals who constituted the Board of Directors at the beginning of
the two-year period immediately preceding such change (together with
any other director whose election by the Board of Directors or whose
nomination for election by the shareholders of the Company was approved
by a vote of at least two-thirds of the directors then in office who
either were directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any
reason to constitute a majority of the directors then in office; or
(iii) any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the
Company, or any sale or transfer of all or substantially all of the
assets of the Company to another Person (other than (x) a merger which
does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Genzyme General Division Common
Stock ("GGD Stock"), (y) a merger which is effected solely to change
the jurisdiction of incorporation of the Company or (z) any
consolidation with or merger of the Company into a wholly owned
subsidiary of the Company, or any sale or transfer by the Company of
all or substantially all of its assets to one or more of its wholly
owned subsidiaries, in any one transaction or a series of transactions,
provided, in any such case, that the resulting corporation or each such
subsidiary assumes or guarantees the Company's obligations under the
Securities); provided, however, that a Fundamental Change shall
A-5
<PAGE> 84
not occur with respect to any such transaction if either (i) the last
sale price of the GGD Stock for any five Trading Days during the ten
Trading Days immediately preceding the public announcement by the
Company of such transaction is at least equal to 105% of the conversion
price in effect on such Trading Day or (ii) the consideration in such
transaction to the holders of GGD Stock consists of cash, securities
that are, or immediately upon issuance will be, listed on a national
securities exchange or quoted on the Nasdaq National Market, or a
combination of cash and such securities, and the aggregate fair market
value of such consideration (which, in the case of such securities,
shall be equal to the average of the last sale prices of such
securities during the ten consecutive Trading Days commencing with the
sixth Trading Day following consummation of the transaction) is at
least 105% of the conversion price in effect on the date immediately
preceding the closing date of such transaction.
"Voting Shares" is defined to mean all outstanding shares of any class
or series (however designated) of Capital Stock entitled to vote generally in
the election of members of the Board of Directors and includes, without
limitation, the GGD Stock, the GTR Stock and the GMO Stock.
7. NOTICE OF REDEMPTION.
Notice of redemption pursuant to paragraph 5 must be mailed at least 30
days, but not more than 60 days, before the redemption date to the Trustee and
each holder of Securities to be redeemed at his address as shown on the register
kept by the Registrar. Securities in denominations larger than $1,000 may be
redeemed in part, but only in integral multiples of $1,000. On and after the
redemption date, interest shall cease to accrue on Securities or any portion of
them called for redemption; provided that funds in the requisite amount are paid
or made available for payment on that date.
8. CONVERSION.
Subject to the provisions of this paragraph 8, a holder of a Security
may convert such Security into GGD Stock of the Company. If the Security is
called for redemption, the holder may convert such Security at any time before
the close of business on the business day immediately preceding the redemption
date (unless the Company defaults in payment of the redemption price, in which
case the conversion right will terminate on the date such default is cured). The
holder may also convert such Security at any time before the close of business
on its maturity date. The initial conversion price is $39.60 per share, subject
to adjustment in certain events. The number
A-6
<PAGE> 85
of shares issuable upon conversion of a Security is determined by dividing the
principal amount to be converted by the conversion price in effect on the
conversion date, and rounding the result to the nearest 1/l00th of a share, with
500/1,000 of a share to be rounded up. Upon conversion, no payment or adjustment
for accrued interest on a converted Security (other than the payment of interest
to the Holder of a Security at the close of business on a record date pursuant
to paragraph 2 hereof) or for dividends or distributions on the GGD Stock will
be made. The Company will deliver a check for any fractional share issuable upon
conversion.
To convert a Security, a holder must (1) complete the appropriate
instruction form for conversion pursuant to the Depository's book-entry
conversion program, (2) deliver to the Conversion Agent by book-entry delivery
the interest in the Security in global form to be converted, (3) furnish the
appropriate endorsements and transfer documents if required by the Registrar or
Conversion Agent, and (4) pay any tax or duty which may be payable in respect of
any transfer involving the issue or delivery of GGD Stock in the name of a
Person other than the Holder thereof. A holder may convert a portion of a
Security if the portion is $1,000 or an integral multiple of $1,000.
If GGD Stock is to be issued in the name of a Person other than the
Holder thereof, and the restrictions on transfer of such Security set forth in
the first paragraph of the face of the Security remain in effect, the Holder
must provide certification through the Assignment Form attached hereto.
If the restrictions on transfer of a Security set forth in the first
paragraph of the face of the Security remain in effect, all shares of GGD Stock
delivered upon conversion thereof shall bear a restrictive legend substantially
in the form of such paragraph.
The conversion price will be adjusted for the issuance of capital stock
of the Company as a dividend or distribution on its GGD Stock; subdivisions,
combinations or certain reclassifications of GGD Stock; distributions to all
holders of GGD Stock of rights or warrants to purchase GGD Stock at less than
the current market price at the time; distributions to such holders of GGD Stock
of cash, debt securities (or other evidences of indebtedness) or other assets of
the Company (excluding dividends or distributions for which adjustment is
required to be made pursuant to another provision); certain dividends or other
distributions consisting exclusively of cash to all holders of GGD Stock; or for
payments to holders of GGD Stock pursuant to certain tender or exchange offers.
No adjustment in the conversion price will be required unless such
A-7
<PAGE> 86
adjustment would require a change of at least 1% in the conversion price then in
effect; provided that any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
However, no adjustment need be made if Securityholders are entitled to
participate in certain of the above transactions or in certain other cases. The
Company from time to time may voluntarily reduce the conversion price for a
period of at least 20 days.
If the Company is a party to a consolidation or merger, or a transfer
or a lease of all or substantially all of its assets or a merger which
reclassifies or changes its outstanding GGD Stock, the right to convert a
Security into GGD Stock may be changed into a right to convert it into
securities, cash or other assets of the Company or another person.
9. SUBORDINATION.
The Securities are subordinated to Senior Indebtedness, which is
defined in the Indenture. To the extent provided in the Indenture, Senior
Indebtedness must be paid before the Securities may be paid. The Company agrees,
and each Securityholder by accepting a Security agrees, to the subordination
provisions contained in the Indenture and authorizes the Trustee to give effect
to such provisions, and each Securityholder appoints the Trustee his
attorney-in-fact for any and all such purposes.
10. DENOMINATIONS, TRANSFER, EXCHANGE.
This global security represents such of the outstanding Securities as
shall be specified herein or endorsed hereon in accordance with the Indenture.
The aggregate amount of outstanding Securities represented hereby may from time
to time be reduced or increased to reflect exchanges. The definitive Securities
are in registered form without coupons in denominations of $1,000 and whole
multiples of $1,000. The transfer of Securities may be registered and Securities
may be exchanged as provided in the Indenture. The Registrar may require a
holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not exchange or register the transfer of any
Security or portion of a Security selected for redemption, except the unredeemed
portion of any Security being redeemed in part. Also, it need not exchange or
register the transfer of any Securities for a period of 15 days before a
selection of Securities to be redeemed.
11. AMENDMENT, SUPPLEMENT, WAIVER.
A-8
<PAGE> 87
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented, with the consent of the Company and the holders of a
majority in aggregate principal amount of the Securities, and any existing
default may be waived with the consent of the holders of a majority in aggregate
principal amount of the Securities. Without the consent of any Securityholder,
the Indenture or the Securities may be amended, inter alia, to cure any
ambiguity, defect or inconsistency, to provide for assumption of Company
obligations to Securityholders in the case of a merger or acquisition, or to
make any change that does not materially adversely affect the rights of any
Securityholder.
12. DEFAULTS AND REMEDIES.
An Event of Default is default in the payment of interest on the
Securities continued for 30 days, whether or not such payment is prohibited or
restricted by the subordination provisions of the Indenture; default in payment
of principal of or premium, if any, on the Securities when due and payable,
whether or not such payment is prohibited or restricted by the subordination
provisions of the Indenture; default in payment of the Repurchase Price to be
paid upon a redemption at the option of the Holder pursuant to paragraph 6;
failure by the Company for 60 days after certain notice to it to comply with any
of its other agreements in the Indenture; default in the payment of other
evidences of indebtedness of the Company if such payment exceeds $20,000,000 or
acceleration of payments with respect to indebtedness of the Company in excess
of $20,000,000; and certain events of bankruptcy or insolvency. If an Event of
Default occurs and is continuing, the Trustee or the holders of at least 25% in
aggregate principal amount of the Securities may declare the principal of, and
accrued interest on, all the Securities to be due and payable immediately.
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Securities being due and payable immediately upon the occurrence
of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may require indemnity satisfactory to
it before it enforces the Indenture or the Securities. Subject to certain
limitations, Holders of a majority in aggregate principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing default
(except a default in payment of principal or premium, if any, or interest) if it
determines that withholding notice is in their interests. The Company must
furnish an annual compliance certificate to the Trustee.
13. TRUSTEE DEALINGS WITH COMPANY.
A-9
<PAGE> 88
State Street Bank and Trust Company, the Trustee and any agent under
the Indenture, in its individual or any other capacity, may make loans to,
accept deposits from, and perform services for the Company or its Affiliates,
and may otherwise deal with the Company or its Affiliates, as if it were not
Trustee or agent.
14. NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Securityholder by accepting
a Security waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Securities.
15. AUTHENTICATION.
This Security shall not be valid until authenticated by the manual
signature of the Trustee or an authenticating agent on the face hereof.
16. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
17. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption.
18. GOVERNING LAW.
The laws of the State of New York shall govern the Indenture and the
Securities.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND
WITHOUT CHARGE A COPY OF THE INDENTURE. IT
A-10
<PAGE> 89
ALSO WILL FURNISH THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE
TO: GENZYME CORPORATION, ONE KENDALL SQUARE, CAMBRIDGE, MASSACHUSETTS 02139,
ATTENTION: INVESTOR RELATIONS DEPARTMENT.
A-11
<PAGE> 90
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been made:
<TABLE>
<S> <C> <C> <C> <C>
Date of Amount of Amount of increase Principal amount of this Signature of authorized
Exchange decrease in in Principal Amount of Global Security officer of Trustee or
Principal Amount this Global Security following such decrease Securities Custodian
of this Global or increase
Security
</TABLE>
A-12
<PAGE> 91
ASSIGNMENT FORM
To assign this Security or, in the event of conversion, shares of
Genzyme General Division Common Stock, fill in the form below:
I or we assign and transfer this Security or, shares of Genzyme General
----
Division Common Stock, to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security
or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
agent to transfer this Security on the
- ------------------------------------
books of the Company. The agent may substitute another to act for him.
Date: Your signature:
-------------------- --------------------------------
(Sign exactly as your name appears
on the face of this Security)
Signature Guaranteed:
--------------------------------------------------------
A-13
<PAGE> 92
EXHIBIT B
FORM OF DEFINITIVE SECURITY
(Face of Security)
No. $
CUSIP No. -----------
GENZYME CORPORATION
5-1/4% Convertible Subordinated Note Due 2005
Genzyme Corporation, a Massachusetts corporation, promises to pay
to or registered assigns, the principal sum of
------------------ --------------
Dollars on June 1, 2005.
Interest Payment Dates: June 1 and December 1.
Record Dates: May 15 and November 15.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Dated:
GENZYME CORPORATION
By:
---------------------------------
By:
---------------------------------
Authenticated:
STATE STREET BANK AND TRUST COMPANY
as Trustee
By:
-------------------------------
Authorized Signer
B-1
<PAGE> 93
(Reverse of Security)
GENZYME CORPORATION
5-1/4% Convertible Subordinated Note Due 2005
1. INTEREST.
GENZYME CORPORATION (the "Company"), a Massachusetts corporation,
promises to pay interest on the principal amount of this Security at the rate of
5-1/4% per annum. The Company will pay interest semi-annually on June 1 and
December 1 each year, commencing on December 1, 1998 to holders of Securities at
the close of business on the relevant record dates specified above. Interest on
the Securities will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from May 22, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT.
The Company will pay interest on the Securities (except defaulted
interest) to the persons who are registered holders of Securities at the close
of business on the May 15 or November 15 next preceding the interest payment
date (including Securities that are cancelled after the record date and on or
before the interest payment date). Holders must surrender Securities to a Paying
Agent to collect principal and any premium payments. The Company will pay
principal, premium, if any, and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT, REGISTRAR, CONVERSION AGENT.
Initially, State Street Bank and Trust Company (the "Trustee") will
act as Paying Agent, Registrar and Conversion Agent. The Company may change any
Paying Agent, Registrar, Conversion Agent or co-registrar by giving notice to
the Trustee. The Company may act as Paying Agent, Registrar, Conversion Agent or
co-registrar.
4. INDENTURE.
The Company issued this Security as one of a duly authorized issue of Notes of
the Company designated as its 5-1/4% Convertible Subordinated Notes Due 2005
(the "Securities") under an Indenture dated as of May 22, 1998 (the
"Indenture"), between the Company and the Trustee. The terms of the Securities
include those stated in the Indenture. The Securities are subject to
B-2
<PAGE> 94
all such terms, and Securityholders are referred to the Indenture for a
statement of such terms. Terms used herein that are defined in the Indenture
shall have the respective meanings assigned thereto in the Indenture. The
Securities are general unsecured obligations of the Company limited to
$225,000,000 in aggregate principal amount ($250,000,000 if the Over-Allotment
Option is exercised in full).
5. OPTIONAL REDEMPTION.
The Securities may not be redeemed prior to June 10, 2001, and are
redeemable, subject to the subordination provisions described below, on such
date and thereafter at the option of the Company, as a whole or from time to
time in part, at the following prices (expressed as percentages of the principal
amount) plus accrued interest to, but not including, the redemption date:
102.63% if redeemed on or before May 31, 2002 and thereafter if redeemed during
the 12-month period beginning on the dates indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2002 101.75%
2003 100.88%
2004 100.00%
</TABLE>
No sinking fund is provided for the Securities.
6. REDEMPTION AT OPTION OF HOLDER UPON A FUNDAMENTAL CHANGE.
If a Fundamental Change (as defined below) occurs, each holder of
Securities shall have the right, at the holder's option, to require the Company
to repurchase all of such holder's Securities, or any portion thereof that is an
integral multiple of $1,000, on the date (the "Repurchase Date") selected by the
Company that is not less than 10 nor more than 30 days after the Final Surrender
Date (as defined below), at a price equal to 100% of the principal amount
thereof, plus accrued interest to the Repurchase Date (the "Repurchase Price").
Unless the Company shall have theretofore called for redemption all
the outstanding Securities, on or before the 30th day after the occurrence of a
Fundamental Change, the Company is obligated to mail or cause the Trustee to
mail to all holders of record of the Securities a notice (the "Company Notice")
describing, among other things, the occurrence of such Fundamental Change and of
the repurchase right arising as a result thereof. The Company must deliver a
copy of the Company Notice to the Trustee and cause a copy of such notice to be
published in a newspaper of general circulation in the Borough of Manhattan, The
City of New York. To exercise the repurchase
B-3
<PAGE> 95
right, a holder of Securities must surrender, on or before the date which,
subject to any contrary requirements of applicable law, is 60 days after the
date of mailing of the Company Notice (the "Final Surrender Date") the
Securities with respect to which the right is being exercised, which, in the
case of definitive Securities, must be duly endorsed for transfer to the
Company.
The term "Fundamental Change" shall mean any of the following:
(i) a "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended)
becoming the "beneficial owner" (as defined in Rule l3d-3 under such
Act) of Voting Shares (as defined below) of the Company entitled to
exercise more than 50% of the total voting power of all outstanding
Voting Shares of the Company (including any right to acquire Voting
Shares that are not then outstanding of which such person or group is
deemed the beneficial owner); or
(ii) a change in the Board of Directors in which the
individuals who constituted the Board of Directors at the beginning of
the two-year period immediately preceding such change (together with
any other director whose election by the Board of Directors or whose
nomination for election by the shareholders of the Company was approved
by a vote of at least two-thirds of the directors then in office who
either were directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any
reason to constitute a majority of the directors then in office; or
(iii) any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the
Company, or any sale or transfer of all or substantially all of the
assets of the Company to another Person (other than (x) a merger which
does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Genzyme General Division Common
Stock ("GGD Stock"), (y) a merger which is effected solely to change
the jurisdiction of incorporation of the Company or (z) any
consolidation with or merger of the Company into a wholly owned
subsidiary of the Company, or any sale or transfer by the Company of
all or substantially all of its assets to one or more of its wholly
owned subsidiaries, in any one transaction or a series of transactions;
provided, in any such case, that the resulting corporation or each such
subsidiary assumes or guarantees the Company's obligations under the
Securities); provided, however, that a Fundamental Change shall
B-4
<PAGE> 96
not occur with respect to any such transaction if either (i) the last
sale price of the GGD Stock for any five Trading Days during the ten
Trading Days immediately preceding the public announcement by the
Company of such transaction is at least equal to 105% of the conversion
price in effect on such Trading Day or (ii) the consideration in such
transaction to the holders of GGD Stock consists of cash, securities
that are, or immediately upon issuance will be, listed on a national
securities exchange or quoted on the Nasdaq National Market, or a
combination of cash and such securities, and the aggregate fair market
value of such consideration (which, in the case of such securities,
shall be equal to the average of the last sale prices of such
securities during the ten consecutive Trading Days commencing with the
sixth Trading Day following consummation of the transaction) is at
least 105% of the conversion price in effect on the date immediately
preceding the closing date of such transaction.
"Voting Shares" is defined to mean all outstanding shares of any
class or series (however designated) of Capital Stock entitled to vote generally
in the election of members of the Board of Directors and includes, without
limitation, the GGD Stock, the GTR Stock and the GMO Stock.
7. NOTICE OF REDEMPTION.
Notice of redemption pursuant to paragraph 5 must be mailed at least
30 days, but not more than 60 days, before the redemption date to the Trustee
and each holder of Securities to be redeemed at his address as shown on the
register kept by the Registrar. Securities in denominations larger than $1,000
may be redeemed in part, but only in integral multiples of $1,000. On and after
the redemption date, interest shall cease to accrue on Securities or any portion
of them called for redemption; provided that funds in the requisite amount are
paid or made available for payment on that date.
8. CONVERSION.
Subject to the provisions of this paragraph 8, a holder of a
Security may convert such Security into GGD Stock of the Company. If the
Security is called for redemption, the holder may convert such Security at any
time before the close of business on the business day immediately preceding the
redemption date (unless the Company defaults in payment of the redemption price,
in which case the conversion right will terminate on the date such default is
cured). The holder may also convert such Security at any time before the close
of business on its maturity date. The initial conversion price is $39.60 per
share, subject to adjustment in certain events. The number
B-5
<PAGE> 97
of shares issuable upon conversion of a Security is determined by dividing the
principal amount to be converted by the conversion price in effect on the
conversion date, and rounding the result to the nearest 1/l00th of a share, with
500/1,000 of a share to be rounded up. Upon conversion, no payment or adjustment
for accrued interest on a converted Security (other than the payment of interest
to the Holder of a Security at the close of business on a record date pursuant
to paragraph 2 hereof) or for dividends or distributions on the GGD Stock will
be made. The Company will deliver a check for any fractional share issuable upon
conversion.
To convert a Security, a holder must (1) complete and sign the
conversion notice on the reverse of the Security, (2) surrender the Security to
a Conversion Agent, (3) furnish the appropriate endorsements and transfer
documents if required by the Registrar or Conversion Agent, and (4) pay any tax
or duty which may be payable in respect of any transfer involving the issue or
delivery of GGD Stock in the name of a Person other than the Holder thereof. A
holder may convert a portion of a Security if the portion is $1,000 or an
integral multiple of $1,000.
If GGD Stock is to be issued in the name of a Person other than the
Holder thereof, and the restrictions on transfer of such Security set forth in
the first paragraph of the face of the Security remain in effect, the Holder
must provide certification through the Assignment Form attached hereto.
If the restrictions on transfer of a Security set forth in the first
paragraph of the face of the Security remain in effect, all shares of GGD Stock
delivered upon conversion thereof shall bear a restrictive legend substantially
in the form of such paragraph.
The conversion price will be adjusted for the issuance of capital
stock of the Company as a dividend or distribution on its GGD Stock;
subdivisions, combinations or certain reclassifications of GGD Stock;
distributions to all holders of GGD Stock of rights or warrants to purchase GGD
Stock at less than the current market price at the time; distributions to such
holders of GGD Stock of cash, debt securities (or other evidences of
indebtedness) or other assets of the Company (excluding dividends or
distributions for which adjustment is required to be made pursuant to another
provision); certain dividends or other distributions consisting exclusively of
cash to all holders of GGD Stock; or for payments to holders of GGD Stock
pursuant to certain tender or exchange offers. No adjustment in the conversion
price will be required unless such adjustment would require a change of at least
1% in the conversion price then in effect; provided that any adjustment that
B-6
<PAGE> 98
would otherwise be required to be made shall be carried forward and taken into
account in any subsequent adjustment. However, no adjustment need be made if
Securityholders are entitled to participate in certain of the above transactions
or in certain other cases. The Company from time to time may voluntarily reduce
the conversion price for a period of at least 20 days.
If the Company is a party to a consolidation or merger, or a
transfer or a lease of all or substantially all of its assets or a merger which
reclassifies or changes its outstanding GGD Stock, the right to convert a
Security into GGD Stock may be changed into a right to convert it into
securities, cash or other assets of the Company or another person.
9. SUBORDINATION.
The Securities are subordinated to Senior Indebtedness, which is
defined in the Indenture. To the extent provided in the Indenture, Senior
Indebtedness must be paid before the Securities may be paid. The Company agrees,
and each Securityholder by accepting a Security agrees, to the subordination
provisions contained in the Indenture and authorizes the Trustee to give effect
to such provisions, and each Securityholder appoints the Trustee his
attorney-in-fact for any and all such purposes.
10. DENOMINATIONS, TRANSFER, EXCHANGE.
This global security represents such of the outstanding Securities
as shall be specified herein or endorsed hereon in accordance with the
Indenture. The aggregate amount of outstanding Securities represented hereby may
from time to time be reduced or increased to reflect exchanges. The definitive
Securities are in registered form without coupons in denominations of $1,000 and
whole multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The Registrar may
require a holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not exchange or register the transfer of any
Security or portion of a Security selected for redemption, except the unredeemed
portion of any Security being redeemed in part. Also, it need not exchange or
register the transfer of any Securities for a period of 15 days before a
selection of Securities to be redeemed.
11. AMENDMENT, SUPPLEMENT, WAIVER.
Subject to certain exceptions, the Indenture or the Securities may
be amended or supplemented, with the consent of the Company and the holders of a
majority in aggregate principal amount of the Securities, and any existing
default may be waived with the consent of the holders of a majority in aggregate
princi-
B-7
<PAGE> 99
pal amount of the Securities. Without the consent of any Securityholder, the
Indenture or the Securities may be amended, inter alia, to cure any ambiguity,
defect or inconsistency, to provide for assumption of Company obligations to
Securityholders in the case of a merger or acquisition, or to make any change
that does not materially adversely affect the rights of any Securityholder.
12. DEFAULTS AND REMEDIES.
An Event of Default is default in the payment of interest on the
Securities continued for 30 days, whether or not such payment is prohibited or
restricted by the subordination provisions of the Indenture; default in payment
of principal of or premium, if any, on the Securities when due and payable,
whether or not such payment is prohibited or restricted by the subordination
provisions of the Indenture; default in payment of the Repurchase Price to be
paid upon a redemption at the option of the Holder pursuant to paragraph 6;
failure by the Company for 60 days after certain notice to it to comply with any
of its other agreements in the Indenture; default in the payment of other
evidences of indebtedness of the Company if such payment exceeds $20,000,000 or
acceleration of payments with respect to indebtedness of the Company in excess
of $20,000,000; and certain events of bankruptcy or insolvency. If an Event of
Default occurs and is continuing, the Trustee or the holders of at least 25% in
aggregate principal amount of the Securities may declare the principal of, and
accrued interest on, all the Securities to be due and payable immediately.
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Securities being due and payable immediately upon the occurrence
of such Events of Default.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Securities. Subject
to certain limitations, Holders of a majority in aggregate principal amount of
the Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing default
(except a default in payment of principal or premium, if any, or interest) if it
determines that withholding notice is in their interests. The Company must
furnish an annual compliance certificate to the Trustee.
13. TRUSTEE DEALINGS WITH COMPANY.
State Street Bank and Trust Company, the Trustee and any agent under
the Indenture, in its individual or any other
B-8
<PAGE> 100
capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates, as if it were not Trustee or agent.
14. NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the
Company shall not have any liability for any obligations of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Securityholder by accepting
a Security waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Securities.
15. AUTHENTICATION.
This Security shall not be valid until authenticated by the manual
signature of the Trustee or an authenticating agent on the face hereof.
16. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
17. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption.
18. GOVERNING LAW.
The laws of the State of New York shall govern the Indenture and the
Securities.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE A COPY OF THE INDENTURE. IT ALSO WILL FURNISH THE TEXT OF
THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO: GENZYME CORPORATION, ONE
KENDALL
B-9
<PAGE> 101
SQUARE, CAMBRIDGE, MASSACHUSETTS 02139, ATTENTION: INVESTOR RELATIONS
DEPARTMENT.
B-10
<PAGE> 102
CONVERSION NOTICE
To Genzyme Corporation:
The undersigned owner of this Security hereby irrevocably exercises the
option to convert this Security, or the portion hereof (which is $1,000 or an
integral multiple thereof) below designated, into shares of Genzyme General
Division Common Stock in accordance with the terms of the Indenture referred to
in this Security, and directs that the shares issuable and deliverable upon
conversion, together with any check in payment for fractional shares and any
Securities representing any unconverted principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name has been
indicated below. If shares are to be issued in the name of a Person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto.
To convert this Security into Genzyme General Division Common Stock of
the Company, check the box: / /
To convert only part of this Security, state the amount (must be $1,000
or any whole multiple thereof):
$--------
If you want the stock certificate made out in another Person's name,
fill in the form below:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert other Person's social security
or tax identification number)
- --------------------------------------------------------------------------------
(Print or type other Person's name, address and zip code)
Date: Your signature:
-------------------- ----------------------------------
(Sign exactly as your name appears
on the face of this Security)
Signature Guaranteed:
----------------------------------------------------------
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<PAGE> 103
ASSIGNMENT FORM
To assign this Security or, in the event of conversion, shares of
Genzyme General Division Common Stock, fill in the form below:
I or we assign and transfer this Security or, shares of Genzyme
------
General Division Common Stock, to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security
or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
agent to transfer this Security on the
- ----------------------------------------
books of the Company. The agent may substitute another to act for him.
Date: Your signature:
---------------------- ----------------------------------
(Sign exactly as your name appears
on the face of this Security)
Signature Guaranteed:
----------------------------------------------------------
B-12
<PAGE> 1
EXHIBIT 4.4
$225,000,000
GENZYME CORPORATION
5 1/4% Convertible Subordinated Notes Due 2005
REGISTRATION RIGHTS AGREEMENT
May 19, 1998
Credit Suisse First Boston Corporation
Cowen & Company
Goldman, Sachs & Co.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Dear Sirs:
Genzyme Corporation, a Massachusetts corporation (the "Company"),
proposes to issue and sell to Credit Suisse First Boston Corporation, Cowen &
Company and Goldman, Sachs & Co. (the "Initial Purchasers"), upon the terms set
forth in a purchase agreement of even date herewith (the "Purchase Agreement"),
$225,000,000 aggregate principal amount of its 5 1/4% Convertible Subordinated
Notes due 2005 (the "Notes"). The Notes will be issued pursuant to an Indenture,
dated as of May 22, 1998 (the "Indenture") by and between the Company and State
Street Bank and Trust Company (the "Trustee"). Under the terms of the Indenture,
the Notes are convertible, in whole or in part, into shares of Genzyme General
Division Common Stock, par value $.01 per share (the "Conversion Shares" and,
together with the Notes, the "Securities"), at the option of the holders thereof
at any time following the date of original issuance thereof at the conversion
prices set forth in the Notes, as adjusted from time to time pursuant to the
Indenture. As an inducement to the Initial Purchasers, the Company agrees with
the Initial Purchasers, for the benefit of the holders of the Notes (including,
without limitation, the Initial Purchasers) and Conversion Shares (collectively,
the "Holders"), as follows:
1. Resale Shelf Registration. (a) The Company shall, at its cost, use
its reasonable best efforts to file (within 60 days after the Closing Date (as
defined in the Purchase Agreement)) with the Securities and Exchange Commission
(the "Commission") and thereafter shall use its reasonable best efforts to cause
to be declared effective a registration statement (the "Resale Shelf
Registration Statement") on an appropriate form under the Securities Act of
1933, as amended (the "Securities Act") relating to the offer and sale of the
Transfer Restricted Securities (as defined in Section 5 hereof) by the Holders
thereof from time to time in accordance with the methods of distribution set
forth in the Resale Shelf Registration Statement and Rule 415 under the
Securities Act (hereinafter, the "Resale Shelf Registration"); provided,
however, that no Holder (other than the Initial Purchasers) shall be entitled to
have the Securities held by it covered by such Resale Shelf Registration
Statement unless such Holder agrees in writing to be bound by all the provisions
of this Agreement applicable to such Holder.
<PAGE> 2
(b) The Company, subject to Section 2(h), shall use its reasonable best
efforts to keep the Resale Shelf Registration Statement continuously effective
in order to permit the prospectus included therein to be lawfully delivered by
the Holders of the relevant Securities, for a period of two years from the date
of its effectiveness or such shorter period that will terminate when all the
Securities covered by the Resale Shelf Registration Statement (i) have been sold
pursuant thereto or (ii) are no longer Transfer Restricted Securities as defined
in Section 5(d) (in any such case, such period being called the "Shelf
Registration Period"). The Company shall be deemed not to have used its best
efforts to keep the Resale Shelf Registration Statement effective during the
requisite period if it voluntarily takes any action that would result in Holders
of Securities covered thereby not being able to offer and sell such Securities
during that period, unless such action is required by applicable law or
otherwise permitted hereunder.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Resale Shelf Registration Statement and
the related prospectus and any amendment or supplement thereto, as of the
effective date of the Resale Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
2. Registration Procedures. In connection with the Resale Shelf
Registration contemplated by Section 1 hereof, the following provisions apply:
(a) The Company shall (i) furnish to the Initial Purchasers, prior to
the filing thereof with the Commission, a copy of the Resale Shelf Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and, in the event that the Initial Purchasers (with
respect to any portion of an unsold allotment from the original offering) is
participating in the Resale Shelf Registration, the Company shall use its best
efforts to reflect in each such document, when so filed with the Commission,
such comments as the Initial Purchasers reasonably may propose; and (ii) subject
to paragraph (l) of this Section 2, include the names of the Holders, who
propose to sell Securities pursuant to the Resale Shelf Registration Statement,
as selling securityholders.
(b) The Company shall give written notice to the Initial Purchasers and
Holders of the Securities (which notice pursuant to clauses (ii)-(v) hereof
shall be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made):
(i) when the Resale Shelf Registration Statement or any
amendment thereto has been filed with the Commission and when the
Resale Shelf Registration Statement or any post-effective amendment
thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to the Resale Shelf Registration Statement or the
prospectus included therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Resale Shelf Registration Statement
or the initiation of any proceedings for that purpose;
2
<PAGE> 3
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the Company to
make changes in the prospectus which forms a part of the Resale
Registration Statement in order that the prospectus does not contain an
untrue statement of a material fact nor omits to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Resale Shelf Registration Statement.
(d) The Company shall furnish to each Holder of Securities included
within the coverage of the Resale Shelf Registration, without charge, at least
one copy of the Resale Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if the
Holder so requests in writing, all exhibits thereto (including those, if any,
incorporated by reference).
(e) The Company shall, during the Resale Shelf Registration Period,
deliver to each Holder of Securities included within the coverage of the Resale
Shelf Registration, without charge, as many copies of the prospectus (including
each preliminary prospectus) included in the Resale Shelf Registration Statement
and any amendment or supplement thereto as such person may reasonably request.
The Company consents, subject to the provisions of this Agreement, to the use of
the prospectus or any amendment or supplement thereto by each of the selling
Holders of the Securities in connection with the offering and sale of the
Securities covered by the prospectus, or any amendment or supplement thereto,
included in the Resale Shelf Registration Statement in the manner described
therein.
(f) Prior to any public offering of the Securities, pursuant to any
Resale Shelf Registration Statement, the Company shall register or qualify or
cooperate with the Holders of the Securities included therein and their
respective counsel in connection with the registration or qualification of the
Securities for offer and sale under the securities or "blue sky" laws of such
states of the United States as any Holder of the Securities reasonably requests
in writing and do any and all other acts or things necessary or advisable to
enable the offer and sale in such jurisdictions of the Securities covered by
such Resale Shelf Registration Statement; provided, however, that the Company
shall not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified or (ii) take any action which
would subject it to general service of process or to taxation in any
jurisdiction where it is not then so subject.
(g) The Company shall cooperate with the Holders of the Securities to
facilitate the timely preparation and delivery of certificates representing the
Securities to be sold pursuant to any Resale Shelf Registration Statement (to
the extent such Securities are certificated) free of any restrictive legends and
in such denominations and registered in such names as the Holders may reasonably
request a reasonable period of time prior to sales of the Securities pursuant to
such Resale Shelf Registration Statement and prior to settlement of such sales.
3
<PAGE> 4
(h) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 2(b) above during the Shelf Registration Period, the
Company shall promptly prepare and file a post-effective amendment to the Resale
Shelf Registration Statement or a supplement to the related prospectus and any
other required document so that, as thereafter delivered to Holders of the
Securities or purchasers of Securities, the prospectus will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided however,
that the Company may delay preparing, filing and distributing any such
supplement or amendment if the Company determines in good faith that such
supplement or amendment would, in the reasonable judgment of the Company, (i)
interfere with or affect the negotiation or completion of a transaction that is
being contemplated by the Company (whether or not a final decision has been made
to undertake such transaction) or (ii) involve initial or continuing disclosure
obligations that are not in the best interests of the Company's stockholders at
such time; provided further, that such delay shall not extend for a period of
more than 30 business days in any three month period or more than 60 business
days in any twelve month period. If the Company notifies the Initial Purchasers
and the Holders of the Securities in accordance with paragraphs (ii) through (v)
of Section 2(b) above to suspend the use of the prospectus until the requisite
changes to the prospectus have been made, then the Initial Purchasers and the
Holders of the Securities shall suspend use of such prospectus. The period of
effectiveness of the Resale Shelf Registration Statement provided for in Section
1(b) above shall be extended by the number of days from and including the date
of the giving of such notice to and including the date when the Initial
Purchasers and the Holders of the Securities shall have received such amended or
supplemented prospectus pursuant to this Section 2(h); provided, however, that
such period of effectiveness including any such extension shall not exceed the
holding period applicable to Rule 144(k) of the Securities Act or any
substitution or modification thereof.
(i) Not later than the effective date of the Resale Shelf Registration
Statement, the Company will provide CUSIP numbers for the Notes and the
Conversion Shares registered under the Resale Shelf Registration Statement and
provide the Trustee with a certificate for the Notes, in a form eligible for
deposit with The Depository Trust Company.
(j) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the Resale Shelf
Registration and will make generally available to its security holders (or
otherwise provide in accordance with Section 11(a) of the Securities Act) an
earnings statement satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days after the end of a 12-month period (or 90 days, if
such period is a fiscal year) beginning with the first month of the Company's
first fiscal quarter commencing after the effective date of the Resale Shelf
Registration Statement, which statement shall cover such 12-month period.
(k) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner and containing such
changes, if any, as shall be necessary for such qualification. In the event that
such qualification would require the appointment of a new trustee under the
Indenture, the Company shall appoint a new trustee thereunder pursuant to the
applicable provisions of the Indenture.
(l) The Company may require each Holder of Securities to be sold
pursuant to the Resale Shelf Registration Statement to furnish to the Company
such information regarding the Holder and the
4
<PAGE> 5
distribution of the Securities as the Company may from time to time reasonably
require for inclusion in the Resale Shelf Registration Statement, and the
Company may exclude from such registration the Securities of any Holder that
fails to furnish such information within a reasonable time after receiving such
request.
(m) The Company shall enter into such customary agreements (including,
if requested in accordance with Section 7 hereof, an underwriting agreement in
customary form) and take all such other action, if any, as any Holder of the
Securities shall reasonably request in order to facilitate the disposition of
the Securities pursuant to any Resale Shelf Registration.
(n) The Company shall (i) make reasonably available for inspection by
the Holders, any underwriter participating in any disposition pursuant to the
Resale Shelf Registration Statement in accordance with Section 7 hereof and any
attorney, accountant or other agent retained by the Holders or any such
underwriter all relevant financial and other records, pertinent corporate
documents and properties of the Company and (ii) cause the Company's officers,
directors, employees, accountants and auditors to supply all relevant
information reasonably requested by the Holders or any such underwriter,
attorney, accountant or agent in connection with the Resale Shelf Registration
Statement, in each case, as shall be reasonably necessary to enable such
persons, to conduct a reasonable investigation within the meaning of Section 11
of the Securities Act; provided, however, that the foregoing inspection and
information gathering shall be coordinated on behalf of the Initial Purchasers
and the other parties, by one firm of counsel, which firm shall be Cahill Gordon
& Reindel until another firm shall be designated as described in Section 3
hereof.
(o) The Company shall cause (i) its counsel to deliver (A) an opinion
relating to the Securities in customary form addressed to such Holders and dated
the effective date of such Resale Shelf Registration Statement (it being agreed
that the matters to be covered by such opinion shall include, without
limitation, the due incorporation and good standing of the Company and its
subsidiaries; the due authorization, execution, authentication and issuance, and
the validity and enforceability, of the applicable Securities; the compliance as
to form of such Resale Shelf Registration Statement and any documents
incorporated by reference therein and of the Indenture with the requirements of
the Securities Act and the Trust Indenture Act, respectively; and, as of the
date of the opinion and as of the effective date of the Resale Shelf
Registration Statement or most recent post-effective amendment thereto, as the
case may be, the absence from such Resale Shelf Registration Statement and the
prospectus included therein, as then amended or supplemented, and from any
documents incorporated by reference therein of an untrue statement of a material
fact or the omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading (in the case
of any such documents, in the light of the circumstances existing at the time
that such documents were filed with the Commission under the Exchange Act); and
(B) an opinion relating to the Securities in customary form addressed to any
underwriters dated the closing date of any underwritten offering in accordance
with Section 7 hereof and covering matters of the type customarily in opinions
to underwriters in connection with underwritten offerings; (ii) its officers to
execute and deliver all customary documents and certificates and updates thereof
requested by any such underwriters of the applicable Securities and (iii) its
independent public accountants and the independent public accountants, if any
with respect to any other entity for which financial information is provided in
the Resale Shelf Registration Statement to provide to the selling Holders of the
applicable Securities and any such underwriter therefor a comfort letter in
customary form; and covering matters of the type customarily
5
<PAGE> 6
covered in comfort letters in connection with underwritten offerings, subject to
receipt of appropriate documentation as contemplated, and only if permitted, by
Statement of Auditing Standards No. 72.
(p) In the event that any broker-dealer registered under the Exchange
Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "assist in the distribution" (within
the meaning of the Conduct Rules (the "Rules") of the National Association of
Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such
Securities or as an underwriter, a placement or sales agent or a broker or
dealer in respect thereof, or otherwise, the Company will assist such
broker-dealer in complying with the requirements of such Rules, including,
without limitation, by (i) if such Rules, including Rule 2720, shall so require,
engaging a "qualified independent underwriter" (as defined in Rule 2720) to
participate in the preparation of the Resale Shelf Registration Statement
relating to such Securities, to exercise usual standards of due diligence in
respect thereto and, if any portion of the offering contemplated by such Resale
Shelf Registration Statement is an underwritten offering in accordance with
Section 7 hereof or is made through a placement or sales agent, to recommend the
yield of such Securities, (ii) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters provided in
Section 4 hereof and (iii) providing such information to such broker-dealer as
may be required in order for such broker-dealer to comply with the requirements
of the Rules.
(q) The Company shall use its reasonable best efforts to take all other
steps necessary to effect the registration of the Securities covered by the
Resale Shelf Registration Statement contemplated hereby.
3. Registration Expenses. The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1
and 2 hereof whether or not a Resale Shelf Registration is filed or becomes
effective, shall bear or reimburse the Holders of the Securities covered thereby
for the reasonable fees and disbursements of one firm of counsel, which firm
shall be Cahill Gordon & Reindel until another firm shall be designated by the
Holders of a majority in principal amount of the Notes covered thereby to act as
counsel for the Holders in connection therewith. The Holders shall be
responsible for all other fees and expenses, such as brokerage fees and
commissions.
4. Indemnification. (a) To the extent permitted by law, the Company
agrees to indemnify and hold harmless each Holder of the Securities and each
person, if any, who controls such Holder within the meaning of the Securities
Act or the Exchange Act (each Holder and such controlling persons are referred
to collectively as the "Indemnified Parties") from and against any losses,
claims, damages or liabilities, joint or several, or any actions in respect
thereof (including, but not limited to, any losses, claims, damages, liabilities
or actions relating to purchases and sales of the Securities) to which each
Indemnified Party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any
6
<PAGE> 7
untrue statement or alleged untrue statement of a material fact contained in the
Resale Shelf Registration Statement or prospectus or in any amendment or
supplement thereto or in any preliminary prospectus relating to the Resale Shelf
Registration, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse, as
incurred, the Indemnified Parties for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action in respect thereof; provided, however, that
(i) the Company shall not be liable in any such case to the extent that such
loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
the Resale Shelf Registration Statement or prospectus or in any amendment or
supplement thereto or in any preliminary prospectus relating to the Resale Shelf
Registration in reliance upon and in conformity with written information
pertaining to a Holder and furnished to the Company by or on behalf of such
Holder specifically for inclusion therein, (ii) with respect to any untrue
statement or omission or alleged untrue statement or omission made in any
preliminary prospectus relating to the Resale Shelf Registration Statement, the
indemnity agreement contained in this subsection (a) shall not inure to the
benefit of any Holder from whom the person asserting any such losses, claims,
damages or liabilities purchased the Securities concerned, to the extent that a
prospectus relating to such Securities was required to be delivered by such
Holder under the Securities Act in connection with such purchase and any such
loss, claim, damage or liability of such Holder results from the fact that there
was not sent or given to such person, at or prior to the written confirmation of
the sale of such Securities to such person, a copy of the final prospectus if
the Company had previously furnished copies thereof to such Holder, (iii) the
Company shall not be liable with respect to any statement in, or omission from,
a prospectus used in a manner inconsistent with the last sentence of Section
2(h) and (iv) the Company shall not be liable with respect to any untrue
statement in, or omission from, a prospectus when a subsequent version of the
prospectus had been supplied and the Holders have been given reasonable notice
of such subsequent version prior to the relevant sale or sales; provided,
further, however, that this indemnity agreement will be in addition to any
liability which the Company may otherwise have to such Indemnified Party. The
Company shall also indemnify underwriters, their officers and directors and each
person who controls such underwriters within the meaning of the Securities Act
or the Exchange Act to the same extent as provided above with respect to the
indemnification of the Holders of the Securities if requested by such Holders in
connection with an underwriting in accordance with Section 7 hereof.
(b) To the extent permitted by law, each Holder of the Securities,
severally and not jointly, will indemnify and hold harmless the Company and each
person, if any, who controls the Company within the meaning of the Securities
Act or the Exchange Act from and against any losses, claims, damages or
liabilities or any actions in respect thereof, to which the Company or any such
controlling person may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Resale Shelf Registration Statement or
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus relating to the Resale Shelf Registration, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein not misleading, but in each case only
to the extent that the untrue statement or omission or alleged untrue statement
or omission was made in reliance upon and in conformity with written information
pertaining to such Holder and furnished to the Company by or on behalf of such
Holder specifically for inclusion therein; and, subject to the limitation set
forth immediately preceding this clause, shall reimburse, as incurred, the
Company for any legal or other expenses reasonably incurred by the Company or
any such controlling person in connection with investigating or defending any
loss, claim, damage, liability or action in respect thereof. This indemnity
agreement will be in addition to any liability which such Holder may otherwise
have to the Company or any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this Section 4
of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 4,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnifi-
7
<PAGE> 8
cation obligation provided in paragraph (a) or (b) above. In case any such
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof the
indemnifying party will not be liable to such indemnified party under this
Section 4 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action. An indemnifying party will not be liable for any settlement of
any action or claim effected without its written consent; provided, however,
that such consent will not be reasonably withheld.
(d) If the indemnification provided for in this Section 4 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party on the other from the sale of the Securities,
pursuant to the Resale Shelf Registration, or (ii) if the allocation provided by
the foregoing clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
such Holder or such other indemnified party, as the case may be, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid by
an indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding any other provision of this
Section 4(d), the Holders of the Securities shall not be required to contribute
any amount in excess of the amount by which the net proceeds received by such
Holders from the sale of the Securities pursuant to a Resale Shelf Registration
Statement exceeds the amount of damages which such Holders have otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls such indemnified party within the meaning of the Securities Act or the
Exchange Act shall have the same rights to contribution as such indemnified
party and each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.
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<PAGE> 9
(e) The agreements contained in this Section 5 shall survive the sale
of the Securities pursuant to the Resale Shelf Registration Statement and shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement or any investigation made by or on behalf of any indemnified
party.
5. Additional Interest Under Certain Circumstances. (a) Additional
interest (the "Additional Interest") with respect to the Notes shall be assessed
as follows if any of the following events occur (each such event in clauses (i)
through (iii) below a "Registration Default":
(i) If on or prior to the 60th day after the first date of
original issuance of the Notes, the Resale Shelf Registration Statement
has not been filed with the Commission;
(ii) If on or prior to the 120th day after the first date of
original issuance of the Notes, the Resale Shelf Registration Statement
has not been declared effective by the Commission; or
(iii) If after the Resale Shelf Registration Statement is declared
effective (A) such Resale Shelf Registration Statement thereafter
ceases to be effective; or (B) such Resale Shelf Registration Statement
or the related prospectus ceases to be usable (except as permitted in
paragraph (b)) in connection with resales of Transfer Restricted
Securities during the periods specified herein because either (1) any
event occurs as a result of which the related prospectus forming part
of such Resale Shelf Registration Statement would include any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or (2) it
shall be necessary to amend such Resale Shelf Registration Statement or
supplement the related prospectus, to comply with the Securities Act or
the Exchange Act or the respective rules thereunder.
Additional Interest shall accrue on the Notes over and above the interest set
forth in the title of the Securities from and including the date on which any
such Registration Default shall occur to but excluding the date on which all
such Registration Defaults have been cured, at a rate of 0.25% per annum in the
case of (i) and 0.50% per annum in the case of (ii) or (iii).
(b) A Registration Default referred to in Section 5(a)(iii)(B) hereof
shall be deemed not to have occurred and be continuing in relation to the Resale
Shelf Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Resale Shelf Registration Statement to incorporate annual
audited financial information with respect to the Company where such
post-effective amendment is not yet effective and needs to be declared effective
to permit Holders to use the related prospectus or (y) other material events,
with respect to the Company that would need to be described in such Resale Shelf
Registration Statement or the related prospectus and (ii) in the case of clause
(y), the Company is proceeding in good faith in accordance with Section 2(h);
provided, however, that in any case if such Registration Default occurs for a
continuous period in excess of 30 days, Additional Interest shall be payable in
accordance with the above paragraph from the day such Registration Default
occurs until such Registration Default is cured.
(c) Any amounts of Additional Interest due pursuant to clause (i), (ii)
or (iii) of Section 5(a) above will be payable in cash on the regular interest
payment dates with respect to the Notes. The amount of Additional Interest will
be determined by multiplying the applicable Additional Interest rate by the
principal amount of the Notes, multiplied by a fraction, the numerator of which
is the number of days such Additional Interest
9
<PAGE> 10
rate was applicable during such period (determined on the basis of a 360-day
year comprised of twelve 30-day months), and the denominator of which is 360.
(d) "Transfer Restricted Securities" means each Security until (i) the
date on which such Security has been effectively registered under the Securities
Act and disposed of in accordance with the Resale Shelf Registration Statement
or (ii) the date on which such Security is distributed to the public pursuant to
Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under
the Securities Act.
(e) Except as set forth in this Section 5, the Company will have no
other liabilities for monetary damages with respect to its registration
obligations hereunder; provided, however, that in the event the Company
breaches, fails to comply with or violates the provisions of this Agreement, the
Holders shall be entitled to, and the Company shall not oppose the granting of,
equitable relief, including injunction and specific performance.
6. Rules 144 and 144A. The Company shall use its reasonable best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it will, upon the request of any Holder of Notes,
make publicly available such other information as is necessary to permit sales
of their securities pursuant to Rules 144 and 144A for the Shelf Registration
Period. The Company covenants that it will take such further action as any
Holder of Notes may reasonably request, all to the extent required from time to
time to enable such Holder to sell Notes without registration under the
Securities Act within the limitation of the exemptions provided by Rules 144 and
144A (including the requirements of Rule 144A(d)(4)). The Company will provide a
copy of this Agreement to prospective purchasers of Notes identified to the
Company by the Initial Purchasers upon request. Upon the request of any Holder
of Notes, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements. Notwithstanding the foregoing,
nothing in this Section 7 shall be deemed to require the Company to register any
of its securities pursuant to the Exchange Act.
7. Underwritten Registrations. The Holders of Securities covered by the
Resale Shelf Registration Statement who desire to do so may sell such securities
in an underwritten offering in accordance with the conditions set forth below.
In any such underwritten offering, the investment banker or bankers and manager
or managers that will administer the offering will be selected by, and the
underwriting arrangements with respect thereto will be approved by, the Holders
of a majority of the Securities to be included in such offering; provided,
however, that (i) with respect to the investment bankers and managers, such
investment bankers and managers will be selected by such Holders subject to
approval by the Company, which approval shall not be unreasonably withheld, and
(ii) the Company shall not be obligated to arrange for more than one
underwritten offering during the Shelf Registration Period. No Holder may
participate in any underwritten offering contemplated hereby unless such Holder
(a) agrees to sell such Holder's Securities in accordance with any approved
underwriting arrangements, (b) completes and executes all reasonable
questionnaires, powers of attorney, indemnities, underwriting agreements,
lock-up letters and other documents required under the terms of such approved
underwriting arrangements, and (c) at least 25% of the outstanding Transfer
Restricted Securities are included in such underwritten offering. The Holders
participating in any underwritten offering shall be responsible for any expenses
customarily borne by selling securityholders, including underwriting discounts
and commissions and fees and expenses of counsel to the selling securityholders
to the extent not required to be paid by the Company pursuant to Section 3
hereof. Notwithstanding the foregoing or the provisions of Section 2(l) hereof,
upon receipt of a request from the managing underwriter or a representative of
Holders of
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<PAGE> 11
a majority of the Transfer Restricted Securities outstanding to prepare and file
an amendment or supplement to the Resale Shelf Registration Statement in
connection with an underwritten offering, the Company may delay the filing of
any such amendment or supplement as set forth in Section 2(h).
8. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current
address given by such Holder to the Company.
(2) if to the Initial Purchasers:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Fax No.: (212) 269-5420
Attention: Geoffrey E. Liebmann
(3) if to the Company, at its address as follows:
Genzyme Corporation
One Kendall Square
Cambridge, MA 02139
Fax No.: (617) 252-7553
Attention: Chief Legal Officer
11
<PAGE> 12
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, MA 02108
Fax No.: (617) 227-4420
Attention: Maureen Manning
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Company has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(i) Securities Held by the Company. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities is required
hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
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<PAGE> 13
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement on
the Initial Purchasers and the Company in accordance with its terms.
Very truly yours,
GENZYME CORPORATION
By: /s/ Henri A. Termeer
---------------------------------------------
Name: Henri A. Termeer
Title: President and Chief Executive Officer
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
COWEN & COMPANY
GOLDMAN, SACHS & CO.
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ W. Robert Dahl
-----------------------------------
Name: W. Robert Dahl
Title: Managing Director
<PAGE> 1
EXHIBIT 4.5
$225,000,000
GENZYME CORPORATION
5 1/4% Convertible Subordinated Notes Due 2005
PURCHASE AGREEMENT
May 19, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
Cowen & Company
Goldman, Sachs & Co.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. Genzyme Corporation, a Massachusetts corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the several initial purchasers named in Schedule C hereto (the
"Purchasers") U.S.$225,000,000 principal amount of its 5 1/4% Convertible
Subordinated Notes Due 2005 (the "Firm Securities") and also proposes to grant
to the Purchasers an option, exercisable by Credit Suisse First Boston
Corporation ("CSFBC") to purchase an aggregate of up to an additional U.S.
$25,000,000 principal amount of its 5 1/4% Convertible Subordinated Notes Due
2005 ("Optional Securities"), each to be issued under an indenture, dated as of
May 22, 1998 (the "Indenture"), between the Company and State Street Bank and
Trust Company, as Trustee. The Firm Securities and the Optional Securities which
the Purchasers may elect to purchase pursuant to Section 3 hereof are herein
collectively called the "Offered Securities." The United States Securities Act
of 1933, as amended, is herein referred to as the "Securities Act."
The holders of the Offered Securities will be entitled to the benefits
of a Registration Rights Agreement of even date herewith among the Company and
the Purchasers (the "Registration Rights Agreement"), pursuant to which the
Company agrees to file a registration statement (the "Registration Statement")
with the Securities and Exchange Commission (the "Commission") registering the
resale of the Offered Securities and the Underlying Shares (as defined below)
issuable upon conversion thereof under the Securities Act.
The Company hereby agrees with the several Purchasers as follows:
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the several Purchasers that:
(a) An offering circular (the "Offering Circular") relating to the
Offered Securities to be offered by the Purchasers has been prepared by the
Company. Such Offering Circular, together with the documents incorporated by
reference therein, the documents listed in Schedule A hereto and any other
document approved by the Company for use in connection with the contemplated
resale of the Offered Securities are hereinafter collectively referred to as the
"Offering Document". As of the date of this
<PAGE> 2
Agreement, the Offering Document does not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The preceding sentence does not apply to statements in or
omissions from the Offering Document based upon written information furnished to
the Company by any Purchaser through CSFBC specifically for use therein, it
being understood and agreed that the only such information is that described as
such in Section 7(b). Except as disclosed in the Offering Document, on the date
of this Agreement, the Company's Annual Report on Form 10-K most recently filed
with the Commission and all subsequent reports (collectively, the "Exchange Act
Reports") which have been filed by the Company with the Commission pursuant to
the Securities Exchange Act of 1934, as amended, (the "Exchange Act") do not
include any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Such documents, when they were filed
with the Commission, conformed in all material respects to the requirements of
the Exchange Act and the rules and regulations of the Commission thereunder.
(b) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the Commonwealth of
Massachusetts, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Offering Document; and
the Company is duly qualified to do business as a foreign corporation in good
standing in all other jurisdictions in which its ownership or lease of property
or the conduct of its business requires such qualification, except where the
failure to be so licensed or qualified would not have a material adverse effect
on the condition (financial or other), business, properties or results of
operations of the Company and the Subsidiaries (as defined below) taken as a
whole or of the Company's General Division ("Genzyme General").
(c) The only "significant subsidiaries" of the Company, as defined in
Rule 1-02(w) of the Commission's Regulation S-X, that are corporations are the
subsidiaries of the Company listed on Schedule B hereto (the "Subsidiaries").
Each Subsidiary has been duly incorporated or organized and is existing in good
standing under the laws of the jurisdiction of its incorporation or formation,
with power and authority to own its properties and conduct its business as
described in the Offering Document; and each Subsidiary is duly licensed or
qualified to do business as a foreign corporation or other entity in good
standing in all other jurisdictions in which its ownership or lease of property
or the conduct of its business requires such license or qualification, except
where the failure to be so licensed or qualified would not have a material
adverse effect on the condition (financial or other), business, properties or
results of operations of the Company and the Subsidiaries taken as a whole or of
Genzyme General; all of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued and, with respect to each
Subsidiary, is fully paid and nonassessable; and the capital stock of each
Subsidiary owned by the Company, directly or through subsidiaries, is owned free
from liens, encumbrances and defects. Except as set forth on Schedule B attached
hereto, the Company is the sole record owner, directly or indirectly, of all of
the capital stock of each of its Subsidiaries.
(d) All outstanding shares of capital stock of the Company have been
duly authorized; all outstanding shares of capital stock of the Company are,
and, when the Underlying Shares have been delivered and paid for upon conversion
of the Offered Securities in accordance with the Indenture, such Underlying
Shares will have been validly issued, fully paid and nonassessable and will
conform to the description thereof contained in the Offering Document; and the
stockholders of the Company have no preemptive or similar rights with respect to
the Underlying Shares. Except as set forth in the
2
<PAGE> 3
Offering Document, the Company does not have outstanding, and at the Closing
Date the Company will not have outstanding, any options to purchase, or any
rights or warrants to subscribe for, or any securities or obligations
convertible into, or any contracts or commitments to issue or sell, (i) any
Offered Securities, or (ii) any shares of capital stock held by it in any
Subsidiary, or any such warrants, convertible securities or obligations (except
shares issued or issuable pursuant to employee or director benefit plans after
the date as of which information with respect thereto is given in the Offering
Document).
(e) No holder of securities of the Company has rights to the
registration of any securities of the Company because of the filing of the
Registration Statement.
(f) Neither the Company nor any of its Subsidiaries is in violation of
any statute, rule, regulation, decision or order of any governmental agency or
body or any court, domestic or foreign, relating to the use, disposal or release
of hazardous or toxic substances or relating to the protection or restoration of
the environment or human exposure to hazardous or toxic substances
(collectively, "environmental laws"), owns or operates any real property
contaminated with any substance that is subject to any environmental laws, is
liable for any off-site disposal or contamination pursuant to any environmental
laws, or is subject to any claim relating to any environmental laws, which
violation, contamination, liability or claim would individually or in the
aggregate have a material adverse effect on the condition (financial or other),
business, properties or results of operations of the Company and the
Subsidiaries taken as a whole or of Genzyme General; and the Company is not
aware of any pending investigation which might lead to such a claim.
(g) The financial statements included or incorporated in the Offering
Document present fairly the financial position of the Company and its
consolidated subsidiaries, Genzyme General, Genzyme Tissue Repair Division
("GTR") and Genzyme Molecular Oncology Division ("GMO") as of the dates shown
and their results of operations and cash flows for the periods shown, and such
financial statements have been prepared in conformity with generally accepted
accounting principles in the United States applied on a consistent basis. No
other financial statements or schedules of the Company are required by the Act,
the Exchange Act, the rules and regulations of the Commission under the
Securities Act ("Rules and Regulations") or the rules and regulations of the
Commission under the Exchange Act ("Exchange Act Rules and Regulations") to be
included or incorporated in the Offering Document. Coopers & Lybrand L.L.P. and
Arthur Andersen LLP, who have reported on certain of such financial statements,
are independent accountants as required by the Securities Act, the Rules and
Regulations, the Exchange Act and the Exchange Act Rules and Regulations, as
applicable.
(h) All contracts described in the Offering Document to which the
Company or any Subsidiary is a party have been duly authorized, executed and
delivered by the Company or such Subsidiary, constitute valid and binding
agreements of the Company or such Subsidiary and are enforceable against the
Company or such Subsidiary in accordance with the terms thereof.
(i) The Indenture has been duly authorized; the Offered Securities have
been duly authorized; and when the Offered Securities are delivered and paid for
pursuant to this Agreement on the Closing Date (as defined below), the Indenture
will have been duly executed and delivered, such Offered Securities will have
been duly executed, authenticated, issued and delivered and will conform to the
description thereof contained in the Offering Document and the Indenture and
such Offered Securities will constitute valid and legally binding obligations of
the Company, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium
3
<PAGE> 4
and similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
(j) When the Offered Securities are delivered and paid for pursuant to
this Agreement on the Closing Date, such Offered Securities will be convertible
into shares ("Underlying Shares") of Genzyme General Division Common Stock, par
value $.01 per share ("GGD Stock"), in accordance with the terms of the
Indenture; the Underlying Shares initially issuable upon conversion of such
Offered Securities have been duly authorized and reserved for issuance upon such
conversion and, when issued upon such conversion, will be validly issued, fully
paid and nonassessable; the shares of GGD Stock outstanding as of the date
hereof have been duly authorized and validly issued, are fully paid and
nonassessable and conform in all material respects to the description thereof
contained in the Offering Document; and the stockholders of the Company have no
preemptive rights with respect to the Offered Securities or the Underlying
Shares.
(k) Except as disclosed in the Offering Document, there are no
contracts, agreements or understandings between the Company and any person that
would give rise to a valid claim against the Company or any Purchaser for a
brokerage commission, finder's fee or other like payment in connection with the
sale of the Offered Securities.
(l) No consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required for the consummation of
the transactions contemplated by this Agreement in connection with the issuance
and sale of the Offered Securities by the Company, except such as may be
required under state securities laws.
(m) The execution, delivery and performance of the Indenture and this
Agreement and the issuance and sale of the Offered Securities and compliance
with the terms and provisions thereof will not result in a breach or violation
of any of the terms and provisions of, or constitute a default under, any
statute, any rule, regulation or order of any governmental agency or body or any
court, domestic or foreign, having jurisdiction over the Company or any
Subsidiary of the Company or any of their properties, or any agreement or
instrument to which the Company or any such Subsidiary is a party or by which
the Company or any such Subsidiary is bound or to which any of the properties of
the Company or any such Subsidiary is subject, or the charter or by-laws (or
comparable instruments) of the Company or any such Subsidiary, and the Company
has full power and authority to authorize, issue and sell the Offered Securities
as contemplated by this Agreement.
(n) This Agreement has been duly authorized, executed and delivered by
the Company.
(o) The Registration Rights Agreement has been duly authorized,
executed and delivered by the Company, conforms in all material respects to the
description thereof in the Offering Document and constitutes a valid and legally
binding obligation of the Company, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and general equity principles.
(p) Except as disclosed in the Offering Document, the Company and its
subsidiaries have good and marketable title to all material real properties and
all other material properties and assets owned by them, in each case free from
liens, encumbrances and defects that would materially affect the value thereof
or materially interfere with the use made or to be made thereof by them; and
except
4
<PAGE> 5
as disclosed in the Offering Document, the Company and its subsidiaries hold any
leased real or personal property under valid and enforceable leases with no
exceptions that would materially interfere with the use made or to be made
thereof by them.
(q) The Company and its Subsidiaries possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by them and have not received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company or
any of its subsidiaries, would individually or in the aggregate have a material
adverse effect on the condition (financial or other), business, properties or
results of operations of the Company and its Subsidiaries taken as a whole or of
Genzyme General.
(r) No labor dispute with the employees of the Company or any
Subsidiary exists or, to the knowledge of the Company, is imminent that might
have a material adverse effect on the condition (financial or other), business,
properties or results of operations of the Company and its Subsidiaries taken as
a whole or of Genzyme General.
(s) The Company and its Subsidiaries own, possess or can acquire on
reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and other
intellectual property (collectively, "intellectual property rights") necessary
to conduct the business now operated by them, or presently employed by them, and
have not received any notice of infringement of or conflict with asserted rights
of others with respect to any intellectual property rights that, if determined
adversely to the Company or any of its Subsidiaries, would individually or in
the aggregate have a material adverse effect on the condition (financial or
other), business, properties or results of operations of the Company and its
Subsidiaries taken as a whole or of Genzyme General. All such intellectual
property rights are valid and enforceable and, to the knowledge of the Company
and its Subsidiaries, are not being infringed by any third parties which
infringement would individually or in the aggregate have a material adverse
effect on the condition (financial or other), business, properties or results of
operations of the Company and its Subsidiaries taken as a whole or of Genzyme
General. To the knowledge of the Company, the Company's and its Subsidiaries'
present use of any of the intellectual property rights does not infringe on any
rights of third parties or conflict with any asserted rights of others that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the condition
(financial or other), business, properties or results of operations of the
Company and its Subsidiaries taken as a whole or of Genzyme General.
(t) The descriptions of the human clinical trials, animal studies and
other preclinical tests being conducted by or on behalf of the Company and its
Subsidiaries and of any license or similar applications relating to products and
services in development contained in the Offering Document (the "Company Studies
and Applications") are accurate and complete in all material respects, and the
Company has no knowledge of any other trials, studies or tests, the results of
which reasonably call into question the results thereof described or referred to
in the Offering Document which have not previously been publicly disclosed by
Genzyme in a press release. Neither the Company nor any Subsidiary has received
any notices or correspondence from the U.S. Food and Drug Administration or any
other governmental agency requiring the termination, suspension or a
modification which would result in a materially adverse change in any Company
Studies and Applications.
5
<PAGE> 6
(u) Neither the Company nor any of the Subsidiaries is in violation of
its certificate of incorporation, by-laws or in default (nor has an event
occurred which with notice or lapse of time or both would constitute a default
or acceleration) in the performance of any obligation, agreement or condition
contained in any indenture, mortgage, deed of trust, voting trust agreement,
loan agreement, bond, debenture, note agreement or other evidence of
indebtedness, lease, contract or other agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which any of them or their
respective properties is bound or affected and neither the Company nor any of
the Subsidiaries is in violation of any judgment, ruling, decree, order,
franchise, license or permit known to such counsel or any statute, rule or
regulation applicable to the business or properties of the Company or any of the
Subsidiaries, where such violation or default would have a material adverse
effect on the condition (financial or otherwise), business, properties or
results of operations of the Company and its Subsidiaries taken as a whole or of
Genzyme General.
(v) Except as disclosed in the Offering Document, there are no pending
actions, suits or proceedings against or affecting the Company, any of its
Subsidiaries or any of their respective properties that, if determined adversely
to the Company or any of its Subsidiaries, would individually or in the
aggregate have a material adverse effect on the condition (financial or other),
business, properties or results of operations of the Company and its
Subsidiaries taken as a whole or of Genzyme General, or would materially and
adversely affect the ability of the Company to perform its obligations under the
Indenture or this Agreement, or which are otherwise material in the context of
the sale of the Offered Securities or the issuance of the Underlying Shares upon
conversion thereof; and no such actions, suits or proceedings are threatened or,
to the Company's knowledge, contemplated.
(w) Except as disclosed in the Offering Document, since the date of the
latest audited financial statements included in the Offering Document there has
been no material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or other),
business, properties or results of operations of the Company and its
Subsidiaries taken as a whole or of Genzyme General, and, except as disclosed in
or contemplated by the Offering Document, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its capital stock.
(x) The Company is not an open-end investment company, unit investment
trust or face-amount certificate company that is or is required to be registered
under Section 8 of the United States Investment Company Act of 1940, as amended
(the "Investment Company Act") ; and the Company is not and, after giving effect
to the offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the Offering Document, will not be an
"investment company" as defined in the Investment Company Act.
(y) The Company and its affiliates have not taken and will not take,
directly or indirectly, any action designed to cause, or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the GGD Stock to facilitate the
sale or resale of the Offered Securities.
(z) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Offered Securities are listed on any
national securities exchange registered under Section 6 of the Exchange Act or
quoted in a U.S. automated inter-dealer quotation system.
6
<PAGE> 7
(aa) Assuming the truth and accuracy of the Purchasers'
representations contained in Section 4, the offer and sale of the
Offered Securities by the Company to the several Purchasers will be
exempt from the registration requirements of the Securities Act by
reason of Section 4(2) thereof, and the resale by the Purchasers
pursuant to Section 4(b) hereof will be exempt from the registration
requirements of the Securities Act by reason of Rule 144A thereunder
and Regulation S thereunder ("Regulation S") and, in connection
therewith, it is not necessary to qualify an indenture in respect of
the Offered Securities under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act".)
(bb) Neither the Company, nor any of its affiliates, nor any
person acting on its or their behalf (i) has, within the six-month
period prior to the date hereof, offered or sold in the United States
or to any U.S. person (as such terms are defined in Regulation S) the
Offered Securities or any security of the same class or series as the
Offered Securities or (ii) has offered or will offer or sell the
Offered Securities (A) in the United States by means of any form of
general solicitation or general advertising within the meaning of Rule
502(c) under the Securities Act or (B) with respect to any such
securities sold in reliance on Rule 903 of Regulation S, by means of
any directed selling efforts within the meaning of Rule 902(b) of
Regulation S. The Company, its affiliates and any person acting on its
or their behalf have complied and will comply with the offering
restrictions requirement of Regulation S. The Company has not entered
and will not enter into any contractual arrangement with respect to the
distribution of the Offered Securities except for this Agreement.
(cc) The Company is subject to Section 13 or 15(d) of the Exchange Act.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Purchasers, and the Purchasers agree to purchase from the Company, at a purchase
price of 97.5% of the principal amount thereof plus accrued interest, if any,
from May 22, 1998 to the Closing Date (as hereinafter defined) the respective
principal amounts of Firm Securities set forth opposite the names of the several
Purchasers in Schedule C hereto.
The Company will deliver against payment of the purchase price the Firm
Securities to be offered and sold by the Purchasers (i) in reliance on Rule 144A
under the Securities Act (the "Firm 144A Securities") issued in the form of one
permanent global security in definitive form without interest coupons deposited
with the Trustee as custodian for DTC and registered in the name of Cede & Co.,
as nominee for DTC, and bearing the legend regarding restrictions on transfer
set forth under "Transfer Restrictions" in the Offering Document and (ii) in
reliance on Regulation S (the "Firm Regulation S Securities") issued in
definitive, fully registered form, in such denominations and registered in such
names as CSFBC requests and bearing the legend relating thereto set forth under
"Transfer Restrictions" in the Offering Document.
Payment for the Firm Securities shall be made by the Purchasers in
Federal (same day) funds by wire transfer to an account at a bank acceptable to
CSFBC drawn to the order of Genzyme Corporation , on May 22, 1998, or at such
other time not later than seven full business days thereafter, as CSFBC and the
Company determine, such time being herein referred to as the "Closing Date,"
against (i) delivery to the Trustee as custodian for DTC of the permanent global
security in definitive form representing all of the Firm 144A Securities and
(ii) delivery to the Purchasers of definitive fully registered certificates
representing all of the Firm Regulation S Securities at the office of Cahill
Gordon & Reindel at 9:00 A.M. (New York time). The certificates representing the
Firm 144A Securities and the Firm Regulation S Securities will be made available
for checking at least 24 hours prior to the First Closing Date.
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<PAGE> 8
In addition, upon written notice from CSFBC given to the Company not
more than 30 days subsequent to the date of this Agreement, the Purchasers may
purchase all or less than all of the Optional Securities at the purchase price
per principal amount of Offered Securities (including any accrued interest
thereon to the related Optional Closing Date) to be paid for the Firm
Securities. The Company agrees to sell to the Purchasers the principal amount of
Optional Securities specified in such notice and the Purchasers agree to
purchase such Optional Securities. Such Optional Securities shall be purchased
from the Company for the account of each Purchaser in the same proportion as the
number of Firm Securities set forth opposite such Purchaser's name in Schedule C
hereto bears to the total number of Firm Securities (subject to adjustment by
CSFBC to eliminate fractions) and may be purchased by the Purchasers only for
the purpose of covering over-allotments made in connection with the sale of the
Firm Securities. No Optional Securities shall be sold or delivered unless the
Firm Securities previously have been, or simultaneously are, sold and delivered.
The right to purchase the Optional Securities or any portion thereof may be
exercised not more than twice and to the extent not previously exercised may be
surrendered and terminated at any time upon notice by CSFBC to the Company.
Each time for the delivery of a payment for the Optional Securities,
being herein referred to as the "Optional Closing Date," which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometime referred to as a "Closing Date"), shall be determined by CSFBC
but shall not be later than seven full business days, nor prior to two full
business days except in the case of the First Closing Date for any such Optional
Closing Date , after written notice of election to purchase Optional Securities
is given. The certificates for the Securities evidencing the Optional Securities
being purchased on each Optional Closing Date will be in such denominations and
registered in such names as CSFBC requests and will be made available for
checking and packaging at the above offices of Cahill Gordon & Reindel at a
reasonable time in advance of such Optional Closing Date.
Payment for the Optional Securities being purchased on each Optional
Closing Date and to be offered and sold by the Purchasers in reliance on Rule
144A (the "Optional 144A Securities") and the Optional Securities being
purchased on such Optional Closing Date and to be offered and sold by the
Purchasers in reliance on Regulation S (the "Optional Regulation S Securities")
shall be made by the Purchasers in Federal (same day) funds by wire transfer to
an account at a bank acceptable to CSFBC drawn to the order of Genzyme
Corporation at 9:00 A.M. (New York time) on such Optional Closing Date against
(i) delivery to the Trustee as custodian for DTC of a permanent global security
in definitive form without coupons representing all of the Optional 144A
Securities and (ii) delivery to the Purchasers of definitive fully registered
certificates representing all of the Optional Regulation S Securities being
purchased on such Optional Closing Date at the office of Cahill Gordon &
Reindel, or at such other place or places of CSFBC and the Company shall
determine.
4. Representations by Purchasers; Resale by Purchasers. (a) Each
Purchaser severally represents and warrants to the Company that it is an
"accredited investor" within the meaning of Regulation D under the Securities
Act.
(b) Each Purchaser severally acknowledges that the Offered Securities
have not been registered under the Securities Act and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S. persons
except in accordance with Regulation S or pursuant to an exemption from the
registration requirements of the Securities Act. Each Purchaser severally
represents and agrees that it has offered and sold the Offered Securities, and
will offer and sell the Offered Securities as part of its distribution at any
time only in accordance with Rule 903 or Rule 144A under the Securities Act
("Rule 144A"). Accordingly, neither such Purchaser nor its affiliates, nor any
persons acting on its or their behalf, have engaged or will
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<PAGE> 9
engage in any directed selling efforts with respect to the Offered Securities,
and such Purchaser, its affiliates and all persons acting on its or their behalf
have complied and will comply with the offering restrictions requirement of
Regulation S. Each Purchaser severally agrees that, at or prior to confirmation
of sale of the Offered Securities, other than a sale pursuant to Rule 144A, such
Purchaser will have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases the Offered
Securities from it during the restricted period a confirmation or notice to
substantially the following effect:
"The securities covered hereby have not been registered under the U.S.
Securities Act of 1933 (the "Securities Act") and may not be offered or
sold within the United States or to, or for the account or benefit of,
U.S. persons (i) as part of their distribution at any time, or (ii)
otherwise until one year after the earlier of the date of the
commencement of the offering and the closing date, except in either
case in accordance with Regulation S (or Rule 144A if available) under
the Securities Act. Terms used above have the meanings given to them by
Regulation S."
Terms used in this subsection (b) have the meanings given to them by Regulation
S.
(c) Each Purchaser severally agrees that it and each of its affiliates
has not entered and will not enter into any contractual arrangement with respect
to the distribution of the Offered Securities except with the prior written
consent of the Company.
(d) Each Purchaser severally agrees that it and each of its affiliates
will not offer or sell the Offered Securities in the United States by means of
any form of general solicitation or general advertising within the meaning of
Rule 502(c) under the Securities Act, including, but not limited to (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. Each Purchaser severally agrees, with
respect to resales made in reliance on Rule 144A of any of the Offered
Securities, to deliver either with the confirmation of such resale or otherwise
prior to settlement of such resale a notice to the effect that the resale of
such Offered Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A.
(e) Each of the Purchasers severally represents and agrees that (i) it
has not offered or sold and prior to the date six months after the date of issue
of the Offered Securities will not offer or sell any Offered Securities to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Offered Securities in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issue of the Offered Securities to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such document may
otherwise lawfully be issued or passed on.
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<PAGE> 10
5. Certain Agreements of the Company. The Company agrees with the
several Purchasers that:
(a) The Company will advise CSFBC promptly of any proposal to amend or
supplement the Offering Document and will not effect such amendment or
supplementation (other than a required filing of a report under the Exchange
Act) without CSFBC's consent. If, at any time prior to the completion of the
resale of the Offered Securities by the Purchasers, any event occurs as a result
of which the Offering Document as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, the Company promptly will notify CSFBC of
such event and promptly will prepare, at its own expense, an amendment or
supplement which will correct such statement or omission. Neither CSFBC's
consent to, nor the Purchasers' delivery to offerees or investors of, any such
amendment or supplement shall constitute a waiver of any of the conditions set
forth in Section 6. CSFBC will notify the Company when its distribution is
complete.
(b) The Company will furnish to the Purchasers copies of the Offering
Document and all amendments and supplements to such documents, in each case as
soon as available and in such quantities as CSFBC reasonably requests, and the
Company will furnish to CSFBC on the date hereof three copies of the Offering
Document signed by a duly authorized officer of the Company. At any time when
the Company is not subject to Section 13 or 15(d) of the Exchange Act, the
Company will promptly furnish or cause to be furnished to CSFBC (and, upon
request, to each of the other Purchasers) and, upon request of holders and
prospective purchasers of the Offered Securities, to such holders and
purchasers, copies of the information required to be delivered to holders and
prospective purchasers of the Offered Securities pursuant to Rule 144A(d)(4)
under the Securities Act (or any successor provision thereto) in order to permit
compliance with Rule 144A in connection with resales by such holders of the
Offered Securities. The Company will pay the expenses of printing and
distributing to the Purchasers all such documents.
(c) The Company will cooperate with the Purchasers and their counsel in
the qualification of the Offered Securities for sale and the determination of
their eligibility for investment under the laws of such jurisdictions in the
United States and Canada as CSFBC designates and will continue such
qualifications in effect so long as required for the resale of the Offered
Securities by the Purchasers, provided that the Company will not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any such jurisdiction.
(d) During the period of five years hereafter, the Company will furnish
to CSFBC (and, upon request, to each of the other Purchasers) as soon as
practicable after the end of each fiscal year, a copy of its annual report to
shareholders for such year; and the Company will furnish to CSFBC (and, upon
request, to each of the other Purchasers) (i) as soon as available, a copy of
each report and any definitive proxy statement of the Company filed with the
Commission under the Exchange Act or mailed to shareholders, and (ii) from time
to time, such other information concerning the Company as CSFBC may reasonably
request.
(e) During the period of two years after the Closing Date, the Company
will, upon request, furnish to CSFBC, each of the other Purchasers and any
holder of Offered Securities a copy of the restrictions on transfer applicable
to the Offered Securities.
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<PAGE> 11
(f) During the period of two years after the Closing Date the Company
will not, and will not permit any of its affiliates (as defined in Rule 144
under the Securities Act) to, resell any of the Offered Securities that have
been reacquired by any of them.
(g) During the period of two years after the Closing Date, the Company
will not be or become, an open-end investment company, unit investment trust or
face-amount certificate company that is or is required to be registered under
Section 8 of the Investment Company Act.
(h) The Company will pay all expenses incidental to the performance of
its obligations under this Agreement and the Indenture, including (i) the fees
and expenses of the Trustee and its professional advisers; (ii) all expenses in
connection with the execution, issue, authentication, packaging and initial
delivery of the Offered Securities, the printing of this Agreement, the Offered
Securities and the Indenture, and the preparation and printing of the Offering
Document and amendments and supplements thereto, and any other document relating
to the issuance, offer, sale and delivery of the Offered Securities ; (iii) the
cost of qualifying the Offered Securities for trading in The Portal(SM) Market
("PORTAL") and any expenses incidental thereto; (iv) the cost of any advertising
approved by the Company in connection with the issue of the Offered Securities;
(v) any expenses (including fees and disbursements of counsel) incurred in
connection with qualification of the Offered Securities for sale under the laws
of such jurisdictions in the United States and Canada as CSFBC designates and
the printing of memoranda relating thereto; (vi) any fees charged by investment
rating agencies for the rating of the Offered Securities in the event such a
rating is requested by the Company; provided, that the Company agrees that in no
event will the Purchasers be obligated to pay any such rating agency fees; and
(vii) expenses incurred in distributing the Offering Document (including any
amendments and supplements thereto) to the Purchasers.
(i) In connection with the Offering, until CSFBC shall have notified
the Company of the completion of the resale of the Offered Securities, neither
the Company nor any of its affiliates has or will, either alone or with one or
more other persons, bid for or purchase for any account in which it or any of
its affiliates has a beneficial interest any Offered Securities or attempt to
induce any person to purchase any Offered Securities; and neither it nor any of
its affiliates will make bids or purchases for the purpose of creating actual,
or apparent, active trading in, or of raising the price of, the Offered
Securities.
(j) The Company will not offer, sell, contract to sell, announce its
intention to sell, pledge or otherwise dispose of, directly or indirectly, or
file with the Commission a registration statement under the Securities Act
relating to (other than pursuant to the Registration Rights Agreement), (i) any
shares of its GGD Stock, or securities (other than GTR Stock, GMO Stock or GGD
Debentures (as defined in the Offering Circular) into which outstanding GMO
Notes (as defined in the Offering Circular) are exchanged in accordance with
their terms) convertible into or exchangeable or exercisable for any shares of
GGD Stock, other than pursuant to employee and director benefit plans or upon
the exercise of outstanding warrants or conversion of the Notes or the GGD
Debentures or (ii) any Notes or other United States dollar-denominated debt
securities (other than GGD Debentures into which outstanding GMO Notes are
exchanged in accordance with their terms), issued or guaranteed by the Company
and having a maturity of more than one year from the date of issue without the
prior written consent of CSFBC for a period of 90 days after the date of the
Offering Document; provided that prior to the expiration of such 90-day period,
the Company may engage in any of the foregoing activities in connection with an
acquisition using GGD Stock or securities convertible into or exchangeable or
exercisable for GGD Stock, provided that the terms of any such acquisition shall
not provide
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<PAGE> 12
for the issuance of any such shares or securities prior to the expiration of
such period without the prior written consent of CSFBC.
(k) The Company will not at any time offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any securities under
circumstances where such offer, sale, pledge, contract or disposition would
cause the exemption afforded by Section 4(2) of the Securities Act or the safe
harbor of Regulation S thereunder to cease to be applicable to the offer and
sale of the Offered Securities.
6. Conditions of the Obligations of the Purchasers. The obligations of
the several Purchasers to purchase and pay for the Firm Securities on the First
Closing Date and the Optional Securities on each Optional Closing Date will be
subject to the accuracy of the representations and warranties on the part of the
Company herein, to the accuracy of the statements of officers of the Company
made pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder and to the following additional conditions precedent:
(a) The Purchasers shall have received a letter, dated as of the
Closing Date, of Coopers & Lybrand LLP confirming that they are independent
public accountants within the meaning of the Securities Act and the applicable
published Rules and Regulations and to the effect that:
(i) in their opinion the financial statements examined by them
and incorporated by reference in the Offering Circular and included in
the Exchange Act Reports comply as to form in all material respects
with the applicable accounting requirements of the Securities Act and
the related published Rules and Regulations;
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in Statement of Auditing
Standards No. 71, Interim Financial Information, on the unaudited
financial statements, if any, incorporated by reference in the Offering
Circular and included in the Exchange Act Reports;
(iii) on the basis of the review referred to in clause (ii)
above, a reading of the latest available interim financial statements,
if any, of the Company, Genzyme General, GTR and GMO, inquiries of
officials of the Company who have responsibility for financial and
accounting matters and other specified procedures, nothing came to
their attention that caused them to believe that:
(A) the unaudited financial statements included in
the Exchange Act Reports do not comply as to form in all
material respects with the applicable accounting
requirements of the Securities Act and the related published
Rules and Regulations or any material modifications should
be made to such unaudited financial statements for them to
be in conformity with generally accepted accounting
principles;
(B) at the date of the latest available balance
sheet read by such accountants, or at a subsequent specified
date not more than three business days prior to the date of
such letter, there was any change in the capital stock,
other than changes due to the issuance of common stock in
connection with the exercise of stock options, stock
warrants or the employee stock purchase plan, or any
increase in long-term debt of the Company and its
con-
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<PAGE> 13
solidated subsidiaries, Genzyme General, GTR or GMO or, at the
date of the latest available balance sheet read by such
accountants, there was any decrease in consolidated net
current assets of the Company, Genzyme General, GTR or GMO, as
compared with amounts shown on the latest balance sheet
included in the Exchange Act Reports; or
(C) for the period from the closing date of the
latest statements of operations included in the Exchange Act
Reports to the closing date of the latest available statements
of operations read by such accountants there were any
decreases, as compared with the corresponding period of the
previous year in the total or per share amounts of
consolidated net income or in the ratio of earnings to fixed
charges,
except in all cases set forth in clauses (iii)(B) and (iii)(C) above
for changes, increases or decreases which the Exchange Act Reports
disclose have occurred or may occur or which are described in such
letter; and
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information incorporated in the Offering Circular and included in the
Exchange Act Reports (in each case to the extent that such dollar
amounts, percentages and other financial information are derived from
the general accounting records of the Company and its subsidiaries,
Genzyme General, GTR or GMO subject to the internal controls of the
Company's accounting system or are derived directly from such records
by analysis or computation) with the results obtained from inquiries, a
reading of such general accounting records and other procedures
specified in such letter and have found such dollar amounts,
percentages and other financial information to be in agreement with
such results, except as otherwise specified in such letter.
(b) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) except for changes relating to events described in
clauses (ii) (C), (D) and (E) of this paragraph, a change in U.S. or
international financial, political or economic conditions or currency exchange
rates or exchange controls as would, in the judgment of CSFBC, be likely to
prejudice materially the success of the proposed issue, sale or distribution of
the Offered Securities, whether in the primary market or in respect of dealings
in the secondary market, or (ii) (A) any change, or any development or event
involving a prospective change, in the condition (financial or other), business,
properties or results of operations of the Company or its subsidiaries which, in
the judgment of a majority in interest of the Purchasers including CSFBC, is
material and adverse and makes it impractical or inadvisable to proceed with
completion of the offering or the sale of and payment for the Offered
Securities; (B) any downgrading in the rating of any debt securities of the
Company by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Securities Act), or any public
announcement that any such organization has under surveillance or review its
rating of any debt securities of the Company (other than an announcement with
positive implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (C) any suspension or limitation of trading in
securities generally on the New York Stock Exchange, or any setting of minimum
prices for trading on such exchange, or any suspension of trading of any
securities of the Company on any exchange or in the over-the-counter market; (D)
any banking moratorium declared by U.S. Federal or New York authorities; or (E)
any outbreak or escalation of major hostilities in which the United States is
involved, any declaration of war by Congress or any other substantial national
or international calamity or emergency if, in the judgment of a majority in
interest of the Purchasers including CSFBC, the effect of any such outbreak,
escalation, declaration,
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<PAGE> 14
calamity or emergency makes it impractical or inadvisable to proceed with
completion of the offering or sale of and payment for the Offered Securities.
(c) The Purchasers shall have received an opinion, dated such Closing
Date, of Palmer & Dodge LLP, counsel for the Company, that:
(i) Each of the Company and Genzyme Securities Corporation
("GSC") and Deknatel Snowden Pencer, Inc. ("DSP" and together with GSC,
the "Domestic Subsidiaries") is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each of the Company and the Domestic Subsidiaries is
duly qualified to do business as a foreign corporation in good standing
in all jurisdictions in which the nature of the activities conducted by
it or the character of the assets owned or leased by it makes such
qualification necessary, except where the failure to be so qualified
would not have a material adverse effect on the condition (financial or
other), business, properties or results of operations of the Company
and the Subsidiaries taken as a whole or of Genzyme General. Each of
the Company and the Domestic Subsidiaries has full corporate power and
authority to own or lease all the assets described as or known to such
counsel to be owned or leased by it and to conduct its business as
described in the Offering Document.
(ii) The Indenture has been duly authorized, executed and
delivered by the Company. The Offered Securities have been duly
authorized and executed by the Company. The Offered Securities
delivered on such Closing Date conform in all material respects to the
description thereof contained in the Offering Document. The Indenture
constitutes and, upon authentication, issuance and delivery of the
Offered Securities against payment therefor, the Offered Securities
delivered on such Closing Date will constitute valid and legally
binding obligations of the Company enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(iii) The Offered Securities delivered on such Closing Date
are convertible into the Underlying Shares of the Company in accordance
with the terms of the Indenture; the Underlying Shares initially
issuable upon conversion of such Offered Securities delivered on such
Closing Date have been duly authorized and reserved for issuance upon
such conversion and, when issued upon such conversion, will be validly
issued, fully paid and nonassessable. The outstanding shares of the
Company's capital stock have been duly authorized and validly issued,
are fully paid and nonassessable, are not subject to any preemptive or
similar right.
(iv) The stockholders of the Company have no preemptive rights
with respect to the Offered Securities or the Underlying Shares.
(v) Except as disclosed in the Offering Document or pursuant
to the agreements listed on Schedule C, there are no contracts,
agreements or understandings known to such counsel between the Company
and any person granting such person the right to require the Company to
file a registration statement under the Act to include shares of GGD
Stock in the securities registered pursuant to a registration statement
filed by the Company under the Act.
(vi) No consent, approval, authorization or order of, or any
filing or declaration with, any court or governmental agency or body is
required in connection with the authorization, issu-
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<PAGE> 15
ance, transfer, sale or delivery of the Offered Securities by the
Company in the manner contemplated by this Agreement or the issuance of
the Underlying Shares by the Company, in connection with the execution,
delivery and performance of this Agreement by the Company or in
connection with the taking by the Company of any action contemplated
thereby, except such as may be required under state securities laws.
(vii) The authorized capital stock of the Company is as set
forth in the Offering Document. The description of the Company's
capital stock and the Underlying Shares contained in the Offering
Document conforms in all material respects to the terms thereof
contained in the Company's articles of organization.
(viii) No registration under the Act of the Offered Securities
is required in connection with the sale of the Offered Securities to
the several Purchasers as contemplated by this Agreement and the
Offering Document or in connection with the initial resale of the
Offered Securities by the Purchasers in accordance with Section 4 of
this Agreement, and prior to the effectiveness of the Shelf
Registration Statement (as defined in the Registration Rights
Agreement), the Indenture is not required to be qualified under the
TIA, in each case assuming (i) (A) that the purchasers who buy such
Offered Securities in the initial resale thereof are qualified
institutional buyers as defined in Rule 144A promulgated under the Act
or (B) that the offer or sale of the Offered Securities is made in an
offshore transaction as defined in Regulation S, (ii) the accuracy of
the Company's representations contained in this Agreement regarding the
absence of general advertising or general solicitation in connection
with the sale of such Offered Securities to the Purchasers and the
initial resale thereof, and (iii) the accuracy of the Purchasers'
representations set forth in Section 4 of this Agreement and the due
performance by the Purchasers of their agreements set forth in that
section.
(ix) Such counsel has participated in the preparation of the
Offering Document. Except as explicitly provided in such opinion, such
counsel has not undertaken to verify independently the facts disclosed
in the Offering Document (including any documents incorporated by
reference therein). However, in the course of such participation,
nothing has come to such counsel's attention which has caused them to
believe that, as of the date hereof and as of such Closing Date, the
Offering Document, or any amendment or supplement thereto including any
documents incorporated by reference into the Offering Document,
contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading (except that such
counsel need express no opinion as to financial statements, schedules
and other financial or statistical data contained in the Offering
Document or incorporated by reference therein).
(x) Such counsel has reviewed all contracts or other
agreements referred to in the Offering Document (including the
contracts referred to in the documents incorporated by reference
therein set forth in such opinion, as agreed upon between such counsel
and counsel for the Purchasers and the descriptions thereof (insofar as
such descriptions constitute a summary of the legal matters referred to
therein) are accurate in all material respects (except that such
counsel need express no opinion as to any descriptions thereof
appearing in the financial statements, schedules and other financial or
statistical data contained in the Offering Document or incorporated by
reference therein). Such counsel does not know of any contracts or
other documents required to be
15
<PAGE> 16
filed as an exhibit to any document incorporated by reference in the
Offering Circular which have not been so filed.
(xi) The Company has full corporate power and authority to
enter into this Agreement, and this Agreement has been duly authorized,
executed and delivered by the Company.
(xii) The execution, delivery and performance of the Indenture
and this Agreement by the Company, the consummation by the Company of
the transactions herein contemplated and the compliance by the Company
with the terms of this Agreement do not and will not result in the
creation or imposition of any lien, charge or encumbrance upon any of
the assets of the Company or GSC pursuant to the terms or provisions
of, or result in a breach or violation of any of the terms or
provisions of, or constitute a default or result in the acceleration of
any obligation under, the charter or by-laws of the Company or any of
the Domestic Subsidiaries, or, to the knowledge of such counsel, any
indenture, mortgage, deed of trust, voting trust agreement, loan
agreement, bond, debenture, note agreement or other evidence of
indebtedness, lease, contract or other agreement or instrument to which
the Company or GSC is a party or by which either the Company's or GSC's
respective properties is bound or affected, or any judgment, ruling,
decree or order known to such counsel or any statute, rule, order or
regulation applicable to the business or properties of the Company or
GSC. The opinion regarding violations of contracts of the Company may
be limited to violations that would materially and adversely affect the
ability of the Company to perform its obligations under this Agreement
or that would have a material adverse effect on the condition
(financial or other), business, properties or results of operations of
the Company and the Subsidiaries taken as a whole or of Genzyme
General. In addition, such counsel need not express any opinion as to
the securities or Blue Sky laws of any jurisdiction other than the
United States.
(xiii) Delivery of the Offered Securities will pass valid and
marketable title thereto free and clear of any liens, encumbrances or
claims to the Purchasers if they have purchased such Offered Securities
in good faith without knowledge or reason to know of any adverse claims
thereto and such counsel is not aware of any adverse claim with respect
thereto.
(xiv) Such counsel is not aware of any legal or governmental
proceeding pending or threatened against the Company or the
Subsidiaries of a character required to be disclosed in the Offering
Circular or any document incorporated therein by reference by the
Securities Act, the Rules and Regulations, the Exchange Act and the
Exchange Act Rules and Regulations, other than those that may be
described therein, nor is such counsel aware of any such proceeding in
which an unfavorable ruling, decision or finding might individually or
in the aggregate materially and adversely affect the ability of the
Company to perform its obligations under this Agreement.
(xv) The Company is not and, after giving effect to the
offering and sale of the Offered Securities, including the issuance of
the Underlying Shares upon conversion of the Offered Securities, and
the application of the proceeds thereof as described in the Offering
Document, will not be an "investment company," as such term is defined
in the Investment Company Act of 1940, as amended.
In rendering the foregoing opinion, such counsel may rely, to the
extent they deem such reliance proper, on the opinions (in form and substance
reasonably satisfactory to Purchasers' counsel) of other counsel reasonably
acceptable to Purchasers' counsel as to matters governed by the laws of
ju-
16
<PAGE> 17
risdictions other than the United States, the Commonwealth of Massachusetts or
the General Corporation Law of the State of Delaware, and as to matters of fact,
upon certificates of officers of the Company and of government officials;
provided that such counsel shall state that the opinion of any other counsel is
in form satisfactory to such counsel and, in such counsel's opinion, such
counsel and the Purchasers are justified in relying on such opinions of other
counsel. Copies of all such opinions and certificates shall be furnished to
counsel to the Purchasers on the Closing Date. Such counsel may state that they
are not passing upon any matters relating to patents, trademarks or state and
federal laws relating to the provision of human health care products and
services. For purposes of the opinion set forth in the last sentence of
paragraph (iii), such counsel may assume that all of the shares issued under the
Company's employee and director stock plans have been issued in compliance with
the terms of such plans and all shares issued upon the exercise of warrants have
been issued in compliance with the terms of such warrants. Such counsel may also
state that their opinion on enforceability of the Indenture and the Notes is
rendered as if Massachusetts law applied to such agreements.
(d) The Purchasers shall have received from Cahill Gordon & Reindel,
counsel for the Purchasers, such opinion or opinions, dated the Closing Date,
with respect to the validity of the Offered Securities, the Offering Document,
the exemption from registration for the offer and sale of the Offered Securities
by the Company to the several Purchasers and the resales by the Purchasers as
contemplated hereby and other related matters as CSFBC may require, and the
Company shall have furnished to such counsel such documents as they reasonably
request for the purpose of enabling them to pass upon such matters.
(e) The Purchasers shall have received a certificate, dated as of such
Closing Date, of the President or the Executive Vice President and Chief Legal
Officer and, a principal financial or accounting officer of the Company in which
such officers, to the best of their knowledge after reasonable investigation,
shall state that the representations and warranties of the Company in this
Agreement are true and correct, that the Company has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date, and that, subsequent to the date of
the most recent financial statements in the Exchange Act Reports, there has been
no material adverse change, nor any development or event involving a prospective
material adverse change, in the condition (financial or other), business,
properties or results of operations of the Company and its subsidiaries taken as
a whole except as set forth in or contemplated by the Exchange Act Reports or as
described in such certificate.
(f) The Purchasers shall have received a certificate, dated the Closing
Date, of the principal financial or accounting officer of DSP in which such
officer shall state that, to the best of his knowledge after reasonable
investigation, the execution and delivery of this Agreement by the Company, the
consummation by the Company of the transactions therein contemplated and the
compliance by the Company with the terms of this Agreement do not and will not
result in the creation or imposition of any lien, charge or encumbrance upon any
of the assets of DSP pursuant to the terms or provisions of, or result in a
breach or violation of any of the terms or provisions of, or constitute a
default or result in the acceleration of any obligation under, the charter or
by-laws of DSP or, to the knowledge of such officer, any indenture, mortgage,
deed of trust, voting trust agreement, loan agreement, bond, debenture, note
agreement or other evidence of indebtedness, lease, contract or other agreement
or instrument to which DSP is a party or by which its properties is bound or
affected, or any judgment, ruling, decree or order known to such officer or any
statute, rule or regulation applicable to the business or properties of DSP,
other than the securities or blue sky laws of any jurisdiction other than the
17
<PAGE> 18
United States or the varying states therein, except as set forth in or
contemplated by the Offering Document or as described in such
certificate.
(g) The Purchasers shall have received a letter, dated the
Closing Date, addressed to the Purchasers and signed by Peter Wirth, in
his capacity as Executive Vice President and Chief Legal Officer of the
Company, in form and substance acceptable to the Purchasers relating to
the Company's annual report on Form 10-K.
The Company will furnish the Purchasers with such conformed copies of
such opinions, certificates, letters and documents as the Purchasers reasonably
request. CSFBC may in its sole discretion waive compliance with any conditions
to the obligations of the Purchasers hereunder, whether in respect of an
Optional Closing Date or otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Purchaser against any losses, claims, damages or liabilities,
joint or several, to which such Purchaser may become subject, under the
Securities Act or the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Offering Document, or any amendment or supplement thereto, or
the Exchange Act Reports, or arise out of or are based upon the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and will reimburse each Purchaser for any legal or other
expenses reasonably incurred by such Purchaser in connection with investigating
or defending any such loss, claim, damage, liability or action as such expenses
are incurred; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement in or omission
or alleged omission from any of such documents in reliance upon and in
conformity with written information furnished to the Company by any Purchasers
through CSFBC specifically for use therein, it being understood and agreed that
the only such information consists of the information described as such in
subsection (b) below.
(b) Each Purchaser will severally and not jointly indemnify and hold
harmless the Company against any losses, claims, damages or liabilities to which
the Company may become subject, under the Securities Act or the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Offering Document, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Purchaser through CSFBC specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred, it being understood
and agreed that the only such information furnished by any Purchasers consists
of the following information in the Offering Document: the last paragraph at the
bottom of the cover page concerning the terms of the offering by the Purchasers,
the legend concerning over-allotments and stabilizing on the inside front cover
page and information contained in the third sentence of the second paragraph,
the sixth and eighth paragraphs, the third sentence of the ninth paragraph and
the eleventh paragraph under the caption "Plan of Distribution."
18
<PAGE> 19
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on any claims that are the subject
matter of such action. An indemnifying party will not be liable for any
settlement of any action or claims effected without its written consent;
provided, however, that such consent will not be unreasonably withheld.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Purchasers on the other from the offering of the Offered
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Purchasers on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Purchasers on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received by
the Company bear to the total discounts and commissions received by the
Purchasers from the Company under this Agreement. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Purchasers
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), no Purchaser shall be required to contribute
any amount in excess of the amount by which the total price at which the Offered
Securities purchased by it were resold exceeds the amount of any damages which
such Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. The Purchasers'
obligations in this subsection (d) to contribute are several in proportion to
their respective purchase obligations and not joint.
(e) The obligations of the Company under this Section 7 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person,
19
<PAGE> 20
if any, who controls any Purchaser within the meaning of the Securities Act or
the Exchange Act; and the obligations of the Purchasers under this Section shall
be in addition to any liability which the respective Purchasers may otherwise
have and shall extend, upon the same terms and conditions, to each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act.
8. Default of Purchasers. If any Purchaser or Purchasers default in
their obligations to purchase Offered Securities hereunder on either the First
Closing Date or any Optional Closing Date and the aggregate principal amount of
Offered Securities that such defaulting Purchaser or Purchasers agreed but
failed to purchase does not exceed 10% of the total principal amount of Offered
Securities that the Purchasers are obligated to purchase on such Closing Date,
CSFBC may make arrangements satisfactory to the Company for the purchase of such
Offered Securities by other persons, including any of the Purchasers, but if no
such arrangements are made by such Closing Date, the non-defaulting Purchasers
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Offered Securities that such defaulting Purchasers
agreed but failed to purchase on such Closing Date. If any Purchaser or
Purchasers so default and the aggregate principal amount of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the total
principal amount of Offered Securities that the Purchasers are obligated to
purchase on such Closing Date and arrangements satisfactory to CSFBC and the
Company for the purchase of such Offered Securities by other persons are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Purchaser or the Company, except as
provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement shall not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Purchaser" includes
any person substituted for a Purchaser under this Section. Nothing herein will
relieve a defaulting Purchaser from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the several Purchasers set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Purchaser, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. If for any reason the purchase of the
Offered Securities by the Purchasers is not consummated, the Company shall
remain responsible for the expenses to be paid or reimbursed by it pursuant to
Section 5 and the respective obligations of the Company and the Purchasers
pursuant to Section 7 shall remain in effect. If the purchase of the Offered
Securities by the Purchasers is not consummated for any reason other than solely
because of the occurrence of any event specified in clause (C), (D) or (E) of
Section 6(b)(ii), the Company will reimburse the Purchasers for all
out-of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Purchasers will be mailed, delivered or telegraphed and confirmed to
the Purchasers c/o Credit Suisse First Boston Corporation, at Eleven Madison
Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking Department
Transactions Advisory Group, or, if sent to the Company, will be mailed,
delivered or telegraphed and confirmed to it at One Kendall Square, Cambridge,
MA 02139, Attention: Chief Financial Officer.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
controlling persons referred to in Section 7, and no other person will have any
right or obligation hereunder, except that holders of Offered Securities shall
be entitled to en-
20
<PAGE> 21
force the agreements for their benefit contained in the second and third
sentences of Section 5(b) hereof against the Company as if such holders were
parties thereto.
12. Representations of Purchasers. CSFBC will act for the several
Purchasers in connection with this purchase, and any action under this Agreement
taken by CSFBC will be binding upon all the Purchasers.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
21
<PAGE> 22
If the foregoing is in accordance with the Purchasers' understanding of
our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Company and the
Purchasers in accordance with its terms.
Very truly yours,
GENZYME CORPORATION
By: /s/ Henri A. Termeer
---------------------------------------------
Name: Henri A. Termeer
Title: President and Chief Executive Officer
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
COWEN & COMPANY
GOLDMAN, SACHS & CO.
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ W. Robert Dahl
--------------------------
Name: W. Robert Dahl
Title: Managing Director
<PAGE> 23
SCHEDULE A
NONE.
<PAGE> 24
SCHEDULE B
<TABLE>
<CAPTION>
Subsidiary % Owned by Genzyme
---------- ------------------
<S> <C>
Deknatel, Snowden, Pencer, Inc. 100%
Genzyme BV 100%
Genzyme Limited 100%
Genzyme Securities Corporation 100%
</TABLE>
<PAGE> 25
SCHEDULE C
<TABLE>
<CAPTION>
Purchasers Principal Amount of
---------- Firm Securities
-------------------
<S> <C>
Credit Suisse First Boston Corporation................. $180,000,000
Cowen & Company........................................ 22,500,000
Goldman, Sachs & Co.................................... 22,500,000
------------
Total.............. $225,000,000
============
</TABLE>
<PAGE> 1
EXHIBIT 5.1
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
TELEPHONE: (617) 573-0100 FACSIMILE: (617) 227-4420
July 21, 1998
Genzyme Corporation
One Kendall Square
Cambridge, MA 02139
We are rendering this opinion in connection with the Registration
Statement on Form S-3 (the "Registration Statement") filed by Genzyme
Corporation (the "Company") with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, on or about the date hereof. The
Registration Statement relates to the registration of up to $250,000,000 in
aggregate principal amount of 5 1/4% Convertible Subordinated Notes due 2005
(the "Notes") and the shares of Genzyme General Division Common Stock, $0.01 par
value per share, issuable upon conversion of the Notes (the "Conversion
Shares"). The Notes were issued by the Company pursuant to an Indenture dated as
of May 22, 1998 (the "Indenture") between the Company and State Street Bank and
Trust Company, as trustee (the "Trustee"). We understand that the Notes and
Conversion Shares are to be offered and sold from time to time by the holders
named in the Prospectus forming part of the Registration Statement in the manner
described in such Prospectus.
We have acted as your counsel in connection with the preparation of the
Registration Statement and are familiar with the proceedings taken by the
Company in connection with the initial sale of the Notes. We have examined such
documents as we consider necessary to render this opinion.
This opinion is limited to the federal laws of the United States and
the laws of the Commonwealth of Massachusetts. We are rendering this opinion as
though the laws of Massachusetts govern the Indenture and the Notes
notwithstanding the recitation in such documents that they are governed by the
laws of the State of New York.
Based upon the foregoing, we are of the opinion that:
1. The Indenture has been duly authorized, executed and delivered by
the Company and the Trustee, and the Notes will be valid and legally binding
obligations of the Company, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
<PAGE> 2
2. The 6,313,131 Conversion Shares being registered have been duly
authorized and, when issued and delivered upon conversion of the Notes in
accordance with the terms of the Indenture, will be validly issued, fully paid
and non-assessable.
In rendering the foregoing opinions, we express no opinion as to
federal or state laws relating to fraudulent transfers.
We hereby consent to the filing of this opinion as a part of the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus filed as a part thereof.
Very truly yours,
/s/ Palmer & Dodge LLP
----------------------
Palmer & Dodge LLP
<PAGE> 1
EXHIBIT 12.1
GENZYME CORPORATION AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(in thousands)
<TABLE>
<CAPTION>
Three
Months
Ended
March 31,
Year Ended December 31, 1998
------------------------------------------------------- --------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before income taxes.................... $(12,554) $30,784 $43,299 $(69,622) $25,729 $ 7,784
Add:
Portion of rents representative of the interest
factor........................................... 2,911 2,888 3,335 4,260 5,421 1,355
Amortization of debt conversion feature value..... - - - - 2,028 1,027
Amortization of debt discount..................... - - - - 196 91
Interest on indebtedness.......................... 2,500 1,354 1,109 7,170 10,599 4,031
--------- ------- ------- -------- ------- -------
As adjusted income (loss)......................... $ (7,143) $35,026 $47,743 $(58,192) $43,973 $14,288
========= ======= ======= ========= ======= =======
Fixed charges:
Portion of rents representative of the interest
factor........................................... 2,911 2,888 3,335 4,260 5,421 1,355
Amortization of debt conversion feature value..... - - - - 2,028 1,027
Amortization of debt discount..................... - - - - 196 91
Interest on indebtedness.......................... 2,500 1,354 1,109 7,404 10,808 4,120
Capitalized interest.............................. 4,554 8,945 8,736 2,377 470 119
Capitalized amortization of debt discount......... 275 275 275 57 - -
--------- ------- ------- -------- ------- -------
Total fixed charges.................................. $ 10,240 $13,462 $13,455 $ 14,098 $18,923 $ 6,712
========= ======= ======= ======== ======= =======
Ratio of earnings to fixed charges (1)............... - 2.6x 3.5x - 2.3x 2.1x
========= ======= ======= ======== ======= =======
</TABLE>
- ----------------------------
(1) The ratio of earnings to fixed charges is not presented for the years ended
December 31, 1993 and 1996 because in such years fixed charges exceeded
earnings (as set forth above) by $17.4 million and $72.3 million,
respectively, due primarily to (i) in 1993, charges for in-process research
and development of $49.0 million and charges for goodwill impairment and
restructuring costs of $26.5 million and (ii) in 1996, charges for
in-process research and development of $130.6 million.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration
Statement on Form S-3 of Genzyme Corporation of our reports dated February 27,
1998 on our audits of the consolidated financial statements and financial
statement schedule of Genzyme Corporation, the combined financial statements and
financial statement schedule of Genzyme General Division, the combined financial
statements and financial statement schedule of Genzyme Tissue Repair Division
and the combined financial statements of Genzyme Molecular Oncology Division as
of December 31, 1996 and 1997 and for each of the three years in the period
ended December 31, 1997, which reports are included in Genzyme Corporation's
1997 Annual Report on Form 10-K, as amended on Form 10-K/A filed on April 27,
1998.
We also consent to the reference to our firm in the Registration
Statement under the caption "Experts."
/s/ PricewaterhouseCoopers LLP
-------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 21, 1998
- -------
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) ____
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
GENZYME CORPORATION
(Exact name of obligor as specified in its charter)
MASSACHUSETTS 06-1047163
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE KENDALL SQUARE
BUILDING 1400
CAMBRIDGE, MA 02109
(Address of principal executive offices) (Zip Code)
CONVERTIBLE SUBORDINATED NOTES
(Title of indenture securities)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent, State
Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now in effect,
is on file with the Securities and Exchange Commission as Exhibit 1 to
Amendment No. 1 to the Statement of Eligibility and Qualification of
Trustee (Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference
thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of Massachusetts
that no certificate of authority for the trustee to commence business
was necessary or issued is on file with the Securities and Exchange
Commission as Exhibit 2 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate trust
powers is on file with the Securities and Exchange Commission as
Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated
herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on file with
the Securities and Exchange Commission as Exhibit 4 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Eastern Edison Company (File No. 33-37823)
and is incorporated herein by reference thereto.
1
<PAGE> 3
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 16TH OF JULY,1998.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Gerald R. Wheeler
-------------------------
NAME: GERALD R. WHEELER
TITLE: VICE PRESIDENT
2
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by GENZYME
CORPORATION. of its CONVERTIBLE SUBORDINATED NOTES, we hereby consent that
reports of examination by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Gerald R. Wheeler
----------------------------
NAME: GERALD R. WHEELER
TITLE: VICE PRESIDENT
DATED: JULY 16, 1998
3
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business March 31, 1998,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................. 1,144,309
Interest-bearing balances .......................................... 9,914,704
Securities ................................................................. 10,062,052
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ................................ 8,073,970
Loans and lease financing receivables:
Loans and leases, net of unearned income ................................... 6,433,627
Allowance for loan and lease losses ................................ 88,820
Allocated transfer risk reserve .................................... 0
Loans and leases, net of unearned income and allowances ............ 6,344,807
Assets held in trading accounts ............................................ 1, 117,547
Premises and fixed assets .................................................. 453,576
Other real estate owned .................................................... 100
Investments in unconsolidated subsidiaries ................................. 44,985
Customers' liability to this bank on acceptances outstanding ............... 66,149
Intangible assets .......................................................... 263,249
Other assets ............................................................... 1,066,572
-----------
Total assets ............................................................... 38,552,020
===========
LIABILITIES
Deposits:
In domestic offices ................................................ 9,266,492
Noninterest-bearing .............................................. 6,824,432
Interest-bearing ................................................. 2,442,060
In foreign offices and Edge subsidiary ............................. 14,385,048
Noninterest-bearing .............................................. 75,909
Interest-bearing ................................................. 14,309,139
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ................................ 9,949,994
Demand notes issued to the U.S. Treasury and Trading Liabilities ........... 171,783
Trading liabilities ........................................................ 1,078,189
Other borrowed money ....................................................... 406,583
Subordinated notes and debentures .......................................... 0
Bank's liability on acceptances executed and outstanding ................... 66,149
Other liabilities .......................................................... 878,947
Total liabilities .......................................................... 36,203,185
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus .............................. 0
Common stock ............................................................... 29,931
Surplus .................................................................... 450,003
Undivided profits and capital reserves/Net unrealized holding gains (losses) 1,857,021
Net unrealized holding gains (losses) on available-for-sale securities ..... 18,136
Cumulative foreign currency translation adjustments ........................ (6,256)
Total equity capital ....................................................... 2,348,835
-----------
Total liabilities and equity capital ....................................... 38,552,020
-----------
</TABLE>
4
<PAGE> 6
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
