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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 1998.
REGISTRATION NO. 333-64901
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
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 (I.R.S. Employer
of incorporation or organization) Identification Number)
</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:
DAVID R. POKROSS, JR., ESQ.
PALMER & DODGE LLP
One Beacon Street
Boston, Massachusetts 02108
(617) 573-0100
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
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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. [ ]
------------------------
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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[GENZYME CORP. LOGO]
787,060 SHARES
GENERAL DIVISION COMMON STOCK
All of the 787,060 shares (the "Shares") of Genzyme General Division Common
Stock, $0.01 par value ("GGD Stock"), offered hereby are being offered by
selling securityholders (the "Selling Securityholders"). The Shares are issuable
to the Selling Securityholders upon the conversion of principal, interest and
other amounts payable under a Convertible Debenture of Genzyme Corporation
("Genzyme" or the "Company") dated August 29, 1998 (the "GGD Debenture") in the
principal amount of $21,200,000.
The Shares may be offered and sold by the Selling Securityholders from time
to time in open market or privately-negotiated transactions at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Securityholders may effect such
transactions by selling the Shares to or through broker-dealers and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Securityholders or the purchasers of the Shares for
whom such broker-dealers may act as agent or to whom they sell as principal or
both (which compensation to a particular dealer might be in excess of customary
commissions). See "PLAN OF DISTRIBUTION."
None of the proceeds from the sale of the Shares by the Selling
Securityholders will be received by Genzyme.
GGD Stock is listed for quotation on the Nasdaq National Market ("Nasdaq")
under the symbol "GENZ." On November 12, 1998, the closing sale price of GGD
Stock as reported by Nasdaq was $43.875 per share.
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INVESTMENT IN GGD STOCK OF GENZYME IS SPECULATIVE AND INVOLVES A HIGH
DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 4 HEREOF.
------------------------
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.
------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SELLING SECURITYHOLDERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, IN ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 13, 1998
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TABLE OF CONTENTS
<TABLE>
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PAGE
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Genzyme Corporation......................................... 3
Risk Factors................................................ 4
Selling Securityholders..................................... 12
Plan of Distribution........................................ 13
Legal Matters............................................... 14
Experts..................................................... 14
Available Information....................................... 14
Incorporation of Certain Documents by Reference............. 15
</TABLE>
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GENZYME CORPORATION
Genzyme Corporation is a biotechnology company that develops innovative
products and services for significant unmet medical needs. Genzyme has three
divisions: (1) Genzyme General Division ("Genzyme General"), which develops and
markets therapeutic and surgical products and diagnostic products and services;
(2) Genzyme Tissue Repair Division ("Genzyme Tissue Repair" or "GTR"), which
develops and markets biological products for the treatment of cartilage damage,
severe burns and neurodegenerative diseases; and (3) Genzyme Molecular Oncology
Division ("Genzyme Molecular Oncology" or "GMO"), which develops gene-based
approaches to cancer therapy and diagnosis through genomics, gene therapy, a
small molecule drug discovery program and genetic diagnostics. 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: GGD 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 Nasdaq under the symbols "GENZ" and "GENZL," respectively. GMO Stock is not
yet publicly traded but is expected to be listed on Nasdaq under the symbol
"GZMO" on or about November 16, 1998.
For purposes of financial presentation, Genzyme allocates programs,
products, assets and liabilities among its divisions; however, Genzyme, the
corporation, continues to hold legal title to all the assets and is responsible
for all of the liabilities allocated to each of its divisions. Holders of GGD
Stock, consequently, have no specific claim against the assets attributed to
Genzyme General.
The Company's principal executive offices are located at One Kendall
Square, Cambridge, Massachusetts 02139 and its telephone number is (617)
252-7500.
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RISK FACTORS
Statements made in this Prospectus relating to product development, the
timing of regulatory approvals, plans for sales and marketing, financial
results, dividend policy, 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," "believes,"
"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 on Form 10-K/A (the
"1997 Genzyme 10-K/A"), and other documents incorporated herein by reference).
Such risks should be considered carefully in evaluating an investment in the GGD
Stock.
RISKS RELATED TO GENZYME AND GENZYME GENERAL
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, both of which treat Gaucher's
disease. Sales of Cerezyme(R) enzyme and Ceredase(R) enzyme totaled $332.7
million for the year ended December 31, 1997 and $297.6 million for the nine
months ended September 30, 1998, representing 63% and 67%, respectively, of
Genzyme General's product revenue for such periods.
In 1994, Genzyme introduced Cerezyme(R) enzyme, a recombinant form of the
enzyme, to replace Ceredase(R) enzyme, production of which is subject to supply
constraints. Genzyme, however, continued producing Ceredase(R) enzyme for
patients who had not yet converted to Cerezyme(R) enzyme. Genzyme ceased
manufacturing Ceredase(R) enzyme during 1998 because this patient conversion was
substantially complete. As a result, Genzyme recorded a charge to earnings of
$14.8 million during the third quarter of 1998 for the remaining inventory used
to make Ceredase(R) enzyme. These products have been allocated to Genzyme
General.
Certain companies have initiated, and other companies in the future may
initiate, efforts to develop competitive products addressing Gaucher's disease.
Although the Company believes its regulatory position, manufacturing capability
and patient and physician relationships provide Cerezyme(R) enzyme with a strong
competitive position, there can be no assurance that any competitive products
which are developed will not gain market acceptance. A reduction in revenue from
sales of Cerezyme(R) enzyme would adversely affect Genzyme's results of
operations.
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 form 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
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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 largely depends on its ability to maintain a competitive
technological position in its product areas. Proprietary rights relating to
Genzyme's product 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. 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 U.S. Food and
Drug Administration (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 lengthen the time
from product development to first sale, limit the universe of applications for a
product or service, 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.
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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 hospital 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 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. In addition, Genzyme General reviewed its requirements to
support its existing and new Sepra Products. As a result, in the third quarter
of 1998, Genzyme General recorded a $10.4 million charge to cost of products
sold to reduce Sepra Products inventory amounts to net realizable value. In
addition, during the third quarter, the Company wrote-off certain costs related
to equipment used to manufacture Sepra Products totalling $1.7 million.
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.
Dependence on Strategic Alliances
Several of Genzyme's strategic initiatives involve alliances with other
biotechnology companies. These include: (i) a joint venture with GelTex
Pharmaceuticals, Inc. for the commercialization of Renagel(R) non-absorbed
phosphate binder; (ii) an agreement with Knoll Pharmaceutical Company for the
marketing of Genzyme's Thyrogen(R) recombinant thyroid stimulating hormone in
the U.S. following regulatory approval; (iii) an agreement with Biogen for the
marketing of AVONEX(R) (Interferon beta-1a), Biogen's treatment for relapsing
forms of multiple sclerosis, in Japan following regulatory approval; (iv) a
joint venture with BioMarin Pharmaceuticals, Inc. ("BioMarin") for the
development and commercialization of ~-L-iduronidase, BioMarin's product
candidate for the treatment of the lysosomal storage disorder known as
mucopolysaccharidosis I; (v) a joint venture with Genzyme Transgenics
Corporation for the development and commercialization of transgenic antithrombin
III, a human protein that Genzyme Transgenics produces in the milk of
genetically modified animals; and (vi) a joint venture with Pharming Group N.V.
for the development and commercialization of human alpha-glucosidase for the
treatment of Pompe's disease.
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Genzyme plans to enter into additional alliances in the future. The success
of these arrangements is largely dependent on the efforts and skill of Genzyme's
partners. There can be no assurance that any of these alliances will result in
the successful development and/or commercialization of a product.
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, reduce or suspend development of these products. 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.
Intense Competition
The human health care products and services industry is extremely
competitive. Major pharmaceutical companies and other biotechnology companies
compete with Genzyme General. Certain of these competitors may have superior
research and development, marketing and production capabilities. Some
competitors also may have greater financial resources than Genzyme General.
Genzyme General incurs significant costs developing and marketing new products
without any assurance of their ultimate commercial viability. The future success
of Genzyme General will depend on its ability to effectively develop and market
its products against those of competitors.
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.
Future Capital Needs
As of September 30, 1998, Genzyme had approximately $555.1 million in cash,
cash equivalents and short and long-term investments (excluding investments in
equity securities).
Although Genzyme currently has substantial cash resources, it has committed
to utilize a portion of such funds for certain purposes, such as (i) making
certain payments to third parties in connection with strategic collaborations,
(ii) 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"), (iii) expanding its facilities and (iv) continued marketing of
Carticel(TM) autologous cultured chondrocytes and developing, producing and
marketing other products through GTR.
As of September 30, 1998, approximately $100.0 million was outstanding
under Genzyme's $225.0 million revolving credit facility with a group of
commercial banks, $82.0 million of which was allocated to Genzyme General and
$18.0 million of which was allocated to GTR. Amounts borrowed under this
facility bear interest at a floating rate based upon an applicable margin above
LIBOR and 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 February 1997, Genzyme issued to a private investor a note with an
aggregate principal amount of $13.0 million convertible into shares of GTR Stock
(the "GTR Note"). The GTR Note bears interest at the annual rate of 5% and
matures on February 27, 2000, but the holder of the GTR Note may exchange
principal, and under certain circumstances interest, on the note for shares of
GTR Stock. In August 1998, Genzyme issued $21.2 million in debentures in
exchange for previously issued debentures (the "GGD Debentures").
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The GGD Debentures bear interest at an annual rate of 5% and mature on August
29, 2003, but the holders of these convertible debentures may exchange principal
of, and under certain circumstances interest on, the convertible debentures for
shares of GGD Stock. In May 1998, Genzyme issued notes to private investors to
fund Genzyme General's operations (the "GGD Notes"). The aggregate principal
amount of the GGD Notes is $250.0 million and the annual interest rate on the
GGD Notes is 5 1/4%. Holders of the GGD Notes may exchange principal on the GGD
Notes for shares of GGD Stock (and, after November 16, 1998, shares of GMO
Stock). Pursuant to the terms of the GTR Note, the GGD Debentures and the GGD
Notes, the holders will, in some circumstances, receive cash from Genzyme. To
the extent cash is used to pay such principal and accrued interest, the
Company's cash reserves will also be diminished. On November 2, 1998, Genzyme
announced that the FDA granted marketing approval for Renagel(R) Capsules for
the reduction of serum phosphorus in patients with end stage renal disease.
Genzyme and GelTex Pharmaceuticals, Inc. have formed a joint venture to
commercialize Renagal(R) Capsules. Under the terms of the joint venture, Genzyme
paid GelTex Pharmaceuticals, Inc. $15.0 million in connection with the receipt
of FDA approval and will pay an additional $10.0 million on the first
anniversary of that approval. This program has been allocated to Genzyme
General.
As a result of these commitments and contingencies, Genzyme may have to
obtain additional financing. There can be no assurance that any such additional
financing will be available on favorable terms, if at all.
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. Third party payers are increasingly attempting to contain healthcare
costs by challenging the prices charged for health care products and services,
limiting both coverage and the level of reimbursement for new therapeutic
products, denying or limiting coverage for products that are approved by the FDA
but are considered experimental or investigational by third party payers and
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.
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 currently installed computer systems and software products are
programmed to accept only two digit entries in the date code field. These date
code fields will need to accept four digit entries to distinguish 21st century
dates from 20th century dates. As a result, Genzyme's software and computer
systems may need
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to be upgraded or replaced in order to comply with "Year 2000" requirements.
Genzyme has implemented a Year 2000 compliance program to identify and minimize
exposure to Year 2000 problems, which includes an assessment of internal
readiness as well as the readiness of third parties with whom Genzyme does
business. Genzyme may incur significant costs in identifying, resolving and
mitigating Year 2000 compliance issues. In addition, there can be no assurance
that Genzyme's Year 2000 issues will be resolved by the end of 1999. The failure
to identify and resolve these issues could result in interruptions in, or
failures of, certain normal business activities or operations that may have an
adverse effect on Genzyme's business, results of operations, and financial
condition. The failure of third parties that are significant to Genzyme's
business to be Year 2000 compliant could also have an adverse effect on
Genzyme's business, results of operations, and financial condition.
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 regulatory initiatives, 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 market price of Genzyme's
securities, including 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.
Possible Adverse Effect of Anti-Takeover Provisions
Certain provisions of Massachusetts law, Genzyme's capital structure,
Genzyme's Restated Articles of Organization (the "Genzyme Charter"), Genzyme's
bylaws and the terms of Genzyme's stockholder rights plan may have the effect of
delaying, deferring or preventing a change in control of Genzyme or a change in
its management and thus deprive stockholders of an opportunity to realize a
premium for their shares. Tracking stock may also deprive Genzyme stockholders
of the opportunity to realize such a premium because, in order to obtain control
of a particular division, an acquiror would be required to obtain control of
Genzyme. In addition, Genzyme's authorized capital stock includes shares of
undesignated common and preferred stock that may be issued from time to time by
the Genzyme Board in one or more series. The issuance of additional series of
common or preferred stock could have the effect of discouraging attempts to
acquire control of Genzyme.
RISKS RELATED TO GENZYME TRACKING STOCK
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 following risks should be carefully considered in evaluating an
investment in Genzyme tracking stock.
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 programs, products, assets and liabilities 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 Shares should,
therefore, read Genzyme's consolidated financial statements in conjunction with
the financial statements of Genzyme General, which are included in the documents
incorporated herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
9
<PAGE> 11
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 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 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
Nasdaq (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
10
<PAGE> 12
total voting power of Genzyme. On October 15, 1998 the Genzyme Board declared a
tax-free dividend of .10805 share of GMO Stock for each share of GGD Stock owned
(the "GMO Distribution"). Genzyme will distribute the shares of GMO Stock on
November 16, 1998 to General Division shareholders of record on November 2,
1998, paying cash for fractional shares at the rate of $7.00 per share.
Following the GMO Distribution, holders of GGD Stock, GTR Stock and GMO Stock
will have approximately 89.0%, 7.5% and 3.5%, 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.
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" set forth in Exhibit 99.1 to the 1997 Genzyme 10-K/A.
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. Each
share of GGD Stock has 100 liquidation units, each share of GTR Stock has 58
liquidation units and each share of GMO Stock has 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 Genzyme 10-K/A.
Use of Operating Losses by Other Genzyme Divisions
The Genzyme Board has adopted a policy which provides 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
11
<PAGE> 13
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 Genzyme 10-K/A.
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 Genzyme 10-K/A.
SELLING SECURITYHOLDERS
The Company previously issued $21.2 million of GGD Debentures due August
29, 2003. Principal of and interest on the GGD Debentures are initially
convertible into shares of GGD Stock at a conversion price of $33.67. Pursuant
to the terms of a Registration Rights Agreement (the "Registration Rights
Agreement"), dated as of August 29, 1997, the Company is obligated to register
the shares of GGD Stock issuable upon conversion of the GGD Debentures. The
Registration Rights Agreement is included as an exhibit to the Registration
Statement of which this Prospectus forms a part and should be reviewed for a
complete description of the Company's obligations under the Registration Rights
Agreement. The registration of the Shares does not necessarily mean that the
Selling Securityholders will sell all or any of the Shares they hold.
The following table sets forth information concerning the aggregate
principal amount of GGD Debentures beneficially owned by each named Selling
Securityholder, the number of shares of GGD Stock initially issuable upon
conversion of the GGD Debentures held thereby and the number of other shares of
GGD Stock held by the Selling Securityholders. Other than their ownership of
such securities, none of the Selling Securityholders has had any material
relationship with the Company during the past three years. The table below has
been prepared on the basis of the information furnished to the Company by or on
behalf of the Selling Securityholders. Any or all of the Shares listed below may
be offered for sale by the Selling Securityholders from time to time pursuant to
this Prospectus. Additionally, individuals and entities who, after the date of
this Prospectus, receive shares from a listed selling securityholder as a gift
or in connection with a pledge may sell up to 500 of such shares using this
Prospectus. Under the terms of the GGD Debentures, in order to prevent dilution,
the GMO Distribution will result in a reduction in the GGD Debenture conversion
price, which in turn, will result in additional shares of GGD Stock being
issuable upon conversion of a given dollar amount of GGD Debentures.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES
GENZYME GENERAL DIVISION OF GENZYME
PRINCIPAL AMOUNT OF COMMON STOCK INTO WHICH THE GENERAL DIVISION
GGD CONVERTIBLE DEBENTURES ARE CONVERTIBLE, COMMON STOCK
DEBENTURES ALL OF WHICH MAY BE OWNED PRIOR TO
BENEFICIALLY SOLD PURSUANT TO THIS CONVERSION OF
NAME OF SELLING SECURITYHOLDER OWNED(1) PROSPECTUS(1)(2) THE DEBENTURES(1)
- -------------------------------------- ------------------- --------------------------- -----------------
<S> <C> <C> <C>
Credit Suisse First Boston
Corporation(3)...................... $15,635,000 464,359 0
Shepherd Investments International,
Ltd................................. $ 795,000 23,611 0
SoundShore Holdings Ltd.(4)........... $ 1,060,000 31,482 0
Stark International................... $ 795,000 23,611 0
Tribeca Investments, L.L.C............ $ 1,060,000 31,482 0
UBS AG -- London Branch............... $ 1,855,000 55,093 0
</TABLE>
- ---------------
(1) All information is as of October 29, 1998.
(2) Assumes conversion of the full amount of debentures held by such holder at
the initial rate of approximately 29.7 shares of Genzyme General Division
Common Stock per $1,000 in principal amount of debentures. The conversion
rate and the number of shares of Genzyme General Division Common Stock
issuable upon conversion of the debentures are subject to adjustment under
certain circumstances. On September 30, 1998, there were 79,806,107 shares
of GGD Stock outstanding.
(3) Information is set forth as of November 2, 1998.
(4) Information is set forth as of November 9, 1998.
12
<PAGE> 14
PLAN OF DISTRIBUTION
Sales of the Shares may be effected by or for the account of the Selling
Securityholders from time to time in transactions (which may include block
transactions) 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 Shares directly to purchasers, to or through
broker-dealers who may purchase Shares as principals and thereafter sell the
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 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
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 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, the Selling Securityholders elect to sell Shares in an
underwritten offering, a Prospectus supplement accompanying this Prospectus will
set forth, to the extent required, the aggregate number of 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 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 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 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 Shares for whom they may act as agent.
Underwriters may sell the 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 Shares will be
subject to certain conditions precedent, and the underwriters will be obligated
to purchase all such 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 Shares offered by the
Selling Securityholders hereby. 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.
To comply with the securities laws of certain jurisdictions, the 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 Shares may be limited in its ability to engage
in market activities with respect to such Shares. Each Selling Securityholder,
for example, will be subject to applicable provisions of the Exchange Act and
the rules and
13
<PAGE> 15
regulations thereunder, which provisions may limit the timing of purchases and
sales of shares of GGD Stock by the Selling Securityholder. The foregoing may
affect the marketability of the Shares.
The Company's outstanding GGD Stock is included for quotation for trading
on Nasdaq, and application has been made to include for quotation the Shares on
Nasdaq.
LEGAL MATTERS
The validity of the Shares 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 statements 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 flow
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 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 and the 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.
14
<PAGE> 16
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 Amendments on Form 10-K/A filed with the Commission on April 27, 1998
and June 30, 1998; (ii) its Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1998 and June 30, 1998; (iii) its Current Reports on
Form 8-K, dated January 6, 1998, May 19, 1998 and October 15, 1998; and (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.
15
<PAGE> 17
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 the registration of
the Genzyme General Division Common Stock are estimated as follows:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 8,040
Printing and engraving expenses............................. $ 5,000
Accounting fees and expenses................................ $ 2,500
Legal fees and expenses..................................... $15,000
Miscellaneous expenses...................................... $ 460
-------
Total.................................................. $31,000
=======
</TABLE>
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 best interests of Genzyme or, to the
extent that the matter for which indemnification is sought relates to service
with respect to an employee benefit plan, in the best interests of the
participants or beneficiaries of such employee benefit plan. Such
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-Laws 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).
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 make
repayment.
The indemnification provided for in Article VI is a contract right inuring
to the benefit of the directors, officers and others entitled to
indemnification. In addition, the indemnification is expressly not exclusive of
any other rights to which such director, officer or 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
II-1
<PAGE> 18
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) transactions 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 of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this 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 this Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 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 of 1933 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 Securities
and Exchange Commission such indemnification is against public policy as
expressed in the 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 Act and will
be governed by the final adjudication of such issue.
II-2
<PAGE> 19
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 of filing on Form S-3 and has duly caused this Amendment No. 1 to
its Registration Statement (File No. 333-64901) to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Cambridge,
Commonwealth of Massachusetts, as of November 13, 1998.
GENZYME CORPORATION
By: /s/ DAVID J. MCLACHLAN
----------------------------------
DAVID J. MCLACHLAN, EXECUTIVE VICE
PRESIDENT, FINANCE AND CHIEF
FINANCIAL OFFICER
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement (File No. 333-64901) has been signed by the
following persons in the capacities indicated as of November 13, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
*HENRI A. TERMEER Director and Principal Executive Officer
- ---------------------------------------------------
HENRI A. TERMEER
/s/ DAVID J. MCLACHLAN Principal Financial and Accounting Officer
- ---------------------------------------------------
DAVID J. MCLACHLAN
* CONSTANTINE E. ANAGNOSTOPOULOS Director
- ---------------------------------------------------
CONSTANTINE E. ANAGNOSTOPOULOS
* DOUGLAS A. BERTHIAUME Director
- ---------------------------------------------------
DOUGLAS A. BERTHIAUME
* HENRY E. BLAIR Director
- ---------------------------------------------------
HENRY E. BLAIR
* ROBERT J. CARPENTER Director
- ---------------------------------------------------
ROBERT J. CARPENTER
* CHARLES L. COONEY Director
- ---------------------------------------------------
CHARLES L. COONEY
* HENRY R. LEWIS Director
- ---------------------------------------------------
HENRY R. LEWIS
</TABLE>
*By: /s/ DAVID J. MCLACHLAN
-------------------------------------------------
DAVID J. MCLACHLAN
ATTORNEY-IN-FACT
II-3
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
4.1 Restated Articles of Organization of Genzyme. Filed as
Exhibit 1 to Genzyme's Registration Statement on Form 8-A
filed with the Commission on June 18, 1997, and incorporated
hereby 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 as Exhibit 4.3 to Genzyme's
Registration Statement on Form S-3 (File No. 333-59513) and
incorporated herein by reference.
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 as Exhibit
4.4 to Genzyme's Registration Statement on Form S-3 (File
No. 333-59513) and incorporated herein by reference.
4.5 Purchase Agreement, dated as of May 19, 1998, among Genzyme,
Credit Suisse First Boston Corporation, Goldman, Sachs & Co.
and Cowen & Company. Filed as Exhibit 4.5 to Genzyme's
Registration Statement on Form S-3 (File No. 333-59513) and
incorporated herein by reference.
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 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 General Division Convertible Debenture dated August
29, 1998, including a schedule with respect thereto filed
pursuant to Instruction 2 to Item 601 of Regulation S-K.
Filed herewith.
4.16 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.
4.17 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>
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
4.18 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.
4.19 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.
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 to the initial
filing of this Registration Statement).
</TABLE>
<PAGE> 1
EXHIBIT 4.15
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS A REGISTRATION STATEMENT UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT
THERETO, OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE, TRANSFER OR
DISPOSITION. THIS DEBENTURE (THIS "DEBENTURE" AND TOGETHER WITH THE OTHER
GENZYME GENERAL DIVISION ("GGD") CONVERTIBLE DEBENTURES, THE "DEBENTURES") HAS
BEEN ISSUED PURSUANT TO AN EXCHANGE FOR ALL OR PART OF THE PRINCIPAL AMOUNT OF A
GENZYME MOLECULAR ONCOLOGY DIVISION ("GMO") CONVERTIBLE DEBENTURE, THE FORM OF
WHICH IS ATTACHED HERETO (THE "GMO DEBENTURE" AND TOGETHER WITH THE OTHER GMO
DEBENTURES OF EVEN DATE THEREWITH, THE "GMO DEBENTURES"). THE DEBENTURES AND THE
GMO DEBENTURES ARE SUBJECT TO THE TERMS OF (A) A PURCHASE AGREEMENT, DATED AS OF
AUGUST 29, 1997 ("PURCHASE AGREEMENT"), BY AND AMONG GENZYME CORPORATION AND THE
PURCHASERS NAMED THEREIN AND (B) A REGISTRATION RIGHTS AGREEMENT, DATED AUGUST
29, 1997 ("REGISTRATION RIGHTS AGREEMENT"), BY AND AMONG GENZYME CORPORATION AND
SUCH PURCHASERS.
<PAGE> 2
GENZYME CORPORATION
GGD CONVERTIBLE DEBENTURE
New York, New York $[ ]
August 29, 1998
FOR VALUE RECEIVED, Genzyme Corporation, a Massachusetts
corporation (the "COMPANY"), hereby promises to pay to the order of [ ] or its
assignees (the "HOLDER") the sum of
[ ] DOLLARS ($[ ]) in same day funds, on or before August 29, 2003 (the
"MATURITY DATE"), and to pay interest thereon from the date hereof (the "ISSUE
DATE") as provided herein.
The following terms shall apply to this Debenture:
1. CONVERSION.
(a) RIGHT TO CONVERT. Subject to the limitation contained in
paragraph 1(g) below, the holder of this Debenture (the "HOLDER") shall have the
right to convert all or any part of the outstanding unpaid principal of this
Debenture at any time and from time to time on or after the Issue Date into
fully paid and non-assessable shares, free and clear of any liens, claims,
preemptive rights or encumbrances imposed by or through the Company (the
"CONVERSION SHARES"), of Genzyme General Division Common Stock, $.01 par value
(the "GGD STOCK"), in accordance with the terms hereof (a "CONVERSION").
(b) CONVERSION NOTICE. In order to convert principal of this
Debenture, or any portion thereof, the Holder shall send by facsimile
transmission, at any time prior to 11:59 p.m., eastern time, on the date on
which the Holder wishes to effect such Conversion (the "CONVERSION DATE"), a
notice of conversion to the Company and to its designated transfer agent for the
GGD Stock (the "TRANSFER AGENT") stating the principal amount to be converted,
the amount of interest accrued on the then unpaid principal balance of this
Debenture as provided herein up to and including the Conversion Date, the
applicable Conversion Price and a calculation of the number of shares of GGD
Stock issuable upon such Conversion (a "CONVERSION NOTICE"). The Holder shall
not be required to physically surrender this Debenture to the Company in order
to effect a Conversion. The Company shall maintain a record showing, at any
given time, the unpaid principal amount of this Debenture and the date of each
Conversion or other payment of principal hereof. The Holder shall amend
-2-
<PAGE> 3
Annex I hereto upon any such Conversion or payment of principal to reflect the
unpaid principal amount hereof. In the case of a dispute as to the calculation
of the Conversion Price or the number of Conversion Shares issuable upon a
Conversion, the Company shall promptly issue to the Holder the number of
Conversion Shares that are not disputed and shall submit the disputed
calculations to its independent accountants within one (1) business day of
receipt of the Holder's Conversion Notice. The Company shall cause such
accountant to calculate the Conversion Price and the number of Conversion Shares
issuable as provided herein and to notify the Company and the Holder of the
results in writing no later than two (2) business days following the day on
which it received the disputed calculations. Such accountant's calculation shall
be deemed conclusive absent manifest error. The fees of any such accountant
shall be borne by the Company.
(c) NUMBER OF CONVERSION SHARES; CONVERSION PRICE. The number of
Conversion Shares to be delivered by the Company pursuant to a Conversion shall
be equal to the principal amount of this Debenture specified in the Conversion
Notice DIVIDED BY the Conversion Price. The "CONVERSION PRICE" shall mean (x)
the average of the Closing Bid Prices for the GGD Stock on the five (5) Trading
Days occurring immediately prior to (but not including) GGD Issue Date (as
defined in the GMO Debentures) TIMES (y) one hundred and thirteen percent
(113%). Conversions may be effected in minimum principal amounts of $100,000 (or
such smaller amount of principal as may remain unpaid at the time of such
Conversion).
(d) DELIVERY OF GGD STOCK UPON CONVERSION. Upon receipt of a
Conversion Notice pursuant to paragraph 1(b) above, the Company shall, no later
than the close of business on the third (3rd) business day following the
Conversion Date set forth in such Conversion Notice (the "DELIVERY DATE"), issue
and deliver or caused to be delivered to the Holder the number of Conversion
Shares as shall be determined as provided herein. If any Conversion would create
a fractional Conversion Share, such fractional Conversion Share shall be
disregarded and the number of Conversion Shares issuable upon such Conversion,
in the aggregate, shall be the next higher number of Conversion Shares.
Certificates representing Conversion Shares shall not contain any restrictive
legend as long as the sale of such Conversion Shares is covered by an effective
Registration Statement (as defined in the Registration Rights Agreement) or may
be made pursuant to Rule 144(k) under the Securities Act or any successor rule
or provision.
(e) FAILURE TO DELIVER CONVERSION SHARES. In the event that the
Company fails to deliver to the Holder the number of Conversion Shares specified
in the applicable Conversion Notice on or before the Delivery Date therefor for
any reason (a "CONVERSION DEFAULT"), and such Conversion Default continues for
longer than seven (7) business days, the Company shall pay to the Holder
payments ("CONVERSION DEFAULT PAYMENTS") in the amount of (i) (N/365) MULTIPLIED
BY (ii) the unpaid principal amount of this Debenture represented by the
Conversion Shares which remain the subject of such Conversion Default MULTIPLIED
BY (iii) the lower of twenty-four percent (24%) and the maximum
-3-
<PAGE> 4
rate permitted by applicable law, where "N" equals the number of days elapsed
between the original Delivery Date of such Conversion Shares and the earlier to
occur of (A) the date on which all of such Conversion Shares are issued and
delivered to the Holder and (B) the date on which the principal amount
represented thereby is redeemed pursuant to the terms of this Debenture. Cash
amounts payable hereunder shall be paid on or before the fifth (5th) business
day of the calendar month following the calendar month in which such amount has
accrued. Nothing herein shall limit the Holder's right to pursue remedies with
respect to its actual damages resulting from a Conversion Default (including,
without limitation, damages relating to any purchase of shares of GGD Stock by
the Holder to make delivery on a sale effected in anticipation of receiving
Conversion Shares upon Conversion), and the Holder shall have the right to
pursue all remedies available to it at law or in equity (including, without
limitation, a decree of specific performance and/or injunctive relief).
(f) PAYMENT OF PRINCIPAL AT MATURITY; OPTIONAL CONVERSION. On the
Maturity Date, the Company shall pay to the Holder the amount of the unpaid
principal amount of this Debenture in same day funds; PROVIDED, however, that if
(i) the Holder agrees to receive such payment in shares of GGD Stock and (ii)
the Company has satisfied each of the Optional Conversion Conditions (as defined
below), such unpaid principal amount may be converted into the number of shares
of GGD Stock equal to the amount of such unpaid principal amount DIVIDED BY the
Conversion Price (an "OPTIONAL CONVERSION"), and the Maturity Date shall be
deemed the Conversion Date with respect to such Optional Conversion. If an
Optional Conversion occurs, the Company and the Holder shall follow the
procedures for Conversion set forth in this Section 1; PROVIDED, HOWEVER, that
the Holder shall not be required to send the Conversion Notice contemplated by
paragraph 1(b) above. The "OPTIONAL CONVERSION Conditions" are as follows:
(i) the GGD Common Stock shall be designated for
quotation on the Nasdaq National Market system or listed on the New York Stock
Exchange ("NYSE") or the American Stock Exchange ("ASE");
(ii) the market value of the outstanding shares of GGD
Stock on the Maturity Date (not including any such shares represented by the
outstanding principal balance of this Debenture) shall be greater than eighty
million ($80,000,000); and
(iii) the GGD Stock shall have an average daily trading
volume of at least eight hundred thousand dollars $800,000 for the period of one
hundred and eighty (180) days immediately prior to the fifteenth (15th) day of
the calendar month occurring immediately prior to the calendar month in which
the Maturity Date occurs (based on the weighted average of the Closing Bid
Prices of the GGD Stock during such period).
-4-
<PAGE> 5
(g) LIMITATIONS ON RIGHT TO CONVERT. In no event shall the Holder
be permitted to convert principal of this Debenture in excess of that amount of
principal upon the Conversion of which (x) the number of shares of GGD Stock
beneficially owned by the Holder (other than shares of GGD Stock which may be
deemed beneficially owned except for being subject to a limitation on conversion
or exercise analogous to the limitation contained in this paragraph (g)) PLUS
(y) the number of shares of GGD Stock issuable upon the Conversion of such
principal amount is equal to or exceeds (z) 4.99% of the number of shares of GGD
Stock then issued and outstanding. The determination of whether the limitation
contained in this paragraph (g) applies and whether principal of this Debenture
is convertible (in relation to other securities owned by the Holder) shall be in
the sole discretion of the Holder, and the submission of a Conversion Notice
shall be deemed to be such Holder's determination that such limitation does not
apply and that the principal amount of this Debenture to which such Conversion
Notice relates is convertible. This paragraph may be amended (A) in order to
clarify an ambiguity or otherwise to give effect to the limitation contained in
this paragraph (g), by the Board of Directors of the Company and the written
consent of the Holders of at least 66% of the aggregate unpaid principal amount
of the Debentures then outstanding and (B) for any other reason, with the
further consent of the holders of a majority of the shares of the Company's
common stock then outstanding. In the event that the limitation contained in
this paragraph (g) applies to all or a portion of the unpaid principal amount of
this Debenture, nothing contained herein shall be deemed to restrict the right
of the Holder to convert such principal amount at such time as such Conversion
will not violate such limitation.
(h) CERTAIN DEFINITIONS. "TRADING DAY" shall mean any day on which
the GGD Stock is traded for any period on the Nasdaq National Market or on the
principal securities exchange or market on which the GGD Stock is then traded.
"CLOSING BID PRICE" means, with respect to a security, the closing bid price of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported (i) if the Nasdaq National Market is
the principal market on which the GGD Stock is then traded, by Nasdaq and (ii)
if the Nasdaq National Market is not such principal market, by Bloomberg
Financial Markets or, if Bloomberg Financial Markets is not then reporting
closing bid prices of such security, a comparable reporting service of national
reputation selected by the Company and reasonably acceptable to holders of a
majority of the unpaid principal amount of the Debentures then outstanding
(collectively, "BLOOMBERG"), or if the foregoing does not apply, the last
reported sale price of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no
sale price is reported for such security by Bloomberg, the average of the bid
prices of all market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc. If the Closing Bid Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Closing Bid Price of such security on such date shall be the fair market value
as reasonably determined by an investment banking firm selected by the Holders
(which may be a holder) of at least 50% of the
-5-
<PAGE> 6
aggregate unpaid principal amount of the Debentures then outstanding, with the
reasonable costs of such appraisal to be borne by the Company.
2. ADJUSTMENTS TO CONVERSION PRICE.
(a) ADJUSTMENT TO CONVERSION PRICE DUE TO STOCK SPLIT, STOCK
DIVIDEND, ETC. If prior to the Conversion of the entire principal amount of this
Debenture, (A) the number of outstanding shares of GGD Stock is increased by a
stock split, stock dividend, reclassification, the distribution to holders of
GGD Stock of rights or warrants entitling them to subscribe for or purchase GGD
Stock at less than the current market price thereof as of the date such right or
warrant first becomes exercisable (other than pursuant to the Company's equity
incentive plan, 401(k) plan, stock option plans, employee stock purchase plan or
any warrants outstanding as of the Issue Date), or other similar event, the
Conversion Price shall be proportionately reduced, or (B) the number of
outstanding shares of GGD Stock is decreased by a reverse stock split,
combination or reclassification of shares or other similar event, the Conversion
Price shall be proportionately increased. In such event, the Company shall
notify the Transfer Agent of such change on or before the effective date
thereof. For purposes of this paragraph 2(a), the "CURRENT MARKET PRICE" per
share of GGD Stock on any date shall be the average of the Closing Bid Prices
for the GGD Stock on the five (5) consecutive Trading Days occurring immediately
prior to (but not including) such date. Nothing contained herein shall be
construed to require the adjustment of the Conversion Price in the event that
the Company issues additional series or classes of its common stock as long as
any such issuance does not result in dilution of the shares of GGD Stock then
outstanding.
(b) ADJUSTMENT TO CONVERSION PRICE. If during the reference period
for determination of the Conversion Price, the number of outstanding shares of
GGD Stock is increased or decreased by a stock split, stock dividend,
combination, reclassification or other similar event, the Conversion Price shall
be calculated giving appropriate effect to the stock split, stock dividend,
combination, reclassification or other similar event for all Trading Days
included in such calculation.
(c) ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, prior to the
Conversion of the entire principal amount of this Debenture, there shall be any
merger, consolidation, exchange of shares, recapitalization, reorganization,
redemption or other similar event, as a result of which shares of GGD Stock
shall be changed into the same or a different number of shares of the same or
another class or classes of stock or securities of the Company or another entity
or there is a sale of all or substantially all the Company's assets or there is
a change of control transaction with respect to which, in any such case, the
Holder does not exercise its right to a Mandatory Redemption (as defined below)
of the outstanding principal hereof, then the Holder shall thereafter have the
right to receive upon Conversion of the principal amount of this Debenture, upon
the terms and conditions specified herein and in lieu of the shares of GGD Stock
immediately theretofore issuable upon
-6-
<PAGE> 7
conversion, such stock, securities and/or other assets, if any, which the Holder
would have been entitled to receive in such transaction had such principal
amount been converted immediately prior to such transaction, and in any such
case appropriate provisions shall be made with respect to the rights and
interests of the Holder to the end that the provisions hereof (including,
without limitation, provisions for the adjustment of the Conversion Price and of
the number of shares issuable upon a Conversion) shall thereafter be applicable
as nearly as may be practicable in relation to any securities thereafter
deliverable upon the exercise hereof. The Company shall not effect any
transaction described in this paragraph 2(c) unless (i) it first gives to the
Holder prior notice of such merger, consolidation, exchange of shares,
recapitalization, reorganization, redemption or other similar event, and makes a
public announcement of such event at the same time that it gives such notice and
(ii) the resulting successor or acquiring entity (if not the Company) assumes by
written instrument the obligations of the Company under this Debenture,
including the terms of this paragraph 2(c).
(d) DISTRIBUTION OF ASSETS. If, prior to the Conversion of the
entire principal amount of this Debenture, the Company shall declare or make any
distribution of its assets (or rights to acquire its assets) to holders of GGD
Stock as a partial liquidating dividend, by way of return of capital or
otherwise, including any dividend or distribution in cash or shares of capital
stock of a subsidiary of the Company (collectively, a "DISTRIBUTION"), then,
upon a Conversion by the Holder occurring after the record date for determining
shareholders entitled to such Distribution but prior to the effective date of
such Distribution, the Holder shall be entitled to receive the amount of such
assets which would have been payable to the Holder had the Holder been the
holder of such shares of GGD Stock on the record date for the determination of
shareholders entitled to such Distribution. The Conversion Price for amounts of
principal of this Debenture not converted prior to the effective date of a
Distribution shall be reduced to a price determined by decreasing the Conversion
Price in effect immediately prior to the record date of the Distribution by an
amount equal to the fair market value of the assets so distributed, as
determined by mutual agreement of the Company and the Holder.
(e) NO FRACTIONAL SHARES. If any adjustment under this Section 2
would create a fractional share of GGD Stock or a right to acquire a fractional
share of GGD Stock, such fractional share shall be disregarded and the number of
shares of GGD Stock issuable upon Conversion shall be the next higher number of
shares.
3. INTEREST.
(a) INTEREST RATE; STOCK PAYMENT OPTION. This Debenture shall bear
interest on the unpaid principal amount hereof at an annual rate of five percent
(5%) from the Issue Date, computed on the basis of a 360-day year of twelve
30-day months for the actual number of days elapsed. Interest accrued hereunder
shall be due and payable on each Conversion Date, on a Redemption Date (as
defined herein) and on the Maturity Date, but, in the case of interest which is
due on a Conversion
-7-
<PAGE> 8
Date and payable in cash, such interest may be paid on the following business
day in the event that a Conversion Notice (as defined herein) is delivered to
the Company after 2 p.m., eastern time, on the Conversion Date. Interest accrued
hereunder shall not be subject to a "gross-up" in the event that backup
withholding is required by applicable law. Interest due on a Conversion Date or
an Optional Redemption Date may be paid either in cash or, at the option of the
Company (the "STOCK PAYMENT OPTION"), and upon satisfaction of the conditions
set forth in paragraph 3(b) below, in shares of GGD Stock or in shares of
capital stock into which such GGD Stock may be changed or reclassified. The
shares of GGD Stock to be issued and delivered by the Company pursuant to the
Stock Payment Option shall be fully paid and non-assessable, free and clear of
any liens, claims, preemptive rights or encumbrances imposed by or through the
Company, in an amount calculated in accordance with paragraph 3(c) below (the
"INTEREST PAYMENT SHARES"). Any amount of interest payable on this Debenture in
cash which is not paid within three (3) business days of the date when the same
becomes due and payable hereunder (the "PAYABLE DATE") shall bear interest at an
annual rate equal to the lower of (x) the "prime" rate (as published in the Wall
Street Journal) on the Payable Date PLUS three percent (3%) and (y) the highest
rate permitted by applicable law, for the number of days elapsed from such third
(3rd) business day until such amount is paid in full ("DEFAULT INTEREST"). The
Company may not make payments of Default Interest in shares of GGD Stock.
(b) CONDITIONS TO STOCK PAYMENT OPTION. If the Company wishes to
exercise the Stock Payment Option, it may do so only if each of the following
conditions has been satisfied as of the relevant Conversion Date:
(i) the number of shares of GGD Stock authorized,
unissued and unreserved for all other purposes, or held in the Company's
treasury, is sufficient to pay the aggregate number of (x) Conversion Shares
issuable on such Conversion Date assuming the conversion in full of the
Debentures at the Conversion Price and (y) the number of Interest Payment Shares
issuable pursuant to such option;
(ii) the Interest Payment Shares are authorized for
quotation on the Nasdaq National Market or for listing or quotation on any other
national securities exchange or market on which the GGD Stock may be listed;
(iii) the GGD Registration Statement (as defined in the
Registration Rights Agreement) is effective and available for the sale of the
Interest Payment Shares by the Holder;
(iv) a Mandatory Redemption Event (as defined herein)
shall not have occurred and be continuing;
(v) the Company has delivered to the Holder a
certificate, signed by an executive officer of the Company, setting forth:
-8-
<PAGE> 9
. the amount of the interest payment to which
the Holder is entitled and, if not the same,
the amount of such payment to be made in
Interest Payment Shares;
. the number of Interest Payment Shares to be
delivered in payment of such interest, and
the calculation therefor; and
. a statement to the effect that all of the
conditions set forth in paragraphs 3(b)(i) -
(iv) have been satisfied;
and
(vi) the Holder shall have consented in writing to the
Company's use of the Stock Payment Option on such Conversion Date.
(c) DELIVERY OF INTEREST PAYMENT SHARES. If the Company elects to
exercise the Stock Payment Option, the Company shall deliver to such Holder, on
or before the third (3rd) business day following the applicable Conversion Date
(the "INTEREST PAYMENT SHARE DELIVERY DATE"), one or more certificates
representing the aggregate number of whole Interest Payment Shares that is
determined by dividing (x) the amount of interest which would otherwise be
payable in cash to such Holder on the applicable Conversion Date by (y) the
Conversion Price. No fractional Interest Payment Shares shall be issued; the
Company shall, in lieu thereof, either issue a number of Interest Payment Shares
which reflects a rounding up to the next whole number of shares or pay such
amount in cash.
(d) FAILURE TO DELIVER INTEREST PAYMENTS SHARES. If the Company
fails to issue and deliver the appropriate number of Interest Payment Shares to
such Holder on or before the tenth (10th) business day following the Interest
Payment Share Delivery Date, the Company shall not be entitled to utilize the
Stock Payment Option in respect of such interest payment, but instead must
immediately pay such interest payment in cash, together with Default Interest on
such unpaid amount calculated from the applicable Payable Date until the date on
which such amount is paid.
(e) NOTICE OF EXERCISE. Not later than five (5) business days
immediately prior to the first day of each calendar month during which any
principal of this Debenture remains unpaid and outstanding, the Company shall
notify the Holder in writing whether the Company intends, assuming satisfaction
of the conditions set forth in subparagraph (b) above, to pay interest in
Interest Payment Shares in lieu of cash on any Conversion Date occurring during
that month or during such longer period as the Company may specify.
-9-
<PAGE> 10
4. PRIORITY; SUBORDINATION.
(a) NO PAYMENT IF DEFAULT ON SENIOR INDEBTEDNESS. No payment of
principal of, premium, if any, or interest on this Debenture or on account of
any purchase or redemption or other acquisition of the Debenture, whether at
maturity or otherwise, shall be made upon, or accepted with respect to, this
Debenture, and the Holder shall not initiate any action to accelerate the
maturity of the Debenture or exercise any remedy to seek collection if at the
time of such payment the Holder has received written notice from the Company or
a holder of Senior Debt (as defined below) that there exists or, after giving
effect to such payment, there would exist any default in respect of any Senior
Debt or under any agreement pursuant to which such Senior Debt was issued (a
"DEFAULT"); PROVIDED, HOWEVER, that the foregoing restriction shall cease to
apply with respect to a Default upon the earliest to occur of (i) the
commencement by any holder of Senior Debt of the exercise of its remedies
against the Company or its property including, without limitation, any action,
suit or other legal proceeding against the Company or its property based upon
such Default, or (ii) at the expiration of 180 days after the date of such
notice if no holder of Senior Debt shall have commenced the exercise of its
remedies against the Company or its property including, without limitation, any
action, suit or other legal proceeding against the Company or its property based
upon such Default. Upon the maturity of any Senior Debt by lapse of time,
acceleration or otherwise, all principal of, premium, if any, interest and other
amounts due or to become due on all such Senior Debt shall first be paid in full
in cash, cash equivalents or in any other manner acceptable to the holders of
Senior Debt (hereinafter, "PAYMENT IN FULL" or "PAID IN FULL"), or such payment
shall have been provided for to the satisfaction of the holders of Senior Debt,
before any payment on account of principal of, premium, if any, interest or any
other amounts shall be made upon this Debenture. This Debenture shall rank in
priority as to payments of interest, principal, dividends and penalties (if
any), upon the occurrence of a Liquidation Event (as defined below) or
otherwise, senior to all capital stock of the Company and pari passu with any
security or debt instrument which by its terms ranks pari passu with this
Debenture.
(b) PAYMENT UPON DISSOLUTION, ETC.
(i) In the event of (x) any insolvency or bankruptcy
proceedings, or any receivership, liquidation, reorganization or other similar
proceedings in connection therewith, relative to the Company or to its
creditors, as such, or to its assets, or (y) the dissolution or other winding up
of the Company whether total or partial, whether voluntary or involuntary and
whether or not involving insolvency or bankruptcy proceedings or (z) any
assignment for the benefit of creditors or any marshalling of the material
assets or material liabilities of the Company, then, and in any such event
(collectively, a "LIQUIDATION EVENT"), (A) the holders of all Senior Debt shall
first be entitled to receive Payment in Full of all principal, premium, if any,
interest and other amounts due or to become due on the Senior Debt (including,
without limitation, any interest and charges accruing
-10-
<PAGE> 11
thereon in any such proceeding, notwithstanding any law to the contrary) before
any payment on account of principal, premium, if any, interest or any other
amounts is made on this Debenture, and (B) in any such proceedings, any payment
that may be payable or deliverable in respect of this Debenture shall be paid to
the holders of the Senior Debt or their representatives, unless and until the
principal of, premium, if any, interest and other amounts due or to become due
on all such Senior Debt shall have been Paid in Full; PROVIDED, HOWEVER, that in
the event that such payment consists solely of shares of stock or securities of
the Company as reorganized the payment of which is subordinated, at least to the
same extent as the Debenture, to the payment of all Senior Debt and such payment
is authorized by an order or decree made by a court of competent jurisdiction in
a reorganization proceeding under any applicable law pursuant to a plan of
reorganization and the rights of the holders of Senior Debt are not impaired or
otherwise altered adversely by such reorganization or adjustment, no such
payment shall be required hereby to be made to the holders of the Senior Debt or
their representatives.
(ii) In the event that any such payment shall be received
by the Holder in violation of the subordination provisions hereof before all
Senior Debt is Paid in Full, such payment or distribution shall be received and
held in trust for and shall be paid over to the holders of all Senior Debt
remaining unpaid, or their representatives, until such Senior Debt shall have
been Paid in Full, after giving effect to any concurrent payment or distribution
or provision thereof to the holders of such Senior Debt.
(c) SUBROGATION. Subject to the prior Payment in Full of all
Senior Debt, the Holder shall be subrogated to the rights of the holders of
Senior Debt to receive payments or distributions of assets of the Company
applicable to the Senior Debt to the extent that payments otherwise payable to
the Holder under the Debenture have been applied to the payment of the Senior
Debt; PROVIDED, HOWEVER, that the subrogation rights of the holder of the
Debenture shall be fully subordinated to the rights and remedies of the holders
of Senior Debt.
(d) AGREEMENTS OF HOLDER.
(i) The Holder agrees that upon the commencement of any
bankruptcy, insolvency or other similar case or proceeding relative to the
Company, or to its creditors, as such, or to its assets, the Holder shall take
such actions as may be necessary or appropriate to effectuate the subordination
provisions hereof, including, without limitation, that the Holder shall (i)
timely file a proof of claim in respect of the Debenture and the indebtedness
and obligations evidenced hereby, provided, however, that if the Holder fails
within thirty (30) days prior to the expiration of any claims bar date to file a
proof of claim, any holder of Senior Debt shall be entitled to file such a proof
of claim in respect thereof in the name of the Holder and the Holder irrevocably
appoints the holders of Senior Debt and their representatives as its
attorney-in-fact solely for such purpose; (ii) not
-11-
<PAGE> 12
oppose any motion filed or supported by any holder of Senior Debt for relief
from stay or adequate protection in respect of the Senior Debt; and (iii) not
file or accept any reorganization plan that impairs or otherwise alters
adversely the rights of the holders of Senior Debt.
(ii) The Company and the Holder, for themselves and their
successors and assigns, covenant to execute and deliver to the holders of Senior
Debt, such further instruments and to take such further action as the holders of
Senior Debt may at any time or times reasonably request in order to carry out
the provisions hereof.
(iii) No holder of Senior Debt shall be prejudiced in its
right to enforce the subordination of this Debenture by any act or failure to
act on the part of the Company.
(iv) Without notice to or the consent of the Holder, the
holders of Senior Debt may at any time and from time to time, in their
discretion, without impairing or releasing the subordination herein made, change
the manner, place or terms of payment, or change or extend the time of payment
of or renew or alter the Senior Debt, or amend or supplement in any manner any
instrument evidencing the Senior Debt, any agreement pursuant to which the
Senior Debt was issued or incurred or any instrument securing or relating to the
Senior Debt; release any person liable in any manner for the payment or
collection of the Senior Debt; exercise or refrain from exercising any rights in
respect of the Senior Debt against the Company or any other person; apply any
moneys or other property paid by any person or release in any manner to the
Senior Debt; or accept or release any security for the Senior Debt.
(e) CONTINUING OFFER. This Section shall constitute a continuing
offer to all persons who, in reliance on such provisions, become holders of, or
continue to hold, Senior Debt, and such provisions of this Section are made for
the benefit of such holders and may not be amended, modified, changed or waived
without the prior written consent of the holders of Senior Debt.
(f) RIGHTS OF HOLDERS UNIMPAIRED. The foregoing provisions as to
subordination are solely for the purpose of defining the relative rights of the
holders of the Senior Debt on the one hand and the Holder on the other hand.
None of such provisions shall impair, as between the Company and the Holder, the
obligation of the Company, which is unconditional and absolute, to pay the
Holder of this Debenture the amounts due on this Debenture in accordance with
the terms hereof and of the Purchase Agreement, nor shall any such provisions
prevent the Holder from exercising all remedies otherwise permitted by law.
Moreover, nothing contained herein shall be deemed to limit in any way the right
of the Holder to convert, at any time and from time to time, the principal
balance of this Debenture into shares of GGD Stock pursuant to Section 1 hereof
or to receive shares of GGD Stock as payment of interest hereon pursuant to
Section 3 hereof.
-12-
<PAGE> 13
(g) DEFINITION OF SENIOR DEBT. For purposes hereof, "SENIOR DEBT"
shall mean (a) the principal of, premium, if any, accrued and unpaid interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company), and any other
monetary obligations on (i) indebtedness of the Company for money borrowed,
whether outstanding on the date of this Debenture or thereafter created,
incurred or assumed (including but not limited to nonrecourse borrowings secured
by receivables), (ii) guaranties by the Company of indebtedness for money
borrowed by any other person, or reimbursement obligations under letters of
credit, in either case, whether outstanding on the date of this Debenture or
thereafter created, incurred or assumed, and (iii) indebtedness evidenced by
notes, debentures, bonds or other instruments of indebtedness (other than this
Debenture) for the payment of which the Company is responsible or liable, by
guarantees or otherwise, whether outstanding on the date of this Debenture or
thereafter created, incurred or assumed, and (b) modifications, renewals,
extensions, refinancings, refundings and replacements of any such indebtedness,
obligations or guarantees; unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is expressly provided that
such indebtedness, obligations or guarantees or such modification, renewal,
extension, refinancing, refunding or replacement thereof are not superior in
right of payment to this Debenture and the holder of such indebtedness has
consented to same; provided, HOWEVER, that Senior Debt shall not be deemed to
include any obligations of the Company to any of its subsidiaries. Without in
any way limiting the scope of the foregoing, it is expressly acknowledged and
agreed that Senior Debt shall include all indebtedness, obligations and
guaranties of the Company and its subsidiaries under that certain Credit
Agreement dated November 14, 1996 among the Company, certain of its
subsidiaries, Fleet National Bank, as administrative agent, The First National
Bank of Boston, as documentation agent, and the lender parties thereto and under
all notes, instruments, agreements and documents entered into pursuant thereto
or in connection therewith and all modifications, renewals, extensions,
refinancings, refundings and replacements thereof.
5. OPTIONAL REDEMPTION BY THE COMPANY.
(a) OPTIONAL REDEMPTION. At any time beginning after the period of
thirty-six (36) months following the Issue Date, the Company shall have the
right, in its sole discretion, to redeem (an "OPTIONAL REDEMPTION"), any or all
of the principal amount of this Debenture then outstanding at the Optional
Redemption Price (as defined herein); PROVIDED, HOWEVER, that in order to effect
an Optional Redemption, the Company shall have provided to the Holder thirty
(30) Trading Days' prior written notice of the effective date of the Optional
Redemption (the "OPTIONAL REDEMPTION DATE") and each of the Optional Redemption
Conditions (as defined below) has been satisfied as of the date of such notice
and as of the Optional Redemption Date. The Company shall be entitled to four
(4) Optional Redemptions during the term of this Debenture. Nothing contained
herein shall prevent the Holder from converting any or all of the unpaid
principal amount of this Debenture at any time or from time to time prior to the
Optional Redemption Date.
-13-
<PAGE> 14
(b) OPTIONAL REDEMPTION PRICE. The "OPTIONAL REDEMPTION PRICE"
shall mean the principal amount of this Debenture being redeemed MULTIPLIED BY
the Optional Redemption Percentage. The "OPTIONAL REDEMPTION PERCENTAGE" shall
mean, where "X" represents the Issue Date:
Number of Months
After Issue Date Optional Redemption Percentage
---------------- ------------------------------
36 [smaller than] X [smaller than or equal to] 48 103%
48 [smaller than] X [smaller than or equal to] 60 100%
(c) PAYMENT OF OPTIONAL REDEMPTION PRICE.
(i) The Company shall pay the Optional Redemption Price
to the Holder within five (5) business days of the Optional Redemption Date. In
the event that the Company redeems the entire remaining unpaid principal amount
of this Debenture, and pays to the Holder all interest accrued thereon and all
other amounts due in connection therewith, the Holder shall return this
Debenture to the Company for cancellation.
(ii) The Company may, upon fifteen (15) business days'
prior written notice to the Holder, pay the Optional Redemption Price in shares
of GGD Stock in lieu of cash. The number of shares of GGD Stock to be delivered
to the Holder in the event that the Company exercises such option shall be
determined by dividing the Optional Redemption Price by the Conversion Price.
The Company may exercise its option to pay the Optional Redemption Price in
shares of GGD Stock only if (A) the aggregate number of such shares and of all
Conversion Shares and Interest Payment Shares issuable upon the conversion of
the aggregate principal amount of the Debentures outstanding immediately
following such Optional Redemption has been reserved for issuance upon such
conversion and (B) the GGD Stock is designated for quotation on the Nasdaq
National Market system or listed on the NYSE or ASE, and actively traded thereon
and (C) the Holder agrees to receive such payment in shares of GGD Stock.
(iii) If the Company fails to issue and deliver the
appropriate number of Conversion Shares to such Holder on or before the tenth
(10th) business day following the Optional Redemption Date, the Company shall
not be entitled to pay the Optional Redemption Price in shares of GGD Stock, but
instead must immediately pay such amount in cash, together with Default Interest
on such unpaid amount calculated from the Optional Redemption Date until the
date on which such amount is paid.
-14-
<PAGE> 15
(d) OPTIONAL REDEMPTION CONDITIONS. The "OPTIONAL REDEMPTION
CONDITIONS" are as follows:
(i) The GGD Registration Statement (as defined in the
Registration Rights Agreement) is effective and available for resales of the
Conversion Shares, or the Conversion Shares may be sold pursuant to Rule 144(k)
under the Securities Act or any successor rule or provision; and
(ii) the GGD Stock is designated for quotation on the
Nasdaq National Market system, or listed on the NYSE or the ASE.
6. MANDATORY REDEMPTION BY THE COMPANY.
(a) MANDATORY REDEMPTION. In the event that a Mandatory Redemption
Event (as defined herein) occurs, the Holder shall have the right, upon written
notice to the Company, to have all or any portion of the unpaid principal amount
of this Debenture redeemed by the Company (a "MANDATORY REDEMPTION") at the
Mandatory Redemption Price (as defined herein) in same day funds. Such notice
shall specify the effective date of such Mandatory Redemption (the "MANDATORY
REDEMPTION DATE") and the amount of principal to be redeemed. The Optional
Redemption Date and the Mandatory Redemption Date are sometimes each referred to
herein as a "REDEMPTION DATE".
(b) MANDATORY REDEMPTION PRICE. The "MANDATORY REDEMPTION PRICE"
shall be equal to (A) the unpaid principal amount of this Debenture being
redeemed MULTIPLIED BY one hundred and twenty percent (120%) PLUS (B) in the
event of a Mandatory Redemption where the Mandatory Redemption Date occurs after
the last day of the third anniversary of the Issue Date, an amount equal to
interest on such unpaid principal amount at an annual rate of fifteen percent
(15%) computed on the basis of a 360-day year of twelve 30-day months for the
actual number of days elapsed (compounded annually) from the such last day
through the Mandatory Redemption Date.
(c) PAYMENT OF MANDATORY REDEMPTION PRICE.
(i) The Company shall pay the Mandatory Redemption Price
to the Holder within five (5) business days of the Mandatory Redemption Date. In
the event that the Company redeems the entire remaining unpaid principal amount
of this Debenture, and pays to the Holder all interest accrued thereon and all
other amounts due in connection therewith, the Holder shall return this
Debenture to the Company for cancellation.
(ii) If Company fails to pay the Mandatory Redemption
Price to the Holder within five (5) business days of the Mandatory Redemption
Date, the Holder shall be entitled to interest thereon at an annual rate equal
to the lower of (x) the "prime" rate (as published in the Wall Street Journal)
on such fifth (5th) business day PLUS three percent (3%) and (y) the highest
rate permitted by
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<PAGE> 16
applicable law from the Mandatory Redemption Date until the Mandatory Redemption
Price has been paid in full.
(d) MANDATORY REDEMPTION EVENT. Each of the following events shall
be deemed a "MANDATORY REDEMPTION EVENT":
(i) the Company fails for any reason (including without
limitation as a result of not having a sufficient number of shares of GGD Stock
authorized and reserved for issuance) to issue certificates representing shares
of GGD Stock to the Holder in accordance with the provisions of this Debenture
upon Conversion of any principal amount hereof, and such failure continues for
ten (10) business days;
(ii) the Company breaches, in a material respect, any
covenant or other material term or condition of this Debenture, the Purchase
Agreement, the Registration Rights Agreement or any other agreement, certificate
or instrument delivered by the Company at the Closing (as defined in the
Purchase Agreement)(the "TRANSACTION DOCUMENTS"), and such breach continues for
a period of ten (10) business days after written notice thereof to the Company
from the Holder;
(iii) the GGD Registration Statement (as defined in the
Registration Rights Agreement) is not declared effective on or prior to the GGD
Registration Deadline (as defined in the Registration Rights Agreement) or if
the GGD Registration Statement has been declared effective by such date, and the
effectiveness of the GGD Registration Statement lapses for any reason (including
without limitation, the issuance of a stop order) or is unavailable to the
Holder for sale of Conversion Shares in accordance with the terms of the GGD
Registration Rights Agreement, and such lapse or unavailability continues for a
period of five (5) business days, PROVIDED that the cause of such lapse or
unavailability is not due to factors solely within the control of the Holder,
and PROVIDED, FURTHER, that the GGD Registration Statement shall not be deemed
to be unavailable to the Holder, for purposes of this paragraph (iii) only,
during any Standstill Period (as defined in the Registration Rights Agreement);
(iv) the GGD Stock is not quoted on the Nasdaq National
Market or listed on the NYSE or the Amex;
(v) the sale, conveyance or disposition of all or
substantially all of the assets of the Company or all or substantially all of
the assets comprising the Genzyme General Division, the effectuation of a
transaction or series of transactions, in which more than fifty percent (50%) of
the voting power of the Company is disposed of, or the consolidation, merger or
other business combination of the Company with or into any other entity,
immediately following which the prior stockholders of the Company fail to own,
directly or indirectly, at least fifty percent (50%) of the surviving entity;
and
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<PAGE> 17
(vi) the Company or any subsidiary of the Company shall
make an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business; or such a receiver or trustee shall otherwise be
appointed; or bankruptcy, insolvency, reorganization or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Company or any
subsidiary of the Company and, in the case of an involuntary action or other
proceeding, remains undismissed and unstayed for a period of sixty (60) days.
(e) FAILURE TO PAY REDEMPTION AMOUNTS. If the Company fails to pay
the Mandatory Redemption Price within ten (10) business days of the Payable Date
therefor, then the Holder shall have the right at any time, so long as the
Company remains in default, to require the Company, upon written notice, to
immediately issue, in lieu of the Mandatory Redemption Price, the number of
shares of GGD Stock of the Company equal to the Mandatory Redemption Price
DIVIDED BY the Conversion Price in effect on such Conversion Date as is
specified by the Holder in writing to the Company.
7. MISCELLANEOUS.
(a) FAILURE TO EXERCISE RIGHTS NOT WAIVER. No failure or delay on
the part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude any other or further
exercise thereof. All rights and remedies of the Holder hereunder are cumulative
and not exclusive of any rights or remedies otherwise available.
(b) NOTICES. Any notice, demand or request required or permitted
to be given by the Company or the Holder pursuant to the terms of this Debenture
shall be in writing and shall be deemed given (i) when delivered personally or
by verifiable facsimile transmission (with a hard copy to follow), (ii) on the
next business day after timely delivery to a nationally recognized overnight
courier and (iii) on the third (3rd) business day after deposit in the U.S. mail
(certified or registered mail, return receipt requested, postage prepaid),
addressed as follows:
If to the Company:
Genzyme Corporation
One Kendall Square
Cambridge, Massachusetts 02139
Attn: Chief Legal Officer
Tel: 617-252-7500
Fax: 617-252-7553
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<PAGE> 18
and if to the Holder, at such address and facsimile number as the Holder shall
have furnished the Company in the Purchase Agreement or at such other address or
facsimile number as the Holder shall have furnished to the Company in accordance
with this paragraph 7(b).
(c) AMENDMENTS. No amendment, modification or other change may be
made to this Debenture unless such amendment, modification or change is set
forth in writing and is signed by the Company and the Holder.
(d) TRANSFER OF DEBENTURE. With the prior consent of the Company,
which consent shall not be unreasonably withheld, the Holder may sell, transfer
or otherwise dispose of all, but not less than all, of this Debenture to any
person or entity as long as such sale, transfer or disposition is the subject of
an effective registration statement under the Securities Act or is exempt from
registration thereunder; PROVIDED, HOWEVER that such consent shall not be
required (but the Company shall nonetheless be entitled to receive written
notice thereof) in the event of a sale, transfer or disposition of this
Debenture to an affiliate (as defined in the Purchase Agreement) of the Holder.
On or before the effective date of any such sale, transfer or disposition, the
transferee shall deliver to the Company a Form W-8 or W-9, as applicable, duly
executed by such transferee, confirming that such transferee is not subject to
backup withholding. From and after the date of such sale, transfer or
disposition, the transferee hereof shall be deemed to be the Holder. Upon any
such sale, transfer or disposition, the Company shall, promptly following the
return of this Debenture by the transferee hereof, issue and deliver to such
transferee a new Debenture identical in all respects to this Debenture, in the
name of such transferee, except that the principal amount of such new Debenture
may reflect the unpaid principal amount of this Debenture at the time of such
sale, transfer or disposition.
(e) LOST OR STOLEN DEBENTURE. Upon receipt by the Company of
evidence of the loss, theft, destruction or mutilation of this Debenture, and
(in the case of loss, theft or destruction) of indemnity or security reasonably
satisfactory to the Company, and upon surrender and cancellation of the
Debenture, if mutilated, the Company shall execute and deliver to the Holder a
new debenture identical in all respects to this Debenture. Upon the issuance of
any new Debenture hereunder, the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge and any expenses
(including reasonable fees and expenses of counsel) in connection therewith.
(f) GOVERNING LAW. This Debenture shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the conflict of law provisions thereof.
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<PAGE> 19
<PAGE> 20
IN WITNESS WHEREOF, the Company has caused this Debenture to be
executed in its name by its duly authorized officer on the date first above
written.
GENZYME CORPORATION
By: /s/ David J. Mclachlan
------------------------------------------
Name: David J. McLachlan
Title: Executive Vice President,
Finance and Chief Financial Officer
-19-
<PAGE> 21
ANNEX I
Schedule of Principal
Payments and Conversions
------------------------
Principal Amount Paid Date of
Balance or Converted Payment or Conversion
------- ------------ ---------------------
$[ ],000,000
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
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<PAGE> 22
Schedule 1
The GGD Convertible Debentures dated August 29, 1998 are identical
except with respect to the names of the holders and the principal amounts of the
debentures. Pursuant to Instruction 2 to Item 601 of Regulation S-K, this
schedule lists all of the holders of the GGD Convertible Debentures as of the
date of this registration statement and the principal amounts of their
respective debentures.
Principal Amount
Holder of Debenture
- ------ ------------
Credit Suisse First Boston Corporation $ 1,060,000
Credit Suisse First Boston Corporation $10,600,000
Credit Suisse First Boston Corporation $ 1,855,000
Credit Suisse First Boston Corporation $ 2,120,000
Shepherd Investments International, Ltd. $ 795,000
SoundShore Holdings Ltd. $ 1,060,000
Stark International $ 795,000
Tribeca Investments L.L.C. $ 1,060,000
UBS AG -- London Branch $ 1,855,000
-21-
<PAGE> 1
EXHIBIT 5.1
PALMER & DODGE LLP
ONE BEACON STREET
BOSTON, MASSACHUSETTS 02108
Telephone: (617) 573-0100 Facsimile: (617) 227-4420
November 12, 1998
Genzyme Corporation
One Kendall Square
Cambridge, Massachusetts 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 787,060 shares (the
"Shares") of the Genzyme General Division Common Stock, $0.01 par value. We
understand that the Shares are to be offered and sold from time to time by the
securityholders 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 authorization and issuance of the Shares. We have
examined all such documents as we consider necessary to enable us to render this
opinion.
Based upon the foregoing, we are of the opinion that the Shares have
been duly authorized and when issued and delivered upon conversion of GGD
Convertible Debentures (the "Debentures") issued August 29, 1998, in accordance
with the terms of the Debentures, will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Palmer & Dodge LLP
-----------------------------------
Palmer & Dodge LLP
<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 to register 787,060 shares of Genzyme General
Division Common Stock 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 General 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.
We also consent to the reference to our firm in the Registration
Statement under the caption "Experts."
/s/ PricewaterhouseCoopers LLP
------------------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 13, 1998
