<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1998.
REGISTRATION NO. 333-59513
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
GENZYME CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MASSACHUSETTS 06-1047163
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
ORGANIZATION)
</TABLE>
ONE KENDALL SQUARE, CAMBRIDGE, MASSACHUSETTS 02139 (617) 252-7500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
PETER WIRTH
EXECUTIVE VICE PRESIDENT AND CHIEF LEGAL OFFICER
GENZYME CORPORATION
ONE KENDALL SQUARE
CAMBRIDGE, MASSACHUSETTS 02139
(617) 252-7500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH COPIES TO:
JOHN L. WHITLOCK, ESQ.
PALMER & DODGE LLP
ONE BEACON STREET
BOSTON, MASSACHUSETTS 02108
(617) 573-0100
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
===============================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER UNIT OFFERING PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5 1/4% Convertible Subordinated Notes
Due 2005............................. $250,000,000 100% $250,000,000 $73,750.00(2)
- -------------------------------------------------------------------------------------------------------------------------------
General Division Common Stock, $0.01
par value per share.................. 6,313,131(3) -- -- $0.00(4)
===============================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(o).
(2) Previously paid.
(3) Plus such additional indeterminate number of shares of Genzyme General
Division Common Stock as shall be required for issuance upon conversion of
the Notes being registered hereunder due to an adjustment in the conversion
price. Includes associated purchase rights which currently are evidenced by
certificates for shares of Genzyme General Division Common Stock and
automatically trade with such shares.
(4) Pursuant to Rule 457(i), there is no filing fee with respect to the shares
of Genzyme General Division Common Stock issuable upon conversion of the
Notes because no additional consideration will be received in connection
with the exercise of the conversion privilege.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO CHANGE, COMPLETION OR AMENDMENT
WITHOUT NOTICE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE
PROSPECTUS IS DELIVERED IN FINAL FORM.
SUBJECT TO COMPLETION, DATED SEPTEMBER 18, 1998
[GENZYME LOGO]
$250,000,000 PRINCIPAL AMOUNT OF
5 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2005
6,313,131 SHARES OF GENZYME GENERAL DIVISION COMMON STOCK
This Prospectus relates to the offer and sale of $250,000,000 aggregate
principal amount of 5 1/4% Convertible Subordinated Notes Due 2005 (the "Notes")
of Genzyme Corporation ("Genzyme" or the "Company"), a Massachusetts
corporation, issued to the initial purchasers of the Notes (the "Initial
Purchasers") in a private placement consummated in May 1998 (including Notes
issued upon exercise in full of the Initial Purchasers' over-allotment option),
and the offer and sale of 6,313,131 shares of Genzyme General Division Common
Stock, $0.01 par value per share (the "GGD Stock"), currently issuable upon
conversion of such Notes plus such additional indeterminate number of shares of
GGD Stock as may become issuable upon conversion of the Notes due to adjustments
in the conversion price (the "Conversion Shares"). The Notes and the Conversion
Shares may be offered from time to time for the accounts of beneficial holders
of the Notes or Conversion Shares named herein or in supplements to this
Prospectus (the "Selling Securityholders"). See "PLAN OF DISTRIBUTION."
The Notes are convertible, at any time at or before maturity, unless
previously redeemed, into shares of GGD Stock, at a conversion price of $39.60
per share, subject to adjustment in certain events. Interest on the Notes is
payable semi-annually on June 1 and December 1 of each year, commencing on
December 1, 1998. The Notes mature on June 1, 2005. The Notes are not redeemable
by the Company prior to June 10, 2001. Thereafter, the Notes are redeemable at
the option of the Company, in whole or in part, at the redemption prices set
forth in this Prospectus, plus accrued interest. Upon a Fundamental Change (as
defined herein), each holder of Notes has the right, subject to the rights of
holders of Senior Indebtedness (as defined herein), to require the Company to
repurchase all or a portion of such holder's Notes at a purchase price equal to
100% of the principal amount thereof, plus accrued interest. See "DESCRIPTION OF
NOTES -- Repurchase at Option of Holder Upon a Fundamental Change." The Notes
are unsecured obligations of the Company subordinated to all existing and future
Senior Indebtedness. The Indenture does not restrict the incurrence of
indebtedness, including Senior Indebtedness, by the Company or its subsidiaries.
See "DESCRIPTION OF NOTES -- Subordination." The Notes do not provide for a
sinking fund.
The GGD Stock is traded on the Nasdaq National Market ("Nasdaq") under the
symbol "GENZ." On September 17, 1998, the closing per share price of GGD Stock
as reported by Nasdaq was $29 3/16 per share. The Notes have been designated for
trading in the Private Offerings, Resales and Trading through Automated Linkages
("PORTAL") Market. Notes resold pursuant to the Registration Statement of which
this Prospectus forms a part will no longer be eligible for trading in the
PORTAL Market.
The Notes and the Conversion Shares may be offered by the Selling
Securityholders from time to time in open-market or privately-negotiated
transactions, or by a combination of such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices. The Selling Securityholders may
effect such transactions to or through underwriters, dealers or agents, and such
underwriters, dealers or agents may receive compensation in the form of
discounts, concessions or commissions from the Selling Securityholders, the
purchasers of the securities or both (which compensation to a particular
underwriter, dealer or agent might be in excess of customary commissions). See
"THE SELLING SECURITYHOLDERS" and "PLAN OF DISTRIBUTION."
The Company will not receive any of the proceeds from the sale of the Notes
or Conversion Shares. The Company, however, has agreed to bear certain expenses
in connection with the registration of the Notes and Conversion Shares. The
Company has also agreed to indemnify the Selling Shareholders against certain
liabilities, including certain liabilities under the Securities Act of 1933, as
amended (the "Securities Act").
SEE "RISK FACTORS" BEGINNING ON PAGE 3 HEREIN FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is September , 1998.
<PAGE> 3
THE COMPANY
GENERAL
Genzyme is a biotechnology company that develops innovative products and
services for major unmet medical needs. Genzyme has three divisions: Genzyme
General Division ("Genzyme General"), which develops and markets therapeutic and
surgical products and diagnostic services and products; Genzyme Tissue Repair
Division ("Genzyme Tissue Repair" or "GTR"), which develops and markets
biological products for the treatment of cartilage damage, severe burns, chronic
skin ulcers and neurodegenerative diseases; and Genzyme Molecular Oncology
Division ("Genzyme Molecular Oncology" or "GMO"), which was formed in June 1997
in connection with the acquisition of PharmaGenics, Inc. ("PharmaGenics") and
develops gene-based approaches to cancer therapy through genomics, gene therapy
and a small molecule drug discovery program. Genzyme has three outstanding
series of common stock, each of which is intended to reflect the value and track
the performance of one of Genzyme's three divisions: Genzyme General Division
Common Stock, Genzyme Tissue Repair Division Common Stock ("GTR Stock") and
Genzyme Molecular Oncology Division Common Stock ("GMO Stock"). GGD Stock and
GTR Stock are listed on Nasdaq under the symbols "GENZ" and "GENZL",
respectively. GMO Stock is not yet publicly traded.
For purposes of financial statement presentation, all of the Company's
programs, products, assets and liabilities are allocated to Genzyme General,
Genzyme Tissue Repair or Genzyme Molecular Oncology. Notwithstanding this
allocation, Genzyme continues to hold title to all of the assets and is
responsible for all of the liabilities allocated to each of the divisions.
Holders of GGD Stock, GTR Stock and GMO Stock have no specific claim against the
assets attributed to the division whose performance is associated with the
series of stock they hold. Liabilities or contingencies of any division that
affect Genzyme's resources or financial condition could affect the financial
condition or results of operations of all three divisions.
For additional information concerning Genzyme and its businesses, please
refer to the documents listed under "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
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<PAGE> 4
RISK FACTORS
Statements made in this Prospectus relating to plans for sales and
marketing, product development, dividend policy, the timing of regulatory
approvals, or that otherwise relate to future periods, are forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934 (the "Exchange Act"). When used in
this Prospectus, the words "anticipates," "expects," "intends" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to a number of risks and uncertainties. Actual results could differ
materially from those anticipated in the forward-looking statements as a result
of certain risks described below or elsewhere in this Prospectus (including the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, as amended (the "1997 10-K"), and other documents incorporated herein by
reference). Such risks should be considered carefully in evaluating an
investment in the Notes or GGD Stock.
RISKS RELATED TO GENZYME AND GENZYME GENERAL
The Notes are convertible only into shares of GGD Stock. The following risk
factors relating to Genzyme General, as well as the Company generally, should be
considered carefully in contemplating an investment in the Notes or the
Conversion Shares.
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 $192.1 million for the six
months ended June 30, 1998, representing 63% and 66%, 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. When the conversion of patients from Ceredase(R) enzyme
to Cerezyme(R) enzyme is finished, Genzyme General is likely to record a charge
to earnings for excess inventory of Ceredase(R) enzyme and related equipment.
This charge to earnings may be material.
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.
Future Capital Needs
Although Genzyme currently has substantial cash resources, it has committed
to utilize a portion of such funds for certain purposes, such as (i) continuing
the development and completing the market introduction in the U.S. and Europe of
its line of biomaterial products based on hyaluronic acid for use in limiting
the formation of post-operative adhesions (the "Sepra Products"), (ii) continued
marketing of Carticel(TM) autologous cultured chondrocytes and developing,
producing and marketing other products through GTR and (iii) making certain
payments to third parties in connection with strategic collaborations.
Genzyme had approximately $509.5 million in cash, cash equivalents and
short and long-term investments (excluding investments in equity securities) at
June 30, 1998. As of June 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 are payable on November 15, 1999. Genzyme's cash
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resources will be diminished upon repayment of amounts borrowed, plus accrued
interest, under this credit facility. In addition, in February 1997 Genzyme
privately placed a note with an aggregate principal amount of $13.0 million,
which is convertible into shares of GTR Stock (the "GTR Note"), to fund GTR's
operations and in August 1997 Genzyme privately placed an aggregate principal
amount of $20.0 million of debentures convertible into GMO Stock (the "GMO
Debentures") to fund GMO's operations. Pursuant to the terms of both the GTR
Note and the GMO Debentures, the holders will, in some circumstances, receive
cash from Genzyme. To the extent cash is used to pay the principal and accrued
interest on the GTR Note or GMO Debentures, the Company's cash reserves will
also be diminished. As a result of these commitments and contingencies, Genzyme
may have to obtain additional financing which could take the form of Senior
Indebtedness, to which the Notes would be subordinated. There can be no
assurance that any such additional financing will be available on favorable
terms, if at all.
Risks Inherent in International Operations
Foreign operations of Genzyme accounted for 36% of consolidated net sales
in 1997 as compared to 35% in each of 1996 and 1995. In addition, Genzyme has
direct investments in a number of subsidiaries in foreign countries (primarily
in Europe and Japan). Financial results of Genzyme could be adversely affected
by fluctuations in foreign exchange rates. Fluctuations in the value of foreign
currencies affect the dollar value of Genzyme's net investment in foreign
subsidiaries, with these fluctuations being included in a separate component of
stockholders' equity. Operating results of foreign subsidiaries are translated
into U.S. dollars at average monthly exchange rates. For the year ended December
31, 1997, the impact of such transactions on operating results was not
significant; however, Genzyme reported a cumulative foreign currency translation
amount of $12.4 million in stockholders' equity as a result of foreign currency
adjustments, and there can be no assurance that the Company will not incur
additional adjustments in future periods. In addition, the U.S. dollar value of
transactions based in foreign currency (collections on foreign sales or payments
for foreign purchases) also fluctuates with exchange rates. The largest foreign
currency exposure results from activity in Dutch guilders, British pounds,
French francs, German marks, Spanish pesetas, Italian lira and Japanese yen.
Genzyme has not hedged net foreign investments in the past, although it may
engage in hedging transactions to manage and reduce its foreign exchange risk,
subject to certain restrictions imposed by the Genzyme Board. There can be no
assurance that Genzyme's attempts to manage its foreign currency exchange risk
will be successful.
Uncertainty Regarding Patents and Protection of Proprietary Technology
Genzyme's success depends, to a large extent, on its ability to maintain a
competitive technological position in its product areas. Proprietary rights
relating to Genzyme's products and services are protected from unauthorized use
by third parties only to the extent that they are covered by patents or are
maintained in confidence as trade secrets. Genzyme has filed for patents and has
rights to numerous patents and patent applications worldwide. While certain of
Genzyme's patents have been allowed or issued, there can be no assurance that
these allowed and issued patents or additional patents allowed or issued to
Genzyme will effectively protect the proprietary technology of Genzyme. In
addition, patent litigation is widespread in the biotechnology industry and it
is not possible to predict how any such litigation will affect Genzyme.
No consistent policy has emerged from the U.S. Patent and Trademark Office
regarding the breadth of claims allowed in biotechnology patents and, therefore,
the degree of future protection for Genzyme's proprietary rights is uncertain.
The allowance of broader claims may increase the incidence and cost of patent
interference proceedings in the U.S. and the risk of infringement litigation in
the U.S. and abroad. Conversely, the allowance of narrower claims, while
reducing the risk of infringement, may limit the value of Genzyme's proprietary
rights under its patents, licenses and pending patent applications.
Genzyme attempts to monitor the patent filings of its competitors in an
effort to guide the design and development of its products to avoid
infringement. Notwithstanding these efforts, there can be no assurance that the
patents issued or licensed to Genzyme will remain free of challenge by third
parties. In addition, patent applications filed by third parties may, if issued,
cover the Company's products and services as
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<PAGE> 6
ultimately developed, which could have an adverse impact on the Company's
results of operations in amounts that cannot presently be determined. Genzyme
may, depending on the final formulation of such products and services, need to
acquire licenses to, or contest the validity of, such patents. For example,
Genzyme may need to acquire patent rights from third parties that cover
particular diagnostic and/or therapeutic gene sequences or that cover aspects of
adjuvant therapies such as compositions of matter or methods of use related to
the administration of cytokines as immunostimulants in combination with a cancer
therapy. In gene therapy, Genzyme may need to license a number of patents
covering different elements of the technique, such as those relating to a
particular viral or non-viral vector or methods for its delivery. The extent to
which Genzyme may need to license such rights or contest the validity of such
patents depends on the scope and validity of such patents and ultimately on the
final design or formulation of its products and services under development. The
cost and ability to license any such rights and the likelihood of successfully
contesting the validity of such patents are uncertain.
Genzyme has also relied upon trade secrets, proprietary know-how and
continuing technological innovation to develop and maintain its competitive
position. There can be no assurance that others will not independently develop
such know-how or otherwise obtain access to Genzyme's technology. While
Genzyme's employees, consultants and corporate partners with access to
proprietary information are generally required to enter into confidentiality
agreements, there can be no assurance that these agreements will be honored.
Certain of Genzyme's consultants have developed portions of Genzyme's
proprietary technology at their respective universities or in governmental
laboratories. There can be no assurance that such universities or governmental
authorities will not assert rights to intellectual property arising out of
university or government based research conducted by such consultants.
Regulation by Government Agencies
The production and sale of health care products and provision of health
care services are highly regulated. In particular, human therapeutic and
diagnostic products are subject to pre-marketing approval by the 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 limit Genzyme
General's reimbursement for its products and services and otherwise materially
affect the results of operations of Genzyme General. Additional regulatory
regimes, in the U.S. and internationally, affect the Company's work in gene
therapy and the provision of cancer diagnostic services. There can be no
assurance that any of the required regulatory approvals will be granted on a
timely basis, if at all.
Certain of Genzyme's products, including Cerezyme(R) enzyme and Ceredase(R)
enzyme, have been designated as orphan drugs under the Orphan Drug Act, which
provides incentives to manufacturers to develop and market drugs for rare
diseases. The Orphan Drug Act generally entitles the first developer that
receives FDA marketing approval for an orphan drug to a seven-year exclusive
marketing period in the United States for that product. Legislation has been
periodically introduced in recent years, however, to amend the Orphan Drug Act.
Such legislation has generally been directed to shortening the period of
automatic market exclusivity and granting certain market rights to simultaneous
developers of a drug. The effect on Genzyme of any amendments ultimately adopted
cannot be assessed at this time.
No Assurance of Commercial Success of the Sepra Products
In August 1996, Genzyme received marketing approval from the FDA for
Seprafilm(R) bioresorbable membrane and commenced commercial sales of
Seprafilm(R) bioresorbable membrane in the U.S. on behalf of Genzyme Ventures
II. The successful commercialization of Seprafilm(R) bioresorbable membrane and
other Sepra Products will depend on many factors, including: (i) the content and
timing of decisions made by the FDA and other regulatory authorities, (ii)
market acceptance of the Sepra Products by surgeons and hospitals
administrators, (iii) Genzyme General's ability to deploy its sales force to
market the Sepra Products, (iv) Genzyme General's ability to supply sufficient
product to meet market demand, (v) the number and relative efficacy of
competitive products that may subsequently enter the market and (vi) the degree
to which
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<PAGE> 7
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.
Technology Transferred to Genzyme Development Partners, L.P. ("GDP")
Genzyme organized GDP, a special purpose research and development entity,
and transferred technology and commercial rights to the Sepra Products that
Genzyme previously had under development. Genzyme has an option to purchase the
limited partnership interests in GDP under certain circumstances. It is
uncertain at this time whether Genzyme will exercise this option. If Genzyme
does not exercise this option, it will have limited rights in revenues generated
from the sale of GDP's products. If Genzyme does exercise this option, it will
be required to make substantial cash payments or to issue shares of GGD Stock,
or both. Cash payments will diminish Genzyme's capital resources. Payments in
GGD Stock could result in dilution to holders of GGD Stock and could negatively
affect the market price of such stock.
Uncertainty Regarding Success of Clinical Trials and Other Risks in Product
Development
Several of Genzyme's products are currently in or will require clinical
trials to test safety and efficacy in humans for various conditions. There can
be no assurance that Genzyme will not encounter problems in clinical trials that
will cause it to delay or suspend these clinical trials. In addition, there can
be no assurance that such clinical testing, if completed, will ultimately show
these products to be safe and efficacious.
Product development involves a high degree of risk, and returns to
investors are dependent upon successful development of Genzyme's products. There
can be no assurance that development of any product will be successfully
completed or that FDA approval of any of Genzyme's products under development
will be obtained.
Rapid Technological Change
The field of biotechnology is expected to continue to undergo significant
and rapid technological change. Although Genzyme General will seek to expand its
technological capabilities in order to remain competitive, there can be no
assurance that research and discoveries by others will not render Genzyme
General's products or services obsolete.
Third Party Reimbursement and Health Care Cost Containment Initiatives
A majority of Genzyme General's revenues are attributable directly or
indirectly to payments received from third party payers, including government
health administration authorities and private health insurers. Significant
uncertainty exists as to the reimbursement status of newly approved health care
products, and third party payers are increasingly challenging the prices charged
for health care products and services. Third party payers are also increasingly
attempting to contain health care costs by limiting both coverage and the level
of reimbursement for new therapeutic products and by refusing in some cases to
provide coverage for uses of approved products for disease indications for which
the FDA has not granted marketing approval. There can be no assurance that third
party insurance coverage will be available for any new products or services
developed by Genzyme General. If adequate coverage and reimbursement are not
provided by government and other third party payers for Genzyme General's
products and services, its results of operations may be materially adversely
affected.
In addition, Congress has from time to time discussed the possible
implementation of broad based health care cost containment measures. While these
discussions have not led to the enactment of any specific health care cost
containment legislation, it is possible that health care measures will again be
proposed in Congress. The effects on Genzyme General of any such measures that
are ultimately adopted cannot be predicted at this time.
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Product Liability and Limitations of Insurance
The Company may be subject to product liability claims in connection with
the use or misuse of its products during testing or after commercialization.
While the Company has taken, and continues to take, what it believes are
appropriate precautions, there can be no assurance that Genzyme General will
avoid significant liability exposure. Genzyme has only limited amounts of
product liability insurance and there can be no assurance that such insurance
will provide sufficient coverage against any or all potential product liability
claims. If Genzyme attempts to obtain additional insurance in the future, there
can be no assurance that it will be able to do so on acceptable terms, if at
all, or that such insurance will provide adequate coverage against claims
asserted.
Year 2000
Many computer systems experience problems handling dates beyond the year
1999. Therefore, some computer hardware and software will need to be modified
prior to the year 2000 in order to remain functional. The Company is assessing
the internal readiness of its computer systems for handling the year 2000. The
Company expects to implement successfully the systems and programming changes
necessary to address year 2000 issues, and does not believe that the cost of
such actions will have a material adverse effect on the Company's results of
operations or financial condition. There can be no assurance, however, that
there will not be a delay in, or increased costs associated with, the
implementation of such changes, and the Company's inability to implement such
changes could have an adverse effect on future results of operations.
RISKS RELATED TO THE SECURITIES
An investment in the Notes or the Conversion Shares involves a high degree
of risk. Accordingly, the following risk factors should be considered carefully
in contemplating such an investment.
Future Capital Needs
See "-- Risks Related to Genzyme and Genzyme General -- Future Capital
Needs." If future financing is needed and available, Genzyme may elect to obtain
such financing in the form of Senior Indebtedness, to which the Notes would be
subordinated.
Subordination
The Notes are general, unsecured obligations of the Company, subordinated
in right of payment to all existing and future Senior Indebtedness of the
Company. Under the Indenture, generally, the Company is not permitted to pay the
principal of, or premium, if any, or interest on or repurchase, redeem or
otherwise retire any Notes in the event of a default in the payment of any
principal of, premium, if any, or interest on any Senior Indebtedness of the
Company when it becomes due and payable, whether at maturity or at a date fixed
for prepayment or by acceleration or otherwise, unless and until such payment
default has been cured or waived or shall have ceased to exist, or, in the event
of certain other defaults with respect to Senior Indebtedness, until the earlier
of the date on which such default has been cured or waived or shall have ceased
to exist, or the 179th day after notice of such default is given. In addition,
the Notes are effectively subordinated to all of the creditors of the Company's
subsidiaries, including trade creditors. As of June 30, 1998, the Company and
its subsidiaries had an aggregate of $109,586,000 of consolidated indebtedness
and other obligations that would have effectively ranked senior to the Notes.
The Indenture does not restrict the incurrence of Senior Indebtedness or other
indebtedness by the Company or any of its subsidiaries. See "DESCRIPTION OF
NOTES -- Subordination."
Upon any distribution of the assets of the Company pursuant to any
insolvency, bankruptcy, dissolution, winding up, liquidation or reorganization,
the payment of the principal of and interest on the Notes will be subordinated
to the extent provided in the Indenture to the prior payment in full of all
Senior Indebtedness. In addition, the Company may not repurchase any Notes in
certain circumstances involving a Fundamental Change if at such time the
subordination provision of the Indenture would prohibit the Company from making
payments of principal in respect of the Notes.
7
<PAGE> 9
Limitations on Repurchase of Notes Upon a Fundamental Change
In the event of a Fundamental Change, each holder of Notes will have the
right, at the holder's option, to require the Company to repurchase all or any
part of such holder's Notes. If a Fundamental Change were to occur, there can be
no assurance that the Company would be able to pay the repurchase price for all
Notes tendered. The Company's revolving credit agreement contains, and any
future credit agreements or other agreements relating to the other indebtedness
to which the Company becomes a party may contain, restrictions on or
prohibitions of such repurchases. In the event a Fundamental Change occurs at a
time when the Company is prohibited from purchasing Notes, the Company could
seek the consent of its lenders to the purchase of the Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company would remain
prohibited from purchasing Notes. In such case, the Company's failure to
repurchase the Notes would constitute an Event of Default under the Indenture
whether or not such repurchase is permitted by the subordination provisions of
the Indenture. Any such default may, in turn, cause a default under Senior
Indebtedness of the Company. Moreover, the occurrence of a Fundamental Change in
and of itself may constitute an event of default under Senior Indebtedness of
the Company. As a result, in each case, any repurchase of the Notes would,
absent a waiver, be prohibited under the subordination provisions of the
Indenture until the Senior Indebtedness is paid in full. See "DESCRIPTION OF
NOTES -- Subordination" and "RISK FACTORS -- Risks Related to the
Notes -- Subordination."
The term "Fundamental Change" is limited to certain specified transactions
and may not include other events that might adversely affect the financial
condition of the Company, nor would the requirement that the Company offer to
repurchase the Notes upon a Fundamental Change necessarily afford holders of the
Notes protection in the event of a highly leveraged transaction, reorganization,
merger or similar transaction involving the Company. See "DESCRIPTION OF NOTES."
Increased Leverage
The sale of the Notes increased the ratio of the Company's total debt to
total capitalization from 14% at March 31, 1998 to 27% at June 30, 1998. As a
result of this increased leverage, the Company's principal and interest
obligations increased substantially. The degree to which the Company is
leveraged could adversely affect the Company's ability to obtain additional
financing for working capital, acquisitions or other purposes and could make it
more vulnerable to economic downturns and competitive pressures. The Company's
increased leverage could also adversely affect its liquidity, as a substantial
portion of available cash from operations may have to be applied to meet debt
service requirements and, in the event of a cash shortfall, the Company could be
forced to reduce other expenditures and forego potential acquisitions to be able
to meet such requirements.
Absence of Public Market for the Notes
There is no existing public market for the Notes and there can be no
assurance as to the liquidity of any market that may develop for the Notes, the
ability of the holders to sell their Notes or the price at which holders of the
Notes may be able to sell their Notes. Future trading prices of the Notes will
depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results, the price of the GGD Stock and the
market for similar securities. The Notes have been designated for trading in the
PORTAL Market; however, the Company has not applied, and does not intend to
apply, for listing of the Notes on any securities exchange. Furthermore, Notes
resold pursuant to the Registration Statement of which this Prospectus forms a
part will no longer be eligible for trading in the PORTAL Market.
Volatility of Prices; Absence of Dividends
The market prices for Genzyme's securities have been volatile. Factors such
as announcements of technological innovations or new commercial products by
Genzyme or its competitors, governmental regulation, patent or proprietary
rights developments, public concern as to the safety or other implications of
biotechnology products and industry and market conditions in general may have a
significant impact on the
8
<PAGE> 10
market price of Genzyme's securities, including the Notes and the GGD Stock. No
cash dividends have been paid to date on GGD Stock, nor does Genzyme General
anticipate paying cash dividends on such stock in the foreseeable future.
RISKS RELATED TO GENZYME TRACKING STOCK
Prior to June 18, 1997, Genzyme had outstanding two classes of common
stock, GGD Stock and GTR Stock. Effective June 18, 1997, the GGD Stock and GTR
Stock were redesignated as separate series of a single class of common stock and
a new series of the same class of common stock, GMO Stock, was issued. As a
result, Genzyme currently has three series of common stock outstanding: GGD
Stock, GTR Stock and GMO Stock, which are intended to reflect the value and
track the performance of Genzyme's three operating divisions: Genzyme General,
GTR and GMO. The Notes are convertible only into shares of GGD Stock.
Accordingly, prospective purchasers of the Notes or the Conversion Shares should
carefully consider the following factors in evaluating an investment in the
Notes or the Conversion Shares.
Stockholders of One Company; Financial Impacts on One Division Could Affect
the Others
Genzyme General, GTR and GMO are each divisions of Genzyme. Notwithstanding
the allocation of Genzyme's products and programs among divisions for financial
statement presentation purposes and allocation of equity interests, Genzyme
continues to hold title to all of the assets and is responsible for all of the
liabilities allocated to each of its divisions. Holders of each series of
Genzyme common stock have no specific claim against the assets attributed for
financial statement presentation purposes to the division whose performance is
associated with the series of stock they hold. Liabilities or contingencies of
any division that affect Genzyme's resources or financial condition could affect
the financial condition or results of operations of the other divisions.
Prospective purchasers of the Notes or the Conversion 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 "CERTAIN DOCUMENTS INCORPORATED BY
REFERENCE."
No Rights or Additional Duties With Respect to the Divisions; Potential
Conflicts
Holders of each series of Genzyme common stock have only the rights of
stockholders of Genzyme and, except in limited circumstances, do not have any
rights specifically related to the division to which such series of common stock
relates.
The existence of separate series of common stock may give rise to occasions
when the interests of holders of each series of Genzyme common stock may diverge
or appear to diverge. Although Genzyme is aware of no precedent concerning the
manner in which Massachusetts law would be applied to the duties of a board of
directors in the context of multiple series of common stock with divergent
interests, Genzyme believes, based on the advice of counsel, that a
Massachusetts court would hold that a board of directors owes an equal duty to
all stockholders regardless of class or series and does not have separate or
additional duties to any group of stockholders. That duty is the fiduciary duty
to act in good faith and in a manner it reasonably believes to be in the best
interests of the corporation. Genzyme has been advised that, under Massachusetts
law, a good faith determination by a disinterested and adequately informed board
of directors that an action is in the best interests of the corporation, taking
into account the interests of the holders of each series of common stock and the
alternatives reasonably available, should represent an appropriate defense to
any challenge by or on behalf of the holders of any series of common stock that
such action could have a disparate effect on different series of common stock.
However, a Massachusetts court hearing a case involving such a challenge may
decide to apply principles of Massachusetts law other than those described
above, or may develop new principles of Massachusetts law, in order to decide
such a case.
Disproportionate ownership interests of members of the Genzyme Board in any
series of common stock or disparities in the value of such stock could create or
appear to create potential conflicts of interest when directors are faced with
decisions that could have different implications for each series of common
stock. Nevertheless, Genzyme believes that a director would be able to discharge
his or her fiduciary responsibilities
9
<PAGE> 11
even if his or her interests in shares of such series were disproportionate or
had disparate values. The Genzyme Board may also from time to time establish one
or more committees to review matters presented to it that raise conflict issues,
which committee(s) would report to the full Genzyme Board on such matters.
No Additional Separate Voting Rights
Holders of each series of Genzyme common stock vote together as a single
class on all matters as to which common stockholders generally are entitled to
vote (including the election of directors). Except in certain limited
circumstances provided under Massachusetts law, in Genzyme's Restated Articles
of Organization (the "Genzyme Charter"), and in the management and accounting
policies adopted by the Genzyme Board, holders of each series of common stock
have no right to vote on matters separately. Accordingly, except in limited
circumstances, holders of shares of one series of common stock could not bring a
proposal to a vote of the holders of that series of common stock only, but would
be required to bring any proposal to a vote of all common stockholders.
On all matters as to which common stockholders generally are entitled to
vote, each share of GGD Stock has one vote, each share of GTR Stock has, through
December 31, 1998, .33 vote and each share of GMO Stock has, through December
31, 1998, .25 vote. On January 1, 1999 and on January 1 every two years
thereafter, the number of votes to which each share of GTR Stock and GMO Stock
is entitled will be adjusted to equal the ratio of the Fair Market Value (as
defined herein) of one share of GTR Stock and GMO Stock, respectively, to the
Fair Market Value of one share of GGD Stock as of such date. Fair Market Value
as of any date means the average of the daily closing prices as reported by the
Nasdaq National Market (or the appropriate exchange or other market on which
such shares are then traded) for the 20 consecutive trading days commencing on
the 30th trading day prior to such date. In the event such closing prices are
unavailable, Fair Market Value will be determined by the Genzyme Board.
Certain matters as to which the holders of common stock are entitled to
vote may involve a divergence or the appearance of a divergence in the interests
of holders of each series of Genzyme common stock. If, when a stockholder vote
is taken on any matter as to which a separate vote by each series is not
required and the holders of any series of common stock would have more than the
number of votes required to approve any such matter, the holders of that series
would control the outcome of the vote on such matter. Holders of GGD Stock, GTR
Stock and GMO Stock currently have approximately 91.2%, 7.7% and 1.1%,
respectively, of the total voting power of Genzyme. As a result, on matters
which are submitted to a vote of common stockholders, the preferences of the
holders of GGD Stock are likely to dominate and determine the outcome of such
vote unless and until the relative number of shares outstanding and/or the
market value of each series of Genzyme common stock materially changes. See
"DESCRIPTION OF GENZYME CAPITAL STOCK -- Voting Rights."
Exchange of GTR Stock and GMO Stock
The Genzyme Board can, in its sole discretion, determine to exchange shares
of GTR Stock and GMO Stock for cash or shares of GGD Stock (or any combination
thereof) at a 30% premium over Fair Market Value of the GTR Stock or GMO Stock
at any time. In addition, following a disposition of all or substantially all of
the assets of GTR or GMO, the shares of GTR Stock or GMO Stock, as the case may
be, are subject to mandatory exchange by Genzyme for cash and/or shares of GGD
Stock at a 30% premium over Fair Market Value of such series of common stock as
determined by the trading prices during a specified period prior to public
announcement of the disposition. Consequently, holders of GTR Stock and GMO
Stock may receive a greater or lesser premium for their shares than any premium
paid by a third party buyer of all or substantially all of the assets of GTR or
GMO. See "Management and Accounting Policies Governing the Relationship of
Genzyme Divisions -- Open Market Purchases of Shares of Common Stock" set forth
in Exhibit 99.1 to the 1997 10-K.
10
<PAGE> 12
No Adjustment to Liquidating Distributions
In the event of a voluntary or involuntary dissolution, liquidation or
winding up of the affairs of Genzyme (other than pursuant to a merger, business
combination or sale of substantially all assets), holders of outstanding shares
of each series of Genzyme common stock would receive the assets, if any,
remaining for distribution to common stockholders on a per share basis in
proportion to the respective per share liquidation units of such series. On June
30, 1998, each share of GGD Stock had 100 liquidation units, each share of GTR
Stock had 58 liquidation units and each share of GMO Stock had 25 liquidation
units. Because the liquidation units will not be adjusted to reflect changes in
the relative market value or performance of each of the divisions of Genzyme,
the per share liquidating distribution to a holder of GGD Stock, GTR Stock or
GMO Stock is not likely to correspond to the value of the assets of Genzyme
General, GTR or GMO, respectively, at the time of a dissolution, liquidation or
winding up of Genzyme.
Management and Accounting Policies Subject to Change
The Genzyme Board has adopted certain management and accounting policies
applicable to the preparation of the financial statements of the divisions of
Genzyme, the allocation of corporate expenses, assets and liabilities and other
accounting matters, the reallocation of assets between divisions and other
matters. These policies may, except as stated therein, be modified or rescinded
in the sole discretion of the Genzyme Board without the approval of Genzyme's
stockholders, subject to the Genzyme Board's fiduciary duty to all holders of
Genzyme's capital stock. The Genzyme Board may also adopt additional policies
depending upon the circumstances. See "Management and Accounting Policies
Governing the Relationship of Genzyme Divisions" set forth in Exhibit 99.1 to
the 1997 10-K.
Non-Compete Policy
The Genzyme Board has adopted a policy providing that the Company will not
develop products and services outside of GTR or GMO that compete with products
and services being developed or sold by GTR or GMO, other than through joint
ventures in which GTR or GMO participates. For a discussion of this and other
matters regarding policies relating to the divisions, see "Management and
Accounting Policies Governing the Relationship of Genzyme Divisions" set forth
in Exhibit 99.1 to the 1997 10-K.
Use of Operating Losses by Other Genzyme Divisions
Genzyme's management and accounting policies provide that to the extent any
division of Genzyme is unable to utilize its operating losses or other projected
tax benefits to reduce its current or deferred income tax expense, such losses
or benefits may be reallocated to another division on a quarterly basis for
financial reporting purposes. Accordingly, although the actual payment of taxes
is a corporate liability of Genzyme as a whole, separate financial statements
will be prepared for each division and any losses that cannot be utilized by a
division will be allocated among the profitable divisions rather than carried
forward to reduce the future tax liability of the division generating the
losses. This could result in a division with losses (such as GTR and GMO
currently) being charged a greater portion of the total corporate tax liability
and reporting lower earnings after taxes in the future than would have been the
case if such division had retained its losses or other benefits in the form of a
net operating loss carryforward. See "Management and Accounting Policies
Governing the Relationship of Genzyme Divisions" set forth in Exhibit 99.1 to
the 1997 10-K.
11
<PAGE> 13
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges is calculated by dividing (x) the
sum of (i) net income (loss) before income taxes and extraordinary credits and
(ii) fixed charges (excluding capitalized interest), by (y) fixed charges. Fixed
charges consist of interest (expensed and capitalized), amortization of debt
issuance costs and conversion features, and the estimated interest portion of
rent expense. The Company's consolidated ratio of earnings to fixed charges for
the fiscal years ended December 31, 1994, 1995 and 1997 were 2.6x, 3.5x and
2.3x, respectively; and the consolidated ratio of earnings to fixed charges for
the six months ended June 30, 1998 was 2.7x. The ratio of earnings to fixed
charges is not presented for the years ended December 31, 1993 and 1996 because
in such years fixed charges exceeded earnings (as set forth above) by $17.4
million and $72.3 million, respectively, due primarily to (i) in 1993, charges
for in-process research and development of $49.0 million and charges for
goodwill impairment and restructuring costs of $26.5 million and (ii) in 1996,
charges for in-process research and development of $130.6 million.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Notes or the
Conversion Shares.
12
<PAGE> 14
CAPITALIZATION
The following table sets forth cash, cash equivalents, short- and long-term
investments and capitalization of the Company as of June 30, 1998:
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
-------------------
(DOLLARS IN
THOUSANDS,
EXCEPT PAR VALUE)
<S> <C>
Cash, cash equivalents, short- and long-term
investments(1)............................................ $ 509,508
==========
Long-term debt less current maturities:
Revolving credit facility(2)................................ 100,000
Convertible subordinated notes offered hereby............... 250,000
Other long-term debt........................................ 8,981
Convertible debentures, net(3).............................. 32,759
----------
Total long-term debt less current maturities........... 391,740
Stockholders' equity(4):
Genzyme General Division Common Stock, $.01 par value
200,000,000 shares authorized; 78,708,877 issued and
outstanding............................................... 787
Genzyme Tissue Repair Division Common Stock, $.01 par value
40,000,000 shares authorized; 20,259,113 issued and
outstanding............................................... 203
Genzyme Molecular Oncology Division Common Stock, $.01 par
value 40,000,000 shares authorized; 3,928,572 issued and
outstanding............................................... 39
Additional paid-in capital -- Genzyme General............... 911,403
Additional paid-in capital -- Genzyme Tissue Repair......... 172,477
Additional paid-in capital -- Genzyme Molecular Oncology.... 34,573
Treasury stock -- at cost Genzyme General Division Common
Stock, 106,358 shares..................................... (901)
Accumulated deficit......................................... (55,466)
Foreign currency translation adjustments.................... (12,605)
Unrealized net gain (loss) on investments................... (3,185)
----------
Total stockholders' equity............................. 1,047,325
----------
Total capitalization.............................. $1,439,065
==========
</TABLE>
- ---------------
(1) Cash, cash equivalents, short- and long-term investments excludes
investments in equity securities.
(2) This credit line is with a group of banks and allows borrowing by the
Company up to $225.0 million (the "Revolving Credit Facility"). As of June
30, 1998, Genzyme had $100.0 million outstanding under the Revolving Credit
Facility.
(3) In February 1997, GTR raised $13.0 million (before fees and expenses)
through the private placement of a 5% convertible note (the "GTR Note") due
February 27, 2000 to an affiliate of Credit Suisse First Boston Corporation.
The GTR Note is convertible into shares of GTR Stock, at the option of the
holder, at a discount to the market price for such shares. In the first
quarter of 1997, GTR recorded $11.4 million of proceeds attributed to the
value of the debt and $1.6 million attributed to the value of the conversion
feature (recorded as an increase to division equity). The debt will be
accreted to its $13.0 million face value by a charge to interest expense of
$1.6 million over the term of the initial 15 month conversion period. As of
June 30, 1998, GTR had accreted $1.6 million of the value of the conversion
feature.
In August 1997, GMO raised $20.0 million (before offering discounts and
expenses) through the private placement of 6% convertible debentures (the
"GMO Debentures") due August 28, 2002. The GMO Debentures are convertible
into shares of GMO Stock, at the option of the holders, beginning on the
91st day after the effective date of a registration statement covering the
initial public offering of GMO Stock (the "GMO IPO") at a discount to the
market price for such shares. In the third quarter of 1997, GMO
13
<PAGE> 15
recorded $16.5 million of proceeds attributed to the value of the debt and
$3.5 million attributed to the value of the conversion feature (recorded as
an increase to division equity). The debt will be accreted to its $20.0
million face value by a charge to the interest expense of $3.5 million over
the term of the initial 15 month conversion period. As of June 30, 1998, GMO
had accreted $2.4 million of the value of the conversion feature.
Because the effective date of the GMO IPO did not occur on or before August
29, 1998, at the holders' option, the GMO Debentures may be exchanged for 5%
convertible debentures (the "GGD Debentures") due 2003. The exchange option
must be exercised before September 29, 1998. The GGD Debentures, if issued,
will be convertible at the option of the holder at any time prior to
maturity into shares of GGD Stock at a conversion price of $33.67 per share.
As of September 15, 1998, exchange options had been exercised with respect
to an aggregate principal amount of $16,250,000 of GMO Debentures.
(4) Excludes (i) 14,193,676 shares of GGD Stock reserved for issuance upon
exercise of outstanding stock options and warrants, (ii) 3,244,098 and
822,508 outstanding shares of GTR Stock reserved for issuance upon exercise
of outstanding stock options and GTR Designated Shares (as defined herein),
respectively, (iii) 1,186,312 shares of GMO Stock reserved for issuance upon
exercise of outstanding stock options and warrants and 6,000,000 shares of
GMO Stock reserved for issuance as GMO Designated Shares (as defined herein)
and (iv) any shares of GGD Stock issuable upon conversion of the GGD
Debentures, for a maximum of 629,641 shares of GGD Stock, assuming a
conversion price of $33.67 per share of GGD Stock.
14
<PAGE> 16
DESCRIPTION OF REVOLVING CREDIT FACILITY
In November 1996, Genzyme refinanced its existing $215.0 million line of
credit with a Revolving Credit Facility made available through a group of
commercial banks administered by Fleet National Bank. Under the terms of the
Revolving Credit Facility, Genzyme may request loans up to a maximum aggregate
principal amount outstanding at any time of $225.0 million. Amounts drawn under
this facility may be allocated to Genzyme General, GTR or GMO. As of June 30,
1998, Genzyme had $100.0 million of debt outstanding under the Revolving Credit
Facility, which had been allocated $82.0 million to Genzyme General and $18.0
million to GTR. Amounts borrowed under the Revolving Credit Facility are payable
on November 15, 1999. In December 1996, Genzyme entered into an interest rate
swap contract (the "Interest Rate Swap Contract") to effectively convert the
variable interest rate on $100.0 million of borrowings under the Revolving
Credit Facility to fixed interest rates. Net payments made or received under the
Interest Rate Swap Contract are recorded as interest expense.
The Revolving Credit Facility imposes certain financial covenants and other
restrictions that, among other things, require Genzyme to maintain certain
levels of earnings, liquidity and leverage ratios and limit Genzyme's and its
subsidiaries' ability to (i) incur additional indebtedness, (ii) incur liens on
their property, (iii) make certain investments, (iv) engage in certain sales of
assets, (v) engage in acquisitions that do not meet specified criteria and (vi)
enter into certain transactions of merger or consolidation. If Genzyme defaults
on the covenants, the Revolving Credit Facility is payable on demand. In
connection with the offering of the Notes, the Revolving Credit Facility was
amended to permit the issuance of the Notes.
The stock of Genzyme Securities Corporation is pledged as collateral for
the Revolving Credit Facility.
Amounts borrowed under the Revolving Credit Facility bear interest at LIBOR
plus an applicable margin pursuant to the terms and conditions defined in the
credit agreement As of June 30, 1998, the interest rate on amounts outstanding
under the Revolving Credit Facility was approximately 6.19%. Genzyme pays a
commitment fee ranging from .15% to .375% on the unused portion of the Revolving
Credit Facility.
Amounts owed under the Revolving Credit Facility represent Senior
Indebtedness, as defined in the Indenture relating to the Notes.
15
<PAGE> 17
DESCRIPTION OF NOTES
The Notes were issued under an Indenture dated as of May 22, 1998 (the
"Indenture"), between the Company and State Street Bank and Trust Company, as
Trustee (the "Trustee"). A copy of the Indenture is included as an exhibit to
the Registration Statement of which this Prospectus forms a part. The statements
under this caption relating to the Indenture and the Notes are summaries and do
not purport to be complete. Such summaries make use of certain terms defined in
the Indenture and are qualified in their entirety by express reference to the
Indenture. The terms of the Notes include those made a part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended. For purposes of this
section, the term "Company" means only Genzyme Corporation and not its
subsidiaries.
GENERAL
The Notes are general unsecured obligations of the Company limited to an
aggregate principal amount of $250,000,000. The Notes bear interest at an annual
rate of 5 1/4%, mature on June 1, 2005 (unless earlier redeemed at the option of
the Company, converted into GGD Stock at the option of the holder or repurchased
by the Company at the option of the holder upon a Fundamental Change) and are
subordinated obligations of the Company. Interest is payable semiannually, on
June 1 and December 1, commencing December 1, 1998, to the registered holders of
record on the preceding May 15 and November 15, respectively. Interest is
calculated on the basis of a 360-day year of twelve 30-day months. Although the
Notes are general obligations of the Company, principal and interest is paid
from funds allocated for financial statement presentation purposes to Genzyme
General. Holders of the Notes have no specific claim against the assets
attributable to Genzyme General.
See "-- Book-Entry; Delivery and Form" for information regarding the form,
documents and mechanics for transferring the Notes.
The Indenture contains no restrictions on the payment of dividends or the
repurchase of securities of the Company or any financial covenants. The
Indenture contains no covenants or other provisions to afford protection to
holders of Notes in the event of a highly leveraged transaction or a change in
control of the Company except to the extent described under "-- Repurchase at
Option of Holder Upon a Fundamental Change."
CONVERSION RIGHTS
The Notes are convertible at their principal amount into GGD Stock at any
time prior to the business day prior to redemption or the business day prior to
maturity, in whole or from time to time in part (in denominations of $1,000 and
integral multiples thereof), at the option of the holder thereof, initially at a
conversion price of $39.60, subject to adjustment as described below.
The right of conversion attaching to any Note may be exercised (a) if such
Note is represented by a Global Note, by book-entry transfer to the conversion
agent (which will initially be the Trustee) through the facilities of DTC, or
(b) if such Note is represented by a definitive Note, by delivery of such Note
at the specified office of the conversion agent, accompanied, in either case, by
a duly signed and completed notice of conversion and appropriate endorsements
and transfer documents if required by the Conversion Agent. The conversion date
is the date on which the Note and all of the items required for conversion have
been so delivered and the requirements for conversion have been met. A holder
delivering a Note for conversion is required to pay any taxes or duties payable
in respect of the issue or delivery of the GGD Stock upon conversion in a name
other than that of the holder.
The conversion privilege and price is subject to adjustment upon the
occurrence of certain events, including (i) the issuance of capital stock of the
Company as a dividend (or other distribution) on the GGD Stock, (ii) the
distribution to all holders of GGD Stock of rights or warrants entitling them to
subscribe for or purchase GGD Stock at less than the current market price (as
defined in the Indenture) on the record date for such issuance, (iii)
subdivisions, combinations and certain reclassifications of GGD Stock, (iv)
certain distributions to all holders of GGD Stock of cash, debt securities (or
other evidence of indebtedness) or other
16
<PAGE> 18
assets (excluding dividends or distributions described in clauses (i) or (ii)
above or (v) below), (v) a dividend or other distribution consisting exclusively
of cash to all holders of GGD Stock, excluding (A) cash dividends that do not
exceed the per share amount of the immediately preceding regular cash dividend
(as adjusted to reflect any of the events referred to in clauses (i) through
(vi) of this sentence) and (B) cash dividends to the extent that the annualized
per share amount thereof does not exceed 15% of the current market price of GGD
Stock as of the trading day immediately preceding the date of declaration of
such dividend; and (vi) payment to holders of GGD Stock in respect of a tender
or exchange offer (other than an odd-lot offer) by the Company or any subsidiary
of the Company for GGD Stock at a price in excess of 110% of the current market
price of GGD Stock on the last date tenders or exchanges may be made pursuant to
such tender or exchange offer.
No adjustment in the conversion price is required unless such adjustment
would require a change of at least 1% in the conversion price then in effect;
provided that any adjustment that would otherwise be required to be made shall
be carried forward and taken into account in any subsequent adjustment. The
Company from time to time may voluntarily reduce the conversion price for a
period of at least twenty days. Fractional shares of GGD Stock will not be
issued upon conversion, but, in lieu thereof, the Company will issue a check for
the current market value of such fractional shares rounded to the nearest cent
based upon the market price of the GGD Stock. No payment or adjustment will be
made for interest accrued on a converted Note or for dividends or distributions
on any GGD Stock issued upon conversion of any Note.
Subject to the rights of holders of the Notes described below under
"-- Repurchase at Option of Holder Upon a Fundamental Change," if the Company
consolidates with or merges into, or transfers or leases all or substantially
all of its assets to, any person, or is a party to a merger that reclassifies or
changes its outstanding GGD Stock, the holder of each Note then outstanding
shall after such consolidation, merger, transfer or lease have the right to
convert such Note into the kind and amount of shares of securities, cash or
other assets that such holder would have been entitled to receive upon such
consolidation, merger, transfer or lease if such holder had held the GGD Stock
issuable upon the conversion of such Note immediately prior to such
consolidation, merger, transfer or lease (assuming, in a case in which the
Company's stockholders may exercise rights of election, that a holder of Notes
would not have exercised any rights of election as to the stock, other
securities or other property or assets receivable in connection therewith and
received per share the kind and amount received per share by a plurality of
nonelecting shares).
REDEMPTION AT THE COMPANY'S OPTION
The Notes may not be redeemed prior to June 10, 2001 and are redeemable,
subject to the subordination provisions described below, on such date and
thereafter at the option of the Company, as a whole or from time to time in
part, at the following prices (expressed as percentages of the principal amount)
plus accrued interest to, but not including, the redemption date: 102.63% if
redeemed on or before May 31, 2002 and thereafter as follows if redeemed during
the 12-month period beginning on June 1 of the years set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2002............................................ 101.75%
2003............................................ 100.88%
2004............................................ 100.00%
</TABLE>
Notice of redemption at the Company's option will be mailed at least 30
days, but not more than 60 days, before the redemption date to the address of
each holder of Notes to be redeemed as set forth in the note register. If fewer
than all the Notes are to be redeemed, selection of Notes for redemption will be
made by the Trustee by lot, or in its discretion, on a pro rata basis (unless
the Company specifically directs the Trustee otherwise) in integral multiples of
$1,000. If any Notes are to be redeemed in part only, the notice of redemption
relating to such Notes shall state the portion of the principal amount to be
redeemed. In that case, new Notes in principal amount equal to the unredeemed
portion thereof will be issued in the name of the holder thereof upon surrender
to the Trustee of the original Notes.
No sinking fund is provided for the Notes.
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<PAGE> 19
REPURCHASE AT OPTION OF HOLDER UPON A FUNDAMENTAL CHANGE
If a Fundamental Change occurs, each holder of Notes has the right, at the
holder's option, to require the Company to repurchase all of such holder's
Notes, or any portion thereof that is an integral multiple of $1,000, on the
date (the "Repurchase Date") selected by the Company that is not less than ten
nor more than 30 days after the Final Surrender Date (as defined below), at a
price equal to 100% of the principal amount of the Notes, plus accrued interest
to the Repurchase Date.
The Company may not purchase any Note pursuant to the preceding paragraph
at any time when the subordination provisions of the Indenture otherwise would
prohibit the Company from making payments of principal in respect of the Notes.
Unless the Company shall previously have called for redemption of all of
the Notes, within 30 days after the occurrence of a Fundamental Change, the
Company is obligated to deliver to the Trustee and mail (or cause the Trustee to
mail) to all holders of record of the Notes a notice (the "Company Notice")
describing, among other things, the occurrence of such Fundamental Change and of
the repurchase right arising as a result thereof. The Company must cause a copy
of the Company Notice to be published in a newspaper of general circulation in
the Borough of Manhattan, The City of New York. To exercise the repurchase
right, a holder of Notes must, on or before the date which is, subject to any
contrary requirements of applicable law, 60 days after the date of mailing of
the Company Notice (the "Final Surrender Date"), give irrevocable written notice
of the holder's exercise of such right and surrender the Notes (if such Note is
represented by a Global Note, by book-entry transfer to the conversion agent
through the facilities of DTC) with respect to which the right is being
exercised, duly endorsed for transfer to the Company, at any place where
principal is payable. The submission of such notice together with such Notes
pursuant to the exercise of a repurchase right will be irrevocable on the part
of the holder (unless the Company fails to repurchase the Notes on the
repurchase date) and the right to convert the Notes will expire upon such
submission.
The term "Fundamental Change" means any of the following:
(i) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) becoming the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act) of Voting Shares (as defined below)
of the Company entitled to exercise more than 50% of the total voting power
of all outstanding Voting Shares of the Company (including any right to
acquire Voting Shares that are not then outstanding of which such person or
group is deemed the beneficial owner); or
(ii) a change in the Board of Directors of the Company in which the
individuals who constituted the Board of Directors of the Company at the
beginning of the two-year period immediately preceding such change
(together with any other director whose election by the Board of Directors
of the Company or whose nomination for election by the shareholders of the
Company was approved by a vote of at least two-thirds of the directors then
in office who either were directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the directors then in office; or
(iii) any consolidation of the Company with, or merger of the Company
into, any other person, any merger of another person into the Company, or
any sale or transfer of all or substantially all of the assets of the
Company to another person (other than (a) a merger which does not result in
any reclassification, conversion, exchange or cancellation of outstanding
shares of GGD Stock, (b) a merger which is effected solely to change the
jurisdiction of incorporation of the Company or (c) any consolidation with
or merger of the Company into a wholly owned subsidiary of the Company, or
any sale or transfer by the Company of all or substantially all of its
assets to one or more of its wholly owned subsidiaries, in any one
transaction or a series of transactions, provided, in any such case, that
the resulting corporation or each such subsidiary assumes or guarantees the
Company's obligations under the Notes, provided, however, that a
Fundamental Change shall not occur with respect to any such transaction if
either (i) the last sale price of the GGD Stock for any five trading days
during the ten trading days immediately preceding the public announcement
by the Company of such transaction is at least equal to 105% of the
conversion price in effect on such trading day or (ii) the consideration in
such transaction to the holders of GGD
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<PAGE> 20
Stock consists of cash, securities that are, or immediately upon issuance
will be, listed on a national securities exchange or quoted on the Nasdaq
National Market, or a combination of cash and such securities, and the
aggregate fair market value of such consideration (which, in the case of
such securities, shall be equal to the average of the last sale prices of
such securities during the ten consecutive trading days commencing with the
sixth trading day following consummation of the transaction) is at least
105% of the conversion price in effect on the date immediately preceding
the closing date of such transaction.
"Voting Shares" is defined to mean all outstanding shares of any class or
series (however designated) of capital stock entitled to vote generally in the
election of members of the Board of Directors and includes, without limitation,
the GGD Stock, the GTR Stock and the GMO Stock.
The right to require the Company to repurchase the Notes as a result of the
occurrence of a Fundamental Change could create an event of default under
existing or future Senior Indebtedness of the Company, as a result of which any
repurchase could, absent a waiver, be blocked by the subordination provisions of
the Notes. See "-- Subordination." Failure by the Company to repurchase the
Notes when required will result in an Event of Default (as defined below) with
respect to the Notes whether or not such repurchase is permitted by the
subordination provisions.
The holders' repurchase right upon the occurrence of a Fundamental Change
could, in certain circumstances, make more difficult or discourage a potential
takeover of the Company and, thus, removal of incumbent management. The
Fundamental Change repurchase right, however, is not the result of management's
knowledge of any specific effort to accumulate shares of GGD Stock or to obtain
control of the Company by means of a merger, tender offer, solicitation or
otherwise. Instead, the Fundamental Change purchase feature is a standard term
contained in other similar debt offerings and the terms of such feature have
resulted from negotiations between the Company and the Initial Purchasers.
The Company could in the future enter into certain transactions, including
highly leveraged recapitalizations, that would not constitute a Fundamental
Change and would, therefore, not provide the holders with the protection of
requiring the Company to repurchase the Notes.
Rule l3e-4 under the Exchange Act requires the dissemination of certain
information to securityholders in the event of an issuer tender offer and may
apply in the event that the repurchase option becomes available to holders of
the Notes. The Company will comply with this rule to the extent applicable at
that time.
SUBORDINATION
The payment of the principal of, and premium, if any, and interest on, the
Notes is subordinated in right of payment to the extent set forth in the
Indenture to the prior payment in full of amounts then due on all Senior
Indebtedness, as defined in the Indenture. In addition, the Notes are
effectively subordinated in right of payment to third party indebtedness of the
Company's subsidiaries. As of June 30, 1998, the Company and its subsidiaries
had an aggregate of $109,586,000 of consolidated indebtedness and other
obligations that would have ranked senior to the Notes. Upon the maturity of
Senior Indebtedness, whether by acceleration or otherwise, or any distribution
of assets of the Company resulting from any liquidation, dissolution, winding
up, reorganization or any insolvency proceedings of the Company, the holders of
all Senior Indebtedness will be entitled to receive payment in full before the
holders of the Notes will be entitled to receive any payment of the principal
of, or premium, if any, or interest on, the Notes. Upon the happening of a
default or event of default in the payment of the principal, premium, if any, or
interest on the Senior Indebtedness, then, unless such default or event of
default has been cured or waived or shall have ceased to exist, no payment shall
be made by the Company with respect to the principal, premium, if any, or
interest on (or otherwise in respect of) the Notes or to acquire any of the
Notes. Upon the happening of a default or event of default in respect of the
Senior Indebtedness (other than a default or event of default in payment of the
principal, premium, if any, or interest on the Senior Indebtedness) and if the
Trustee and the Company receives a notice of such default or event of default
from the holders of the Senior Indebtedness or their representative (a "Payment
Blockage Notice"), then no payment shall be made by the Company with respect to
the principal, premium, if any, or interest on (or otherwise in respect of) the
Notes until the earlier of (i) the date on which such default or
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<PAGE> 21
event of default shall have been cured or waived or shall have ceased to exist
or (ii) the 179th day after the date of such receipt of such Payment Blockage
Notice. No more than one Payment Blockage Notice shall be effective during any
365 consecutive day period. No such default or event of default that existed
upon first delivery of any Payment Blockage Notice shall be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default or event of
default shall have been cured or waived for a period of 180 consecutive days.
See "RISK FACTORS -- Risks Related to the Notes -- Subordination" and
"-- Limitations on Repurchase of Notes Upon a Fundamental Change." By reason of
such subordination, in the event of insolvency, holders of the Notes may recover
less, ratably, than other creditors of the Company.
"Senior Indebtedness" is defined to mean: (a) the principal of, interest
(including interest during bankruptcy and similar proceedings) on and any other
amounts owing with respect to (i) any indebtedness of the Company, now or
hereafter outstanding, in respect of borrowed money (other than the Notes), (ii)
any indebtedness of the Company, now or hereafter outstanding evidenced by a
bond, note, debenture, capitalized lease, letter of credit reimbursement
agreement or other similar instrument, (iii) any other written obligation of the
Company, now or hereafter outstanding. to pay money issued or assumed as all or
part of the consideration for the acquisition of property, assets or securities
and (iv) any guaranty or endorsement (other than for collection or deposit in
the ordinary course of business) or discount with recourse of, or other
agreement (contingent or otherwise) to purchase, repurchase or otherwise
acquire, to supply or advance funds or to become liable with respect to
(directly or indirectly), any indebtedness or obligation of any person of the
type referred to in the preceding subclauses (i), (ii) and (iii) now or
hereafter outstanding and (b) any refundings, renewals or extensions of any
indebtedness or other obligation described in clause (a); unless, in the case of
any of the foregoing, the instrument, lease or other document creating or
evidencing the same expressly provides that such indebtedness or obligation by
its terms is not senior in right of payment to the Notes. The Indenture does not
contain any limitation or restriction on the issuance of Senior Indebtedness or
other indebtedness or securities of the Company or its subsidiaries.
The Indenture permits the Trustee and any paying agent to become a creditor
of the Company and to own Notes and does not preclude the Trustee or any such
paying agent from enforcing its rights as a creditor, including rights as a
holder of Senior Indebtedness. See "-- Concerning the Trustee."
In the event that any holder of Notes receives any payment or distribution
of assets of the Company of any kind in contravention of the subordination
provisions of the Indenture in respect of the Notes before all Senior
Indebtedness is paid in full, then such payment or distribution will be held by
the recipient in trust for the benefit of holders of Senior Indebtedness of the
Company and shall pay it over to them as their interests may appear.
Any right of the Company to receive assets of any of its subsidiaries upon
their liquidation or reorganization (and the consequent right of the holders of
the Notes to participate in these assets) will be effectively subordinated to
the claims of that subsidiary's creditors (including trade creditors), except to
the extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinate
to any security interests in the assets of such subsidiary and any indebtedness
of such subsidiary senior to that held by the Company and would be subject to
judicial power to subordinate the Company's claim to those of other creditors of
such subsidiary in certain cases.
The Company is obligated to pay reasonable compensation to the Trustee and
to indemnify the Trustee against any losses, liabilities or expenses incurred by
it in connection with its duties under the Indenture. The Trustee's claims for
such payments will be senior to those of holders of the Notes in respect of all
funds collected or held by the Trustee.
EVENTS OF DEFAULT AND NOTICE THEREOF
The following are Events of Default: (a) a default in the payment of any
interest on any Note continues for 30 days or more after such payment is due,
whether or not such payment is prohibited by the subordination provisions of the
Indenture, (b) a default in the payment of principal of or premium, if any, on
any Note or of the repurchase price in respect of any Note when due, whether or
not such payment is prohibited by the subordination provisions of the Indenture,
(c) a default in the performance of any other covenant or
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<PAGE> 22
agreement of the Company in the Indenture that continues for 60 days after
written notice to the Company by the Trustee or the holders of at least 25% in
principal amount of outstanding Notes, (d) failure by the Company to make any
payment when due, including any applicable grace period, in respect of
indebtedness for borrowed money of the Company, which payment is in an amount in
excess of $20.0 million, (e) default by the Company with respect to any
indebtedness for borrowed money of the Company, which default results in
acceleration of any such indebtedness which is in an amount in excess of $20.0
million, and (f) certain events of bankruptcy, insolvency or reorganization.
If an Event of Default shall occur and be continuing and if it is known to
the Trustee, the Trustee is required to mail to each holder of the Notes a
notice of the Event of Default within 90 days after such default occurs. Except
in the case of a default in payment of the principal of or premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as the
Trustee in good faith determines that withholding the notice is in the interests
of the holders of the Notes.
If an Event of Default shall occur and be continuing, the Trustee or the
holders of not less than 25% in principal amount of outstanding Notes may
declare the principal of, and accrued interest on, all the Notes to be due and
payable immediately. If the Event of Default relates to bankruptcy, insolvency
or reorganization, the Notes shall automatically become due and payable
immediately, subject to applicable law.
Holders of the Notes may not enforce the Indenture or Notes except as
provided in the Indenture. Subject to the provisions of the Indenture relating
to the duties of the Trustee in case an Event of Default shall occur and be
continuing, the Trustee will be under no obligation to exercise any of the
rights or powers under the Indenture at the request or direction of any holders
of the Notes, unless the holders shall have offered the Trustee indemnity
reasonably satisfactory to it. Subject to the indemnification provisions and
certain limitations contained in the Indenture, the holders of a majority in
principal amount of the Notes at the time outstanding will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee. Those holders may, in certain cases, waive any default except a default
in payment of principal of, or premium, if any, or interest on, any Note or a
failure to comply with certain provisions of the Indenture relating to
conversion of the Notes.
The Company is required to furnish the Trustee annually with a certificate
as to its compliance with the conditions and covenants provided for in the
Indenture.
DISCHARGE
The Indenture provides that the Company may terminate its obligations under
the Indenture at any time by delivering all outstanding Notes to the Trustee for
cancellation if the Company has paid all sums payable by it under the Indenture.
At any time within one year before the maturity of the Notes or the redemption
of all the Notes, the Company may terminate its substantive obligations under
the Indenture, other than its obligations to pay the principal of, and interest
on, the Notes, by depositing with the Trustee money or U.S. Government
obligations sufficient to pay all remaining indebtedness on the Notes when due.
MERGER AND CONSOLIDATION
The Company may not consolidate or merge with or into, or sell, lease,
convey or otherwise dispose of all or substantially all of its assets to,
another corporation, person or entity unless (i) the Company is the surviving
person or the successor or transferee is a corporation organized under the laws
of the United States, any state thereof or the District of Columbia, or a
corporation or comparable legal entity organized under the laws of a foreign
jurisdiction and whose equity securities are listed on a national securities
exchange in the United States or authorized for quotation on Nasdaq, (ii) the
successor assumes all the obligations of the Company under the Notes and the
Indenture (except under certain circumstances, conversion obligations) and
enters into a supplemental indenture and (iii) after such transaction no Event
of Default exists.
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<PAGE> 23
MODIFICATION AND WAIVER
Subject to certain exceptions, supplements of and amendments to the
Indenture or the Notes may be made by the Company and the Trustee with the
consent of the holders of not less than a majority in aggregate principal amount
of the outstanding Notes and any existing default or compliance with any
provisions may be waived with the consent of the holders of a majority in
aggregate principal amount of the outstanding Notes. Without the consent of any
holders of the Notes, the Company and the Trustee may amend or supplement the
Indenture or the Notes to cure any ambiguity, defect or inconsistency, to
provide for the assumption of the Company's obligations to holders of the Notes
and to make certain changes with respect to conversion rights in case of a
merger or acquisition otherwise in compliance with the Indenture or to make any
change that does not materially adversely affect the rights of any holder of the
Notes. Without the consent of the holders of each Note affected thereby, an
amendment, supplement or waiver may not (a) change the stated maturity date of
the principal of, or interest on, any Note, or adversely affect the right to
convert any Note, (b) reduce the principal amount or repurchase price of, or
interest or premium, if any, on, any Note, (c) change the currency for payment
of principal of, or interest on, any Note, (d) impair the right to institute
suit for the enforcement of any payment on or with respect to any Note, (e)
modify the subordination provisions of the Indenture in a manner adverse to the
holders, (f) reduce the above stated percentage of outstanding Notes necessary
to amend or supplement the Indenture or waive defaults or compliance or (g)
modify (with certain exceptions) any provisions of the Indenture relating to
modification and amendment of the Indenture or waiver of compliance with
conditions and defaults thereunder.
CONCERNING THE TRUSTEE
State Street Bank and Trust Company, the Trustee under the Indenture, has
been appointed by the Company as the initial paying agent, conversion agent and
registrar ("Registrar") with regard to the Notes. The Company and its
subsidiaries may maintain deposit accounts and conduct other banking
transactions with the Trustee or its affiliates in the ordinary course of
business, and the Trustee and its affiliates may from time to time in the future
provide the Company with banking and financial services in the ordinary course
of their business.
In case an Event of Default shall occur (and shall not be cured) and
holders of the Notes have notified the Trustee, the Trustee will be required to
exercise its powers with the degree of care and skill that a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs. Subject to such provisions, the Trustee is under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
of the holders of Notes, unless the holders shall have offered to the Trustee
indemnity reasonably satisfactory to it.
GOVERNING LAW
The Indenture and Notes are governed by and construed in accordance with
the laws of the State of New York, without giving effect to such State's
conflicts of law principles.
BOOK-ENTRY; DELIVERY AND FORM
The Depository Trust Company ("DTC") acts as securities Depositary for the
Notes. The Notes have been issued in fully registered form, without coupons, in
denominations of $1,000 principal amount and multiples thereof. The Notes are
evidenced by the Global Notes deposited with the Trustee as custodian for DTC
and registered in the name of Cede & Co. as DTC's partnership nominee. Record
ownership of the Global Notes may be transferred, in whole or in part, only to
another nominee of DTC or to a successor of DTC or its nominee. Interests in the
Global Note will trade in DTC's Same-Day Funds Settlement System and secondary
market trading activity in such interests will therefore settle in immediately
available funds, subject in all cases to the rules and procedures of DTC and its
participating organizations ("Participants").
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE. THE LAWS OF SOME STATES
REQUIRE
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<PAGE> 24
THAT CERTAIN PERSONS TAKE PHYSICAL DELIVERY IN DEFINITIVE FORM OF SECURITIES
THAT THEY OWN. CONSEQUENTLY, THE ABILITY TO TRANSFER BENEFICIAL INTERESTS IN A
GLOBAL NOTE TO SUCH PERSONS MAY BE LIMITED TO THAT EXTENT. BECAUSE DTC CAN ACT
ONLY ON BEHALF OF THE PARTICIPANTS, WHICH IN TURN ACT ON BEHALF OF THE INDIRECT
PARTICIPANTS AND CERTAIN BANKS, THE ABILITY OF A PERSON HAVING BENEFICIAL
INTERESTS IN A GLOBAL NOTE TO PLEDGE SUCH INTERESTS TO PERSONS OR ENTITIES THAT
DO NOT PARTICIPATE IN THE DTC SYSTEM, OR OTHERWISE TAKE ACTIONS IN RESPECT OF
SUCH INTERESTS, MAY BE AFFECTED BY THE LACK OF A PHYSICAL CERTIFICATE EVIDENCING
SUCH INTERESTS.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its Participants deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants" include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain custodial relationships with Direct
Participants, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Securities and
Exchange Commission (the "Commission").
Purchases of Notes within the DTC system must be made by or through Direct
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each actual purchaser of each Note ("Beneficial Owner") is
in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the Beneficial
Owners purchased Notes. Transfers of ownership interests in the Notes are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Notes, except in the event that use of the
book-entry system for the Notes is discontinued.
To facilitate transfers, all Notes deposited by Participants with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
Notes with DTC and their registration in the name of Cede & Co. effect no change
in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of
the Notes; DTC's records reflect only the identity of the Direct Participants to
whose accounts such Notes are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the Notes. If less than all of the Notes are being redeemed, DTC's current
practice is to determine by lot the amount of the interest of each Direct
Participant to be redeemed.
Although voting with respect to the Notes is limited to the holders of
record of the Notes, in those instances in which a vote is required, neither DTC
nor Cede & Co. will itself consent or vote with respect to Notes. Under its
usual procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the
Trustee as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts such Notes are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
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<PAGE> 25
Payments of principal of and any premium and interest on the Notes will be
made by the Trustee to Cede & Co., as DTC's partnership nominee. DTC's practice
is to credit Direct Participants' accounts on the relevant payment date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participant and not of DTC or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
distributions to DTC is the responsibility of the Trustee, disbursement of such
payments to Direct Participants shall be the responsibility of DTC, and
disbursements of such payments to the Beneficial Owners is the responsibility of
Direct and Indirect Participants.
DTC may discontinue providing its services as securities Depositary with
respect to any of the Notes at any time by giving reasonable notice to the
Company. In the event that a successor securities Depositary is not obtained,
definitive certificates representing such Notes are required to be printed or
delivered. The Company, at its option, may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor Depositary).
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be accurate, but the
Company assumes no responsibility for the accuracy thereof. The Company has no
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
A Global Note is exchangeable for definitive Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depository for the Global Note and the Company thereupon
fails to appoint a successor depository or (y) has ceased to be a clearing
agency registered under the Exchange Act, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Notes in certificated form or (iii) there shall have occurred and be continuing
a Default or an Event of Default with respect to the Notes. In all cases,
certificated Notes delivered in exchange for any Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of DTC (in accordance with its
customary procedures).
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<PAGE> 26
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal
income tax considerations relevant to holders of the Notes and shares of GGD
Stock issuable upon conversion of the Notes. This discussion is based on the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
promulgated thereunder, Internal Revenue Service ("IRS") rulings and judicial
decisions now in effect, all of which are subject to change (possibly with
retroactive effect) or to different interpretations. This discussion does not
purport to deal with all aspects of United States federal income taxation that
may be relevant to a particular investor's decision to purchase the Notes or
acquire shares of GGD Stock issuable upon conversion of the Notes, and it is not
intended to be wholly applicable to all categories of investors, some of which
(such as dealers in securities, banks, insurance companies, tax-exempt
organizations and persons holding the Notes as a position in a "straddle",
hedge, conversion transaction or otherwise as an integrated investment) may be
subject to special rules. In addition, this discussion is limited to persons
that purchase the Notes pursuant to this Prospectus and hold the Notes and will
hold GGD shares as "capital assets" within the meaning of Section 1221 of the
Code.
PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE GGD STOCK.
As used herein, the term "United States Holder" means a beneficial owner of
the Notes that is, for United States federal income tax purposes, (i) a citizen
or resident (as defined in Section 7701(b) of the Code) of the United States,
(ii) a corporation, partnership or other entity created or organized in or under
the laws of the United States or political subdivision thereof, (iii) an estate
the income of which is subject to United States federal income taxation
regardless of its source, or (iv) a trust whose administration is subject to the
primary supervision of a United States court and which has one or more United
States persons who have the authority to control all substantial decisions of
the trust. A "Non-United States Holder" is any holder of Notes that is not a
United States Holder.
UNITED STATES HOLDERS
PAYMENT OF INTEREST
Interest on a Note generally will be includable in the income of a United
States Holder as ordinary income at the time such interest is received or
accrued, in accordance with such United States Holder's regular method of
accounting for United States federal income tax purposes.
CONVERSION OF NOTES INTO GGD STOCK
In general, a United States Holder will not recognize income, gain or loss
upon a conversion of the Notes into shares of GGD Stock except with respect to
cash received in lieu of a fractional share of GGD Stock. Such holder's adjusted
tax basis in the GGD Stock received on conversion of a Note will equal the
holders's adjusted tax basis in the Note at the time of conversion, reduced by
the portion of the adjusted tax basis of the Note allocated to any fractional
share of GGD Stock exchanged for cash. A United States Holder's holding period
in the GGD Stock received on conversion of Notes will include the period during
which the converted Notes were held.
Cash received in lieu of a fractional share of GGD Stock upon conversion of
a Note will be treated as a payment in exchange for the fractional share of GGD
Stock. Accordingly, the receipt of cash in lieu of a fractional share of GGD
Stock generally will result in capital gain or loss, measured by the difference
between the cash received for the fractional share and the United States
Holder's adjusted tax basis in the fractional share interest.
The conversion price of the Notes is subject to adjustment under certain
circumstances. See "DESCRIPTION OF NOTES -- Conversion Rights." Section 305 of
the Code and the Treasury Regulations issued thereunder may treat the United
States Holders of the Notes as having received a constructive distribution,
taxable as ordinary income to the extent of the Company's current and
accumulated earnings and profits, if
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and to the extent that certain adjustments in the conversion price, or failure
to make such an adjustment, that may occur in limited circumstances
(particularly an adjustment to reflect a taxable dividend to holders of GGD
Stock) increase the proportionate interest of a holder of Notes in the fully
diluted GGD Stock, whether or not such holder ever exercises its conversion
privilege. Generally, a United States Holder's tax basis in a Note will be
increased by the amount of any such constructive dividend.
The Company believes that the GGD Stock should be treated as common stock
of the Company. United States Holders should be aware, however, that there are
no United States federal income tax regulations, court decisions or published
IRS rulings bearing directly on the characterization of the GGD Stock. In
addition, the IRS has announced that it will not issue any advance rulings
regarding the United States federal income tax consequences of stock such as the
GGD Stock that has certain voting and liquidation rights in an issuing
corporation, but whose dividend rights are determined by reference to the
earnings and profits of a segregated portion of the issuing corporation's
assets. It is possible that the IRS might take the position that the GGD Stock
represents property other than stock of the Company, with the result that (i) a
portion of the purchase price of the Notes could be allocated to the conversion
right, potentially resulting in the Notes being issued with original issue
discount, and (ii) the conversion of Notes into shares of GGD Stock would be a
taxable transaction.
MARKET DISCOUNT
Under the market discount rules, if a United States Holder purchases a Note
at market discount (i.e., at a price below its principal amount) in excess of a
statutorily-defined de minimis amount and thereafter recognizes a gain upon a
disposition or retirement of the Note, then the lesser of the gain recognized or
the portion of the market discount that accrued on a straight-line basis (or, if
elected, on a constant interest rate basis) generally will be treated as
ordinary income at the time of the disposition. Any accrued market discount not
previously taken into income prior to a conversion of a Note, however, should
(under Treasury Regulations not yet issued) carry over to the GGD Stock received
on conversion and be treated as ordinary income upon a subsequent disposition of
such GGD Stock to the extent of any gain recognized on such disposition. In
addition, absent an election to include market discount in income as it accrues,
a United States Holder of a market discount debt instrument may be required to
defer a portion of any interest expense that otherwise may be deductible on any
indebtedness incurred or maintained to purchase or carry such debt instrument
until the holder disposes of the debt instrument in a taxable transaction.
AMORTIZABLE BOND PREMIUM
If a United States Holder of a Note acquires a Note at a cost that is in
excess of its principal amount, the United States Holder may elect under Section
171 of the Code to amortize the excess cost (as an offset to interest income) on
a constant interest rate basis over the term of such Note. (If a smaller
amortization allowance would result, the amortization is determined instead by
reference to an earlier call date and price.) If the United States Holder makes
an election to amortize bond premium, the tax basis of all such holder's Notes
will be reduced by the allowable bond premium amortization. The amortization
election would apply to all debt instruments held or subsequently acquired by
the electing purchaser and cannot be revoked without permission from the IRS. On
conversion of a Note into shares of GGD Stock, no additional amortization of any
bond premium would be allowed, and any remaining premium would be added to the
United States Holder's basis in the GGD stock received.
SALE, EXCHANGE OR RETIREMENT OF NOTES
Each United States Holder of Notes generally will recognize a gain or loss
upon the sale, exchange, redemption, repurchase, retirement or other disposition
of the Notes (not including a conversion of the Notes into GGD Stock) equal to
the difference (if any) between (i) the amount of cash and the fair market value
of any property received (except to the extent that such cash or other property
is attributable to the payment of accrued interest not previously included in
income, which amount will be taxable as ordinary income) and (ii) such holder's
adjusted tax basis in those Notes (including any market discount previously
included in income by the holder). Each United States Holder of GGD Stock into
which the Notes are converted, in
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general, will recognize gain or loss upon the sale, exchange or other
disposition of the GGD Stock measured under rules similar to those described in
the preceding sentence for the Notes. Any such gain or loss recognized on the
sale, exchange, repurchase, retirement or other disposition of a Note or share
of GGD Stock should generally be capital gain or loss (except as discussed under
"-- Market Discount" above), and would be subject to tax at the short-term,
mid-term or long-term capital gain tax rate, depending on the period for which
the Notes are held. A United States Holder's initial tax basis in a Note will be
the purchase price paid therefor. The deductibility of capital losses is subject
to limitation.
DISTRIBUTIONS
Distributions, if any, made on any GGD Stock received upon conversion of
the Notes generally will be includable in the income of a United States Holder
as ordinary income to the extent of the Company's current and accumulated
earnings and profits. Such distributions may be eligible for the
dividends-received deduction in the case of United States Holders that are
domestic corporations, subject to applicable limitations.
To the extent that the amount of any distribution exceeds the Company's
current and accumulated earnings and profits, the distribution first will be
treated as a tax-free return of capital until the United States Holder's
adjusted basis in the GGD Stock is reduced to zero, and the balance in excess of
adjusted basis will be taxed as capital gain.
INFORMATION REPORTING AND BACKUP WITHHOLDING
A United States Holder of Notes or GGD Stock may be subject to backup
withholding at a rate of 31% with respect to certain reportable payments,
including interest payments, dividend payments and, under certain circumstances,
principal payments on the Notes or proceeds of the sale of the Notes or the GGD
Stock. These backup withholding rules apply if the holder, among other things,
(i) fails to furnish a social security number or other taxpayer identification
number ("TIN") certified under penalties of perjury within a reasonable time
after the request therefor, (ii) furnishes an incorrect TIN, (iii) fails to
report properly interest or dividends or (iv) under certain circumstances, fails
to provide a certified statement, signed under penalties of perjury, that the
TIN furnished is the correct number and that such holder is not subject to
backup withholding. A United States Holder who does not provide the Company with
its correct TIN also may be subject to penalties imposed by the IRS. Any amount
withheld from a payment to a United States Holder under the backup withholding
rules is creditable against such holder's United States federal income tax
liability, provided the required information is furnished to the IRS. Backup
withholding will not apply, however, with respect to payments made to certain
holders, including corporations and tax-exempt organizations, provided their
exemption from backup withholding is properly established.
The Company will report to the United States Holders of Notes and GGD Stock
and to the IRS the amount of any reportable payments for each calendar year and
the amount of tax withheld, if any, with respect to such payments.
NON-UNITED STATES HOLDERS
PAYMENT OF INTEREST
Generally, interest income of a Non-United States Holder that is not
effectively connected with a United States trade or business or attributable to
a permanent establishment in the United States will be subject to a withholding
tax at a 30% rate (or, if applicable, a lower treaty rate). However, interest
paid on a Note by the Company or any Paying Agent to a Non-United States Holder
will qualify for the "portfolio interest exemption" and therefore, subject to
the discussion of backup withholding below, will not be subject to United States
federal income tax or withholding tax, provided that (i) the Non-United States
Holder does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the Company entitled to vote, (ii) the
Non-United States Holder is not a controlled foreign corporation that is related
to the Company actually or constructively through stock ownership, (iii) the
Non-United States Holder is not a bank which acquired the Notes in consideration
for an extension of credit made pursuant to a
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loan agreement entered into in the ordinary course of business and (iv) either
(a) the beneficial owner of the Note, under penalties of perjury, provides the
Company or its agent with a Form W-8 (or a suitable substitute form) that
includes its name and address and certifies that it is not a United States
person or (b) a securities clearing organization, bank, or other financial
institution that holds customers' securities in the ordinary course of its trade
or business certifies to the Company or its agent, under penalties of perjury,
that such a Form W-8 (or a suitable substitute) statement has been received by
it from the Non-United States Holder or a qualifying intermediary and furnishes
to the Company or its agent a copy thereof.
Recently adopted Treasury regulations (the "Withholding Regulations") will
change the methods for satisfying the certification requirement described in
clause (iv) above. The Withholding Regulations also will require, in the case of
Notes held by a foreign partnership that (i) this certification generally be
provided by the partners rather than by the foreign partnership and (ii) the
foreign partnership provide certain information, including a United States
employer identification number. A look-through rule would apply in the case of
tiered partnerships. The Withholding Regulations are effective for payments made
after December 31, 1999.
A Non-United States Holder will generally be subject to tax in the same
manner as a United States corporation or resident with respect to interest
income if it is effectively connected with the conduct of trade or business in
the United States (or is attributable to a permanent establishment in the United
States, if a tax treaty applies). Such income received by a Non-United States
Holder that is a corporation may in certain circumstances be subject to an
additional "branch profits tax" at a 30% rate or, if applicable, a lower treaty
rate.
To claim the benefit of a tax treaty or to claim exemption from withholding
because the income is effectively connected to a U.S. trade or business, the
Non-United States Holder must provide a properly executed Form 1001 or 4224, as
applicable, prior to the payment of interest. Under the Withholding Regulations,
the Non-United States Holder would need to provide a properly executed Form W-8
in either instance.
SALE, EXCHANGE OR RETIREMENT OF NOTES
A Non-United States Holder generally will not be subject to United States
federal income tax or withholding tax on gain realized on the sale or exchange
of Notes unless (i) the Non-United States Holder is an individual who was
present in the United States for 183 days or more during the taxable year and to
whom such gain is U.S. source, (ii) the gain is effectively connected with the
conduct of a trade or business of the holder in the United States (or is
attributable to a permanent establishment in the United States, if a tax treaty
applies), (iii) the Non-United States Holder is subject to tax pursuant to the
provisions of the Code applicable to certain United States expatriates or, (iv)
under certain circumstances, which the Company does not expect to be applicable,
the Note is a "United States real property interest," within the meaning of
section 897 of the Code.
CONVERSION OF NOTES INTO GGD STOCK
In general, no United States federal income tax or withholding tax will be
imposed upon the conversion of a Note into GGD Stock by a Non-United States
Holder, except with respect to the receipt of cash in lieu of fractional shares
by Non-United States Holders upon conversion of a Note, where any of the
conditions described above under "Non-United States Holders -- Sale, Exchange or
Retirement of Notes" is satisfied.
SALE OR EXCHANGE OF GGD STOCK
A Non-United States Holder will generally not be subject to United States
federal income tax or withholding tax on the sale or exchange of GGD Stock
unless any of the conditions above under "Non-United States Holders -- Sale,
Exchange or Retirement of Notes" is satisfied.
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DIVIDENDS ON THE GGD STOCK
Under current Treasury Regulations, dividends paid on shares of GGD Stock
held by a Non-United States Holder and not effectively connected with the
conduct of a trade or business in the United States (or attributable to a
permanent establishment in the United States) by such holder will generally be
subject to United States withholding tax at a rate of 30%, or such lower rate as
may be provided by an applicable tax treaty, but generally will not be subject
to any additional information reporting or backup withholding.
Except to the extent that an applicable tax treaty otherwise provides, a
Non-United States Holder will be subject to tax in the same manner as a United
States Holder on dividends paid that are effectively connected with the conduct
of a trade or business in the United States by the Non-United States Holder (or
is attributable to a permanent establishment in the United States, if a tax
treaty applies). If such Non-United States Holder is a foreign corporation, it
may also be subject to a United States "branch profits tax" on such effectively
connected income at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
Under the Withholding Regulations, effective for payments made after
December 31, 1999, a holder who is not a United States person who wishes to
claim the benefit of an applicable tax treaty rate will be required to satisfy
applicable certification requirements. In the case of GGD Stock held by a
foreign partnership, the Withholding Regulations will require that (i) this
certification generally be provided by the partners rather than by the foreign
partnership and (ii) the foreign partnership provide certain information,
including a United States employer identification number. A look-through rule
would apply in the case of tiered partnerships.
DEATH OF A NON-UNITED STATES HOLDER
A Note held by an individual who is not a citizen or resident of the United
States at the time of death will not be includable in the decedent's gross
estate for United States estate tax purposes, provided that such holder or
beneficial owner did not at the time of death actually or constructively own 10%
or more of the combined voting power of all classes of stock of the Company
entitled to vote, and provided that, at the time of death, payments with respect
to such Note would not have been effectively connected with the conduct by such
Non-United States Holder of a trade or business within the United States.
GGD Stock actually or beneficially held (other than through a foreign
corporation) by a Non-United States Holder at the time of his or her death (or
previously transferred subject to certain retained rights or powers or
transferred by gift within three years of death) will be subject to United
States federal estate tax unless otherwise provided by an applicable estate tax
treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
United States information reporting requirements and backup withholding tax
will not apply to payments on a Note to a Non-United States Holder if the
statement described in "Non-United States Holders -- Payment of Interest" is
duly provided by such Holder, provided that the payor does not have actual
knowledge that the Holder is a United States person.
Under current Treasury Regulations, information reporting requirements and
backup withholding tax will not apply to any payment of the proceeds of the sale
of a Note or any payment of the proceeds of the sale of GGD Stock effected
outside the United States by a foreign office of a "broker" (as defined in
applicable Treasury Regulations), unless such broker is (i) a United States
person, (ii) a foreign person that derives 50% or more of its gross income for
certain periods from activities that are effectively connected with the conduct
of a trade or business in the United States or (iii) a controlled foreign
corporation for United States federal income tax purposes. Payment of the
proceeds of any such sale effected outside the United States by a foreign office
of any broker that is described in (i), (ii) or (iii) of the preceding sentence
will not be subject to backup withholding tax, but will be subject to
information reporting requirements unless such broker has documentary evidence
in its records that the beneficial owner is a Non-United States Holder and
certain other conditions are met, or the beneficial owner otherwise establishes
an exemption. Payment of the proceeds of any such sale
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to or through the United States office of a broker is subject to information
reporting and backup withholding requirements, unless the beneficial owner of
the Note provides the statement described in "Non-United States
Holders -- Payment of Interest" or otherwise establishes an exemption.
If paid to an address outside the United States, dividends on GGD Stock
held by a Non-United States Holder will generally not be subject to the
information reporting and backup withholding requirements described in this
section, provided that the payor does not have actual knowledge that the Holder
is a United States person. However, under the Withholding Regulations, dividend
payments made after December 31, 1999 will be subject to information reporting
and backup withholding unless applicable certification requirements are
satisfied. See the discussion above with respect to rules applicable to foreign
partnerships under the Withholding Regulations.
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DESCRIPTION OF GENZYME CAPITAL STOCK
The following descriptions are qualified in their entirety by reference to
the Genzyme Charter which is an exhibit to the Registration Statement of which
this Prospectus forms a part.
INTRODUCTION
Genzyme is authorized to issue 390 million shares of common stock, of which
200 million shares have been designated GGD Stock, 40 million shares have been
designated GTR Stock, 40 million shares have been designated GMO Stock and 110
million shares remain undesignated as to series. In addition, Genzyme is
authorized to issue 10 million shares of preferred stock. Each designated series
of Genzyme common stock has the voting powers, qualifications and rights
described below.
DIVIDENDS
Genzyme has never paid any cash dividends on shares of its capital stock.
Genzyme currently intends to retain its earnings to finance future growth and,
therefore, does not anticipate paying any cash dividends on Genzyme common stock
in the foreseeable future.
Dividends on each series of Genzyme common stock may be declared and paid
only out of the lesser of funds of Genzyme legally available therefor and the
Available GGD Dividend Amount (with respect to the GGD Stock), the Available GTR
Dividend Amount (with respect to the GTR Stock) or the Available GMO Dividend
Amount (with respect to the GMO Stock)(each term as defined below). Under the
Massachusetts Business Corporation Law (the "MBCL"), the payment of dividends is
permitted if the corporation is not insolvent, the dividend payment does not
render the corporation insolvent, and the dividend payment does not violate the
corporation's articles of organization. Subject to such limitations, the Genzyme
Board may, in its sole discretion, declare and pay dividends exclusively on any
series of Genzyme common stock, in equal or unequal amounts, notwithstanding the
amounts available for the payment of dividends on each series, the respective
voting and liquidation rights of each series, the amounts of prior dividends
declared on each series or any other factor.
As stated above, in addition to the statutory limitations under the MBCL,
dividends on the GGD Stock, the GTR Stock and the GMO Stock are limited to an
amount not in excess of the Available GGD Dividend Amount, the Available GTR
Dividend Amount or the Available GMO Dividend Amount, respectively. The
"Available Dividend Amount" with respect to a particular series of Genzyme
common stock is defined to mean generally the greater of
(i) the excess of
(a) the greater of
(X) the fair value of the net assets allocated to the division
represented by such series of Genzyme common stock and
(Y) an amount equal to stockholders' equity allocated to such
division as of June 30, 1994, in the case of the GGD Stock and the GTR
Stock, and September 30, 1996, in the case of the GMO Stock, increased
or decreased, as appropriate, to reflect, after such date
(1) the net income or loss of such division,
(2) any dividends or other distributions (including by
reclassification or exchange) declared or paid with respect to, or
repurchases or issuances of, any shares of capital stock attributed
to such division, but excluding dividends or other distributions paid
in shares of capital stock attributed to such division to the holders
thereof and
(3) any other adjustments to the stockholders' equity of such
division made in accordance with generally accepted accounting
principles, over
(b) the aggregate par value of all outstanding shares of capital stock
attributed to such division and
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(ii) the amount legally available for the payment of dividends determined
in accordance with Massachusetts law applied as if such division were a separate
corporation.
EXCHANGE OF GTR STOCK AND GMO STOCK
The GTR Stock or the GMO Stock may be exchanged for any combination of cash
and/or GGD Stock upon the terms described below. Genzyme cannot predict the
impact on the market prices of each series of Genzyme common stock of its
ability to effect such exchanges.
OPTIONAL EXCHANGE. The Genzyme Board may at any time exchange all
outstanding shares of GTR Stock or GMO Stock for any combination of cash and/or
GGD Stock having a Fair Market Value equal to 130% of the Fair Market Value of
the GTR Stock or GMO Stock, as the case may be, such Fair Market Value being
determined by the trading prices during a specified period prior to the first
public announcement by Genzyme of such exchange.
The foregoing provision allows Genzyme the flexibility to redeem all
outstanding shares of GTR Stock and/or GMO Stock and leave outstanding one or
two series of Genzyme common stock that would, collectively, represent the
residual equity interest in all of Genzyme's businesses. The optional exchange
could be exercised at any future time if the Genzyme Board determined that,
under the facts and circumstances then existing, an equity structure consisting
of three series of common stock was no longer in the best interests of all of
Genzyme's stockholders. Such exchange may be completed, however, at a time that
is disadvantageous to the holders of a particular series of Genzyme common
stock. The right of the Genzyme Board to exchange at any time all outstanding
shares of GTR Stock or GMO Stock for any combination of cash and/or GGD Stock
having a Fair Market Value equal to 130% of the Fair Market Value of the GTR
Stock or the GMO Stock does not preclude the Genzyme Board from making an offer
to exchange such shares on terms other than those provided in the Genzyme
Charter. Although any alternative offer would be subject to acceptance by
holders of the shares to be exchanged, such offer could be made on terms less
favorable than those provided in the Genzyme Charter. See "RISK FACTORS -- Risks
Related to Genzyme Tracking Stock -- No Rights or Additional Duties With Respect
to the Divisions; Potential Conflicts."
MANDATORY EXCHANGE. In the event of the disposition, in one transaction or
a series of related transactions, by Genzyme of all or substantially all of the
properties and assets allocated to GTR or GMO (other than in connection with the
sale by Genzyme of all or substantially all of its properties and assets) to any
person, entity or group (other than (i) a wholly-owned subsidiary of Genzyme or
(ii) any entity formed at the direction of Genzyme in connection with obtaining
financing for the programs or products of GTR or GMO, as the case may be),
Genzyme will be required to exchange each outstanding share of GTR Stock or GMO
Stock for any combination of cash and/or GGD Stock having a Fair Market Value
equal to 130% of the Fair Market Value of GTR Stock or GMO Stock, as the case
may be, as determined by the trading prices during a specified period prior to
the first public announcement by Genzyme of such disposition. See "RISK
FACTORS -- Risks Related to Genzyme Tracking Stock -- Exchange of GTR Stock and
GMO Stock."
VOTING RIGHTS
Holders of shares of each series of Genzyme common stock vote together as a
single class on all matters as to which common stockholders generally are
entitled to vote (including the election of directors). On all such matters,
each share of GGD Stock has one vote, each share of GTR Stock has, through
December 31, 1998, .33 vote, and each share of GMO Stock has, through December
31, 1998, .25 vote. Holders of outstanding GGD Stock, GTR Stock and GMO Stock
currently have approximately 91.1%, 7.7% and 1.2%, respectively, of the total
voting power of Genzyme. On January 1, 1999 and on each January 1 every two
years thereafter, the number of votes to which each share of GTR Stock and GMO
Stock is entitled will be adjusted to equal the ratio of the Fair Market Value
of one share of GTR Stock or GMO Stock, as the case may be, to the Fair Market
Value of one share of GGD Stock as of such date. If no shares of GGD Stock are
outstanding on such date, then all other series of Genzyme common stock
outstanding on such date will have a number of votes such that each share of the
series of common stock that has the highest Fair Market Value per share on such
date (the "Base Series") will have one vote, and each share of each other series
of outstanding common
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stock will have the number of votes determined according to the immediately
preceding sentence, treating, for such purpose, the Base Series as the GGD Stock
in such sentence.
The voting rights of the GTR Stock and the GMO Stock will be appropriately
adjusted so as to avoid dilution in the aggregate voting rights of any series of
Genzyme common stock in the event the outstanding shares of any series are
subdivided (by stock split, reclassification or otherwise) or combined (by
reverse stock split, reclassification or otherwise), or in the event of the
issuance of shares of any series as a dividend or a distribution to holders of
shares of such series. If shares of only one series of Genzyme common stock are
outstanding, or if shares of any series of Genzyme common stock are entitled to
vote separately as a class, each share of that series would have one vote.
The relative voting rights of each series of Genzyme common stock are
adjusted from time to time as described above so that a holder's voting rights
may more closely reflect the market value of such holder's equity investment in
Genzyme. Adjustments in the relative voting rights of each class of Genzyme
common stock may influence an investor interested in acquiring and maintaining a
fixed percentage of Genzyme's voting power to acquire such percentage of all
series of Genzyme common stock, and will limit the ability of investors in one
series to acquire for the same consideration relatively greater or lesser voting
power per share than investors in the other series. To the extent the relative
market values of each series of Genzyme common stock change prior to the first
such adjustment or in between any adjustments, however, an investor in one
series of Genzyme common stock may acquire relatively more or less voting power
for the same consideration when compared with investors in another series of
Genzyme common stock.
In addition to voting together as a single class of stock, the Genzyme
Charter requires the approval by the holders of the affected series of Genzyme
common stock at a meeting at which a quorum is present and the votes cast in
favor of the proposal exceed those cast against to:
(i) allow any proceeds from the disposition of the properties or
assets allocated to any division to be used in the business of the other
division without fair compensation,
(ii) allow any properties or assets allocated to any division to be
used in the business of another division or for the declaration or payment
of any dividend or distribution on any series of Genzyme common stock not
attributed to such division without fair compensation,
(iii) issue shares of any series of Genzyme common stock without
allocating the proceeds of such issuance to the division represented by
such series of Genzyme common stock (provided, however, that Genzyme may
without such approval issue GTR Designated Shares and GMO Designated
Shares),
(iv) change the rights or preferences of any series of Genzyme common
stock so as to affect the series adversely or
(v) effect any merger or business combination involving Genzyme as a
result of which (a) the holders of all series of Genzyme common stock shall
no longer own, directly or indirectly, at least fifty percent (50%) of the
voting power of the surviving corporation and (b) the holders of all series
of Genzyme common stock do not receive the same form of consideration,
distributed among such holders in proportion to the market capitalization
of each series of Genzyme common stock as of the date of the first public
announcement of such merger or business combination.
In addition to the voting rights provided in the Genzyme Charter, the
approval of the holders of a majority of the outstanding shares of each series
of Genzyme common stock, voting together as a single class, is required under
the current MBCL to approve any amendment to the articles of organization that
would alter or change the powers, preferences or special rights of the shares of
such series so as to affect them adversely. The MBCL does not currently provide
for any other separate voting rights for a series of common stock. Consequently,
because most matters brought to a stockholder vote will only require the
approval of a majority of all of Genzyme's outstanding capital stock entitled to
vote on such matters (including all series of common stock) voting together as a
single class and because the holders of GGD Stock will initially have more than
the number of votes required to approve any such matter, such holders would be
in a position to control the
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outcome of the vote on such a matter. See "RISK FACTORS -- Risks Related to
Genzyme Tracking Stock -- No Additional Separate Voting Rights."
LIQUIDATION RIGHTS
In the event of a voluntary or involuntary dissolution, liquidation or
winding up of the affairs of Genzyme, after Genzyme has satisfied or made
provision for its debts and obligations and for payment to the holders of shares
of any series of capital stock having preferential rights to receive
distributions of the net assets of Genzyme, the holders of Genzyme common stock
are entitled to receive the net assets, if any, remaining for distribution to
common stockholders on a per share basis in proportion to the respective per
share liquidation units of such series and will have no direct claim against any
particular assets of Genzyme or any of its subsidiaries. On June 30, 1998, each
share of GGD Stock had 100 liquidation units, each share of GTR Stock had 58
liquidation units and each share of GMO Stock had 25 liquidation units. The
liquidation units of the GTR Stock and the GMO Stock will be appropriately
adjusted so as to avoid dilution in the aggregate liquidation rights of any
series in the event the outstanding shares of any series are subdivided (by
stock split, reclassification or otherwise) or combined (by reverse stock split,
reclassification or otherwise), or in the event of the issuance of shares of any
series as a dividend or a distribution to holders of shares of that series, but
will not otherwise be adjusted. A merger or business combination involving
Genzyme or a sale of all or substantially all of the assets of Genzyme will not
be treated as a liquidation. Genzyme may not, however, without approval by the
holders of the GTR Stock and the GMO Stock voting as separate series of stock,
effect any merger or business combination involving Genzyme as a result of which
(i) the holders of all series of Genzyme common stock shall no longer own,
directly or indirectly, at least fifty percent of the voting power of the
surviving corporation and (ii) the holders of each series of Genzyme common
stock do not receive the same form of consideration, distributed among such
holders in proportion to the market capitalization of each series of common
stock as of the date of the first public announcement of such merger or business
combination.
GTR DESIGNATED SHARES AND GMO DESIGNATED SHARES
GTR Designated Shares and GMO Designated Shares are authorized shares of
GTR Stock and GMO Stock, respectively, which are not issued and outstanding, but
which the Genzyme Board may from time to time issue, sell or otherwise
distribute without allocating the proceeds or other benefits of such issuance,
sale or distribution to GTR or GMO, respectively. The shares of GTR Stock and
GMO Stock that are issuable with respect to the GTR Designated Shares and the
GMO Designated Shares, respectively, are not outstanding shares of GTR Stock or
GMO Stock, are not eligible to receive dividends and cannot be voted by Genzyme.
As of December 31, 1997, there were 885,053 GTR Designated Shares,
representing a potential 5.6% equity interest in GTR. The number of GTR
Designated Shares from time to time will be:
(i) adjusted as appropriate to reflect subdivisions (by stock split or
otherwise) and combinations (by reverse stock split or otherwise) of the
GTR Stock and dividends or distributions of shares of GTR Stock to holders
of GTR Stock and other reclassifications of GTR Stock;
(ii) decreased by (a) the number of any shares of GTR Stock issued by
Genzyme, the proceeds of which are allocated to Genzyme General, (b) the
number of any shares of GTR Stock issued upon the exercise or conversion of
securities convertible into GTR Stock that are attributed to Genzyme
General and (c) the number of any shares of GTR Stock issued by Genzyme as
a dividend or distribution or by reclassification, exchange or otherwise to
holders of GGD Stock; and
(iii) increased by (a) the number of any outstanding shares of GTR
Stock repurchased by Genzyme, the consideration for which was allocated to
Genzyme General, (b) one for each $10.00 reallocated from Genzyme General
to GTR from time to time in satisfaction of the purchase option of Genzyme
General set forth in section 4.18 of the Agreement and Plan of
Reorganization among Genzyme, Phoenix Acquisition Corporation and
BioSurface Technology, Inc. dated as of July 25, 1994, up to a maximum $30
million, and (c) the number of shares of GTR Stock equal to the fair value
(as
34
<PAGE> 36
determined by the Genzyme Board) of assets or properties allocated to
Genzyme General that are reallocated to GTR (other than reallocations that
represent sales at fair value between such divisions or reallocations
described in clause (b) above) divided by the Fair Market Value of one
share of GTR Stock as of the date of such reallocation.
The Genzyme Charter prohibits the taking of any action which would have the
effect of reducing the number of GTR Designated Shares to a number which is less
than zero.
As of December 31, 1997, there were 6,000,000 GMO Designated Shares,
representing a potential 60.4% equity interest in GMO. The number of GMO
Designated Shares from time to time will be:
(i) adjusted as appropriate to reflect subdivisions (by stock split or
otherwise) and combinations (by reverse stock split or otherwise) of the
GMO Stock and dividends or distributions of shares of GMO Stock to holders
of GMO Stock and other reclassifications of GMO Stock;
(ii) decreased by (a) the number of any shares of GMO Stock issued by
Genzyme, the proceeds of which are allocated to Genzyme General, (b) the
number of any shares of GMO Stock issued upon the exercise or conversion of
securities convertible into GMO Stock that are attributed to Genzyme
General and (c) the number of any shares of GMO Stock issued by Genzyme as
a dividend or distribution or by reclassification, exchange or otherwise to
holders of GGD Stock; and
(iii) increased by
(a) the number of any outstanding shares of GMO Stock repurchased
by Genzyme, the consideration for which was allocated to Genzyme
General;
(b) the number of shares of GMO Stock equal to the fair value (as
determined by the Genzyme Board) of assets or properties allocated to
Genzyme General that are reallocated to GMO (other than reallocations
that represent sales at fair value between such divisions) divided by
the Fair Market Value of one share of GMO Stock as of the date of such
reallocation;
(c) with respect to amounts drawn under an equity line of credit
approved by the Genzyme Board providing for the allocation of up to $25
million in cash from Genzyme General to GMO (the "GMO Equity Line"), a
number equal to the sum of the quotients obtained by dividing (A) the
amount of each advance under the GMO Equity Line by (B) $7.00 plus or
minus a daily proration of the difference between the price to the
public in the GMO IPO at $7.00, assuming straight line appreciation or
depreciation in the value of the GMO Stock over the period from the
closing date of the acquisition of PharmaGenics, Inc. to the closing
date of the GMO IPO; and, thereafter, upon each advance made under the
GMO Equity Line, a number equal to the quotient obtained by dividing (X)
the amount of each such advance by (Y) the Fair Market Value of the GMO
Stock on the date of such advance; or
(d) the number of shares of GMO Stock into which the Genzyme Board
elects to convert the promissory note dated February 10, 1997 issued by
PharmaGenics, Inc. to Genzyme.
The Genzyme Charter prohibits the taking of any action which would have the
effect of reducing the number of GMO Designated Shares to a number which is less
than zero.
Whenever additional shares of any series of common stock are issued and
sold by Genzyme, Genzyme will identify (i) the number of such shares issued and
sold for the account of the division to which they relate, the proceeds of which
will be allocated to and reflected in the financial statements of such division
and (ii) the number of such shares issued and sold from the GTR Designated
Shares or the GMO Designated Shares, which shall reduce the number of GTR
Designated Shares or GMO Designated Shares, as the case may be, and the proceeds
of which may be used for any proper corporate purpose. In the event Genzyme
repurchases outstanding shares of GTR Stock or GMO Stock, it will identify the
number of shares that are repurchased for consideration that was allocated to
Genzyme General and the number of GTR Designated Shares or GMO Designated Shares
may increase accordingly.
35
<PAGE> 37
DETERMINATIONS BY THE GENZYME BOARD
Any determination made by the Genzyme Board in good faith under any of the
provisions described above will be final and binding on all stockholders of
Genzyme.
"ANTI-TAKEOVER" PROVISIONS
CONTRACTUAL MEASURES. The Genzyme Charter and the By-Laws of Genzyme (the
"By-Laws") contain provisions that could discourage potential takeover attempts
and prevent stockholders from changing Genzyme's management, including
authorization of the Genzyme Board to issue shares of common stock and preferred
stock in series, enlarge the size of the Genzyme Board and fill any vacancies on
the Genzyme Board, and restrictions on the ability of stockholders to call a
special meeting of stockholders, bring business before an annual meeting and
nominate candidates for election as directors. Genzyme also has agreements with
certain officers containing change of control provisions.
In addition, Genzyme has a stockholder rights plan. Under this plan, each
outstanding share of GGD Stock, GTR Stock and GMO Stock also represents a right
that, under certain circumstances, may trade separately from the GGD Stock, GTR
Stock and GMO Stock, respectively. The rights, which are not currently
exercisable, under certain circumstances will permit their holders (other than
an acquiror) to purchase at a favorable price large amounts of GGD Stock, GTR
Stock and GMO Stock or securities of a successor to Genzyme with the result that
an acquiror's interest in Genzyme would be substantially diluted. The
description and terms of the rights are set forth in an Amended and Restated
Rights Agreement between Genzyme and American Stock Transfer and Trust Company
as Rights Agent.
BUSINESS COMBINATION STATUTE. The Massachusetts "Business Combination"
statute provides that, if a person acquires 5% or more of the stock of a
Massachusetts corporation without the approval of its board of directors (an
"interested stockholder"), he or she may not engage in certain transactions with
the corporation for a period of three years. There are certain exceptions to
this prohibition; for example, if the board of directors approves the
acquisition of stock or the transaction prior to the time that the person became
an interested stockholder, or if the interested stockholder acquires 90% of the
voting stock of the corporation (excluding voting stock owned by directors who
are also officers and certain employee stock plans) in one transaction, or if
the transaction is approved by the board of directors and by the affirmative
vote of two-thirds of the outstanding voting stock which is not owned by the
interested stockholder, the prohibition does not apply.
Genzyme is subject to the Massachusetts Business Combination statute unless
it elects not to be governed by the statute in the Genzyme Charter or the
By-Laws. Genzyme has not made such election and does not currently intend to
make such an election.
CONTROL SHARE ACQUISITION STATUTE. The Massachusetts "Control Share
Acquisition" statute provides that a person (the "acquiror") who makes a bona
fide offer to acquire, or acquires, shares of stock of a corporation that when
combined with shares already owned, would increase the acquiror's ownership to
at least 20%, 33 1/3% or a majority of the voting stock of the corporation, must
obtain the approval of a majority in interest of the shares held by all
stockholders, excluding shares held by the acquiror and the officers and inside
directors of the corporation, in order to vote the shares acquired. The statute
does not require the acquiror to consummate the purchase before the stockholder
vote is taken.
The Control Share Acquisition statute permits a Massachusetts corporation
to elect not to be governed by these provisions by including such an election in
its articles of incorporation or by-laws. The By-Laws contain a provision
pursuant to which Genzyme elected not to be governed by the Massachusetts
Control Share Acquisition statute. However, if at a future date the Genzyme
Board determines that it is in the best interests of Genzyme and its
stockholders that Genzyme be governed by the statute, the By-Laws may be amended
to permit it to be governed by such statute. Any such amendment, however, would
apply only to acquisitions crossing the thresholds which occur after the
effective date of such amendment.
36
<PAGE> 38
RIGHTS OF CERTAIN HOLDERS
The holders of an aggregate of 3,163,032 shares of Genzyme capital stock
are entitled to certain registration rights with respect to such shares.
Notwithstanding the existence of these rights, all of such shares, if held by
nonaffiliates of the Company, are eligible for unrestricted resale under the
Securities Act.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer and Trust Company is the registrar and transfer
agent for each series of Genzyme common stock.
37
<PAGE> 39
MANAGEMENT AND ACCOUNTING POLICIES GOVERNING
THE RELATIONSHIP OF GENZYME DIVISIONS
The Genzyme Board has adopted certain policies to govern the management of
Genzyme General, GTR and GMO. A description of these policies can be found in
Exhibit 99.1 to the 1997 10-K, which is incorporated herein by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." Except as otherwise provided
in the policies, the Genzyme Board may further modify or rescind the policies in
its sole discretion without approval of the stockholders, subject only to the
Genzyme Board's fiduciary duty to Genzyme's stockholders. The Genzyme Board may
also adopt additional policies depending upon the circumstances. Any
determination of the Genzyme Board to modify or rescind the policies, or to
adopt additional policies, including any such decision that would have disparate
impacts upon holders of the common stock representing the three divisions, would
be governed by the principles of Massachusetts law discussed under "RISK
FACTORS -- Risks Related to Genzyme Tracking Stock -- No Rights or Additional
Duties With Respect to the Divisions; Potential Conflicts." In addition,
generally accepted accounting principles require that any change in policy be
preferable (in accordance with such principles) to the previous policy.
38
<PAGE> 40
SELLING SECURITYHOLDERS
The Company issued and sold the Notes to Credit Suisse First Boston
Corporation, Cowen & Company and Goldman, Sachs & Co. (the "Initial Purchasers")
on May 22, 1998 pursuant to a private placement exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) thereof. The Notes
were sold by the Initial Purchasers in transactions exempt from the registration
requirements of the Securities Act, to persons reasonably believed by such
Initial Purchasers to be "qualified institutional buyers" (as defined in Rule
144A under the Securities Act). The Registration Statement of which the
Prospectus is a part has been filed pursuant to Rule 415 under the Securities
Act to afford the Selling Securityholders the opportunity to sell Notes and
Conversion Shares in registered transactions rather than pursuant to exemptions
from the registration requirements of the Securities Act.
The following table sets forth information concerning the aggregate
principal amount of Notes beneficially owned by each named Selling
Securityholder, as of September 11, 1998, and the number of shares of GGD Stock
issuable upon conversion of Notes held thereby, which may be offered from time
to time pursuant to this Prospectus. Other than their ownership of such
securities, none of the Selling Securityholders has had any material
relationship with the Company within the past three years. The table below has
been prepared on the basis of the information furnished to the Company by DTC
and/or by or on behalf of the Selling Securityholders. Any or all of the Notes
or the Conversion Shares listed below may be offered for sale by the Selling
Securityholders from time to time.
<TABLE>
<CAPTION>
NUMBER OF
PRINCIPAL AMOUNT SHARES OF PERCENTAGE OF
OF NOTES GGD STOCK NUMBER OF GGD STOCK
BENEFICIALLY PERCENTAGE BENEFICIALLY CONVERSION OUTSTANDING
OWNED THAT OF NOTES OWNED PRIOR TO SHARES THAT AFTER THE
NAME MAY BE SOLD OUTSTANDING OFFERING MAY BE SOLD(1) OFFERING(2)
---- ---------------- ----------- -------------- -------------------- -------------
<S> <C> <C> <C> <C> <C>
Alexandra Global Investment
Fund 1 Ltd.................. $ 6,000,000 2.4 0 151,515 *
Allegheny Teledyne Inc.
Pension Plan................ 2,165,000 * 0 54,671 *
Allstate Insurance Company.... 3,000,000 1.2 32,800 75,757 *
Aloha Airlines Non-Pilots
Pension Trust............... 175,000 * 0 4,419 *
Aloha Airlines Pilots
Retirement Trust............ 100,000 * 0 2,525 *
American Home Assurance
Company..................... 1,800,000 * 1,200 45,454 *
Argent Classic Convertible
Arbitrage Fund (Bermuda)
L.P......................... 10,000,000 4.0 0 252,525 *
Argent Classic Convertible
Arbitrage Fund L.P.......... 4,900,000 2.0 0 123,737 *
Argent Offshore Fund L.P...... 6,500,000 2.6 0 164,141 *
Aristeia International
Limited..................... 3,000,000 1.2 0 75,757 *
Aristeia Trading, L.L.C....... 1,500,000 * 0 37,878 *
Arkansas PERS................. 1,500,000 * 0 37,878 *
Associated Electric & Gas
Insurance Services
Limited..................... 625,000 * 0 15,782 *
Banca Popolare Friuladria..... 100,000 * 0 2,525 *
Bancroft Convertible Fund,
Inc......................... 500,000 * 0 12,626 *
Bankers Trust International... 5,000,000 2.0 0 126,262 *
Black Diamond Ltd............. 211,000 * 0 5,328 *
Black Diamond Partners,
L.P......................... 187,000 * 0 4,722 *
BNP Arbitrage SNC(3).......... 7,635,000 3.1 52,824 192,803 *
Bond Fund Series - Oppenheimer
Convertible Securities
Fund........................ 5,000,000 2 0 126,262 *
BS Debt Income Fund - Class
A........................... 10,000 * 0 252 *
BT Alex. Brown Inc............ 3,370,000 1.3 0 85,101 *
CALAMOS Convertible Fund...... 1,660,000 * 0 41,919 *
CALAMOS Growth and Income
Fund........................ 230,000 * 0 5,808 *
Canadian Imperial Holdings,
Inc......................... 1,500,000 * 0 37,878 *
Carrigaholt Capital (Bermuda)
L.P......................... 250,000 * 0 6,313 *
CFW-C, L.P.................... 7,500,000 3 0 189,393 *
</TABLE>
39
<PAGE> 41
<TABLE>
<CAPTION>
NUMBER OF
PRINCIPAL AMOUNT SHARES OF PERCENTAGE OF
OF NOTES GGD STOCK NUMBER OF GGD STOCK
BENEFICIALLY PERCENTAGE BENEFICIALLY CONVERSION OUTSTANDING
OWNED THAT OF NOTES OWNED PRIOR TO SHARES THAT AFTER THE
NAME MAY BE SOLD OUTSTANDING OFFERING MAY BE SOLD(1) OFFERING(2)
---- ---------------- ----------- -------------- -------------------- -------------
<S> <C> <C> <C> <C> <C>
Champion International
Corporation Master
Retirement Trust............ 2,600,000 1.0 0 65,656 *
Chrysler Corporation Master
Retirement Trust............ 2,600,000 1.0 0 65,656 *
CIBC Oppenheimer Corp......... 1,790,000 * 0 45,202 *
City of Knoxville Pension
System...................... 3,590,000 1.4 0 90,656 *
Commonwealth Life Insurance
Company - (Teamsters-Camden
Non-Enhanced)............... 2,500,000 1.0 0 63,131 *
CPR (USA) Inc................. 500,000 * 0 12,626 *
Credit Suisse First Boston
Corporation................. 18,753,000 7.5 0 473,560 *
Delaware PERS................. 1,050,000 * 0 26,515 *
Delta Air Lines Master
Trust....................... 3,875,000 1.6 0 97,853 *
Delta Airlines Inc. Retirement
Plan........................ 9,979,000 4.0 0 251,994 *
Deutsche Bank AG.............. 8,000,000 3.2 0 202,020 *
Double Black Diamond Offshore
LDC......................... 88,000 * 0 2,222 *
Eighteen Seventy Capital
Corporation................. 200,000 * 0 5,050 *
Ellsworth Convertible Growth
and Income Fund, Inc........ 500,000 * 0 12,626 *
Frederic C. Hamilton.......... 207,000 * 0 5,227 *
Golden Rule Insurance
Company..................... 123,000 * 0 3,106 *
GranGem 23 41 LLC............. 500,000 * 0 12,626 *
Greek Catholic Union.......... 20,000 * 0 505 *
Guaranty National Insurance
Company..................... 1,000,000 * 0 25,252 *
Hawaiian Airlines Employees
Pension Plan - IAM.......... 80,000 * 0 2,020 *
Hawaiian Airlines Pension Plan
for Salaried Employees...... 20,000 * 0 505 *
Hawaiian Airlines Pilots
Retirement Plan............. 125,000 * 0 3,156 *
Highbridge Capital
Corporation................. 9,914,000 4.0 0 250,353 *
HSBC Securities Inc........... 1,800,000 * 0 45,454 *
ICI American Holdings Trust... 450,000 * 0 11,363 *
J.P. Morgan & Co. Inc.(3)..... 4,000,000 1.6 2,665,900 101,010 3.5
John M. Olin Foundation,
Inc......................... 137,000 * 0 3,459 *
Kapiolani Medical Center...... 200,000 * 0 5,050 *
Kettering Medical Center
Funded Depreciation
Account..................... 110,000 * 0 2,777 *
Key Asset Management, Inc. as
Agent for the Charitable
Sec. Fd..................... 550,000 * 0 13,888 *
Key Asset Management, Inc. as
Agent for the EB Convertible
Sec. Fd..................... 675,000 * 0 17,045 *
Key Asset Management, Inc. as
Agent for the Field Fdn of
Illinois.................... 30,000 * 0 757 *
Key Asset Management, Inc. as
Agent for the GenCorp Fdn... 60,000 * 0 1,515 *
Key Asset Management, Inc. as
Agent for the Key Tr.
Convertible Sec. Fd......... 150,000 * 0 3,787 *
Key Asset Management, Inc. as
Agent for the Parker
Society/ Convertible Fund... 125,000 * 0 3,156 *
Key Asset Management, Inc. as
Agent for the Victory
Convertible Sec. Fd......... 750,000 * 0 18,939 *
</TABLE>
40
<PAGE> 42
<TABLE>
<CAPTION>
NUMBER OF
PRINCIPAL AMOUNT SHARES OF PERCENTAGE OF
OF NOTES GGD STOCK NUMBER OF GGD STOCK
BENEFICIALLY PERCENTAGE BENEFICIALLY CONVERSION OUTSTANDING
OWNED THAT OF NOTES OWNED PRIOR TO SHARES THAT AFTER THE
NAME MAY BE SOLD OUTSTANDING OFFERING MAY BE SOLD(1) OFFERING(2)
---- ---------------- ----------- -------------- -------------------- -------------
<S> <C> <C> <C> <C> <C>
Key Asset Management, Inc. as
Investment Manager for the
Health Foundation of Greater
Cincinnati.................. 100,000 * 0 2,525 *
Key Asset Management, Inc. as
Investment Manager for the
Potlatch-First Trust Co of
St. Paul.................... 260,000 * 0 6,565 *
Key Asset Management, Inc. as
Investment Manager for the
University of So. Florida
Fdn......................... 75,000 * 0 1,893 *
L.A. Fire and Police Pension
Fund........................ 555,000 * 0 14,015 *
LibertyView Plus Fund......... 500,000 * 0 12,626 *
Lipper Convertibles, L.P...... 3,250,000 1.3 0 82,070 *
Lipper Offshore Convertibles,
L.P......................... 2,750,000 1.1 0 69,444 *
Merrill Lynch Convertible
Fund, Inc................... 1,900,000 * 0 47,979 *
Merrill Lynch Equity
Convertible Series
Convertible Securities
Portfolio................... 700,000 * 0 17,676 *
Merrill Lynch Insurance
Group....................... 300,000 * 0 7,575 *
Merrill Lynch World Income
Fund, Inc................... 900,000 * 0 22,727 *
Merrill, Lynch, Pierce, Fenner
and Smith, Inc.............. 1,400,000 * 0 35,353 *
Nalco Chemical Company........ 225,000 * 0 5,681 *
National Union Fire Insurance
Company..................... 2,500,000 1.0 0 63,131 *
Occidental Petroleum.......... 200,000 * 0 5,050 *
OCM Convertible Trust......... 2,400,000 * 0 60,606 *
Ohio Workers Compensation
Board....................... 250,000 * 0 6,313 *
OZ Master Fund, Ltd........... 3,700,000 1.5 0 93,434 *
Pacific Life Insurance
Company..................... 1,000,000 * 0 25,252 *
Paloma Strategic Securities
Limited..................... 500,000 * 0 12,626 *
Partner Reinsurance Company,
Ltd......................... 500,000 * 0 12,626 *
Pitney Bowes Retirement
Fund........................ 237,000 * 0 5,984 *
Port Authority of Allegheny
County Retirement and
Disability Allowance Plan
for the Employees
Represented by Local 85 of
the Amalgamated Transit
Union....................... 1,385,000 * 0 34,974 *
PRIM Board.................... 2,000,000 * 0 50,505 *
Providian Life & Health
(Camden).................... 2,000,000 * 0 50,505 *
Queen's Health Care Plan...... 50,000 * 0 1,262 *
Raytheon Company Master
Pension Trust............... 1,290,000 * 0 32,575 *
Reliance Insurance Company.... 2,000,000 * 0 50,505 *
Security Insurance Company of
Hartford.................... 1,000,000 * 0 25,252 *
SG Cowen Securities Corp...... 10,700,000 4.3 0 270,202 *
Shell Pension Trust........... 200,000 * 0 5,050 *
South Dakota Retirement
System...................... 3,000,000 1.2 10,000 75,757 *
SPT........................... 800,000 * 0 20,202 *
State Employees' Retirement
Fund of the State of
Delaware.................... 890,000 * 0 22,474 *
State of Connecticut Combined
Investment Funds............ 3,150,000 1.3 0 79,545 *
State of Oregon Equity........ 5,325,000 2.1 0 134,469 *
Susquehanna Capital Group..... 5,300,000 2.1 0 133,838 *
The Class IC Company, Ltd..... 500,000 * 0 12,626 *
</TABLE>
41
<PAGE> 43
<TABLE>
<CAPTION>
NUMBER OF
PRINCIPAL AMOUNT SHARES OF PERCENTAGE OF
OF NOTES GGD STOCK NUMBER OF GGD STOCK
BENEFICIALLY PERCENTAGE BENEFICIALLY CONVERSION OUTSTANDING
OWNED THAT OF NOTES OWNED PRIOR TO SHARES THAT AFTER THE
NAME MAY BE SOLD OUTSTANDING OFFERING MAY BE SOLD(1) OFFERING(2)
---- ---------------- ----------- -------------- -------------------- -------------
<S> <C> <C> <C> <C> <C>
The Dow Chemical Company
Employees' Retirement
Plan........................ 2,815,000 1.1 0 71,085 *
The Fondren Foundation........ 90,000 * 0 2,272 *
The Northwestern Mutual Life
Insurance Company........... 2,000,000 * 4,308 50,505 *
The Travelers Indemnity
Company..................... 2,099,000 * 0 53,005 *
The Travelers Insurance
Company..................... 1,343,000 * 0 33,914 *
The Travelers Insurance
Company Separate Account
TLAC........................ 158,000 * 0 3,989 *
Toronto Dominion (New York),
Inc......................... 5,000,000 2.0 0 126,262 *
Transatlantic Holdings,
Inc......................... 2,200,000 * 0 55,555 *
Travelers Series Managed
Assets Trust................ 300,000 * 0 7,575 *
Travelers Series Trust
Convertible Bond
Portfolio................... 100,000 * 0 2,525 *
U.S. Olympic Foundation....... 335,000 * 0 8,459 *
Unifi, Inc. Profit Sharing
Plan and Trust.............. 220,000 * 0 5,555 *
United Food and Commercial
Workers Local 1262 and
Employers Pension Fund...... 600,000 * 0 15,151 *
Univar Corporation............ 395,000 * 0 9,974 *
Value Line Convertible Fund,
Inc......................... 1,000,000 * 0 25,252 *
Van Kampen Convertible
Securities Fund............. 590,000 * 0 14,898 *
Van Kampen Harbor Fund........ 3,410,000 1.4 0 86,111 *
Vanguard Convertible
Securities Fund, Inc........ 2,070,000 * 0 52,272 *
Xerox Corporation Profit
Sharing Plan................ 254,000 * 0 6,414 *
Zeneca Holdings Trust......... 450,000 * 0 11,363 *
Subtotal: $240,690,000 96.3 -- 6,077,976 --
Unnamed holders of Notes or
any future transferees,
pledgees, donees or
successors of or from such
unnamed holders(4).......... $ 9,310,000 3.7 -- 235,101 --
Total: $250,000,000 100 -- 6,313,077 --
</TABLE>
- ---------------
* Less than 1%.
(1) Assumes conversion of the full amount of Notes held by such holder at the
initial rate of 25.2525 shares of GGD Stock per $1,000 in principal amount
of Notes. The conversion rate and the number of shares of GGD Stock issuable
upon conversion of the Notes are subject to adjustment under certain
circumstances. See "DESCRIPTION OF NOTES -- Conversion Rights." Accordingly,
the number of shares of GGD Stock issuable upon conversion of the Notes may
increase or decrease from time to time. Under the terms of the Indenture,
fractional shares will not be issued upon conversion of the Notes; cash will
be paid in lieu of fractional shares, if any. As a result, this column does
not exactly total the aggregate number of Conversion Shares initially
issuable upon conversion of the Notes, which is 6,313,131.
(2) Based upon 79,135,204 shares of GGD Stock outstanding as of August 31, 1998,
treating as outstanding the total number of shares of GGD Stock shown as
being issuable upon the assumed conversion by the named Selling
Securityholder of the full amount of such Selling Securityholder's Notes but
not assuming the conversion of the Notes of any other Selling
Securityholder.
(3) Information is set forth as of September 16, 1998.
42
<PAGE> 44
(4) Assumes that the unnamed holders of the Notes or any future transferees,
pledgees, donees or successors of or from any such unnamed holder do not
beneficially own any GGD Stock other than the GGD Stock issuable upon
conversion of the Notes at the initial conversion rate. No such unnamed
holder may offer Notes pursuant to this Prospectus unless and until such
unnamed holder is included as a Selling Securityholder in an amendment or a
supplement to this Prospectus.
Because the Selling Securityholders may, pursuant to this Prospectus, offer
all or some portion of the Notes and GGD Stock they presently hold or, with
respect to the GGD Stock, have the right to acquire upon conversion of such
Notes, no estimate can be given as to the amount of the Notes and GGD Stock that
will be held by the Selling Securityholders upon termination of any such sales.
In addition, the Selling Securityholders identified above may have sold,
transferred or otherwise disposed of all or a portion of their Notes and their
Conversion Shares since the date on which they provided the information
regarding their Notes and their Conversion Shares, in transactions exempt from
the registration requirements of the Securities Act.
Only Selling Securityholders identified above who have complied with the
conditions to being included as Selling Securityholders under the Registration
Rights Agreement and who beneficially own the Notes and the Conversion Shares
set forth opposite each such Selling Securityholder's name in the foregoing
table on the effective date of the Registration Statement may sell such Notes
and Conversion Shares pursuant to this Prospectus. The Company may from time to
time, in accordance with the Registration Rights Agreement, include additional
Selling Securityholders in supplements to this Prospectus.
43
<PAGE> 45
PLAN OF DISTRIBUTION
In connection with the sale of Notes to the Initial Purchasers, the Company
agreed pursuant to a Registration Rights Agreement (the "Registration Rights
Agreement"), to file with the Commission the Registration Statement of which
this Prospectus forms a part. The Registration Statement covers resales of the
Notes and the Conversion Shares (the "Registrable Securities") by the Selling
Securityholders. The Company has agreed to use its reasonable best efforts to
keep the Registration Statement effective until two years from its effective
date (or such earlier date when the Selling Securityholders have sold the
Registrable Securities or are able to sell all such securities immediately
without restriction pursuant to Rule 144(k) under the Securities Act or any
successor rule thereto or otherwise). The Company is permitted to suspend the
use of this Prospectus during certain periods of time. If the Registration
Statement ceases to be effective or usable (subject to certain exceptions
described in the Registration Rights Agreement), additional interest, at the
rate of 0.5% per annum, may accrue on the Notes. The Registration Rights
Agreement provides that holders of at least 25% of the then outstanding Notes
may elect to have one underwritten offering of the Notes. The managing
underwriter(s) for any such offering must be selected by holders of a majority
of the Notes to be included in the underwritten offering and must be reasonably
acceptable to the Company. The specific provisions relating to the registration
rights described above are contained in the Registration Rights Agreement, and
the foregoing summary is qualified in its entirety by the provisions of such
agreement which is included as an exhibit to the Registration Statement.
Sales of the Notes and the Conversion Shares may be effective by or for the
account of the Selling Securityholders from time to time in transactions (which
may include block transactions in the case of the Conversion Shares) on any
exchange or market on which such securities are listed or quoted, in negotiated
transactions, through a combination of such methods of sale, or otherwise, at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to prevailing market prices, or at negotiated prices.
The Selling Securityholders may effect such transactions by selling the Notes or
Conversion Shares directly to purchasers, to or through underwriters, dealers or
agents who may purchase Notes or Conversion Shares as principals and thereafter
sell the Notes or Conversion Shares, through a combination of such methods of
sale, or otherwise. Underwriters, dealers or agents engaged by Selling
Securityholders may receive compensation in the form of discounts, concessions
or commissions from the Selling Securityholders, the purchasers of the Notes or
Conversion Shares for whom such underwriters, dealers or agents 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 underwriters, dealers or agents that
participate with the Selling Securityholders in the distribution of the Notes or
Conversion Shares may be deemed to be "underwriters" within the meaning of the
Securities Act. Any commissions paid or any discounts or concessions allowed to
any such persons, and any profits received on the resale of the Notes or
Conversion Shares offered hereby may be deemed to be underwriting commissions or
discounts under the Securities Act.
In connection with distributions of the Conversion Shares, any Selling
Securityholder may enter into hedging transactions with broker-dealers and the
broker-dealers may engage in short sales of GGD Common Stock in the course of
hedging the positions they assume with such Selling Securityholder. Any Selling
Securityholder also may sell GGD Common Stock short and deliver Conversion
Shares to close out such short positions. Any Selling Securityholder also may
enter into option or other transactions with broker-dealers that involve the
delivery of Conversion Shares to the broker-dealers, which may then resell or
otherwise transfer such Conversion Shares. Any Selling Securityholder also may
loan or pledge Conversion Shares to a broker-dealer and the broker-dealer may
sell the Conversion Shares so loaned or upon a default may sell or otherwise
transfer the pledged Conversion Shares.
To the extent required, the Company will amend or supplement this
Prospectus to disclose material arrangements regarding the plan of distribution.
If, for example, pursuant to the terms of the Registration Rights Agreement, the
Note holders elect to sell Registrable Securities in an underwritten offering, a
prospectus supplement accompanying this Prospectus will set forth, to the extent
required, the aggregate principal amount of Notes and number of Conversion
Shares being offered, the name or names of the Selling
44
<PAGE> 46
Securityholders, and the terms of the offering, including the name or names of
the underwriters, any discounts, concessions or commissions and other terms
constituting compensation from the Selling Securityholders, and any discounts,
concessions or commissions allowed or reallowed or paid to dealers. In such an
underwritten offering, the Notes and/or Conversion Shares will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The Notes
and/or Conversion Shares may be offered to the public either through
underwriting syndicates represented by one or more managing underwriters or
directly by one or more firms acting as underwriters. In connection with such a
sale of Notes and/or Conversion Shares, the underwriters may receive
compensation from the Selling Securityholders in the form of underwriting
discounts or commissions and may also receive commissions from purchasers of the
Notes and/or Conversion Shares for whom they may act as agent. Underwriters may
sell the Notes and/or Conversion Shares to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Unless otherwise set forth in the prospectus supplement relating
thereto, the obligations of any underwriters to purchase the Notes and/or
Conversion Shares will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all such Notes and/or Conversion
Shares if any are purchased. Underwriters may be entitled under agreements with
the Company to indemnification against certain civil liabilities, including
liabilities under the Securities Act, or to contribution with respect to
payments which such agents, dealers or underwriters may be required to make in
respect thereof. Such underwriters may engage in transactions with, or perform
services for, the Company for customary compensation.
Pursuant to the Registration Rights Agreement, the Company has agreed to
pay certain expenses incident to the offer and sale of the Notes and Conversion
Shares offered by the Selling Securityholders hereby, including the fees of one
counsel to the Selling Securityholders. The Selling Securityholders, however,
will pay any underwriting discounts and selling commissions. The Company has
agreed to indemnify the Selling Securityholders against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
the Selling Securityholders may be required to make in respect thereof.
To comply with the securities laws of certain jurisdictions, the Notes and
Conversion Shares offered hereby may need to be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Notes or the Conversion Shares may be limited
in its ability to engage in market activities with respect to such Notes or
Conversion Shares. Each Selling Securityholder, for example, will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, which provisions may limit the timing of purchase and sales of any
of the Notes and Conversion Shares by the Selling Securityholder. The foregoing
may affect the marketability of the Notes and Conversion Shares.
The Company's outstanding GGD Stock is included for quotation for trading
on the Nasdaq National Market, and application has been made to include for
quotation the shares of GGD Stock issuable upon conversion of the Notes on
Nasdaq. The Notes have been designated for trading in the PORTAL Market;
however, the Company has not applied, and does not intend to apply, for listing
of the Notes on any securities exchange. Furthermore, Notes resold pursuant to
this Registration Statement will no longer be eligible for trading in the PORTAL
Market. No assurance can be given that there will be a market for the Notes sold
pursuant to this Prospectus, or that if such market does develop, that it will
continue to provide holders of such Notes with liquidity for such investment or
will continue for the duration the Notes are outstanding.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Company by Palmer & Dodge LLP, Boston, Massachusetts, counsel for the Company.
EXPERTS
The consolidated balance sheets of Genzyme as of December 31, 1996 and 1997
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the
45
<PAGE> 47
period ended December 31, 1997 included in Genzyme's Annual Report on Form 10-K
for the year ended December 31, 1997, as amended, and the financial statement
schedule appearing therein, incorporated by reference into this Prospectus, have
been incorporated herein in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The combined balance sheets of Genzyme General and GTR as of December 31,
1996 and 1997, and the related combined statements of operations and cash flows
for each group for each of the three years in the period ended December 31, 1997
included in Genzyme's Annual Report on Form 10-K for the year ended December 31,
1997, as amended, and the financial statement schedule appearing therein, have
also been incorporated herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The combined balance sheets of GMO as of December 31, 1996 and 1997, and
the related combined statements of operations and cash flows for each of the
three years in the period ended December 31, 1997 included in Genzyme's Annual
Report on Form 10-K for the year ended December 31, 1997, as amended, have also
been incorporated herein in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of that firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
Genzyme is subject to the informational requirements of the Exchange Act,
and, in accordance therewith, files periodic reports, proxy statements and other
information with the Commission. Reports, proxy and information statements filed
pursuant to Sections 14(a) and 14(c) of the Exchange Act and other information
filed with the Commission, as well as copies of the Registration Statement, can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, and at the following Regional Offices of the Commission: Midwest
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60611;
and Northeast Regional Office, 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material can also be obtained at prescribed rates
from the Public Reference Section of the Commission at its principal office at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. Such material
may also be accessed electronically by means of the Commission's home page on
the Internet at http://www.sec.gov.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act. This Prospectus omits
certain of the information contained in the Registration Statement in accordance
with the rules and regulations of the Commission. Reference is hereby made to
the Registration Statement and related exhibits for further information with
respect to the Company, its Notes and the Conversion Shares. Statements
contained herein concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Genzyme incorporates herein by reference the following documents previously
filed with the Commission (File No. 0-14680) pursuant to the Exchange Act: (i)
its Annual Report on Form 10-K for the fiscal year ended December 31, 1997, as
amended by 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 and May 19, 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
46
<PAGE> 48
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.
47
<PAGE> 49
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY INITIAL PURCHASER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE NOTES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
The Company............................ 2
Risk Factors........................... 3
Ratio of Earnings to Fixed Charges..... 12
Use of Proceeds........................ 12
Capitalization......................... 13
Description of Revolving Credit
Facility............................. 15
Description of Notes................... 16
Certain Federal Income Tax
Considerations....................... 25
Description of Genzyme Capital Stock... 31
Management and Accounting Policies
Governing the Relationship of Genzyme
Divisions............................ 38
Selling Securityholders................ 39
Plan of Distribution................... 44
Legal Matters.......................... 45
Experts................................ 45
Available Information.................. 46
Incorporation of Certain Documents by
Reference............................ 46
</TABLE>
=======================================================
=======================================================
[GENZYME LOGO]
$250,000,000
5 1/4% CONVERTIBLE
SUBORDINATED NOTES
DUE 2005
6,313,131 SHARES OF
GENZYME GENERAL DIVISION
COMMON STOCK
=======================================================
<PAGE> 50
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be borne by Genzyme in connection with this offering of
Notes and Conversion Shares are estimated as follows:
<TABLE>
<S> <C>
SEC registration fee........................................ $ 73,750
Printing Expenses........................................... 50,000
Accounting fees and expenses................................ 2,500
Legal fees and expenses..................................... 15,000
Transfer Agent and Registrar fees........................... 0
Miscellaneous expenses...................................... 750
--------
Total............................................. $142,000
========
</TABLE>
All of the above figures, except the SEC registration fee, are estimates.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 67 of chapter 156B of the Massachusetts Business Corporation Law
grants Genzyme the power to indemnify any director, officer, employee or agent
to whatever extent permitted by Genzyme's Amended and Restated Articles of
Organization, By-Laws or a vote adopted by the holders of a majority of the
shares entitled to vote thereon, unless the proposed indemnitee has been
adjudicated in any proceeding not to have acted in good faith in the reasonable
belief that his or her actions were in the bet interests of Genzyme or, to the
extent that the matter for which indemnification may include payment by Genzyme
of expenses incurred in defending a civil or criminal action or proceeding in
advance of the final disposition of such action or proceeding, upon receipt of
an undertaking by the person indemnified to repay such payment if he or she
shall be adjudicated to be not entitled to indemnification under the statute.
Article VI of Genzyme's By-Law provides that Genzyme shall, to the extent
legally permissible, indemnify each person who may serve or who has served at
any time as a director or officer of Genzyme or of any of its subsidiaries, or
who at the request of Genzyme may serve or at any time has served as a director,
officer or trustee of, or in a similar capacity with, another organization or an
employee benefit plan, against all expenses and liabilities (including counsel
fees, judgments, fines, excise taxes, penalties and amounts payable in
settlements) reasonably incurred by or imposed upon such person in connection
with any threatened, pending or completed action, suit or other proceeding,
whether civil, criminal, administrative or investigative, in which he or she may
become involved by reason of his or her serving or having served in such
capacity (other than a proceeding voluntarily initiated by such person unless he
or she is successful on the merits, the proceeding was authorized by Genzyme or
the proceeding seeks a declaratory judgment regarding his or her own conduct);
provided that no indemnification shall be provided for any such person with
respect to any matter as to which he or she shall have been finally adjudicated
in any proceeding not to have acted in good faith in the reasonable belief that
his or her action was in the best interests of the corporation or, to the extent
such matter relates to service with respect to any employee benefit plan, in the
best interests of the participants or beneficiaries of such employee of such
employee benefit plan; and provided, further, that as to any matter disposed of
by a compromise payment by such person, pursuant to a consent decree or
otherwise, the payment and indemnification thereof have been approved by the
corporation, which approval shall not unreasonably be withheld, or by a court of
competent jurisdiction. Such indemnification shall include payment by Genzyme of
expenses incurred in defending a civil or criminal action or proceeding in
advance of the final disposition of such action or proceeding, upon receipt of
an undertaking by the person indemnified to repay such payment if he or she
shall be adjudicated to be not entitled to indemnification under Article VI,
which undertaking may be accepted without regard to the financial ability of
such person to me repayment.
II-1
<PAGE> 51
The indemnification provided for in Article VI is a contract right inuring
to the benefit of the directors, officers and other entitled to indemnification.
In addition, the indemnification is expressly not exclusive of any other rights
to which such director, officer of other person may be entitled by contract or
otherwise under law, and inures to the benefit of the heirs, executors and
administrators of such a person.
Genzyme also has in place agreements with certain officers and directors
which affirm Genzyme's obligation to indemnify them to the fullest extent
permitted by law and contain various procedural and other provisions which
expand the protection afforded by Genzyme's By-Laws.
Section 13(b)(1 1/2) of chapter 156B of the Massachusetts Business
Corporation Law provides that a corporation may, in its articles of
organization, eliminate a director's personal liability to the corporation and
its stockholders for monetary damages for breaches of fiduciary duty, except in
circumstances involving (i) a breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
unauthorized distributions and loans to insiders and (iv) transaction from which
the director derived an improper personal benefit. Article VI.C.5. of Genzyme's
Amended and Restated Articles of Organization provides that no director shall be
personally liable to Genzyme or its stockholders for monetary damages for any
breach of fiduciary duty as a director, except to the extent that such
exculpation is not permitted under the Massachusetts Business Corporation Law as
in effect when such liability is determined.
ITEM 16. EXHIBITS
See Exhibit Index immediately following signature page.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high value and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) To include any material information with respect to the plan
of distribution to previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the Registration Statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the
Exchange Act that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-2
<PAGE> 52
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 of Regulation S-X at the start
of any delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)(3) of the
Securities Act need not be furnished, provided, that the registrant
includes in the prospectus, by means of a post-effective amendment,
financial statements required pursuant to this paragraph (a)(4) and other
information necessary to ensure that all other information in the
prospectus is at least as current as the date of those financial
statements. Notwithstanding the foregoing, with respect to registration
statements on Form F-3, a post-effective amendment need not be filed to
include financial statements and information required by Section 10(a)(3)
of the Securities Act or Rule 3-19 of Regulation S-X if such financial
statements and information are contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated in the Form F-3.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of any employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this registration statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions referred to in Item 15 hereof, or
otherwise, the registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 53
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
its Registration Statement (File No. 333-59513) to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Cambridge,
Commonwealth of Massachusetts, on September 18, 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. 333-59513) has been signed by the
following persons in the capacities indicated as of September 18, 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
*By: /s/ DAVID J. MCLACHLAN
- --------------------------------------------------
David J. McLachlan
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 54
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
4.1 Restated Articles of Organization of Genzyme, as amended.
Filed as Exhibit 1 to Genzyme's Registration Statement on
Form 8-A filed with the Commission on June 18, 1997, and
incorporated herein by reference.
4.2 By-laws of Genzyme. Filed as Exhibit 3.2 to Genzyme's Form
8-K dated December 31, 1991 (File No. 0-14680), and
incorporated herein by reference.
4.3 Indenture, dated as of May 22, 1998, between Genzyme and
State Street Bank and Trust Company, as Trustee, including
the form of Note. Previously filed.
4.4 Registration Rights Agreement, dated as of May 19, 1998,
among Genzyme, Credit Suisse First Boston Corporation,
Goldman, Sachs & Co. and Cowen & Company. Previously filed.
4.5 Purchase Agreement, dated as of May 19, 1998, among Genzyme,
Credit Suisse First Boston Corporation, Goldman, Sachs & Co.
and Cowen & Company. Previously filed.
4.6 Series Designation for Genzyme Molecular Oncology Division
Common Stock, $.01 par value. Filed as Exhibit 2 to
Genzyme's Registration Statement on Form 8-A filed with the
Commission on June 18, 1997, and incorporated herein by
reference.
4.7 Series Designation for the Series A, Series B and Series C
Junior Participating Preferred Stock, $.01 par value, of
Genzyme. Filed as Exhibit 3 to Genzyme's Registration
Statement on Form 8-A filed with the Commission on June 18,
1997, and incorporated herein by reference.
4.8 Amended and Restated Rights Agreement dated as of June 12,
1997 between Genzyme and American Stock Transfer and Trust
Company. Filed as Exhibit 5 to Genzyme's Registration
Statement on Form 8-A filed with the Commission on June 18,
1997, and incorporated herein by reference.
4.9 Specimen Callable Warrant to purchase Genzyme Common Stock
issued to shareholders of Neozyme II. Filed as Exhibit 28.6
to Genzyme's Form 10-Q for the quarter ended March 31,1992,
and incorporated herein by reference.
4.10 Warrant issued to Richard Warren, Ph.D. Filed as Exhibit 4
to the Form 8-K of IG Laboratories, Inc. dated October 11,
1990 (File No. 0-18439), and incorporated herein by
reference.
4.11 Genzyme Common Stock Purchase Warrant No. A-1 dated July 31,
1997 issued to Canadian Medical Discoveries Fund, Inc.
("CMDF"). Filed as Exhibit 10.2 to Genzyme's Form 10-Q for
the quarter ended September 30, 1997, and incorporated
herein by reference.
4.12 Genzyme Common Stock Purchase Warrant No. A-2 dated July 31,
1997 issued to CMDF. Filed as Exhibit 10.3 to Genzyme's Form
10-Q for the quarter ended September 30, 1997, and
incorporated herein by reference.
4.13 Genzyme Common Stock Purchase Warrant No. A-3 dated July 31,
1997 issued to CMDF. Filed as Exhibit 10.3 to Genzyme's Form
10-Q for the quarter ended September 30, 1997, and
incorporated herein by reference.
4.14 Registration Rights Agreement dated as of July 31, 1997 by
and between Genzyme and CMDF. Filed as Exhibit 10.1 to
Genzyme's Form 10-Q for the quarter ended September 30,
1997, and incorporated herein by reference.
4.15 Genzyme Molecular Oncology Division Convertible Debenture
dated August 29, 1997, including a schedule with respect
thereto filed pursuant to Instruction 2 to Item 601 of
Regulation S-K. Filed as Exhibit 10.6 to Genzyme's Form 10-Q
for the quarter ended September 30, 1997, and incorporated
herein by reference.
4.16 Form of Genzyme General Division Convertible Debenture.
Filed as Exhibit 10.7 to Genzyme's Form 10-Q for the quarter
ended September 30, 1997, and incorporated herein by
reference.
4.17 Registration Rights Agreement dated as of August 29, 1997 by
and among Genzyme and the entities listed on the signature
pages thereto. Filed as Exhibit 10.8 to Genzyme's Form 10-Q
for the quarter ended September 30, 1997, and incorporated
herein by reference.
4.18 Warrant Agreement between Genzyme and Comdisco, Inc. Filed
as Exhibit 10.22 to a Form 10 of PharmaGenics, Inc.
("PharmaGenics") (File No. 0-20138), and incorporated herein
by reference.
</TABLE>
II-5
<PAGE> 55
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
4.19 Form of Genzyme Corporation Convertible Note dated February
28, 1997 issued to Credit Suisse First Boston (Hong Kong)
Ltd. ("CSFB"). Filed as Exhibit 4.14 to Genzyme's Form
10-K/A for the year ended December 31, 1997 filed with the
Commission on April 27, 1998, and incorporated herein by
reference.
4.20 Registration Rights Agreement dated February 27, 1997 by and
between Genzyme and CSFB. Filed as Exhibit 4.15 to Genzyme's
Form 10-K/A for the year ended December 31, 1997 filed with
the Commission on April 27, 1998, and incorporated herein by
reference.
5.1 Opinion of Palmer & Dodge LLP. Previously filed.
12.1 Statements regarding Computation of Ratio of Earnings to
Fixed Charges. Filed herewith.
23.1 Consent of PricewaterhouseCoopers LLP, independent
accountants to Genzyme Corporation. Filed herewith.
23.2 Consent of Palmer & Dodge LLP (included in Exhibit 5.1
hereto).
24.1 Power of Attorney (included on signature page to the initial
filing of this Registration Statement).
25.1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, on Form T-1 of State
Street Bank and Trust Company. Previously filed.
</TABLE>
- ---------------
* To be filed by amendment or incorporated by reference in connection with any
underwritten offering.
II-6
<PAGE> 1
EXHIBIT 12.1
GENZYME CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six
Months
Year Ended December 31, Ended
-------------------------------------------------- June 30,
1993 1994 1995 1996 1997 1998
-------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before income taxes .......... $(12,554) $30,784 $43,299 $(69,622) $25,729 $20,880
Add:
Portion of rents representative of the
interest factor .......................... 2,911 2,888 3,335 4,260 5,421 2,710
Amortization of debt conversion
feature value ............................ - - - - 2,028 1,948
Amortization of debt discount ............. - - - - 196 282
Interest on indebtedness .................. 2,500 1,354 1,109 7,170 10,599 6,967
-------- ------- ------- -------- ------- -------
As adjusted income (loss) .................. $ (7,143) $35,026 $47,743 $(58,192) $43,973 $32,787
======== ======= ======= ======== ======= =======
Fixed charges:
Portion of rents representative of the
interest factor .......................... 2,911 2,888 3,335 4,260 5,421 2,710
Amortization of debt conversion
feature value ............................ - - - - 2,028 1,948
Amortization of debt discount ............. - - - - 196 282
Interest on indebtedness .................. 2,500 1,354 1,109 7,404 10,808 7,070
Capitalized interest ...................... 4,554 8,945 8,736 2,377 470 319
Capitalized amortization of debt
discount ................................. 275 275 275 57 - -
-------- ------- ------- -------- ------- -------
Total fixed charges ........................ $ 10,240 $13,462 $13,455 $ 14,098 $18,923 $12,329
======== ======= ======= ======== ======= =======
Ratio of earnings to fixed charges(1) ...... - 2.6x 3.5x - 2.3x 2.7x
======== ======= ======= ======== ======= =======
</TABLE>
- -------------------------
(1) The ratio of earnings to fixed charges is not presented for the years ended
December 31, 1993 and 1996 because in such years fixed charges exceeded
earnings (as set forth above) by $17.4 million and $72.3 million,
respectively, due primarily to (i) in 1993, charges for in-process research
and development of $49.0 million and charges for goodwill impairment and
restructuring costs of $26.5 million and (ii) in 1996, charges for
in-process research and development of $130.6 million.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 1 to
the Registration Statement on Form S-3 of Genzyme Corporation of our reports
dated February 27, 1998 on our audits of the consolidated financial statements
and financial statement schedule of Genzyme Corporation, the combined financial
statements and financial statement schedule of Genzyme General Division, the
combined financial statements and financial statement schedule of Genzyme Tissue
Repair Division and the combined financial statements of Genzyme Molecular
Oncology Division as of December 31, 1996 and 1997 and for each of the three
years in the period ended December 31, 1997, which reports are included in
Genzyme Corporation's 1997 Annual Report on Form 10-K, as amended.
We also consent to the reference to our firm in this Amendment No. 1 to
the Registration Statement under the caption "Experts."
/s/ PricewaterhouseCoopers LLP
-------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 18, 1998
- ------------
