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EXHIBIT 99.2
MANAGEMENT AND ACCOUNTING POLICIES
GENZYME MANAGEMENT AND ACCOUNTING POLICIES GOVERNING THE RELATIONSHIPS
AMONG ITS DIVISIONS
THE BOARD OF DIRECTORS OF GENZYME CORPORATION (THE "GENZYME BOARD") HAS ADOPTED
THE FOLLOWING POLICIES TO GOVERN THE MANAGEMENT OF GENZYME BIOSURGERY, GENZYME
GENERAL AND GENZYME MOLECULAR ONCOLOGY, AND THE RELATIONSHIPS BETWEEN EACH
DIVISION. EXCEPT AS OTHERWISE PROVIDED IN THE POLICIES, THE GENZYME BOARD MAY
MODIFY OR RESCIND THE POLICIES, OR ADOPT ADDITIONAL POLICIES, IN ITS SOLE
DISCRETION WITHOUT APPROVAL OF THE STOCKHOLDERS, SUBJECT ONLY TO THE GENZYME
BOARD'S FIDUCIARY DUTY TO THE STOCKHOLDERS OF GENZYME CORPORATION.
1. PURPOSE OF GENZYME BIOSURGERY, GENZYME GENERAL AND GENZYME MOLECULAR
ONCOLOGY.
The purpose of Genzyme Biosurgery is to create a business with a comprehensive
approach to the field of biosurgery by developing and commercializing a
portfolio of products for the treatment and prevention of serious tissue injury
(excluding products developed on behalf of GDP) and a portfolio of devices,
biomaterials, biotherapeutics and other products for the field of biosurgery;
these products and services include (i) the products and services offered or
under development by Biomatrix, Inc. as of December 18, 2000, and included in
the Descriptive Memorandum furnished by it to Genzyme Corporation, and (ii)
products and services offered or under development by Genzyme Corporation's
former Genzyme Tissue Repair Division and Genzyme Corporation's former Genzyme
Surgical Products Division as of December 18, 2000. The purpose of Genzyme
General is to develop and market therapeutic products and diagnostic services
and products. The purpose of Genzyme Molecular Oncology is to create a focused,
integrated oncology business that will develop and commercialize novel
therapeutic and diagnostic products and services based upon molecular tools and
genomic information. In addition to the programs initially assigned to each of
Genzyme Biosurgery and Genzyme Molecular Oncology, it is expected that the
product and service portfolio of each division will expand through the addition
of complementary programs, products and services developed either within or
outside of the division, including acquiring or in-licensing programs, products
and services from outside of Genzyme Corporation. Each of Genzyme Biosurgery and
Genzyme Molecular Oncology will be operated and managed similarly to Genzyme
General except as provided herein.
2. REVENUE ALLOCATION. Revenues from the sale or licensing of a division's
products and services to entities external to Genzyme Corporation shall be
credited to that division. Products and services normally sold by a division to
entities external to Genzyme Corporation that are used by other divisions within
Genzyme Corporation shall be recorded as interdivisional revenues and
interdivisional purchases subject to the policy regarding Other Interdivisional
Transactions.
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3. EXPENSE ALLOCATION. Direct Expenses shall be charged to the division for
whose benefit the Direct Expenses have been incurred. Expenses other than Direct
Expenses shall be subject to the policy regarding Other Interdivisional
Transactions.
4. ASSET ALLOCATION. Assets that are exclusively dedicated to the production of
goods and services of a division shall be allocated to that division. Production
assets that are utilized by more than one division shall be subject to the
policy regarding Other Interdivisional Transactions.
5. TAX ALLOCATIONS. Income taxes shall be allocated to each division based upon
the financial statement income, taxable income, credits and other amounts
properly allocable to such division under generally accepted accounting
principles as if each division were a separate taxpayer; provided, however, that
as of the end of any fiscal quarter of Genzyme Corporation, any projected annual
tax benefit attributable to any division that cannot be utilized by such
division to offset or reduce its current or deferred income tax expense may be
allocated to the other divisions in proportion to their taxable income without
any compensating payment or allocation
6. ACQUISITIONS OF PROGRAMS, PRODUCTS OR ASSETS. Upon the acquisition by Genzyme
Corporation from a third party of any programs, products or assets (whether by
acquisitions of assets or stock, merger, consolidation or otherwise), the
aggregate cost of the acquisition and the programs, products or assets acquired
shall be allocated among the divisions of Genzyme Corporation. In the case of
material acquisitions, such allocation shall be made in a manner determined by
the Genzyme Board to be fair and reasonable to each division and to the holders
of the common stock representing each division, taking into account such matters
as the Genzyme Board and its financial advisors, if any, deem relevant. Any such
determination will be final and binding on the holders of common stock.
7. DISPOSITION OF PROGRAMS, PRODUCTS OR ASSETS. Upon the sale, transfer,
assignment or other disposition by Genzyme Corporation of any program, product
or asset not consisting of all or substantially all of the assets of the
division, all proceeds from such disposition shall be allocated to the division
to which the program, product or asset had been allocated among such divisions
based on their respective interests in such program, product or asset. Such
allocations shall be made in a manner determined by the Genzyme Board to be fair
and reasonable to such divisions and to holders of the common stock representing
such divisions, taking into account such matters as the Genzyme Board and its
financial advisors, if any, deem relevant. Any such determination by the Genzyme
Board will be final and binding on the holders of common stock.
8. INTERDIVISIONAL ASSET TRANSFERS. The Genzyme Board may at any time and from
time to time reallocate any program, product or other asset from one division to
any other division. All such reallocations shall be done at fair market value,
determined by the Genzyme Board, taking into account, in the case of a program
under development, the commercial potential of such program, the phase of
clinical development of such program, the expenses associated with realizing any
income from such program, the likelihood and timing of any such realization and
other matters that the Genzyme Board and its financial advisors, if any, deem
relevant. The consideration for such reallocation may be paid by one division to
another in
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cash or other consideration with a value equal to the fair market value of the
assets being reallocated or, in the case of a reallocation of assets from
Genzyme General to Genzyme Biosurgery or Genzyme Molecular Oncology, the Genzyme
Board may elect to account for such reallocation as an increase in the
Designated Shares representing the division to which such assets are reallocated
in accordance with the provisions of Genzyme Corporation's articles of
organization.
Notwithstanding the foregoing, no Key GMO Program, as defined below, may be
transferred out of Genzyme Molecular Oncology without a class vote of the
holders of the common stock representing Genzyme Molecular Oncology (the
"Molecular Oncology Stock") unless the Genzyme Board determines that such Key
GMO Program has application outside of the field of oncology, in which case it
may be transferred out only for the non-oncology applications; provided, however
that the SAGE Service (as herein defined) may not be transferred out of Genzyme
Molecular Oncology for any application without the approval of the holders of
the Molecular Oncology Stock voting as a separate class.
A "Key GMO Program" is any of the following: (i) use of the Serial Analysis of
Gene Expression ("SAGE-TM-") technology licensed from The Johns Hopkins
University School of Medicine for third parties ("SAGE Service"); (ii) the
clinical program developing adenovirus vectors containing the tumor antigens
Ad-MART 1 or Ad-gp100 for the treatment of melanoma; (iii) the "suicide" gene
therapy research program developing adenovirus and lipid vectors containing
genes to enhance chemotherapy for oncology indications; (iv) the research
program developing adenovirus and lipid vectors containing tumor suppressor
genes for oncology indications; (v) the research program developing adenovirus
and lipid vectors containing genes to regulate the immune system for oncology
indications, including heat shock proteins; (vi) the research program developing
antibody-based gene therapy for the treatment of tumors; and (vii) any
additional program, product or service being developed from time to time in
Genzyme Molecular Oncology which (a) constituted 20% or more of the research and
development budget of Genzyme Molecular Oncology in any one of the three most
recently completed fiscal years or (b) has had a cumulative investment of $8
million or more in research and development expenses by Genzyme Molecular
Oncology.
The foregoing policies regarding transfers of assets between divisions will not
be changed by the Genzyme Board without the approval of the holders of the
common stock representing Genzyme Biosurgery (the "Biosurgery Stock") and the
Molecular Oncology Stock, each voting as a separate class; provided, however,
that if a policy change affects one, but not both of, Genzyme Biosurgery and
Genzyme Molecular Oncology, only holders of shares representing the affected
division will be entitled to vote on such matter.
9. OTHER INTERDIVISIONAL TRANSACTIONS. This policy shall cover interdivisional
transactions other than asset transfers, which shall be subject to the policy
regarding Interdivisional Asset Transfers. From time to time, a division may
engage in transactions directly with one or more other divisions or jointly with
one or more other divisions and one or more third parties. Such transactions may
include agreements by one division to provide products and services for use by
another division and joint venture or other collaborative arrangements involving
more than one division to develop new products and services jointly and with
third parties. The division providing such products and services does not
recognize revenue
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on any such transaction unless the division provides such products and services
to unrelated third parties in the ordinary course of business. Such transactions
shall also be subject to the following conditions:
(a) Research and development (including clinical and regulatory
support), distribution, sales, marketing, and general and
administrative services (including allocated space) performed
by one division for the benefit of another division will be
charged to the division for which work is performed on a cost
basis. Direct costs shall be allocated in a manner described
above under "Expense Allocation" and such division performing
the work will not recognize revenue as a result of performing
such work. Direct labor and indirect costs shall be allocated
in a reasonable and consistent manner based on the utilization
by the division of the services to which such costs relate.
(b) Manufacturing of goods and services by one division
exclusively for the benefit of another division and not for
external sale shall be charged to the division for which the
work is performed on a cost basis. Manufacturing costs shall
include an interest charge on the gross fixed assets employed
in such manufacturing process. Gross fixed assets in this case
shall be determined at the beginning of each fiscal year for
the facility used. The interest rate in this case shall be the
short term borrowing rate of Genzyme Corporation at the
beginning of each fiscal year. Direct labor and indirect costs
shall be allocated in a reasonable and consistent manner based
on the receipt of benefit by the division of the goods and
services to which such costs relate.
(c) Other than Research and development (including clinical and
regulatory support) distribution, sales, marketing, general
and administrative services (including allocated space),
interdivisional transactions shall be on terms and conditions
that would be obtainable in transactions negotiated at arm's
length with unaffiliated third parties.
(d) Any interdivisional transaction (i) to be performed on terms
and conditions that deviate from the policies set forth in
subparagraphs (a), (b) or (c) above and (ii) that is material
to one or more of the participating divisions will require
approval by the Genzyme Board, which approval shall include a
determination by the Genzyme Board that the transaction is
fair and reasonable to each participating division and to the
holders of the common stock representing each such division.
(e) Loans may be made from time to time between divisions. Any
such loan of $1 million or less will mature within 18 months
and interest will accrue at the best borrowing rate available
to Genzyme Corporation for a loan of like type and duration.
Amounts borrowed in excess of $1 million will require approval
of the Genzyme Board, which approval shall include a
determination by the Genzyme Board that the material terms of
such loan, including the interest rate and maturity date, are
fair and reasonable to each participating division and to
holders of the common stock representing such division.
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(f) All material interdivisional transactions shall be reduced to
service contracts and signed by an authorized member of the
management team of affected divisions.
10. ACCESS TO TECHNOLOGY AND KNOW-HOW. Each division of Genzyme Corporation
shall have unrestricted access to all technology and know-how of the Corporation
that may be made useful to such division's business, subject to any obligations
or limitations applicable to Genzyme Corporation and its divisions.
11. DISPOSITION OF BIOSURGERY AND MOLECULAR ONCOLOGY DESIGNATED SHARES.
(a) The Biosurgery Designated Shares and the Molecular Oncology
Designated Shares may be (i) issued upon the exercise or
conversion of outstanding stock options, warrants or
convertible securities allocated to Genzyme General, (ii)
subject to the restrictions set forth in Paragraph 13, sold
for any valid business purpose, or (iii) distributed as a
dividend to the holders of shares of the common stock
representing Genzyme General (the "Genzyme General Stock"),
all as determined from time to time by the Genzyme Board in
its sole discretion.
(b) If, as of September 30 of each year, the number of Biosurgery
Designated Shares on such date exceeds ten percent (10%) of
the number of shares of Biosurgery Stock then issued and
outstanding on such date, substantially all Biosurgery
Designated Shares will be distributed to holders of record of
Genzyme General Stock, subject to reservation of a number of
such shares equal to the sum of (x) the number of Biosurgery
Designated Shares reserved for issuance with respect to stock
options, stock purchase rights, warrants or other securities
convertible into or exercisable for shares of Genzyme General
Stock outstanding on such date ("Genzyme General Convertible
Securities") as a result of anti-dilution adjustments required
by the terms of such instruments or approved by the Genzyme
Board and (y) the number of Biosurgery Designated Shares
reserved by the Genzyme Board as of such date for sale not
later than six months after such date, the proceeds of which
sale will be allocated to Genzyme General.
(c) If, as of November 30 of each year, the number of Molecular
Oncology Designated Shares on such date exceeds ten percent
(10%) of the number of shares of Molecular Oncology Stock then
issued and outstanding on such date, substantially all
Molecular Oncology Designated Shares will be distributed to
holders of record of Genzyme General Stock, subject to
reservation of a number of such shares equal to the sum of (x)
the number of Molecular Oncology Designated Shares reserved
for issuance upon the exercise or conversion of Genzyme
General Convertible Securities as a result of anti-dilution
adjustments required by the terms of such instruments or
approved by the Genzyme Board and (y) the number of Molecular
Oncology Designated Shares reserved by the Genzyme Board as of
such date for sale not later than
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six months after such date, the proceeds of which sale will be
allocated to Genzyme General.
12. ISSUANCE AND SALE OF ADDITIONAL SHARES OF COMMON STOCK. When additional
shares of common stock are issued and sold by Genzyme Corporation, Genzyme
Corporation 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 that shall reduce the number of
Designated Shares of such division. Notwithstanding the foregoing, Genzyme will
not sell any Biosurgery Designated Shares or Molecular Oncology Designated
Shares (except upon exercise or conversion of options, warrants or convertible
securities issued by Genzyme General that were adjusted as a result of a
dividend of Biosurgery or Molecular Oncology Stock paid to holders of Genzyme
General Stock) unless (i) the Genzyme Board determines that Genzyme Biosurgery
or Genzyme Molecular Oncology, as the case may be, has cash sufficient to fund
its operations for at least the next 12 months or (ii) shares of Biosurgery
Stock or Molecular Oncology Stock, as the case may be, are concurrently being
sold for the account of Genzyme Biosurgery or Genzyme Molecular Oncology,
respectively, in an amount that will produce proceeds sufficient to fund such
division's cash needs for the next 12 months.
13. OPEN MARKET PURCHASES OF SHARES OF COMMON STOCK. Genzyme Corporation may
make open market purchases of its common stock in accordance with applicable
securities law requirements; provided, however, that in no event shall any such
purchases be made if as an immediate result thereof the number of Designated
Shares representing a division will exceed 60% of the number of shares of such
division outstanding plus such number of Designated Shares. Notwithstanding the
foregoing, within 90 days of any open market purchase of the common stock
representing any division, Genzyme Corporation may not exercise the right
provided under its articles of organization to exchange shares representing such
division for cash and/or shares of Genzyme General Stock.
14. CLASS VOTING. In addition to any stockholder approval required by
Massachusetts law, whenever the approval of the holders of the common stock
representing a division is required to take any action pursuant to these
policies or Genzyme Corporation's articles of organization, such requirement
shall be satisfied if a meeting of the holders of the common stock representing
such division is held at which a quorum is present and the votes cast in favor
of the proposed action exceed the votes cast against.
15. NON-COMPETE. Genzyme Biosurgery, Genzyme General and Genzyme Molecular
Oncology shall not engage to any material extent in each other's principal
businesses other than through joint ventures or other collaborative arrangements
involving more than one division to develop new products and services jointly
and with third parties, which transactions shall be subject to the conditions
set forth in Paragraph 9. The divisions may compete in a business which is not a
principal business of another division. The Genzyme Board may determine in its
good faith business judgment whether any particular activities of one division
involve a material engagement in the principle businesses of another division.
16. CORPORATE OPPORTUNITIES. The Genzyme Board will review any matter which
involves the allocation of a material corporate opportunity to any of the
divisions, or in
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part to one division and in part to another division. In accordance with
Massachusetts law, the Genzyme Board will make its determination with regard to
the allocation of any such opportunity and the benefit of any such opportunity
in accordance with its good faith business judgment of the best interests of
Genzyme and all of its stockholders as a whole. Among the factors that the
Genzyme Board may consider in making this allocation are (i) whether a
particular corporate opportunity is principally related to the business of
Genzyme Biosurgery, Genzyme General or Genzyme Molecular Oncology; (ii) whether
one division, because of its managerial or operational expertise, will be better
positioned to undertake the corporate opportunity; (iii) whether one division,
because of its financial resources, will be better positioned to undertake the
corporate opportunity; and (iv) existing contractual agreements and
restrictions.
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