-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BYkoJITQkXu5mMnsF/eGt6Re9lubUYzbUVnRo0waB4CydaYLjaXD/f7jTiVpNWzI ft2gMi+hAKOwcN3fp2L5uw== 0000912057-00-054030.txt : 20001220 0000912057-00-054030.hdr.sgml : 20001220 ACCESSION NUMBER: 0000912057-00-054030 CONFORMED SUBMISSION TYPE: 8-A12G PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20001219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENZYME CORP CENTRAL INDEX KEY: 0000732485 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 061047163 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-A12G SEC ACT: SEC FILE NUMBER: 000-14680 FILM NUMBER: 791449 BUSINESS ADDRESS: STREET 1: ONE KENDALL SQ CITY: CAMBRIDGE STATE: MA ZIP: 02139 BUSINESS PHONE: 6172527500 MAIL ADDRESS: STREET 1: ONE KENDALL SQUARE CITY: CAMBRIDGE STATE: MA ZIP: 02139 8-A12G 1 a2033583z8-a12g.txt 8-A12G U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 8-A FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 GENZYME CORPORATION (Exact name of Registrant as Specified in its Charter) MASSACHUSETTS 06-1047163 (State of Incorporation or Organization) (I.R.S. Employer Identification No.) ONE KENDALL SQUARE, CAMBRIDGE, MASSACHUSETTS 02139 (Address of Principal Executive Offices) (Zip Code) If this Form relates to the If this Form relates to the registration of a class of securities registration of a class of securities pursuant to Section 12(b) of Exchange pursuant to Section 12(g) of the Act and is effective upon filing Exchange Act and is effective pursuant pursuant to General Instruction A.(c), to General Instruction A.(d), please please check the following box. / / check the following box. /X/ Securities Act registration statement file number to which this form relates: -------------------------------------- (If applicable) Securities to be registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Each Class is to be to be so Registered Registered NONE NONE Securities to be registered pursuant to Section 12(g) of the Act: GENZYME GENERAL DIVISION COMMON STOCK, $0.01 PAR VALUE GENZYME MOLECULAR ONCOLOGY DIVISION COMMON STOCK, $0.01 PAR VALUE GENZYME BIOSURGERY DIVISION COMMON STOCK, $0.01 PAR VALUE (Title of Class) INFORMATION REQUIRED IN REGISTRATION STATEMENT ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED. The purpose of this Registration Statement is to register and describe a new series of the Registrant's common stock, the Genzyme Biosurgery Division Common Stock , $0.01 par value. Included in this description is a description of the Registrant's other two series of common stock, the Genzyme General Division Common Stock , $0.01 par value, and the Genzyme Molecular Oncology Division Common Stock , $0.01 par value, which have been previously registered pursuant to section 12(g) of the Exchange Act of 1934, as amended. OVERVIEW OF GENZYME'S "TRACKING STOCK" CAPITAL STRUCTURE Throughout the discussion below: - "Genzyme General Stock" refers to the Genzyme General Division Common Stock , $0.01 par value, a series of Genzyme's common stock designed to reflect the value and track the performance of its Genzyme General Division; - "Molecular Oncology Stock" refers to the Genzyme Molecular Oncology Division Common Stock , $0.01 par value, a series of Genzyme's common stock designed to reflect the value and track the performance of its Genzyme Molecular Oncology Division; and - "Biosurgery Stock" refers to the Genzyme Biosurgery Division Common Stock , $0.01 par value, a series of Genzyme's common stock designed to reflect the value and track the performance of its Genzyme Biosurgery Division. Genzyme has three series of common stock--Genzyme General Stock, Molecular Oncology Stock, Biosurgery Stock--which it refers to as "tracking stock." Tracking stock is common stock of Genzyme that, unlike typical common stock, is designed to track the financial performance of a specific subset of the company's business operations and related allocated assets, rather than operations and assets of the entire company. For instance, operations and assets dedicated to Genzyme's cancer treatment business are referred to as the Genzyme Molecular Oncology division. That division is not a company or legal entity; consequently, the division does not and could not issue stock. Therefore, Molecular Oncology Stock is not stock of Genzyme Molecular Oncology division, but rather a series of Genzyme Corporation's common stock containing special provisions intended to tie the value of that stock primarily to the operations and assets of Genzyme Corporation that it attributes to its Genzyme Molecular Oncology division. The chief mechanism intended to cause a Genzyme tracking stock to "track" the financial performance of its corresponding division are special provisions in Genzyme's charter governing dividends and distributions. The provisions governing dividends provide that Genzyme's board has discretion to decide if and when to declare dividends subject to certain limitations. Those limitations are dependent, in part, upon the excess of earnings and paid-in capital or of the fair value of the net assets allocated to the related division over the outstanding tracking stock's combined par value and amounts needed to satisfy preferences and debt obligations allocated to the related division. Within these and other, general limitations under Genzyme's charter and Massachusetts law, the amount of any dividend payment will be at the board's discretion. When deciding whether to declare a dividend, and for how much, the board would consider, among other things, Genzyme's earnings, financial condition, capital requirements and level of indebtedness. To date, Genzyme has never paid or declared a cash dividend on shares of any of its series of common stock, nor does it anticipate doing so in the foreseeable future. Unless declared, dividends do not accrue on Genzyme's tracking stock. The charter provisions governing distributions require that a distribution be made to holders of Molecular Oncology Stock, Biosurgery Stock if all or substantially all of the assets allocated to that stock's corresponding division are sold to a third party. This mandatory distribution can be in the form of a dividend, a redemption of the division's related tracking stock or an exchange of that tracking stock for Genzyme General Stock, as chosen by Genzyme's board in its discretion. The distribution, if by dividend or redemption, must equal in value the net after-tax proceeds 2 received from the sale. If Genzyme's board chooses to make the distribution by issuing Genzyme General Stock in exchange for the selling division's related tracking stock, then the exchange must be effected at a 10% premium to the corresponding tracking stock's average market price following announcement of the sale. Genzyme aids investors in evaluating the net worth and earnings performance of each of its divisions by - defining in its charter, those programs that will initially comprise the division; and - publishing quarterly financial statements that break out the assets and liabilities and results of operations of each tracked division for the reported periods. The financial statements include audited annual and unaudited quarterly financial statements and separate management's discussion and analysis for each division and Genzyme Corporation. Genzyme manages and accounts for transactions between the division and its other divisions and with third parties, and any resulting re-allocations of assets and liabilities, by applying consistently across divisions a detailed set of policies established by Genzyme's board. Genzyme publicly discloses these divisional management and accounting policies; the policies appear in Exhibit 3 to this Registration Statement. With some exceptions contained in the policies, Genzyme's board retains the discretion to revise the policies at any time, subject to its fiduciary duties to stockholders. The separate financial statements do not represent any physical segregation of assets among divisions or separate division accounts. They are an accounting presentation only, for the purpose of permitting investors to assess the financial performance of the operations and assets allocated to each division. While tracking stock is designed to reflect a division's performance, it remains common stock of the entire company. Therefore, a tracking stockholder is a common stockholder subject to risks of investing in the businesses, assets and liabilities of Genzyme as a whole. For instance, the assets allocated to any division are nonetheless subject to company-wide claims of creditors, product liability plaintiffs and stockholder litigation. Also, in the event of a Genzyme liquidation, insolvency or similar event, a holder of tracking stock would have no direct claim against the assets allocated to the corresponding tracked division; a holder of tracking stock would only have the rights of a common stockholder in the combined assets of Genzyme, subject also to the Genzyme charter's allocation of liquidation units as discussed below under the heading "Liquidation Rights." AUTHORIZED CAPITAL STOCK Genzyme is authorized to issue 390,000,000 shares of common stock, $0.01 par value per share, of which: - - 200,000,000 shares have been designated Genzyme General Stock; - - 40,000,000 shares have been designated Molecular Oncology Stock; - - 100,000,000 shares have been designated Biosurgery Stock; and - - 50,000,000 shares remain undesignated as to a series. In addition, Genzyme is authorized to issue 10,000,000 shares of preferred stock, $0.01 par value per share, of which: - - 2,000,000 shares have been designated Series A Junior Participating Preferred Stock; - - 1,000,000 shares have been designated Series B Junior Participating Preferred Stock; - - 400,000 shares have been designated Series C Junior Participating Preferred Stock; and - - 6,600,000 shares remain undesignated as to a series. 3 Each series of junior participating preferred stock is meant to be associated with one of the series of common stock and would be issued under Genzyme's stockholder rights plan upon the occurrence of events described below under the heading "Anti-Takeover Measures." Throughout this description of Genzyme's capital stock, unless otherwise stated, the "fair market value" of any series of Genzyme common stock means its average per share closing price for the 20 consecutive trading days beginning on the 30th trading day before the shares are valued. DIVIDENDS Genzyme has never paid cash dividends on its stock. Currently, Genzyme intends to retain its earnings to finance future growth. Therefore, it does not expect to pay any cash dividends on its common stock in the near future. Genzyme can declare and pay dividends on a series of its common stock only in amounts permitted by its charter, and only if it has funds legally available for that purpose. Under state law, Genzyme can pay a dividend if it is solvent, would remain solvent after paying the dividend, and the payment would not violate its charter. Subject to these limitations, Genzyme's board may, in its sole discretion, declare and pay dividends exclusively on any series of its common stock in equal or unequal amounts. Genzyme's charter sets the amount available for dividends payable on a tracking stock. The amount available is the excess of either: - - the fair value of the net assets allocated to the tracking stock's corresponding division; or, if greater, - - the equity amount initially allocated to that division as adjusted to reflect: -- the net income or loss attributable to the division as adjusted for the allocation of tax benefits in accordance with our management and accounting policies; -- any dividends or other distributions, including by reclassification or exchange, declared or paid on shares of capital stock attributable to the division, excluding those paid with a stock attributable to a division to holders of that stock; -- repurchases or issuances of capital stock attributed to the division; and -- any other adjustments made to stockholders' equity of the division consistent with GAAP; over the sum of: - - the total par value of all outstanding shares of capital stock attributed to the division; and - - unless Genzyme's charter permits otherwise, the total amount of preferential payments that would be due to holders of preferred stock attributed to the division, if any, upon Genzyme's dissolution less that preferred stock's aggregate par value and any amount needed by the division to pay debts allocated to the division as they become due. If the above-described available dividend amount is less than would otherwise be available under Massachusetts law, assuming that the division were a separate corporation, then the greater amount permitted by law shall be the available dividend amount. EXCHANGE OF BIOSURGERY STOCK AND MOLECULAR ONCOLOGY STOCK Genzyme may exchange any series of its tracking stock, other than Genzyme General Stock, for cash, securities, other property and/or Genzyme General Stock upon the terms described below. 4 OPTIONAL EXCHANGE Under Genzyme's charter, the board may, at any time, exchange all outstanding shares of Molecular Oncology Stock and Biosurgery Stock for any combination of cash and/or Genzyme General Stock having a fair market value equal to 130% of the fair market value of the series to be exchanged. Fair market value will be determined as of the day Genzyme first publicly announces the exchange. Genzyme could exercise the optional exchange at any future time if its board determines that, considering current facts and circumstances, an equity structure consisting of several series of common stock is no longer in the best interests of all of its stockholders. Genzyme could make an exchange, however, at a time that is disadvantageous to the holders of a particular series of its common stock. The board's right to exchange at any time all outstanding shares of Molecular Oncology Stock or Biosurgery Stock for any combination of cash and/or Genzyme General Stock with a fair market value 30% greater than the fair market value of the stock being exchanged does not prevent the board from offering to exchange the shares on other terms. Although the holders of the shares to be exchanged would have to approve any alternative offer, Genzyme could make the offer on terms less favorable than those of this optional exchange provision. If at any time Genzyme receives an opinion of tax counsel that an "adverse tax event" has occurred due to a "tax law change," Genzyme may exchange the Molecular Oncology or Biosurgery Stock for Genzyme General Stock, and not for cash, at its fair market value. This means that the holders of the exchanged stock would not receive any premium in the exchange. The phrase "adverse tax event," with respect to any series of Genzyme's common stock, means an event making it more likely than not, for U.S. federal income tax purposes, that: - - Genzyme or its stockholders are, or will be in the future, taxed upon issuance of shares of that series; or - - shares of that series or of Genzyme General Stock are not, or will not be in the future, treated solely as Genzyme's common stock. The phrase "tax law change" means either: - - any enactment of or change in federal, state or other tax laws or regulations, including any proposed changes announced by a legislative committee or administrative agency; or - - any official or administrative pronouncement, action or judicial decision interpreting or applying the tax laws or regulations. For purposes of tax counsel's opinion, it may be assumed that any legislative or administrative proposals will be adopted or enacted as proposed. A third optional exchange provision provides that at any time at which all of the assets allocated to a division (excluding Genzyme General) --and only that division's assets-- are held by a wholly-owned subsidiary (or subsidiaries) of Genzyme, the board can redeem all outstanding shares of the division's corresponding tracking stock in exchange for the subsidiary's stock. This type of transaction is commonly referred to as a "spin off" of a line of business to existing shareholders. The end result, in the case of Biosurgery Stock, for example, would be that Genzyme Biosurgery would exist as a separate corporate entity, owned by stockholders who had formerly held Biosurgery Stock. If at the time of the spin off, any shares of tracking stock corresponding to the spun off division were designated for the benefit of Genzyme General, then an appropriate number of shares of the spun off corporation would be issued to Genzyme and allocated to Genzyme General. MANDATORY EXCHANGE Under Genzyme's charter, following the sale of all or substantially all of the assets of Genzyme Molecular Oncology or Genzyme Biosurgery, as the case may be, Genzyme's board would be required to authorize, chosen at 5 its sole discretion, one of the following mandatory payments to holders of the tracking stock corresponding to the sold division: - PAYMENT METHOD 1. A pro rata dividend payment of cash, securities (other than Genzyme common stock) or other property to those tracking stockholders in an amount equal to the after-tax net proceeds of the sale. - PAYMENT METHOD 2. A redemption of all or a portion of the outstanding stock corresponding to that division. If all of the assets allocated to the division were sold, Genzyme would redeem all outstanding stock corresponding to that division for cash, securities (other than Genzyme common stock) or other property in an amount equal to the sale's net proceeds. If substantially all (but not all) of the assets allocated to that division were sold, Genzyme would redeem a pro rata portion of the stock corresponding to that division in an amount equal to the sale's net proceeds. - PAYMENT METHOD 3. An exchange of each share of stock corresponding to that division for shares of Genzyme General Stock equal to 110% of the average closing price of the exchanged stock. The average closing price of each stock would be calculated during the 10-day trading period beginning on the fifth trading day AFTER Genzyme's announcement of the sale's estimated net proceeds. The board's decision may be made at any time prior to 20 business days after the date on which Genzyme announces the estimated net proceeds received from the sale. The redemption or dividend payment under methods 1 and 2 described above could be in the form of cash, securities or other property, but not Genzyme common stock, and need not be in the same form as the cash, securities and/or other property paid by the third party purchasing the assets. An exchange under method 3, on the other hand, could be completed only with Genzyme General Stock. To determine the amount of cash, securities or other property distributable to stockholders after the sale of the associated division's assets, two calculations would be made. First, the net proceeds of the sale would be computed. Net proceeds would equal the gross proceeds of the sale, less taxes, transactional costs, liabilities allocated to another Genzyme division because of the sale, and amounts payable to any holders of preferred stock that corresponds to the division. Second, the amount of net proceeds allocable for distribution to the division's corresponding tracking stockholders would be calculated. This amount is the product of the net proceeds multiplied by a fraction. The fraction equals the outstanding shares of the division's corresponding tracking stock divided by the sum of those outstanding shares plus the shares corresponding to the division then designated for the benefit of Genzyme General. (For an explanation of designated shares, see "Molecular Oncology Designated Shares and Biosurgery Designated Shares" below.) In establishing the value of the cash, property and/or securities that comprise the gross proceeds of a sale: - - cash will be valued at face value; - - securities will be valued at the average of their intra-day high and low trading prices (or if there is no market for the security, at their fair value determined by Genzyme's board) on the date of the sale; and - - property, other than cash and securities, will be valued at its fair value on the date of the sale, as determined by Genzyme's board. Similarly, the value of cash, property and/or securities (other than Genzyme General Stock distributed under Payment Method 3) distributed to stockholders will be established in the same manner and as of the date of the sale. Interest earned up until the record date on any cash net proceeds distributed to stockholders will be included in that distribution payment. Genzyme's board must announce the estimated net proceeds of the sale no later than 20 business days after the sale is completed. Within 20 business days following that announcement, the board must choose and announce which of the three payment methods it will use. Within 60 business days after the announcement of the payment method selected, Genzyme must complete the distribution to the stockholders. 6 Under the terms of the Molecular Oncology Stock and Biosurgery Stock, there are four types of asset sales that will not trigger a mandatory payment to stockholders: - - a sale of assets to an entity controlled, as determined by the board, by Genzyme; - - a sale of assets primarily for equity in a buyer that Genzyme's board determines is engaged primarily in a business similar or complementary to that of the division; - - a distribution to a division's corresponding tracking stockholders of Genzyme's equity interest (which is allocated entirely to that division) in one or more Genzyme subsidiaries that hold all of the assets allocated to that division (and only those assets)--namely, a "spin off" of Genzyme's ownership of the division to that division's corresponding stockholders; and - - a sale of a assets allocated to a division conditioned on the affirmative vote of that division's corresponding stockholders voting together as a single class. TERMINATION OF CASH EXCHANGE FEATURE Under Genzyme's charter, if Genzyme receives an opinion of tax counsel at any time that, because of a tax law change, its right to exchange Molecular Oncology or Biosurgery Stock for cash would cause an adverse tax event, then Genzyme's board may by majority vote elect to terminate its right to exchange that tracking stock for cash. If Genzyme's board elects to terminate this right, then we will only have the right to exchange that tracking stock for Genzyme General Stock, and not for cash. In the case of the mandatory exchange feature, elimination of the cash exchange right will result in the mandatory exchange provision requiring Genzyme to exchange the tracking stock corresponding to a division whose associated assets are being sold into shares of Genzyme General Stock based on both stocks' fair market value as of the date of the sale's announcement and at no premium. VOTING RIGHTS Stockholders of all series of Genzyme's common stock vote together as one class on all matters on which common stockholders generally are entitled to vote, including the election of directors. The following chart shows the number of votes per share to which each series of common stock is entitled on such matters:
NUMBER OF VOTES PER SHARE SERIES UNTIL DECEMBER 31, 2000 Genzyme General Stock................. 1.00 Molecular Oncology Stock.............. 0.08 Biosurgery Stock...................... 0.50
You can calculate the percentage of a series' total voting power at any time, by dividing that series' number of votes -- that is, the total number of outstanding shares of a series multiplied by the vote per share to which that series is entitled -- by the total number of votes held by all series. On January 1, 2001 and on January 1st every two years afterward, Genzyme's charter requires it to adjust the number of votes per share to which Molecular Oncology Stock and Biosurgery Stock are entitled as follows:
fair market value of a share of Molecular Oncology Stock Number of votes per = -------------------------------------------------- share of Molecular Oncology Stock fair market value of a share of Genzyme General Stock 7 fair market value of a share of Biosurgery Stock Number of votes per = -------------------------------------------------- share of Biosurgery Stock fair market value of a share of Genzyme General Stock
If no shares of Genzyme General Stock are outstanding on that date, then of the series that are outstanding, the one with the highest fair market value per share becomes the "base" series. That series becomes the denominator in the formula above and has one vote per share. Each other series then has the number of votes per share determined under the above formulas, after replacing Genzyme General Stock in the denominator with the new base series. Genzyme's charter provides for adjustment of the voting rights of the Molecular Oncology Stock and Biosurgery Stock to avoid dilution of any series' voting rights in the event the outstanding shares of any series are subdivided or combined by stock split, reverse stock split, reclassification or otherwise, or a stock dividend or distribution is issued to stockholders of that series. If shares of only one series are outstanding, or if shares of any series are entitled to vote separately as a class, each share of that series will have one vote. The purpose of the periodic adjustments to the relative voting rights of each series is to ensure that a holder's voting rights more closely reflect the market value of the holder's investment in Genzyme. These adjustments to voting rights may influence the investment activities of an investor interested in acquiring and maintaining a fixed percentage of Genzyme's voting power. The adjustments will limit the ability of an investor in one series to obtain for the same consideration more or less voting power per share than investors in another series. If the relative market values of each series of common stock change before the first adjustment or in between any adjustments an investor in one series may acquire relatively more or less voting power for the same consideration when compared with investors in another series. While generally all Genzyme common stockholders vote together as a single class, Genzyme's charter requires that holders of a series affected by any of the following proposals approve the proposal at a meeting at which both a quorum is present and the votes in favor of the proposal exceed those against it: - to allow any proceeds from a disposition of the properties or assets allocated to a division to be used in the business of another division without fair compensation; - to allow any properties or assets allocated to a division to be used in the business of another division or to declare or pay any dividend or distribution on any series of common stock not attributed to that division without fair compensation; - to issue shares of any series of common stock without allocating the proceeds of the issuance to the division represented by that series except, however, for "designated" shares; - to change the rights or preferences of any series in a manner that affects the series adversely; or - to effect any merger or business combination in which (a) stockholders of all series together will no longer own, directly or indirectly, at least fifty percent (50%) of the voting power of the surviving corporation, and (b) stockholders of all series will not receive the same form of consideration, distributed among stockholders in proportion to the market capitalization of each series of Genzyme's common stock as of the date of the first public announcement of the merger or business combination. If, however, Genzyme receives an opinion of tax counsel at any time that, because of a tax law change, the special voting rights described above would cause an adverse tax event, then Genzyme may, by vote of a majority of all of its common stock outstanding voting as one class--without need of an additional, separate series vote--eliminate the special voting rights of the Molecular Oncology and/or Biosurgery Stock. Under Massachusetts law, any amendment to Genzyme's charter that would adversely alter or change the powers, preferences or special rights of any series of common stock must be approved by a majority of the outstanding shares of each affected series, voting together as a single class. 8 The following types of charter amendments are considered to adversely affect a series of stock under Massachusetts law: - - alteration or abolishment any of any preferential right of stock having preferences; - - creation, alteration or abolishment of any redemption right of the stock; - - alteration or abolishment of any preemptive right of the stock; - - creation or alteration (other than abolishment) of any restriction on transfer of the stock; and - - exclusion or limitation of the stockholder's right to vote on a matter except a limitation by virtue of voting rights given to new shares being authorized of a new or existing class of stock. Massachusetts law 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 require only the approval of a majority of all of Genzyme's outstanding capital stock entitled to vote and because the holders of Genzyme General Stock currently have more than the number of votes required to approve a matter, those stockholders currently are in a position to control the outcome of most votes. LIQUIDATION RIGHTS If Genzyme voluntarily or involuntarily dissolves, liquidates or winds up its affairs, common stockholders will be entitled to receive any net assets remaining for distribution after Genzyme has satisfied or made provision for its debts and obligations and for payment to any stockholders with preferential rights to receive distributions of its net assets. Genzyme will distribute any remaining assets to common stockholders on a per share basis in proportion to each series' respective per share liquidation units. Common stockholders will have no direct claim against any particular assets of Genzyme or its subsidiaries. Each series has the following number of liquidation units per share:
SERIES NUMBER OF LIQUIDATION UNITS --------------------------- Genzyme General Stock. 100 Molecular Oncology Stock 25 Biosurgery Stock 50
Genzyme will adjust the liquidation units of the Biosurgery Stock and Molecular Oncology Stock only to avoid dilution in the aggregate liquidation rights of any series in the event the outstanding shares of any series are subdivided or combined by stock split, reverse stock split, reclassification or otherwise, or a dividend or distribution is given to stockholders of that series. A merger or business combination or a sale of all or substantially all of its assets will not be treated as a liquidation. Genzyme may not, however, without approval from each series voting as a separate class, effect a merger or business combination involving Genzyme that results in: - - stockholders of all series no longer owning, directly or indirectly, at least 50% of the voting power of the surviving corporation; and - - stockholders of each series not receiving the same form of consideration distributed among stockholders in proportion to the market capitalization of each series of common stock as of the date of the first public announcement of the merger or business combination. MOLECULAR ONCOLOGY DESIGNATED SHARES AND BIOSURGERY DESIGNATED SHARES Designated shares are authorized but unissued shares which Genzyme's board may from time to time issue, sell or otherwise distribute without allocating the proceeds or other benefits of the issuance, sale or distribution to the 9 division tracked by the shares. Until the shares are issued by Genzyme's board, designated shares are not outstanding shares of stock, and, therefore, may not receive dividends and cannot be voted by Genzyme. MOLECULAR ONCOLOGY DESIGNATED SHARES On September 30, 2000, there were 2,000,198 Molecular Oncology designated shares, which, if issued, would represent 11.5% of the outstanding shares of Molecular Oncology Stock. The number of Molecular Oncology designated shares, from time to time will be: - adjusted to reflect subdivisions or combinations by stock split, reverse stock split or otherwise of the Molecular Oncology Stock and dividends or distributions of shares of Molecular Oncology Stock to holders of Molecular Oncology Stock and other reclassifications of Molecular Oncology Stock; - - decreased by - - the number of any designated shares of Molecular Oncology Stock that Genzyme issues; - the number of any shares of Molecular Oncology Stock issued upon the exercise or conversion of securities convertible into Molecular Oncology Stock that are attributed to Genzyme General; and - the number of any shares of Molecular Oncology Stock that Genzyme issues as a dividend or distribution or by reclassification, exchange or otherwise to holders of Genzyme General Stock; and - - increased by - the number of any outstanding shares of Molecular Oncology Stock that Genzyme repurchases, the consideration for which was paid by Genzyme General; and - the number of shares of Molecular Oncology Stock equal to the fair value, as determined by Genzyme's board, of assets or properties allocated to Genzyme General that are reallocated to Genzyme Molecular Oncology (excluding reallocations that represent sales at fair value between those divisions) divided by the fair market value of one share of Molecular Oncology Stock on the date of that reallocation. BIOSURGERY DESIGNATED SHARES The initial number of Biosurgery designated shares will be the aggregate total of the pre-existing Surgical Products designated shares converted into Biosurgery designated shares at a ratio of 1-for-0.6060 and of the pre-existing Tissue Repair designated shares converted at a ratio of 1-for-0.3352 at the effective time of the Amendment. Based on the number of Surgical Products designated shares and Tissue Repair designated shares existing as of September 30, 2000, upon the creation of Genzyme Biosurgery, there would be 1,995,354 Biosurgery designated shares, which, if issued, would represent 5.4% of the outstanding shares of Biosurgery Stock, assuming that there are 34,800,000 shares of Biosurgery Stock outstanding after the tracking stock exchange and the merger. Following the creation of Biosurgery stock, that number, from time to time will be: - adjusted to reflect subdivisions or combinations by stock split, reverse stock split or otherwise of the Biosurgery Stock and dividends or distributions of shares of Biosurgery Stock to holders of Biosurgery Stock and other reclassifications of Biosurgery Stock; - - decreased by - - the number of any designated shares of Biosurgery Stock that Genzyme issues; 10 - the number of any shares of Biosurgery Stock issued upon the exercise or conversion of securities convertible into Biosurgery Stock that are attributed to Genzyme General; and - the number of any shares of Biosurgery Stock Genzyme issued as a dividend or distribution or by reclassification, exchange or otherwise to Genzyme General Stockholders; and - - increased by - - the number of any outstanding shares of Biosurgery Stock that Genzyme repurchases, the consideration for which was paid by Genzyme General; - the number of shares of Biosurgery Stock equal to the fair value, as determined by Genzyme's board, of assets or properties allocated to Genzyme General that are reallocated to Genzyme Biosurgery (excluding reallocations that represent sales at fair value between those divisions) divided by the fair market value of one share of Biosurgery Stock on the date of that reallocation; and - the number of shares of Biosurgery Stock equal to (1) the aggregate fair market value of any shares of Genzyme General Stock issued to the limited partners of Genzyme Development Partners in connection with Genzyme's exercise on behalf of Genzyme Biosurgery of Genzyme's purchase option to reacquire all of the limited partnership interests of that partnership divided by (2) the fair market value of one share of Biosurgery Stock on the date of the exercise. Whenever Genzyme issues or sells additional shares of any series of common stock, Genzyme will identify: - the number of shares issued and sold for account of a particular division to which they relate, the proceeds of which will be allocated to and reflected in the financial statements of that division; and - the number of shares issued and sold from the designated shares of Molecular Oncology Stock and/or Biosurgery Stock. If Genzyme repurchases outstanding shares of Molecular Oncology Stock or Biosurgery Stock, Genzyme will identify the number of shares that are repurchased for consideration that was derived from Genzyme General and the number of designated shares may increase accordingly. DETERMINATIONS BY GENZYME'S BOARD Any determination made by Genzyme's board in good faith under any of the provisions described above will be final and binding on all stockholders. "ANTI-TAKEOVER" PROVISIONS CONTRACTUAL MEASURES Genzyme's charter and by-laws contain provisions that could discourage potential takeover attempts and prevent stockholders from changing Genzyme's management. For example, Genzyme's board is authorized to issue shares of common stock and preferred stock in series, enlarge the board's size and fill any vacancies on the board. Also, stockholders face restrictions on calling a special meeting of stockholders, bringing business before an annual meeting and nominating candidates for election as directors. Genzyme also has agreements with some of its officers that contain change of control provisions. In addition, Genzyme has a stockholder rights plan, the Amended Rights Agreement. Under the plan, each outstanding share of Genzyme's common stock carries with it a right, currently unexercisable, that if triggered permits the holder to purchase large amounts of Genzyme's or any successor entity's securities at a discount and/or 11 trade those purchase rights separately from the common stock. The rights are triggered when a person acquires, or makes a tender or exchange offer to acquire, 15% of Genzyme's common stock's voting power. The plan, however, prohibits the 15%-acquiror, or its affiliates, from exercising its Genzyme shares' purchase rights. As a result, the acquiror's interest in Genzyme is substantially diluted. A summary of the rights is provided below under "5(c) Description of the Amended Rights Agreement." The rights are described more completely in the Amended Rights Agreement itself, which is contained in Exhibit 4 to Genzyme's Registration Statement on Form 8-A filed on December 19, 2000 registering rights to purchase the Biosurgery Stock, and is incorporated in this document by reference. BUSINESS COMBINATION STATUTE Under the Massachusetts Business Combination statute, if a person acquires 5% or more of the outstanding voting stock of a Massachusetts corporation without the approval of its board of directors, that person becomes an interested stockholder and he or she may not engage in business combination transactions with the corporation for three years. There are exceptions to this prohibition, including: - if the board of directors approves the acquisition of stock or the transaction before the time that the person became an interested stockholder; - if the interested stockholder acquires 90% of the outstanding voting stock of the company, excluding voting stock owned by directors who are also officers and some employee stock plans, in one transaction; or - if the transaction is approved by the board and by two-thirds of the outstanding voting stock not owned by the interested stockholder. Genzyme is subject to the Massachusetts Business Combination statute unless it elects, with stockholder approval, not to be. Genzyme has not elected to be exempt and does not currently intend to do so. CONTROL SHARE ACQUISITION STATUTE The Massachusetts Control Share Acquisition statute provides that each and any time a person offers to acquire, or acquires, shares of stock permitting it to control at least 20%, 33 1/3% or a majority of the voting power of a corporation, it cannot vote those acquired shares unless the acquiror obtains the approval of a majority in interest of the shares held by all stockholders, excluding shares held by the acquiror, officers of the corporation, and directors who are also employees of the corporation. The statute does not require that the acquiror have already purchased the shares before the stockholder vote. As permitted under Massachusetts law, Genzyme has elected not to be governed by the Massachusetts Control Share Acquisition statute. However, the statute permits Genzyme's board to elect at a future date to be governed by the statute by amending the company's by-laws accordingly. Any such amendment, however, would apply only to acquisitions that occur after the effective date of the amendment. TRANSFER AGENT AND REGISTRAR American Stock Transfer & Trust Company is the registrar and transfer agent for each series of Genzyme's common stock. Its telephone number is (212) 936-5100. 5(b) DESCRIPTION OF GENZYME'S MANAGEMENT AND ACCOUNTING POLICIES OVERVIEW 12 Because each of Genzyme's operating divisions is part of a single company, Genzyme's board has adopted policies to address issues that may arise among divisions and to govern the management of and the relationships between each division. The issues addressed by the policies include: - the financing of each division; - competition among the divisions; - inter-divisional business transactions; - access to technology and know-how; - corporate opportunities; and - the allocation of debt, corporate overhead, interest, taxes and other charges among the divisions. Summarized below are the policies as they relate to Genzyme's three divisions. We recommend that you read the full text of the policies, which is contained in Exhibit 3 to this Registration Statement. With a few exceptions that are noted, Genzyme's board may modify or rescind the policies, or adopt additional policies, in its sole discretion without approval of the stockholders, subject only to the board's fiduciary duty to Genzyme's stockholders. PURPOSE OF GENZYME GENERAL, GENZYME MOLECULAR ONCOLOGY AND GENZYME BIOSURGERY 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 on molecular tools and genomic information. 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 Genzyme Development Partners) and a portfolio of devices, biomaterials, biotherapeutics and other products for the field of biosurgery. In addition to the programs initially assigned to each of the divisions, Genzyme expects that the product and service portfolio of each division will expand through the addition of complementary programs, products and services developed either internally or externally, including outside of Genzyme. Genzyme will operate and manage each of the divisions similarly to Genzyme General except as provided in the policies. REVENUE ALLOCATION AND RECOGNITION Genzyme allocates revenues from the sale or licensing of products and services to the division to which those products or services had been allocated. When products and services that are normally sold by a division to third parties are used by other divisions, Genzyme records interdivisional revenue and interdivisional purchases, which Genzyme describes in detail in its policy "Other Interdivisional Transactions." EXPENSE ALLOCATION Genzyme charges all direct expenses to the division that has incurred the expenses. Genzyme's policy "Other Interdivisional Transactions" addresses expenses other than direct expenses. ASSET ALLOCATION Genzyme allocates assets that are exclusively dedicated to the production of goods and services of a particular division to that division. Genzyme addresses the use of production assets by more than one division in its policy "Other Interdivisional Transactions." 13 TAX ALLOCATIONS Genzyme allocates income taxes to each division based upon the financial statement income, taxable income, credits and other amounts properly allocable to it under generally accepted accounting principles as if it were a separate taxpayer. As of the end of any fiscal quarter, however, if a division cannot use any projected annual tax benefit attributable to it to offset or reduce its current or deferred income tax expense, Genzyme may allocate the tax benefit to the other divisions in proportion to their taxable income without any compensating payment or allocation. ACQUISITIONS OF PROGRAMS, PRODUCTS OR ASSETS If Genzyme acquires any programs, products or assets from a third party, it will allocate among its divisions the aggregate cost of the acquisition and the programs, products or assets acquired. In the case of material acquisitions, Genzyme will make the allocation in a manner that its board determines to be fair and reasonable to each division and to holders of the common stock representing each division, taking into account matters that its board and its financial advisors, if any, deem relevant. Genzyme's policies provide that the determinations by its board will be final and binding on all holders of common stock. DISPOSITION OF PROGRAMS, PRODUCTS OR ASSETS If Genzyme disposes of any programs, products or assets that do not consist of all or substantially all of the assets allocated to a division, it will allocate all proceeds to the division to which the program, product or asset had been allocated. If a program, product or asset was allocated to more than one division, Genzyme will allocate the proceeds among the divisions based on their interests in the program, product or asset. Genzyme will make the allocation in a manner that its board determines to be fair and reasonable to each of the divisions and to holders of the common stock representing each of the divisions, taking into account matters that its board and its financial advisors, if any, deem relevant. Genzyme's policies provide that the determinations by its board will be final and binding on all holders of common stock. INTERDIVISIONAL ASSET TRANSFERS Genzyme's board may at any time reallocate any program, product or other asset from one division to any other division. It will make reallocations at fair market value, determined by its board, taking into account the following criteria in the case of a program under development: - the commercial potential of the program; - the phase of clinical development of the program; - - the expenses associated with realizing any income from the program and the likelihood and timing of the realization; and - other matters that Genzyme's board and its financial advisors, if any, deem relevant. One division may pay another division the consideration for a reallocation in cash or other consideration with a value equal to the fair market value of the reallocated assets. In the case of a reallocation of assets from Genzyme General to another division, Genzyme's board may elect instead to account for the reallocation as an increase in the designated shares representing the division to which the assets are reallocated in accordance with the provisions of Genzyme's charter. These policies regarding transfers of assets between divisions will not be changed by Genzyme's board without the approval of the holders of the common stock representing each of the divisions voting as a separate class. If, however, the policy change affects one or more, but not all of the divisions, only holders of shares of the affected division(s) will be entitled to vote on the matter. OTHER INTERDIVISIONAL TRANSACTIONS 14 Genzyme's divisions 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. These transactions may include agreements by one division to provide products and services for use by another division, license agreements and joint ventures or other collaborative arrangements involving more than one division to develop new products and services jointly and with third parties. The division providing the products or services does not recognize revenue unless the division provides those products or services to unrelated third parties as part of its ordinary conduct of business. The transactions will be subject to the following conditions: - Genzyme will charge research and development (including clinical and regulatory support), distribution, sales, marketing, and general and administrative services (including allocated space) performed by one division for another division to the division for which the services are performed on a cost basis. It charges all direct expenses to the division that has incurred the expenses. It will allocate direct labor and indirect costs in reasonable and consistent manners based on the use by a division of relevant services. - Genzyme will charge the manufacturing of goods and services by one division exclusively for another division to the division for which it is performed on a cost basis. It will include in manufacturing costs an interest charge on the gross fixed assets used in the manufacturing process. It will determine gross fixed assets for the facility used at the beginning of each fiscal year. The interest rate will be Genzyme's short term borrowing rate at the beginning of each fiscal year. Genzyme will allocate direct labor and indirect costs in reasonable and consistent manners based on the benefit received by a division of related goods and services. - Other than transactions involving research and development, distribution, sales, marketing, general and administrative services, which are addressed above, all interdivisional transactions will be on terms and conditions obtainable in arm's length transactions with third parties. - Genzyme's board must approve interdivisional transactions that are performed on terms and conditions other than as described above and that are material to one or more of the participating divisions. In giving its approval, Genzyme's board must determine that the transaction is fair and reasonable to each participating division and to holders of the common stock representing each participating division. - Divisions may make loans to other divisions. Any loan of $1 million or less will mature within 18 months and interest will accrue at the best borrowing rate available to Genzyme for a loan of a similar type and duration. Genzyme's board must approve any loan in excess of $1 million. In giving its approval, the board must determine 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 each such division. - All material interdivisional transactions will be set forth in a written agreement signed by an authorized member of the management team of each division involved in the transaction. ACCESS TO TECHNOLOGY AND KNOW-HOW Each division will have unrestricted access to all of Genzyme's technology and know-how that may be useful in that division's business, subject to any obligations or limitations that apply to the company. DISPOSITION OF DESIGNATED SHARES OF MOLECULAR ONCOLOGY STOCK AND BIOSURGERY STOCK Genzyme's board may from time to time and in its sole discretion dispose of designated shares of Molecular Oncology Stock and Biosurgery Stock in the following manner: 15 - issue the designated shares upon the exercise or conversion of outstanding stock options, warrants or convertible securities allocated to Genzyme General; - sell the designated shares for any valid purpose, subject to the restrictions set forth in Genzyme's policy entitled "Issuance and Sale of Additional Shares of Common Stock," which is set forth on page; and - distribute the designated shares as a dividend to the holders of shares of Genzyme General Stock. MOLECULAR ONCOLOGY DESIGNATED SHARES Genzyme will distribute substantially all of the designated shares of Molecular Oncology Stock to holders of record of Genzyme General Stock, if as of November 30 of each year, the number of Molecular Oncology designated shares exceeds 10% of the number of shares of Molecular Oncology Stock then issued and outstanding. Genzyme will, however, reserve for issuance a number of shares equal to the sum of: - the number of Molecular Oncology designated shares reserved for issuance with respect to securities convertible into Genzyme General Stock which include stock options, stock purchase rights, warrants or other securities convertible into or exercisable for shares of Genzyme General Stock, then outstanding as a result of anti-dilution adjustments required by the terms of these instruments or approved by Genzyme's board, plus - the number of Molecular Oncology designated shares reserved by Genzyme's board as of that date for sale not later than six months afterwards, with the proceeds to be allocated to Genzyme General. BIOSURGERY DESIGNATED SHARES Genzyme will distribute substantially all of the designated shares of Biosurgery Stock to holders of record of Genzyme General Stock if, as of September 30 of each year, the number of Biosurgery designated shares exceeds 10% of the number of shares of Biosurgery Stock then issued and outstanding. Genzyme will, however, reserve a number of shares equal to the sum of: - the number of Biosurgery designated shares reserved for issuance with respect to securities convertible into Genzyme General Stock which then outstanding as a result of anti-dilution adjustments required by the terms of these instruments or approved by Genzyme's board, plus - the number of Biosurgery designated shares reserved by Genzyme's board as of that date for sale not later than six months afterwards, with the proceeds to be allocated to Genzyme General. ISSUANCE AND SALE OF ADDITIONAL SHARES OF COMMON STOCK When Genzyme issues additional shares of its common stock, it will identify both: - the number of shares issued and sold for the account of the division to which they relate and the corresponding proceeds, which Genzyme will allocate to and reflect in the financial statements of that division; and - the number of shares issued and sold for the account of Genzyme General, which will reduce the number of designated shares of that division. Genzyme will not, however, sell any designated shares of a division, 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 Molecular Oncology Stock or Biosurgery Stock paid to holders of Genzyme General Stock, unless either: 16 - Genzyme's board determines that the division has sufficient cash to fund its operations for at least the next 12 months; or - Genzyme is then selling shares of a division for that division's own account in an amount that will produce proceeds sufficient to fund that division's cash needs for the next 12 months. OPEN MARKET PURCHASES OF SHARES OF COMMON STOCK Genzyme may purchase its common stock in the open market in accordance with applicable securities law requirements. Genzyme will not, however, purchase its Molecular Oncology Stock or Biosurgery Stock if, as an immediate result, the number of that series' designated shares will exceed 60% of the sum of the number of that series' shares outstanding and the number of its designated shares. Additionally, Genzyme may not, within 90 days of any open market purchase of shares of any of those series, exercise the right provided under its charter to exchange shares of that series for cash and/or shares of Genzyme General Stock. CLASS VOTING Where Genzyme has provided that the approval of the holders of a series of its tracking stock is required to take any action pursuant to these policies or Genzyme's charter, the requirement may be satisfied if the action is approved by a majority of the votes cast at a meeting of the holders of that series at which a quorum is present. This is in addition to any stockholder approval required by Massachusetts law. NON-COMPETE Genzyme's divisions may not materially engage 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. These permissible transactions are subject to the conditions set forth on page in Genzyme's policy entitled "Interdivisional Asset Transfers." The divisions may compete in a business which is not a principal business of another division. Genzyme's board may determine in its good faith business judgment whether particular activities of one division constitute a material engagement in the principal businesses of another division. CORPORATE OPPORTUNITIES Genzyme's board will review any matter which involves the allocation of a material corporate opportunity to any of the divisions, or in part to one division and in part to another division. The board will make its determination with regard to the allocation and benefit of an opportunity in accordance with its good faith business judgment of the best interests of Genzyme and all of its stockholders as a whole. In making this allocation, the board may consider, among other factors: - - whether a particular corporate opportunity is principally related to the business of a particular division; - - whether one division, because of its managerial or operational expertise, will be better positioned to undertake the corporate opportunity; - - whether one division, because of its allocated financial resources, will be better positioned to undertake the corporate opportunity; and - - existing contractual agreements and restrictions. 17 ITEM 2. EXHIBITS. EXHIBIT NO. DESCRIPTION ----------- ----------- 1. Restated Articles of Organization of the Registrant. Filed herewith. 2. By-Laws of the Registrant. Filed as Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999. (File No. 0-14680), and incorporated herein by reference. 3. Management and Accounting Policies Governing the Relationship of Genzyme Divisions. Filed herewith. 18 SIGNATURE Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. GENZYME CORPORATION Date: December 18, 2000 By: /s/ Michael S. Wyzga -------------------------------------------- Name: Michael S. Wyzga Title: Senior Vice President, Finance and Chief Financial Officer 19 EXHIBIT LIST EXHIBIT NO. DESCRIPTION ----------- ----------- 1. Restated Articles of Organization of the Registrant. Filed herewith. 2. By-Laws of the Registrant. Filed as Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999. (File No. 0-14680), and incorporated herein by reference. 3. Management and Accounting Policies Governing the Relationship of Genzyme Divisions. Filed herewith. 20 EX-1 2 a2033583zex-1.txt EXHIBIT 1 EXHIBIT 1 RESTATED ARTICLES OF ORGANIZATION Federal Identification Number: 06-1047163 ------------------ THE COMMONWEALTH OF MASSACHUSETTS William Francis Galvin Secretary of the Commonwealth One Ashburton Place, Boston, Massachusetts 02108-1512 RESTATED ARTICLES OF ORGANIZATION (GENERAL LAWS, CHAPTER 156B, SECTION 74) We, MICHAEL S. WYZGA, *Senior Vice-President and PETER WIRTH, *Clerk of Genzyme Corporation located at One Kendall Square, Cambridge, MA 02139 do hereby certify that the following Restatement of the Articles of Organization was duly adopted at a meeting held on March 5, 2000 and May 25, 2000 and December 18, 2000 by a vote of the directors/or: 59,927,251 votes of all series of Genzyme common stock of 99,103,359 votes outstanding, 9,007,794 shares of Genzyme Surgical Products Division Common Stock of 14,998,985 shares outstanding, and 16,175,534 shares of Genzyme Tissue Repair Division Common Stock of 28,868,052 shares outstanding, **being at least a majority of each type, class or series outstanding and entitled to vote thereon and of each type, class or series of stock whose rights are adversely affected thereby: ARTICLE I The name of the corporation is: GENZYME CORPORATION ARTICLE II The purpose of the corporation is to engage in the following business activities: TO DEVELOP, MANUFACTURE AND SELL HUMAN HEALTH CARE PRODUCTS AND TO ENGAGE GENERALLY IN ANY BUSINESS THAT MAY LAWFULLY BE CARRIED ON BY A CORPORATION FORMED UNDER CHAPTER 156B OF THE GENERAL LAWS OF MASSACHUSETTS. *Delete the inapplicable words. **Delete the inapplicable clause. ARTICLE III State the total number of shares and par value, if any, of each class of stock which the corporation is authorized to issue:
WITHOUT PAR VALUE WITH PAR VALUE ----------------- -------------- TYPE NUMBER OF SHARES TYPE NUMBER OF PAR VALUE SHARES ------ Common: COMMON: 390,000,000* $.01 ------- ------------ ---- Preferred: PREFERRED: 10,000,000*** $.01 ---------- ------------- ----
* of which 200,000,000 shares have been designated Genzyme General Division Common Stock, 40,000,000 shares have been designated Genzyme Molecular Oncology Division Common Stock and 100,000,000 share have been designated Genzyme Biosurgery Division Common Stock. *** of which 2,000,000 shares have been designated Series A Junior Participating Preferred Stock, 1,000,000 shares have been designated Series B Junior Participating Preferred Stock, and 400,000 shares have been designated Series C Junior Participating Preferred Stock. ARTICLE IV If more than one class of stock is authorized, state a distinguishing designation for each class. Prior to the issuance of any shares of a class, if shares of another class are outstanding, the corporation must provide a description of the preferences, voting powers, qualifications, and special or relative rights or privileges of that class and of each other class of which shares are outstanding and of each series then established within any class. 2 DESCRIPTION OF CAPITAL STOCK A. AUTHORIZED CAPITAL STOCK The total number of shares of all classes of capital stock which the Corporation shall be authorized to issue is four hundred million (400,000,000) shares, consisting of three hundred ninety million (390,000,000) shares of Common Stock, $.01 par value per share (the "Common Stock") and ten million (10,000,000) shares of Preferred Stock, $.01 par value per share (the "Preferred Stock"). B. UNDESIGNATED COMMON STOCK Shares of Common Stock not at the time designated as shares of a particular series pursuant to this Section IV.B. or any other provision of these Articles of Organization may be issued from time to time in one or more additional series. The Board of Directors may determine, in whole or in part, the preferences, voting powers, qualifications and special or relative rights or privileges of any such series before the issuance of any shares of that series, PROVIDED that in no event shall the holder of a share of any series of Common Stock be entitled to more than one vote per share at the time that shares of such series are first issued. The Board of Directors shall determine the number of shares constituting each series of Common Stock and each series shall have a distinguishing designation. C. GENZYME GENERAL DIVISION COMMON STOCK 1. Authorized Amounts. Two hundred million (200,000,000) shares of Common Stock are designated as a series of Common Stock with the following designation: Genzyme General Division Common Stock (the "GGD Stock"). To the extent legally permitted, such number of shares may be increased or decreased by vote of the Board of Directors, provided that no decrease shall reduce the number of shares of GGD Stock to a number less than the number of shares of such series then outstanding plus the number of shares of such series reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into such series of Common Stock. A description of the GGD Stock and a statement of its preferences, voting powers, qualifications and special or relative rights or privileges is as follows: 2. Dividends And Distributions. Subject to the express terms of any outstanding series of Preferred Stock, dividends may be declared and paid upon the GGD Stock, in such amounts and at such times as the Board of Directors may determine, only out of the lesser of (a) funds of the Corporation legally available therefor and (b) the Available GGD Dividend Amount. 3. Voting Rights. The holders of GGD Stock, voting together with the holders of shares of all other series of Common Stock as a single class of stock, shall have the exclusive right to vote for the election of directors and on all other matters requiring action by the stockholders or submitted to the stockholders for action, except as may be determined by the Continuation Sheet - 4 Board of Directors in establishing any series of Common or Preferred Stock or as may otherwise be required by law. Each share of the GGD Stock shall entitle the holder thereof to one vote. 4. Liquidation, Dissolution Or Winding Up. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the rights of the holders of GGD Stock shall be as follows: (a) After the Corporation has satisfied or made provision for its debts and obligations and for the payment to the holders of shares of any class or series of capital stock having preferential rights to receive distributions of the net assets of the Corporation (including any accumulated and unpaid dividends), the holders of GGD Stock shall be entitled to receive the net assets of the Corporation remaining for distribution, on a per share basis in proportion to the respective liquidation units per share of all series of Common Stock. Each share of GGD Stock shall have one hundred (100) liquidation units. (b) For the purposes of Section IV.C.4(a), any merger or business combination involving the Corporation or any sale of all or substantially all of the assets of the Corporation shall not be treated as a liquidation. 5. Special Voting Rights. The Corporation shall not, without approval by the holders of the GGD Stock at a meeting at which a quorum is present and the votes cast in favor of the proposal exceed those cast against: (a) allow any proceeds from the Disposition of the properties or assets allocated to Genzyme General Division to be used in the business of any other Division without fair compensation being allocated to Genzyme General Division as determined by the Board of Directors; (b) allow any properties or assets allocated to Genzyme General Division to be used in the business of any other Division or for the declaration or payment of any dividend or distribution on any series of Common Stock other than the GGD Stock without fair compensation being allocated to Genzyme General Division as determined by the Board of Directors; (c) issue, sell or otherwise distribute shares of GGD Stock without allocating the proceeds or other benefits of such issuance, sale or distribution to Genzyme General Division; (d) change the rights or preferences of the GGD Stock so as to affect the GGD Stock adversely; or (e) effect any merger or business combination involving the Corporation as a result of which (a) the holders of all series of Common Stock of the Corporation 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 Common Stock of the Corporation 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. Continuation Sheet - 5 6. Definitions. As used in this Section IV.C., the following terms shall have the following meanings (with terms defined in the singular having comparable meaning when used in the plural and vice versa), unless another definition is provided or the context otherwise requires: (a) "Available GGD Dividend Amount," on any date, shall mean the greater of: (1) the excess of (A) the greater of (x) the fair value on such date of the net assets of Genzyme General Division and (y) an amount equal to $335,378,000 (stockholders' equity allocated to Genzyme General Division at June 30, 1994), such dollar amount to be increased or decreased, as appropriate, to reflect, after June 30, 1994, (A) the Earnings Attributable to Genzyme General Division, (B) any dividends or other distributions (including by reclassification or exchange) declared or paid with respect to, or repurchases or issuances of, any shares of GGD Stock or any other class of capital stock attributed to Genzyme General Division, but excluding dividends or other distributions paid in shares of GGD Stock to the holders thereof or in shares of any other class of capital stock attributed to Genzyme General Division to the holders thereof, and (C) any other adjustments to the stockholders' equity of Genzyme General Division made in accordance with generally accepted accounting principles, over (B) the sum of (x) the aggregate par value of all outstanding shares of GGD Stock and any other class of capital stock attributed to Genzyme General Division and (y) unless these Articles of Organization permit otherwise, the aggregate amount that would be needed to satisfy any preferential rights to which holders of all outstanding Preferred Stock attributed to Genzyme General Division are entitled upon dissolution of the Corporation in excess of the aggregate par value of such Preferred Stock, provided that such excess shall be reduced by any amount necessary to enable Genzyme General Division to pay its debts as they become due, and (2) the amount legally available for the payment of dividends determined in accordance with Massachusetts law applied as if Genzyme General Division were a separate corporation. (b) "Earnings Attributable" to Genzyme General Division for any period, shall mean the net income or loss of Genzyme General Division for such period (or for the fiscal periods of the Corporation commencing prior to the GTR Effective Date and after June 30, 1994, pro forma net income or loss of Genzyme General Division as if the GTR Effective Date were June 30, 1994) determined in accordance with generally accepted accounting principles, with all income and expenses of the Corporation being allocated between Divisions in a reasonable and consistent manner in accordance with policies adopted by the Board of Directors; provided, however, that as of the end of any fiscal quarter of the Corporation, any projected annual tax benefit attributable to any Division that cannot be utilized by such Division to offset or reduce its allocated tax liability may be allocated to any other Division without any compensating payment or allocation. Continuation Sheet - 6 (c) "Genzyme General Division" shall mean, at any time, the Corporation's interest in (i) all of the businesses, products, or development or research programs in which the Corporation or any of its subsidiaries (or any of their predecessors or successors) is or has been engaged, directly or indirectly, other than those allocated to any division of the Corporation represented by a series of Common Stock (any "Division") other than the GGD Stock; and (ii) all assets and liabilities of the Corporation to the extent allocated to any such businesses, products, or development or research programs in accordance with generally accepted accounting principles consistently applied for all of the Corporation's business units. From and after the date on which all of the outstanding shares of any series of Common Stock are exchanged for shares of GGD Stock, other securities, cash, other property or a combination thereof, all of the businesses, products, development or research programs, assets and liabilities of the Division represented by such series of Common Stock shall be included in Genzyme General Division. Genzyme General Division shall be represented by the GGD Stock. D. GENZYME MOLECULAR ONCOLOGY COMMON STOCK 1. Authorized Amounts And Designations. Forty million (40,000,000) shares of Common Stock are designated as a series of Common Stock with the following designation: Genzyme Molecular Oncology Division Common Stock (the "GMO Stock"). To the extent legally permitted, such number of shares may be increased or decreased by vote of the Board of Directors, provided that no decrease shall reduce the number of shares of GMO Stock to a number less than the number of shares of such series then outstanding plus the number of shares of such series reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into such series of Common Stock. 2. Dividends And Distributions. Subject to the express terms of any outstanding series of Preferred Stock, dividends may be declared and paid upon the GMO Stock, in such amounts and at such times as the Board of Directors may determine, only out of the lesser of (a) funds of the Corporation legally available therefor and (b) the Available GMO Dividend Amount. 3. Voting Rights. The holders of GMO Stock, voting together with the holders of shares of all other series of Common Stock as a single class of stock, shall have the exclusive right to vote for the election of directors and on all other matters requiring action by the stockholders or submitted to the stockholders for action, except as may be determined by the Board of Directors in establishing any series of Common or Preferred Stock or as may otherwise be required by law. Each share of GMO Stock shall entitle the holder thereof to .08 vote through December 31, 2000. On January 1, 2001 and on each January 1 every two years thereafter, the number of votes to which the holder of each share of GMO Stock shall be entitled shall be adjusted and fixed for two-year periods to equal the quotient (expressed as a decimal and rounded to the nearest two decimal places) obtained by dividing (i) the Fair Market Value of one share of GMO Stock by (ii) 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 voting Common Stock outstanding on such date shall have a number of votes such that each share of the series of outstanding Common Stock that has the highest Fair Market Value per share on such date (the "Base Series") shall have one vote and each share of each other series of outstanding Common Continuation Sheet - 7 Stock shall 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. If shares of GMO Stock are entitled to vote separately as a class, each share of GMO Stock shall have one vote. 4. Liquidation, Dissolution Or Winding Up. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the rights of the holders of GMO Stock shall be as follows: (a) After the Corporation has satisfied or made provision for its debts and obligations and for the payment to the holders of shares of any class or series of capital stock having preferential rights to receive distributions of the net assets of the Corporation (including any accumulated and unpaid dividends), the holders of GMO Stock shall be entitled to receive the net assets of the Corporation remaining for distribution, on a per share basis in proportion to the respective liquidation units per share of all series of Common Stock. Each share of GMO Stock shall, subject to Section IV.F.4., have 25 liquidation units. (b) For the purposes of Section IV.D.4(a) any merger or business combination involving the Corporation or any sale of all or substantially all of the assets of the Corporation shall not be treated as a liquidation. 5. Special Voting Rights. The Corporation shall not, without approval by the holders of the GMO Stock at a meeting at which a quorum is present and the votes cast in favor of the proposal exceed those cast against: (a) allow any proceeds from the Disposition of the properties or assets allocated to Genzyme Molecular Oncology Division to be used in the business of any other Division without fair compensation being allocated to Genzyme Molecular Oncology Division as determined by the Board of Directors; (b) allow any properties or assets allocated to Genzyme Molecular Oncology Division to be used in the business of any other Division or for the declaration or payment of any dividend or distribution on any series of Common Stock other than the GMO Stock without fair compensation being allocated to Genzyme Molecular Oncology Division as determined by the Board of Directors; (c) issue, sell or otherwise distribute shares of GMO Stock without allocating the proceeds or other benefits of such issuance, sale or distribution to Genzyme Molecular Oncology Division; provided, however, that the Corporation may without such approval issue GMO Designated Shares; (d) change the rights or preferences of the GMO Stock so as to affect the GMO Stock adversely; or (e) effect any merger or business combination involving the Corporation as a result of which (i) the holders of all series of Common Stock of the Corporation shall no longer own, directly or indirectly, at least fifty percent (50%) of the voting power of the surviving corporation and (ii) the holders of all series of Common Stock of the Corporation do Continuation Sheet - 8 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. Notwithstanding the foregoing, if the Corporation receives an opinion of Qualified Tax Counsel that, by reason of any Tax Law Change, the special voting rights of the GMO Stock set forth in this subsection 5 would cause a Tax Event absent the termination of such rights, then the Corporation may, by vote of a majority of the stock outstanding and entitled to vote thereon, voting together as a single class, authorize an amendment to these Articles of Organization to effect the termination of such rights in order to avoid the occurrence of such Tax Event. Any such amendment shall not be deemed to change the rights or preferences of the GMO Stock so as to affect the GMO Stock adversely as contemplated by either Section IV.D.5(d) or Section 77 of the Massachusetts Business Corporation Law. 6. Exchange or Redemption of GMO Stock. Shares of GMO Stock are subject to exchange or redemption upon the terms and conditions set forth below: (a) Optional Exchange of GMO Stock. (1) The Board of Directors may at any time, including without limitation in the event of the reallocation, in one transaction or a series of related transactions, by the Corporation and/or its subsidiaries of all or substantially all of the properties and assets allocated to Genzyme Molecular Oncology Division to any other Division of Genzyme, declare that each of the outstanding shares of GMO Stock shall be exchanged, on an Exchange Date, as determined by the Board of Directors, for (a) a number of fully paid and nonassessable shares of GGD Stock (calculated to the nearest five decimal places) equal to (1) 130% of the Fair Market Value of one share of the GMO Stock (the "GMO Optional Exchange Amount") as of the date of the first public announcement by the Corporation (the "GMO Optional Exchange Announcement Date") of such exchange divided by (2) the Fair Market Value of one share of GGD Stock as of such GMO Optional Exchange Announcement Date or (b) cash equal to the GMO Optional Exchange Amount, or (c) any combination of GGD Stock and cash equal to the GMO Optional Exchange Amount as determined by the Board of Directors. (2) If the Corporation receives an opinion of Qualified Tax Counsel that a Tax Event has occurred by reason of any Tax Law Change, then the Board of Directors may at any time declare that each of the outstanding shares of GMO Stock shall be exchanged, on an Exchange Date, as determined by the Board of Directors, for a number of fully paid and nonassessable shares of GGD Stock (calculated to the nearest five decimal places) equal to (1) the Fair Market Value of one share of the GMO Stock as of the date of the first public announcement by the Corporation of such exchange divided by (2) the Fair Market Value of one share of GGD Stock as of such date. (3) At any time at which all of the assets and liabilities attributed to Genzyme Molecular Oncology Division (and no other assets or liabilities of the Corporation or any subsidiary thereof) are held directly or indirectly by one or more wholly-owned subsidiaries of the Corporation (each, a "GMO Subsidiary"), the Board of Directors may, provided that there are funds of the Corporation legally available therefor, exchange on an Continuation Sheet - 9 Exchange Date, as determined by the Board of Directors, all of the outstanding shares of GMO Stock for that number of the shares of common stock of each GMO Subsidiary equal to the number of such GMO Subsidiary shares outstanding immediately prior to such exchange multiplied by the GMO Allocation Ratio, such shares of common stock of each GMO Subsidiary to be delivered to the holders of shares of GMO Stock on the Exchange Date either directly or indirectly through the delivery of shares of another GMO Subsidiary that owns directly or indirectly all such shares, and to be divided among the holders of GMO Stock on a pro rata basis in accordance with the number of shares of GMO Stock held by each such holder, each of which shares of common stock of such GMO Subsidiary shall be, upon such delivery, fully paid and nonassessable; provided, however, that upon any such exchange, any existing GMO Designated Shares shall be cancelled in exchange for the allocation to Genzyme General of the direct or indirect interest of the Corporation in any remaining outstanding shares of each such GMO Subsidiary that are not transferred to the holders of GMO Stock in such exchange. (b) Mandatory Exchange or Redemption of or Payment of Dividend on GMO Stock. (1) GMO Mandatory Payment. In the event of the Disposition, in one transaction or a series of related transactions, by the Corporation and/or its subsidiaries of all or substantially all of the properties and assets allocated to Genzyme Molecular Oncology Division to any person, entity or group (other than a Disposition of a type set forth in subsection (2) of this subsection (b)), on or prior to the 60th Business Day, or such earlier date required under this Section IV.D.6, following the date of the GMO Mandatory Payment Announcement (as defined in Section IV.D.6(d)(2)), the Corporation shall select one of the following alternatives, as determined by the Board of Directors in its discretion: (A) provided that there are funds of the Corporation legally available therefor, pay to the holders of the shares of GMO Stock a dividend on a pro rata basis in accordance with the number of shares of GMO Stock held by each such holder in cash, securities (other than shares of a series of Common Stock) and/or other property having a Fair Market Value as of the date of the Disposition in the aggregate equal to the Fair Market Value as of the date of the Disposition of the GMO Net Proceeds of such Disposition; or (B) provided that there are funds of the Corporation legally available therefor, (1) if such Disposition involves all (not merely substantially all) of the properties and assets attributed to Genzyme Molecular Oncology Division, redeem or exchange as of a Redemption Date determined by the Board of Directors, all outstanding shares of GMO Stock in exchange for, on a pro rata basis, cash, securities (other than shares of a series of Common Stock) and/or other property having a Fair Market Value as of the date of the Disposition in the aggregate equal to the Fair Market Value as of the date of the Disposition of the GMO Net Proceeds of such Disposition; or (2) if such Disposition involves substantially all (but not all) of the properties and assets attributed to Genzyme Molecular Oncology Division, redeem or exchange as of a Redemption Date as determined by the Board of Directors such Continuation Sheet - 10 number of whole shares of GMO Stock (which may be all, but not more than all, of such shares outstanding) as have in the aggregate an average Closing Price during the period of ten (10) consecutive Business Days beginning on the first Business Day immediately following the date of the Estimated GMO Net Proceeds Announcement (as defined in Section IV.D.6(d)(2)) closest to the Fair Market Value as of the date of the Disposition of the GMO Net Proceeds of such Disposition in consideration for, on a pro rata basis, cash securities (other than shares of a series of Common Stock) and/or other property having a Fair Market Value as of the date of the Disposition in the aggregate equal to such Fair Market Value of the GMO Net Proceeds; or (C) declare that each outstanding share of GMO Stock shall be exchanged as of an Exchange Date as determined by the Board of Directors into a number of fully paid and nonassessable shares of GGD Stock equal to 110% of the ratio (calculated to the nearest five decimal places) of the average Closing Price of one share of GMO Stock over the period of ten (10) consecutive Business Days beginning on the first Business Day immediately following the date of the Estimated GMO Net Proceeds Announcement (as defined in Section IV.D.6(d)(2)) to the average Closing Price of one share of GGD Stock over the same ten Business Day period. Any redemption or exchange of or dividend payment on GMO Stock made pursuant to this Section IV.D.6(b)(1) or Section IV.D.6(c)(3) is hereinafter referred to as a "GMO Mandatory Payment." Notwithstanding the foregoing provisions of this Section IV.D.6.(b), the Corporation shall redeem GMO Stock as provided by Section IV.D.(b)(1)(B) only if the amount to be paid pursuant to such redemption is less than or equal to the Available GMO Dividend Amount as of the Redemption Date. (2) Exceptions to Mandatory Payment. Notwithstanding the foregoing Section IV.D.6(b)(1) or Section IV.D.6(c)(3), a GMO Mandatory Payment shall not be required by the occurrence of a Disposition: (A) by the Corporation of all or substantially all of the Corporation's properties and assets in one transaction or a series of related transactions, including such Disposition in connection with the dissolution, liquidation or winding up of the Corporation and the distribution of assets to stockholders as referred to in Section IV.D.4; (B) of the properties and assets attributed to Genzyme Molecular Oncology Division as contemplated by Section IV.D.6(a)(3) or otherwise to all holders of GMO Stock divided among such holders on a pro rata basis in accordance with the number of shares GMO Stock outstanding; (C) to any person or entity controlled (as determined by the Board of Directors) by the Corporation; (D) in connection with a Related Business Transaction in respect of Genzyme Molecular Oncology Division; or (E) that is conditioned upon the affirmative vote of the holders of GMO Stock, voting as a separate class. Continuation Sheet - 11 (c) Termination of Cash Exchange Right. If the Corporation receives an opinion of Qualified Tax Counsel that, by reason of any Tax Law Change, the right or obligation of the Corporation to exchange GMO Stock for cash, securities or other property pursuant to Section IV.D.6(a)(1) or (3) or IV.D.6(b) (each, a "GMO Cash Exchange Right") would cause a Tax Event if not terminated, then the Board of Directors may at any time, by a vote of a majority of the directors then in office, elect to terminate any or all such GMO Cash Exchange Rights, with the result that the Corporation shall thereafter have, depending on which GMO Cash Exchange Right(s) is (are) so terminated: (1) under Section IV.D.6(a)(1) only the right to cause the exchange of GMO Stock for GGD Stock and not for cash, securities or other property other than capital stock of the Corporation, (2) no right to effect an exchange under Section IV.D.6(a)(3), and/or (3) no right or obligation to effect a GMO Mandatory Payment under Section IV.D.6(b), provided that if the Board shall no longer have the right or obligation to effect a GMO Mandatory Payment under Section IV.D.6(b), then if a GMO Mandatory Payment thereunder shall otherwise be or have been required, the Corporation instead shall have the obligation to effect on or prior to the first Business Day after the 90th day following the consummation of such Disposition, a GMO Mandatory Payment pursuant to which it shall exchange each outstanding share of GMO Stock for a number of fully paid and nonassessable shares of GGD Stock (calculated to the nearest five decimal places) equal to (i) the Fair Market Value of one share of the GMO Stock as of the date of the first public announcement of such Disposition by the Corporation by press release divided by (ii) the Fair Market Value of one share of GGD Stock as of such date. Notwithstanding the foregoing, the Board of Directors may not terminate any GMO Cash Exchange Right during the period commencing on the date of a Disposition requiring a GMO Mandatory Payment until the date upon which the related Mandatory Payment is effected by the Corporation. (d) Exchange and Redemption Procedures. (1) If the Corporation determines to exchange shares of GMO Stock pursuant to Section IV.D.6(a), the Corporation shall cause notice to be sent not less than 30 nor more than 60 days prior to the Exchange Date in the form and manner set forth in Section IV.F.1, and the procedures governing such exchange shall be those set forth in Section IV.F.1. (2) Not later than the 20th Business Day following the consummation of a Disposition described in Section IV.D.6(b)(1) with respect to Genzyme Molecular Oncology Division, the Corporation shall announce publicly by press release (1) the estimated GMO Net Proceeds, (2) the number of outstanding shares of GMO Stock and (3) the number of shares of GMO Stock into or for which Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof (the Continuation Sheet - 12 "Estimated GMO Net Proceeds Announcement"). Not earlier than the day immediately following the 10th Business Day, nor later than the 20th Business Day, following the date of the Estimated GMO Net Proceeds Announcement, the Corporation shall announce publicly by press release which of the actions specified in Section IV.D.6(b)(1) that it has irrevocably determined to make in respect of such Disposition (the "GMO Mandatory Payment Announcement"). (3) If the Corporation determines to pay a dividend pursuant to Section IV.D.6(b)(1)(A), the Corporation shall, not later than the 20th Business Day following the date of the Estimated GMO Net Proceeds Announcement, cause notice to be sent to the holders of shares of GMO Stock and to each holder of Convertible Securities that are convertible into or exchangeable or exercisable for shares of GMO Stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities), setting forth (1) the record date for determining holders entitled to receive such dividend, which shall be not earlier than the 10th Business Day and not later than the 20th Business Day following the date of such notice, (2) the anticipated payment date of such dividend (which shall not be more than 60 Business Days following the date of the GMO Mandatory Payment Announcement), (3) the type and amount of property to be paid as such dividend in respect of the outstanding shares of GMO Stock, (4) the GMO Net Proceeds, (5) the number of outstanding shares of GMO Stock and the number of shares of GMO Stock into or for which outstanding Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof and (6) in the case of notice to be given to holders of Convertible Securities, a statement to the effect that a holder of such Convertible Securities shall be entitled to receive such dividend only if such holder properly converts, exchanges or exercises such Convertible Securities (unless the terms of a Convertible Security provide otherwise) on or prior to the record date referred to in clause (1) of this sentence. Except as provided in the preceding sentence, such notice shall conform with the provisions governing notice at Section IV.F.1 and the provisions governing the payment of such dividend shall be those set for in such Section IV.F.1 to the extent such provisions are applicable to the payment of a dividend. (4) If the Corporation determines to redeem shares of GMO Stock pursuant to Section IV.D.6(b)(1)(B)(i), the Corporation shall, not later than the 20th Business Day following the date of the Estimated GMO Net Proceeds Announcement, cause notice to be sent in the form and manner set forth in Section IV.F.1, and the procedures governing such redemption shall be those set forth in Section IV.F.1; provided, however, the Redemption Date shall not be more than 60 Business Days following the date of the GMO Mandatory Payment Announcement. Such notice shall also state the GMO Net Proceeds. (5) If the Corporation determines to redeem shares of GMO Stock pursuant to Section IV.D.6(b)(1)(B)(ii), the Corporation shall, not later than the 20th Business Day following the date of the GMO Estimated Net Proceeds Announcement, cause notice to be sent in the form and manner set forth in Section IV.F.1, and the procedures governing such redemption shall be those set forth in Section IV.F.1; provided, however, the Redemption Date shall not be more than 60 Business Days following the date of the Estimated GMO Net Proceeds Announcement. The notice delivered hereunder shall also state (a) the GMO Net Proceeds and (b) a date (the "selection date") not earlier than the 10th Business Day and not later than the 20th Business Day following the date of such notice on which shares of GMO Stock shall be selected Continuation Sheet - 13 for redemption and that the Corporation will not be required to register a transfer of any shares of GMO Stock for a period of ten (10) Business Days next preceding the Selection Date. (6) If the Corporation determines to exchange GMO Stock for GGD Stock pursuant to Section IV.D.6(b)(1)(C), the Corporation shall cause notice to be sent in the form and manner set forth in Section IV.F.1, and the procedures governing such exchange shall be those set forth in Section IV.F.1; provided, however, the Exchange Date shall not be more than 60 Business Days following the date of the GMO Mandatory Payment Announcement. Such notice shall also state the GMO Net Proceeds. (7) If the Corporation determines to exchange GMO Stock for GGD Stock pursuant to Section IV.D.6(c)(3), the Corporation shall cause notice to be sent not less than 30 nor more than 60 days in the form and manner set forth in Section IV.F.1, and the procedures governing such exchange shall be those set forth in Section IV.F.1. (e) Special Mandatory Payment Provisions. For purposes of this Section IV.D.6: (1) "substantially all of the properties and assets allocated to Genzyme Molecular Oncology Division" shall mean a portion of the properties and assets allocated to Genzyme Molecular Oncology Division (A) that represents at least 80% of the then-current fair value (as determined by the Board of Directors) of, or (B) to which is attributable at least 80% of the aggregate revenues for the immediately preceding twelve fiscal quarterly periods of the Corporation derived from, the properties and assets allocated to Genzyme Molecular Oncology Division; (2) in the case of a Disposition of properties and assets in a series of related transactions, such Disposition shall not be deemed to have been consummated until the consummation of the last of such transactions; and (3) in the event that at the time of any Disposition there are outstanding any Convertible Securities convertible into or exercisable for shares of GMO Stock that would give the holders rights to receive any dividend related to the Disposition upon exercise, conversion or otherwise, or would adjust as a result of such dividend to give the holder equivalent economic rights, then the shares of GMO Stock underlying such Convertible Securities will be taken into account for purposes of computing the GMO Allocation Ratio and determining the terms of any dividend payment on such shares; (4) in the event that as a result of or in connection with a dividend payment pursuant to Section IV.D.6(b)(1)(A) there ceases to be any properties or assets attributed to Genzyme Molecular Oncology Division, then each outstanding share of GMO Stock shall immediately following such dividend payment be cancelled and all rights of a holder of a share of GMO Stock shall cease except for the right to such dividend payment; and (5) there shall be added to any cash portion of a GMO Mandatory Payment paid to holders of GMO Stock, which cash comprised a portion of the GMO Net Proceeds, any interest earned by Genzyme Molecular Oncology Division or the Corporation on Continuation Sheet - 14 such cash from the date of the Disposition up to the record date of such GMO Mandatory Payment. 7. Definitions. As used in this Section IV.D., the following terms shall have the following meanings (with terms defined in the singular having comparable meaning when used in the plural and vice versa), unless another definition is provided or the context otherwise requires. Capitalized terms used but not defined in this Section IV.D.7 shall have the meanings given them in Section IV.F.7. (a) "Available GMO Dividend Amount," on any date, shall mean the greater of: (1) the excess of (A) the greater of (x) the fair value on such date of the net assets of Genzyme Molecular Oncology Division and (y) an amount equal to $20,500,000 (stockholders' equity allocated to Genzyme Molecular Oncology Division at September 30, 1996), such dollar amount to be increased or decreased, as appropriate, to reflect, after September 30, 1996, (A) the Earnings Attributable to Genzyme Molecular Oncology Division, (B) any dividends or other distributions (including by reclassification or exchange) declared or paid with respect to, or repurchases or issuances of, any shares of GMO Stock or any other class of capital stock attributed to Genzyme Molecular Oncology Division, but excluding dividends or other distributions paid in shares of GMO Stock to the holders thereof or in shares of any other class of capital stock attributed to Genzyme Molecular Oncology Division to the holders thereof, and (C) any other adjustments to the stockholders' equity of Genzyme Molecular Oncology Division made in accordance with generally accepted accounting principles, over (B) the sum of (x) the aggregate par value of all outstanding shares of GMO Stock and any other class of capital stock attributed to Genzyme Molecular Oncology Division and (y) unless these Articles of Organization permit otherwise, the aggregate amount that would be needed to satisfy any preferential rights to which holders of all outstanding Preferred Stock attributed to Genzyme Molecular Oncology Division are entitled upon dissolution of the Corporation in excess of the aggregate par value of such Preferred Stock, provided that such excess shall be reduced by any amount necessary to enable Genzyme Molecular Oncology Division to pay its debts as they become due, and (2) the amount legally available for the payment of dividends determined in accordance with Massachusetts law applied as if Genzyme Molecular Oncology Division were a separate corporation. (b) "Earnings Attributable" to Genzyme Molecular Oncology Division for any period, shall mean the net income or loss of Genzyme Molecular Oncology Division for such period (or for the fiscal periods of the Corporation commencing prior to the GMO Effective Date and after September 30, 1996, pro forma net income or loss of Genzyme Molecular Oncology Division as if the GMO Effective Date were September 30, 1996) determined in accordance with generally accepted accounting principles, with all income and expenses of the Corporation being allocated between Divisions in a reasonable and consistent manner in accordance with policies Continuation Sheet - 15 adopted by the Board of Directors; provided, however, that as of the end of any fiscal quarter of the Corporation, any projected annual tax benefit attributable to any Division that cannot be utilized by such Division to offset or reduce its allocated tax liability may be allocated to any other Division without any compensating payment or allocation. (c) "GMO Allocation Ratio," as of any date, shall mean the fraction computed by dividing the GMO Shares Outstanding by the sum of the GMO Shares Outstanding plus the GMO Designated Shares. (d) "GMO Designated Shares" as of any date shall mean a number of shares of GMO Stock that, as of the GMO Effective Date, shall be 6,000,000, which number shall be subject to adjustment as provided in the next sentence. The number of GMO Designated Shares shall from time to time be (1) 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, (2) decreased by (A) the number of any shares of GMO Stock issued by the Corporation, the proceeds of which are allocated to Genzyme General Division, (B) the number of any shares of GMO Stock issued upon the exercise or conversion of Convertible Securities attributed to Genzyme General Division, and (C) the number of any shares of GMO Stock issued by the Corporation as a dividend or distribution or by reclassification, exchange or otherwise to holders of GGD Stock, and (3) increased by (A) the number of any outstanding shares of GMO Stock repurchased by the Corporation, the consideration for which was allocated to Genzyme General Division, (B) the number equal to the fair value (as determined by the Board of Directors) of assets or properties allocated to Genzyme General Division that are reallocated to Genzyme Molecular Oncology Division (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) the number equal to the number of shares into which the Board of Directors elects to convert the promissory note dated February 10, 1997 issued by PharmaGenics, Inc. to the Corporation pursuant to the terms of such promissory note and (D) with respect to the $25 million equity line from Genzyme General Division to Genzyme Molecular Oncology Division approved by the Corporation's Board of Directors on January 30, 1997 (the "Equity Line"), if (A) the closing of the first public offering by the Corporation of GMO Stock has occurred prior to the third anniversary of the GMO Effective Date, then, upon such closing, a number equal to the aggregate of the quotients obtained by dividing (i) the amount of each advance made under the Equity Line by (ii) the dollar amount determined for each such advance by the following formula: 7.00 + [(IPOGMO - 7.00) x (ADATE/IPODATE)]; where IPOGMO = the offering price of the GMO Stock in the first such public offering, ADATE = the number of days from the GMO Effective Date to the time of such advance, and IPODATE = the number of days from the GMO Effective Date to the time of the Continuation Sheet - 16 first such public offering; and, thereafter, upon each advance made under the Equity Line, a number equal to the quotient obtained by dividing (i) the amount of each such advance by (ii) the Fair Market Value of the GMO Stock on the date of such advance; or (B) the closing of the first public offering by the Corporation of GMO Stock has not occurred prior to the third anniversary of the GMO Effective Date, then, upon the election of the Corporation's Board of Directors, a number equal to the quotient obtained by dividing (i) the aggregate amount of all advances made under the Equity Line by (ii) the Fair Market Value of the GMO Stock on the date of such third anniversary; PROVIDED, that the Corporation shall take no action which would have the effect of reducing the GMO Designated Shares to a number which is less than zero. Within 45 days after the end of each fiscal quarter of the Corporation, the Corporation shall prepare and file a statement of such change with the transfer agent for the GMO Stock and with the Clerk of the Corporation. (e) "GMO Effective Date" shall mean June 18, 1997. (f) "GMO Net Proceeds" shall mean, as of any date, with respect to a Disposition of any of the properties and assets of Genzyme Molecular Oncology Division, a fraction of the proceeds from such disposition determined by multiplying the GMO Allocation Ratio by the gross proceeds of such Disposition after any adjustment to such gross proceeds resulting from payment of, or reasonable provision for, (a) any taxes payable by the Corporation in respect of either such Disposition or any mandatory exchange, redemption or dividend payment resulting from such Disposition (or that would have been payable but for the utilization of tax benefits attributable to any division or group of the Corporation other than Genzyme Molecular Oncology Division (a "Non-GMO Division")), (b) any transaction costs borne by Non-GMO Division in connection with such Disposition, including, without limitation, any legal, investment banking and accounting fees and expenses borne by a Non-GMO Division in connection with such Disposition, (c) any liabilities and other obligations (contingent or otherwise) of Genzyme Molecular Oncology Division borne by a Non-GMO Division in connection with such Disposition, including, without limitation, any indemnity or guarantee obligations incurred by a Non-GMO Division in connection with the Disposition or any liabilities assumed by a Non-GMO Division for future purchase price adjustments, and (d) any preferential amounts, accumulated and unpaid dividends and other obligations in respect of any Preferred Stock attributed to Genzyme Molecular Oncology Division. (g) "GMO Shares Outstanding" as of any date shall mean the number of shares of GMO Stock then issued and outstanding. (h) "Genzyme Molecular Oncology Division" shall mean, at any time, the Corporation's interest in (i) the following businesses, products, or development or research programs: (A) the use of the Serial Analysis of Gene Expression ("SAGE") technology licensed from Johns Hopkins University School of Medicine for third parties; (B) the clinical program developing adenovirus vectors containing the tumor antigens MART 1 or gp100 for treatment of melanoma: (C) the "suicide" gene therapy research program developing adenovirus and lipid vectors containing genes to enhance chemotherapy for oncology indications; (D) the research Continuation Sheet - 17 program developing adenovirus and lipid vectors containing tumor suppressor genes for oncology indications; (E) the research program developing adenovirus and lipid containing genes to regulate the immune system for oncology indications, including heat shock proteins; (F) the research program developing antibody-targeted gene therapy for treatment of tumors; (G) the research program developing small molecule compounds to inhibit angiogenesis and stimulate apoptosis; (H) the research program developing small molecule compounds to regulate tumor suppressor gene function; and (I) the research program developing diagnostic applications for tumor suppressor genes and other cancer-related genes licensed from Hoffmann-La Roche Inc. or identified by Johns Hopkins University using SAGE technology or other genomic technology; (ii) all assets and liabilities of the Corporation to the extent allocated to any such businesses, products, or development or research programs in accordance with generally accepted accounting principles consistently applied for all of the Corporation's business units; (iii) to the extent not described above, all assets and liabilities of PharmaGenics, Inc. as of the GMO Effective Date; and (iv) such businesses, products, or development or research programs developed in, or acquired by the Corporation for, Genzyme Molecular Oncology Division after the GMO Effective Date, in each case as determined by the Board of Directors; provided, however, that, from and after any Disposition or transfer to Genzyme General Division of any business, product, development program, research project, assets or properties, Genzyme Molecular Oncology Division shall no longer include the business, product, development program, research project, assets or properties so disposed of or transferred. Genzyme Molecular Oncology Division shall be represented by the GMO Stock. E. GENZYME BIOSURGERY DIVISION COMMON STOCK 1. Authorized Amounts and Designations. One hundred million (100,000,000) shares of Common Stock are designated as a series of Common Stock with the following designation: Genzyme Biosurgery Division Common Stock (the "GBS Stock"). To the extent legally permitted, such number of shares may be increased or decreased by vote of the Board of Directors, provided that no decrease shall reduce the number of shares of GBS Stock to a number less than the number of shares of such series then outstanding plus the number of shares of such series reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into GBS Stock. 2. Dividends and Distributions. Subject to the express terms of any outstanding series of Preferred Stock, dividends may be declared and paid upon the GBS Stock, in such amounts and at such times as the Board of Directors may determine, only out of the lesser of (a) funds of the Corporation legally available therefor and (b) the Available GBS Dividend Amount. 3. Voting Rights. The holders of GBS Stock, voting together with the holders of shares of all other series of Common Stock as a single class of stock, shall have the exclusive right to vote for the election of directors and on all other matters requiring action by the stockholders or submitted to the stockholders for action, except as may be determined by the Board of Directors in establishing any series of Common or Preferred Stock or as may otherwise be required by law. Each share of GBS Stock shall entitle the holder thereof to .50 votes through December 31, 2000, or, if no shares of GBS Stock are outstanding on December 31, 2000, Continuation Sheet - 18 through December 31, 2002. On January 1, 2001 or, if no shares of GBS Stock are outstanding on December 31, 2000, on January 1, 2003, and on each January 1 every two years thereafter, the number of votes to which the holder of each share of GBS Stock shall be entitled shall be adjusted and fixed for two-year periods to equal the quotient (expressed as a decimal and rounded to the nearest two decimal places) obtained by dividing (i) the Fair Market Value of one share of GBS Stock by (ii) 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 voting Common Stock outstanding on such date shall have a number of votes such that each share of the series of outstanding Common Stock that has the highest Fair Market Value per share on such date (the "Base Series") shall have one vote and each share of each other series of outstanding Common Stock shall 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. If shares of GBS Stock are entitled to vote separately as a class, each share of GBS Stock shall have one vote. 4. Liquidation, Dissolution or Winding Up. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the rights of the holders of GBS Stock shall be as follows: (a) After the Corporation has satisfied or made provision for its debts and obligations and for the payment to the holders of shares of any class or series of capital stock having preferential rights to receive distributions of the net assets of the Corporation (including any accumulated and unpaid dividends), the holders of GBS Stock shall be entitled to receive the net assets of the Corporation remaining for distribution, on a per share basis in proportion to the respective liquidation units per share of all series of Common Stock. Each share of GBS Stock shall, subject to this Section IV.E.4(a), have 50 liquidation units. (b) For the purposes of Section IV.E.4(a). any merger or business combination involving the Corporation or any sale of all or substantially all of the assets of the Corporation shall not be treated as a liquidation. 5. Special Voting Rights. The Corporation shall not, without approval by the holders of the GBS Stock at a meeting at which a quorum is present and the votes cast in favor of the proposal exceed those cast against: (a) allow any proceeds from the Disposition of the properties or assets allocated to Genzyme Biosurgery Division to be used in the business of any other Division without fair compensation being allocated to Genzyme Biosurgery Division as determined by the Board of Directors; (b) allow any properties or assets allocated to Genzyme Biosurgery Division to be used in the business of any other Division or for the declaration or payment of any dividend or distribution on any series of Common Stock other than the GBS Stock without fair compensation being allocated to Genzyme Biosurgery Division as determined by the Board of Directors; Continuation Sheet - 19 (c) issue, sell or otherwise distribute shares of GBS Stock without allocating the proceeds or other benefits of such issuance, sale or distribution to Genzyme Biosurgery Division; provided, however, that the Corporation may without such approval issue GBS Designated Shares; (d) change the rights or preferences of the GBS Stock so as to affect the GBS Stock adversely; or (e) effect any merger or business combination involving the Corporation as a result of which (i) the holders of all series of Common Stock of the Corporation shall no longer own, directly or indirectly, at least fifty percent (50%) of the voting power of the surviving corporation and (ii) the holders of all series of Common Stock of the Corporation 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. Notwithstanding the foregoing, if the Corporation receives an opinion of Qualified Tax Counsel that, by reason of any Tax Law Change, the special voting rights of the GBS Stock set forth in this subsection 5 would cause a Tax Event absent the termination of such rights, then the Corporation may, by vote of a majority of the stock outstanding and entitled to vote thereon, voting together as a single class, authorize an amendment to these Articles of Organization to effect the termination of such rights in order to avoid the occurrence of such Tax Event. Any such amendment shall not be deemed to change the rights or preferences of the GBS Stock so as to affect the GBS Stock adversely as contemplated by either Section IV.E.5(d) or Section 77 of the Massachusetts Business Corporation Law. 6. Exchange or Redemption of GBS Stock. Shares of GBS Stock are subject to exchange or redemption upon the terms and conditions set forth below: (a) Optional Exchange of GBS Stock. (1) The Board of Directors may at any time, including without limitation in the event of the reallocation, in one transaction or a series of related transactions, by the Corporation and/or its subsidiaries of all or substantially all of the properties and assets allocated to Genzyme Biosurgery Division to any other Division of Genzyme (a "GBS Reallocation"), declare that each of the outstanding shares of GBS Stock shall be exchanged, on an Exchange Date, as determined by the Board of Directors, for (a) a number of fully paid and nonassessable shares of GGD Stock (calculated to the nearest five decimal places) equal to (1) 130% of the Fair Market Value of one share of the GBS Stock (the "GBS Optional Exchange Amount") as of the date of the first public announcement by the Corporation (the "GBS Optional Exchange Announcement Date") of such exchange divided by (2) the Fair Market Value of one share of GGD Stock as of such GBS Optional Exchange Announcement Date or (b) cash equal to the GBS Optional Exchange Amount, or (c) any combination of GGD Stock and cash equal to the GBS Optional Exchange Amount as determined by the Board of Directors. (2) If the Corporation receives an opinion of Qualified Tax Counsel that a Tax Event has occurred by reason of any Tax Law Change, then the Board of Continuation Sheet - 20 Directors may at any time declare that each of the outstanding shares of GBS Stock shall be exchanged, on an Exchange Date, as determined by the Board of Directors, hereof, for a number of fully paid and nonassessable shares of GGD Stock (calculated to the nearest five decimal places) equal to (1) the Fair Market Value of one share of the GBS Stock as of the date of the first public announcement by the Corporation of such exchange divided by (2) the Fair Market Value of one share of GGD Stock as of such date. (3) At any time at which all of the assets and liabilities attributed to Genzyme Biosurgery Division (and no other assets or liabilities of the Corporation or any subsidiary thereof) are held directly or indirectly by one or more wholly-owned subsidiaries of the Corporation (each, a "GBS Subsidiary"), the Board of Directors may, provided that there are funds of the Corporation legally available therefor, exchange on an Exchange Date, as determined by the Board of Directors, all of the outstanding shares of GBS Stock for that number of the shares of common stock (which term, as used throughout this Section IV.E.6(a)(3), shall refer to any applicable type of equity security with respect to any GBS Subsidiary that is not a corporation) of each GBS Subsidiary equal to the number of such GBS Subsidiary shares outstanding immediately prior to such exchange multiplied by the GBS Allocation Ratio, such shares of common stock of each GBS Subsidiary to be delivered to the holders of shares of GBS Stock on the Exchange Date either directly or indirectly through the delivery of shares of another GBS Subsidiary that owns directly or indirectly all such shares, and to be divided among the holders of GBS Stock on a pro rata basis in accordance with the number of shares of GBS Stock held by each such holder, each of which shares of common stock of such GBS Subsidiary shall be, upon such delivery, fully paid and nonassessable; provided, however, that upon any such exchange, any existing GBS Designated Shares shall be cancelled in exchange for the allocation to Genzyme General of the direct or indirect interest of the Corporation in any remaining outstanding shares of each such GBS Subsidiary that are not transferred to the holders of GBS Stock in such exchange. (b) Mandatory Exchange or Redemption of or Payment of Dividend on GBS Stock. (1) GBS Mandatory Payment. In the event of the Disposition, in one transaction or a series of related transactions, by the Corporation and/or its subsidiaries of all or substantially all of the properties and assets allocated to Genzyme Biosurgery Division to any person, entity or group (other than a Disposition of a type set forth in subsection (2) of this subsection (b)), on or prior to the 60th Business Day, or such earlier date required under this Section IV.E.6, following the date of the GBS Mandatory Payment Announcement (as defined in Section IV.E.6(d)(2)), the Corporation shall select one of the following alternatives, as determined by the Board of Directors in its discretion: (A) provided that there are funds of the Corporation legally available therefor, pay to the holders of the shares of GBS Stock a dividend on a pro rata basis in accordance with the number of shares of GBS Stock held by each such holder in cash, securities (other than shares of a series of Common Stock) and/or other property having a Fair Market Value as of the date of the Disposition in the aggregate equal to the Fair Market Value as of the date of the Disposition of the GBS Net Proceeds of such Disposition; or Continuation Sheet - 21 (B) provided that there are funds of the Corporation legally available therefor, (1) if such Disposition involves all (not merely substantially all) of the properties and assets attributed to Genzyme Biosurgery Division, redeem or exchange as of a Redemption Date determined by the Board of Directors, all outstanding shares of GBS Stock in exchange for, on a pro rata basis, cash, securities (other than shares of a series of Common Stock) and/or other property having a Fair Market Value as of the date of the Disposition in the aggregate equal to the Fair Market Value as of the date of the Disposition of the GBS Net Proceeds of such Disposition; or (2) if such Disposition involves substantially all (but not all) of the properties and assets attributed to Genzyme Biosurgery Division, redeem or exchange as of a Redemption Date as determined by the Board of Directors such number of whole shares of GBS Stock (which may be all, but not more than all, of such shares outstanding) as have in the aggregate an average Closing Price during the period of ten (10) consecutive Business Days beginning on the first Business Day immediately following the date of the Estimated GBS Net Proceeds Announcement (as defined in Section IV.E.6(d)(2)) closest to the Fair Market Value as of the date of the Disposition of the GBS Net Proceeds of such Disposition in consideration for, on a pro rata basis, cash, securities (other than shares of a series of Common Stock) and/or other property having a Fair Market Value as of the date of the Disposition in the aggregate equal to such Fair Market Value of the GBS Net Proceeds; or (C) declare that each outstanding share of GBS Stock shall be exchanged as of an Exchange Date as determined by the Board of Directors into a number of fully paid and nonassessable shares of GGD Stock equal to 110% of the ratio (calculated to the nearest five decimal places) of the average Closing Price of one share of GBS Stock over the period of ten (10) consecutive Business Days beginning on the first Business Day immediately following the date of the Estimated GBS Net Proceeds Announcement (as defined in Section IV.E.6(d)(2)) to the average Closing Price of one share of GGD Stock over the same ten Business Day period. Any redemption or exchange of or dividend payment on GBS Stock made pursuant to this Section IV.E.6(b)(1) or Section IV.E.6(c)(3) is hereinafter referred to as a "GBS Mandatory Payment." Notwithstanding the foregoing provisions of this Section IV.E.6(b), the Corporation shall redeem GBS Stock as provided by Section IV.E.6(b)(1)(B) only if the amount to be paid pursuant to such redemption is less than or equal to the Available GBS Dividend Amount as of the Redemption Date. (2) Exceptions to Mandatory Payment. Notwithstanding the foregoing Section IV.E.6(b)(1) or Section IV.E.6(c)(3), a GBS Mandatory Payment shall not be required by the occurrence of a Disposition: (A) by the Corporation of all or substantially all of the Corporation's properties and assets in one transaction or a series of related transactions, including such Disposition in connection with the dissolution, liquidation or winding up of the Corporation and the distribution of assets to stockholders as referred to in Section IV.E.4; Continuation Sheet - 22 (B) of the properties and assets attributed to Genzyme Biosurgery Division as contemplated by Section IV.E.6(a)(3) or otherwise to all holders of GBS Stock divided among such holders on a pro rata basis in accordance with the number of shares GBS Stock outstanding; (C) to any person or entity controlled (as determined by the Board of Directors) by the Corporation; (D) in connection with a Related Business Transaction in respect of Genzyme Biosurgery Division; or (E) that is conditioned upon the affirmative vote of the holders of GBS Stock, voting as a separate class. (c) Termination of Cash Exchange Right. If the Corporation receives an opinion of Qualified Tax Counsel that, by reason of any Tax Law Change, the right or obligation of the Corporation to exchange GBS Stock for cash, securities or other property pursuant to Section IV.E.6(a)(1) or (3) or IV.E.6(b) (each, a "GBS Cash Exchange Right") would cause a Tax Event if not terminated, then the Board of Directors may at any time, by a vote of a majority of the directors then in office, elect to terminate any or all such GBS Cash Exchange Rights, with the result that the Corporation shall thereafter have, depending on which GBS Cash Exchange Right(s) is (are) so terminated: (1) under Section IV.E.6(a)(1) only the right to cause the exchange of GBS Stock for GGD Stock and not for cash, securities or other property other than capital stock of the Corporation, (2) no right to effect an exchange under Section IV.E.6(a)(3), and/or (3) no right or obligation to effect a GBS Mandatory Payment under Section IV.E.6(b), provided that if the Board shall no longer have the right or obligation to effect a GBS Mandatory Payment under Section IV.E.6(b), then if a GBS Mandatory Payment thereunder shall otherwise be or have been required, the Corporation instead shall have the obligation to effect on or prior to the first Business Day after the 90th day following the consummation of such Disposition, a GBS Mandatory Payment pursuant to which it shall exchange each outstanding share of GBS Stock for a number of fully paid and nonassessable shares of GGD Stock (calculated to the nearest five decimal places) equal to (i) the Fair Market Value of one share of the GBS Stock as of the date of the first public announcement of such Disposition by the Corporation by press release divided by (ii) the Fair Market Value of one share of GGD Stock as of such date. Notwithstanding the foregoing, the Board of Directors may not terminate any GBS Cash Exchange Right during the period commencing on the date of a Disposition requiring a GBS Mandatory Payment until the date upon which the related GBS Mandatory Payment is effected by the Corporation. (d) Exchange and Redemption Procedures. Continuation Sheet - 23 (1) If the Corporation determines to exchange shares of GBS Stock pursuant to Section IV.E.6(a), the Corporation shall cause notice to be sent not less than 30 nor more than 60 days prior to the Exchange Date in the form and manner set forth in Section IV.F.1, and the procedures governing such exchange shall be those set forth in Section IV.F.1. (2) Not later than the 20th Business Day following the consummation of a Disposition described in Section IV.E.6(b)(1) with respect to Genzyme Biosurgery Division, the Corporation shall announce publicly by press release (1) the estimated GBS Net Proceeds, (2) the number of outstanding shares of GBS Stock and (3) the number of shares of GBS Stock into or for which Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof (the "Estimated GBS Net Proceeds Announcement"). Not earlier than the day immediately following the 10th Business Day, nor later than the 20th Business Day, following the date of the Estimated GBS Net Proceeds Announcement, the Corporation shall announce publicly by press release which of the actions specified in Section IV.E.6(b)(1) that it has irrevocably determined to make in respect of such Disposition (the "GBS Mandatory Payment Announcement"). (3) If the Corporation determines to pay a dividend pursuant to Section IV.E.6(b)(1)(A), the Corporation shall, not later than the 20th Business Day following the date of the Estimated GBS Net Proceeds Announcement, cause notice to be sent to the holders of shares of GBS Stock and to each holder of Convertible Securities that are convertible into or exchangeable or exercisable for shares of GBS Stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities), setting forth (1) the record date for determining holders entitled to receive such dividend, which shall be not earlier than the 10th Business Day and not later than the 20th Business Day following the date of such notice, (2) the anticipated payment date of such dividend (which shall not be more than 60 Business Days following the date of the GBS Mandatory Payment Announcement), (3) the type and amount of property to be paid as such dividend in respect of the outstanding shares of GBS Stock, (4) the GBS Net Proceeds, (5) the number of outstanding shares of GBS Stock and the number of shares of GBS Stock into or for which outstanding Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof and (6) in the case of notice to be given to holders of Convertible Securities, a statement to the effect that a holder of such Convertible Securities shall be entitled to receive such dividend only if such holder properly converts, exchanges or exercises such Convertible Securities (unless the terms of a Convertible Security provide otherwise) on or prior to the record date referred to in clause (1) of this sentence. Except as provided in the preceding sentence, such notice shall conform with the provisions governing notice at Section IV.F.1 and the provisions governing the payment of such dividend shall be those set for in such Section IV.F.1 to the extent such provisions are applicable to the payment of a dividend. (4) If the Corporation determines to redeem shares of GBS Stock pursuant to Section IV.E.6(b)(1)(b)(i), the Corporation shall, not later than the 20th Business Day following the date of the Estimated GBS Net Proceeds Announcement, cause notice to be sent in the form and manner set forth in Section IV.F.1, and the procedures governing such redemption shall be those set forth in Section IV.F.1; provided, however, the Redemption Date Continuation Sheet - 24 shall not be more than 60 Business Days following the date of the GBS Payment Method Announcement. Such notice shall also state the GBS Net Proceeds. (5) If the Corporation determines to redeem shares of GBS Stock pursuant to Section IV.E.6(b)(1)(B)(ii), the Corporation shall, not later than the 20th Business Day following the date of the GBS Estimated Net Proceeds Announcement, cause notice to be sent in the form and manner set forth in Section IV.F.1, and the procedures governing such redemption shall be those set forth in Section IV.F.1; provided, however, the Redemption Date shall not be more than 60 Business Days following the date of the Estimated GBS Net Proceeds Announcement. The notice delivered hereunder shall also state (a) the GBS Net Proceeds and (b) a date (the "selection date") not earlier than the 10th Business Day and not later than the 20th Business Day following the date of such notice on which shares of GBS Stock shall be selected for redemption and that the Corporation will not be required to register a transfer of any shares of GBS Stock for a period of ten (10) Business Days next preceding the Selection Date. (6) If the Corporation determines to exchange GBS Stock for GGD Stock pursuant to Section IV.E.6(b)(1)(C), the Corporation shall cause notice to be sent in the form and manner set forth in Section IV.F.1, and the procedures governing such exchange shall be those set forth in Section IV.F.1; provided, however, the Exchange Date shall not be more than 60 Business Days following the date of the GBS Mandatory Payment Announcement. Such notice shall also state the GBS Net Proceeds. (7) If the Corporation determines to exchange GBS Stock for GGD Stock pursuant to Section IV.E.6(c)(3), the Corporation shall cause notice to be sent not less than 30 nor more than 60 days in the form and manner set forth in Section IV.F.1, and the procedures governing such exchange shall be those set forth in Section IV.F.1. (e) Special Mandatory Payment Provisions. For purposes of this Section IV.E.6: (1) "substantially all of the properties and assets allocated to Genzyme Biosurgery Division" shall mean a portion of the properties and assets allocated to Genzyme Biosurgery Division (A) that represents at least 80% of the then-current fair value (as determined by the Board of Directors) of, or (B) to which is attributable at least 80% of the aggregate revenues for the immediately preceding twelve fiscal quarterly periods of the Corporation derived from, the properties and assets allocated to Genzyme Biosurgery Division; (2) in the case of a Disposition of properties and assets in a series of related transactions, such Disposition shall not be deemed to have been consummated until the consummation of the last of such transactions; (3) in the event that at the time of any Disposition there are outstanding any Convertible Securities convertible into or exercisable for shares of GBS Stock that would give the holders rights to receive any dividend related to the Disposition upon exercise, conversion or otherwise, or would adjust as a result of such dividend to give the holder equivalent economic rights, then the shares of GBS Stock underlying such Convertible Securities Continuation Sheet - 25 will be taken into account for purposes of computing the GBS Allocation Ratio and determining the terms of any dividend payment on such shares; (4) in the event that as a result of or in connection with a dividend payment pursuant to Section IV.E.6(b)(1)(A) there ceases to be any properties or assets attributed to Genzyme Biosurgery Division, then each outstanding share of GBS Stock shall immediately following such dividend payment be cancelled and all rights of a holder of a share of GBS Stock shall cease except for the right to such dividend payment; and (5) there shall be added to any cash portion of a GBS Mandatory Payment paid to holders of GBS Stock, which cash comprised a portion of the GBS Net Proceeds, any interest earned by Genzyme Biosurgery Division or the Corporation on such cash from the date of the Disposition up to the record date of such GBS Mandatory Payment. 7. Definitions. As used in this Section IV.E., the following terms shall have the following meanings (with terms defined in the singular having comparable meaning when used in the plural and vice versa), unless another definition is provided or the context otherwise requires. Capitalized terms used but not defined in this Section IV.E.7 shall have the meanings given them in Section IV.F.7. (a) "Available GBS Dividend Amount," on any date, shall mean the greater of: (1) the excess of (A) the greater of (x) the fair value on such date of the net assets of Genzyme Biosurgery Division and (y) an amount equal to $325,166,000 (division equity allocated to Genzyme Biosurgery Division at June 30, 2000), such dollar amount to be increased or decreased, as appropriate, to reflect, after June 30, 2000, (A) the Earnings Attributable to Genzyme Biosurgery Division, (B) any dividends or other distributions (including by reclassification or exchange) declared or paid with respect to, or repurchases or issuances of, any shares of GBS Stock or any other class of capital stock attributed to Genzyme Biosurgery Division, but excluding dividends or other distributions paid in shares of GBS Stock to the holders thereof or in shares of any other class of capital stock attributed to Genzyme Biosurgery Division to the holders thereof, and (C) any other adjustments to the stockholders' equity of Genzyme Biosurgery Division made in accordance with generally accepted accounting principles, over (B) the sum of (x) the aggregate par value of all outstanding shares of GBS Stock and any other class of capital stock attributed to Genzyme Biosurgery Division and (y) unless these Articles of Organization permit otherwise, the aggregate amount that would be needed to satisfy any preferential rights to which holders of all outstanding Preferred Stock attributed to Genzyme Biosurgery Division are entitled upon dissolution of the Corporation in excess of the aggregate par value of such Preferred Stock, provided that such excess shall be reduced by any amount necessary to enable Genzyme Biosurgery Division to pay its debts as they become due, and Continuation Sheet - 26 (2) the amount legally available for the payment of dividends determined in accordance with Massachusetts law applied as if Genzyme Biosurgery Division were a separate corporation. (b) "Earnings Attributable" to Genzyme Biosurgery Division for any period shall mean the net income or loss of Genzyme Biosurgery Division for such period (or for the fiscal periods of the Corporation commencing prior to the GBS Effective Date and after June 30, 2000, pro forma net income or loss of Genzyme Biosurgery Division as if the GBS Effective Date were June 30, 2000) determined in accordance with generally accepted accounting principles, with all income and expenses of the Corporation being allocated between Divisions in a reasonable and consistent manner in accordance with policies adopted by the Board of Directors; provided, however, that as of the end of any fiscal quarter of the Corporation, any projected annual tax benefit attributable to any Division that cannot be utilized by such Division to offset or reduce its allocated tax liability may be allocated to any other Division without any compensating payment or allocation. (c) "GBS Allocation Ratio," as of any date, shall mean the fraction computed by dividing the GBS Shares Outstanding by the sum of the GBS Shares Outstanding plus the GBS Designated Shares. (d) "GBS Designated Shares" as of any date shall mean a number of shares of GBS Stock that, as of the GBS Effective Date, shall be 1,355,552, which number shall be subject to adjustment as provided in the next sentence. The number of Genzyme Biosurgery Designated Shares shall from time to time be (1) adjusted as appropriate to reflect subdivisions (by stock split or otherwise) and combinations (by reverse stock split or otherwise) of the GBS Stock and dividends or distributions of shares of GBS Stock to holders of GBS Stock and other reclassifications of GBS Stock, (2) decreased by (A) the number of any shares of GBS Stock issued by the Corporation, the proceeds of which are allocated to Genzyme General Division, (B) the number of any shares of GBS Stock issued upon the exercise or conversion of Convertible Securities attributed to Genzyme General Division, and (C) the number of any shares of GBS Stock issued by the Corporation as a dividend or distribution or by reclassification, exchange or otherwise to holders of GGD Stock, and (3) increased by (A) the number of any outstanding shares of GBS Stock repurchased by the Corporation, the consideration for which was allocated to Genzyme General Division, (B) the number equal to the fair value (as determined by the Board of Directors) of assets or properties allocated to Genzyme General Division that are reallocated to Genzyme Biosurgery Division (other than reallocations that represent sales at fair value between such Divisions) divided by the Fair Market Value of one share of GBS Stock as of the date of such reallocation, (C) the number equal to (i) the aggregate Fair Market Value of any shares of GGD Stock issued to the limited partners of Genzyme Development Partners L.P. ("GDP") in connection with the Corporation's exercise on behalf of Genzyme Biosurgery Division of its purchase option to reacquire all of the limited partnership interests of GDP divided by (ii) the Continuation Sheet - 27 Fair Market Value of one share of GBS Stock as of the date of such exercise, and (D) the number equal to Fair Market Value of any shares of GBS Stock issued to Genzyme General Division in satisfaction of its refunding obligations under the Confirmation and Acknowledgement of Programmer Allocation, dated as of June 21, 1999, in connection with the transfer by the Genzyme Tissue Repair Division of its ownership interest in the Diacrin/Genzyme LLC to the Genzyme General Division. PROVIDED, that the Corporation shall take no action which would have the effect of reducing the GBS Designated Shares to a number which is less than zero. Within 45 days after the end of each fiscal quarter of the Corporation, the Corporation shall prepare and file a statement of such change with the transfer agent for the GBS Stock and with the Clerk of the Corporation. (e) "GBS Effective Date" shall mean December 18, 2000. (f) "GBS Net Proceeds" shall mean, as of any date, with respect to a Disposition of any of the properties and assets of Genzyme Biosurgery Division, a fraction of the proceeds from such disposition determined by multiplying the GBS Allocation Ratio by the gross proceeds of such Disposition after any adjustment to such gross proceeds resulting from payment of, or reasonable provision for, (a) any taxes payable by the Corporation in respect of either such Disposition or any mandatory exchange, redemption or dividend payment resulting from such Disposition (or that would have been payable but for the utilization of tax benefits attributable to any division or group of the Corporation other than Genzyme Biosurgery Division (a "Non-GBS Division")), (b) any transaction costs borne by a Non-GBS Division in connection with such Disposition, including, without limitation, any legal, investment banking and accounting fees and expenses borne by a Non-GBS Division in connection with such Disposition, (c) any liabilities and other obligations (contingent or otherwise) of Genzyme Biosurgery Division borne by a Non-GBS Division in connection with such Disposition, including, without limitation, any indemnity or guarantee obligations incurred by a Non-GBS Division in connection with the Disposition or any liabilities assumed by a Non-GBS Division for future purchase price adjustments, and (d) any preferential amounts, accumulated and unpaid dividends and other obligations in respect of any Preferred Stock attributed to Genzyme Biosurgery Division. (g) "GBS Shares Outstanding" as of any date shall mean the number of shares of GBS Stock then issued and outstanding. "Genzyme Biosurgery Division" shall mean, at any time, the Corporation's interest in [(i) businesses, products, or development or research programs relating to (A) the prevention or treatment of tissue damage and (B) surgical devices, closures, instruments, biomaterials and biotherapeutics directed toward the cardiovascular, general and plastic surgery markets, which exist as of the GBS Effective Date (other than such businesses, products, or development or research programs allocated to Genzyme Development Partners, L.P. or that were allocated to the Genzyme Molecular Oncology or Genzyme General divisions immediately prior to the GBS Effective Date);] (ii) all assets and liabilities of the Corporation to the extent allocated to any such businesses, products, or development or research programs in accordance with generally accepted accounting principles consistently applied for all of the Corporation's business units; Continuation Sheet - 28 and (iii) such businesses, products, or development or research programs developed in, or acquired by the Corporation for, Genzyme Biosurgery Division on or after the GBS Effective Date, in each case as determined by the Board of Directors; PROVIDED, HOWEVER, that, from and after any Disposition or transfer to another Division of any business, product, development program, research project, assets or properties, Genzyme Biosurgery Division shall no longer include the business, product, development program, research project, assets or properties so disposed of or transferred. Genzyme Biosurgery Division shall be represented by the GBS Stock. F. GENERAL PROVISIONS REGARDING THE COMMON STOCK 1. General Exchange and Redemption Provisions. In the event of any exchange or mandatory redemption or dividend pursuant to the provisions of these Articles of Organization, the following provisions shall apply: (a) Any notice delivered hereunder shall be sent by the Corporation to each record holder of shares of the Common Stock to be exchanged or redeemed or upon which will be made a dividend payment (the "Exchange Stock") and to the holders of Convertible Securities that are convertible into or exchangeable or exercisable for shares of such Exchange Stock (unless alternate provision for such notice is made pursuant to the terms of such Convertible Securities). Unless otherwise required by any other provision of these Articles of Organization, such notice shall be sent not less nor more than 60 days prior to the Exchange Date. (b) With respect to an exchange or redemption, such notice shall state, to the extent and in the manner applicable, (1) the number of shares of Exchange Stock outstanding on the record date for such exchange or redemption and the number of such shares to be redeemed or exchanged, (2) the aggregate amount and form of consideration, including shares of Common Stock, other securities, cash or other property, that will be paid on the Exchange Date or Redemption Date upon the exchange or redemption of the shares of Exchange Stock, (3) the amount and form of such consideration to be received by such holder with respect to each share of the Exchange Stock held by such holder, including details as to the calculation thereof, (4) the Exchange Date or Redemption Date, (5) the place or places where certificates for shares of Exchange Stock, properly endorsed or assigned for transfer are to be surrendered for delivery of such consideration (unless the Corporation shall waive such requirement), (6), if applicable, a statement to the effect that, subject to Section IV.F.1(e) dividends on shares of Exchange Stock shall cease to be paid as of such Exchange Date or Redemption Date, (7) the number of shares of Exchange Stock into or for which outstanding Convertible Securities are convertible, exchangeable or exercisable as of the record date for such exchange or redemption and the conversion, exchange or exercise price thereof and (8) in the case of notice to holders of Convertible Securities, a statement to the effect that a holder of Convertible Securities shall be entitled to receive its pro rata portion of the consideration, as applicable, upon redemption or exchange only if such holder properly converts, exchanges or exercises such Convertible Securities (unless the terms of a Convertible Security provide otherwise) on or prior to the Exchange Date or Redemption Date and a statement as to what, if anything, such holder will be entitled to receive pursuant to the terms of such Convertible Securities if such holder thereafter converts, exchanges or exercises such Convertible Securities. Continuation Sheet - 29 (c) Any notice delivered under this Section IV.F.1 shall be sent by first-class mail, postage prepaid at such holder's address as the same appears on the stock transfer books of the Corporation. Neither the failure to mail such notice to any particular holder of shares of Exchange Stock nor any defect therein shall affect the sufficiency thereof with respect to any other holder of shares of Exchange Stock or the validity of any such exchange, redemption or dividend payment. (d) The Corporation shall not be required to issue or deliver fractional shares of any series of Common Stock, capital stock, securities or other property to any holder of shares of Exchange Stock upon any such exchange, redemption or dividend payment. If more than one share of Exchange Stock shall be held by the same holder of record, the Corporation shall aggregate the number of shares of any security that shall be issuable or any other property that shall be distributable to such holder upon any such exchange, redemption or dividend payment. If fractional shares of any security would be required to be issued or distributed to the holder of Exchange Stock, the Corporation shall, if such fractional shares are not issued or distributed to such holder, either arrange for the disposition of such fraction by or on behalf of such holder or pay the Fair Market Value (without interest) of such fractional shares. (e) No adjustments in respect of dividends shall be made upon the exchange or redemption of any shares of Exchange Stock; provided, however, that if the Exchange Date shall be subsequent to the record date for determining holders of Exchange Stock entitled to the payment of a dividend or other distribution thereon or with respect thereto, the holders of shares of Exchange Stock at the close of business on such record date shall be entitled to receive the dividend or other distribution payable on or with respect to such shares on the date set for payment of such dividend or other distribution, notwithstanding the exchange or redemption of such shares. (f) With respect to an exchange or redemption, before any holder of shares of Exchange Stock shall be entitled to receive the consideration to be received by such holder with respect to the exchange or redemption of such shares of Exchange Stock, such holder shall surrender at such place as the Corporation shall specify certificates for such shares of Exchange Stock, properly endorsed or assigned for transfer (unless the Corporation shall waive such requirement). The Corporation will as soon as practicable after such surrender of certificates representing such shares of Exchange Stock deliver to the person for whose account such shares of Exchange Stock were so surrendered, or to the nominee or nominees of such person, the consideration to which such person shall be entitled as aforesaid, together with any fractional share payment contemplated by Section IV.F.1(d). (g) With respect to an exchange or redemption, from and after the Exchange Date, all rights of a holder of shares of Exchange Stock shall cease except for the right, upon surrender of the certificates representing such shares of Exchange Stock, to receive the consideration for which such shares were exchanged are redeemed, together with any fractional share payment contemplated by Section IV.F.1(d), and rights to dividends as provided in Section IV.F.1(e). No holder of a certificate that immediately prior to the Exchange Date represented shares of Exchange Stock shall be entitled to receive any dividend or interest payment or other distribution with respect to the shares of any security or instrument for which the Exchange Stock was exchanged or redeemed until surrender of such holder's certificate for a Continuation Sheet - 30 certificate or certificates or instrument or instruments representing such security (unless the Corporation shall waive such requirement). Subject to applicable escheat and similar laws, upon such surrender, there shall be paid to the holder the amount of any dividend or interest payments or other distributions (without interest) which theretofore became payable with respect to a record date after the Exchange Date, but that were not paid by reason of the foregoing, with respect to the number of shares of the kind of securities represented by the certificate or certificates issued upon such surrender. From and after the Exchange Date, the Corporation shall, however, be entitled to treat the certificates for Exchange Stock that have not yet been surrendered for exchange or redemption as evidencing the ownership of the number of shares of the kind of securities for which the shares of Exchange Stock represented by such certificates shall have been exchanged or redeemed, notwithstanding the failure to surrender such certificates. (h) The Corporation will pay any and all documentary, stamp or similar issue or transfer taxes that may be payable in respect of the issue or delivery of any securities in exchange for or upon redemption of or dividend payment on shares of Exchange Stock pursuant hereto. The Corporation shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issue and delivery of any such securities issued in exchange or upon redemption or as a dividend in a name other than that in which the shares of Exchange Stock so exchanged or redeemed or paid as a dividend upon were registered and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax, or has established to the satisfaction of the Corporation that such tax has been paid or that no such tax is due. (i) After the Exchange Date, any share of Exchange Stock issued upon conversion or exercise of any Convertible Security shall, immediately upon issuance pursuant to such conversion or exercise and without any notice or any other action on the part of the Corporation or its Board of Directors or the holder of such share of Exchange Stock, be exchanged for the amount of cash, securities and/or other property thereof (together with any payments in lieu of fractional shares or dividends, if any) that a holder of such Convertible Security would have been entitled to receive pursuant to the terms of such Convertible Security had such terms provided that the conversion privilege in effect immediately prior to any exchange by the Corporation of any shares of Exchange Stock would be adjusted so that the holder of any such Convertible Security thereafter surrendered for conversion would be entitled to receive the amount of cash, securities and/or other property he or she would have owned immediately following such action had such Convertible Security been converted immediately prior to such exchange. The foregoing provisions shall not apply to the extent that equivalent adjustments are otherwise made pursuant to the provisions of such Convertible Security. 2. Voting of Controlled Shares. Shares of any series of Common Stock held by a corporation or other entity controlled by the Corporation (other than an employee benefit plan) shall be voted on any proposal requiring a vote of the holders of such series in the same proportion as votes are cast for or against such proposal by all other holders of such series. 3. Discrimination Between Classes of Common Stock. Subject to the provisions of each series of Common Stock regarding the payment of dividends on such series of Common Stock, the Board of Directors may, in its sole discretion, declare and pay dividends Continuation Sheet - 31 exclusively on any series of Common Stock, or all series, in equal or unequal amounts, notwithstanding the amounts available for the payment of dividends on any series, the respective voting and liquidation rights of each series, the amounts of prior dividends declared on each series or any other factor. 4. Adjustments Relative to Voting Rights and Liquidation. If at any time the Corporation shall in any manner subdivide (by stock split, reclassification or otherwise) or combine (by reverse stock split, reclassification or otherwise) the outstanding shares of any series of Common Stock, or pay a dividend or make a distribution in shares of any series of Common Stock to holders of such series, the per share voting rights and the liquidation units of each series of Common Stock other than the GGD Stock shall be appropriately adjusted so as to avoid dilution in the aggregate voting and liquidation rights of any series. The issuance by the Corporation of shares of any series of Common Stock (whether by a dividend or otherwise) to the holders of any other series of Common Stock shall not require adjustment pursuant to this paragraph. 5. Rank. All series of Common Stock shall rank junior with respect to the payment of dividends and the distribution of assets to all series of the Corporation's Preferred Stock that specifically provide that they shall rank prior to the Common Stock. Nothing herein shall preclude the Board from creating any series of Preferred Stock ranking on a parity with or prior to the Common Stock as to the payment of dividends or the distribution of assets. 6. Fractional Shares. Any series of Common Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of such series of Common Stock. 7. Definitions. As used in these Articles of Organization, the following terms shall have the following meanings (with terms defined in the singular having comparable meaning when used in the plural and vice versa), unless another definition is provided or the context otherwise requires: (a) "Business Day" shall mean each weekday other than any day on which any relevant series of common stock is not traded on any national securities exchange or the Nasdaq National Market or in the over-the-counter market. (b) The "Closing Price," with respect to any security, as of any given day, shall be (x) if such security is listed or admitted to trading on a national securities exchange, the closing price on the New York Stock Exchange Composite Tape (or any successor composite tape reporting transactions on national securities exchanges) or, if such composite tape shall not be in use or shall not report transactions in such shares, the last reported sales price regular way on the principal national securities exchange on which such shares are listed or admitted to trading (which shall be the national securities exchange on which the greatest number of shares of such series of stock has been traded during such consecutive trading days), or, if there is no such sale on any such day, the mean of the bid and asked prices on such day, or (y) if such shares are not listed or admitted to trading on any such exchange, the closing price, if reported, or, if the closing price is not reported, the mean of the closing bid and asked prices as reported by the Continuation Sheet - 32 Nasdaq National Market or a similar source selected from time to time by the Corporation for the purpose. (c) "Convertible Securities" shall mean any securities (including employee stock options) of the Corporation that are convertible into or evidence the right to purchase any shares of any series of Common Stock. (d) "Disposition" shall mean the sale, transfer, assignment or other disposition (whether by merger, consolidation, sale or contribution of assets or stock or otherwise) of any properties or assets, other than by pledge, hypothecation or grant of any security interest in such properties or assets. (e) "Exchange Date" shall mean, in respect of any exchange of any share of a series of Common Stock effected pursuant to these Articles of Organization, the date upon which such exchange becomes effective. (f) "Fair Market Value" shall mean (1) as to shares of any series of stock of the Corporation as of any date, the average of the daily Closing Prices for the 20 consecutive Business Days commencing on the 30th Business Day prior to such date, except that in the event such Closing Prices are unavailable, Fair Market Value shall be determined by the Board of Directors; (2) in the case of securities other than securities of the Corporation, if such security of a class that has previously been publicly traded for a period of at least three months, the Market Value thereof or, in the case of a security that has not been publicly traded for at least such period, the fair value per share of stock or per other unit of such security, on a fully distributed basis, as determined by an independent investment banking firm experienced in the valuation of securities selected in good faith by the Board of Directors; (3) in the case of property other than securities, the "Fair Market Value" as determined in good faith by the Board of Directors based upon such appraisals or valuation reports of such independent experts as the Board of Directors shall in good faith determine to be appropriate in accordance with good business practice. Any determination of Fair Market Value made under clauses 2 or 3 above shall be described in a statement filed with the records of the actions of the Board of Directors. (g) "Market Capitalization" of any series of Common stock on any date shall mean the product of (i) the Fair Market Value of one share of such series of Common Stock on such date and (ii) the number of shares of such series of Common Stock outstanding on such date. (h) "Market Value" as of any day of any security shall mean the average of the high and low reported sales prices regular way of a share of such class or series on such day (if such day is a Business Day, and, if such day is not a Business Day, on the Business Day immediately preceding such day); or, in case no such reported sale takes place on such Business Day, the average of the reported closing bid and asked prices regular way of a share of such class Continuation Sheet - 33 or series on such Business Day, in either case, on the New York Stock Exchange; or, if the shares of such class or series are not quoted on the New York Stock Exchange on such Business Day, on the Nasdaq National Market; or, if the shares of such class or series are not quoted on the Nasdaq National Market on such Business Day, the average of the closing bid and asked prices of a share of such class or series in the over-the-counter market on such Business Day as furnished by any New York Stock Exchange member firm selected from time to time by the corporation; or, if such closing bid and asked prices are not made available by any such New York Stock Exchange member firm on such Business Day (including, without limitation, because such securities are not publicly held), the market value as determined by an independent investment banking firm experienced in the valuation of securities selected in good faith by the Board of Directors. Any determination of Fair Market Value made under the final clause of the preceding sentence shall be described in a statement filed with the records of the actions of the Board of Directors. (i) "Qualified Tax Counsel" shall mean tax counsel who may be regular outside counsel to the Corporation but shall not be an officer or employee of the Corporation or any of its affiliates. (j) "Redemption Date" shall mean, in respect of any redemption of any share of a series of Common Stock effected pursuant to these Articles of Organization, the date upon which such redemption becomes effective. (k) "Related Business Transaction" shall mean, with respect to the Disposition of all or substantially all the properties and assets attributed to a particular series of Common Stock, such Disposition in a transaction or series of related transactions that result in the Corporation receiving in consideration of such properties and assets primarily equity securities (including, without limitation, capital stock, debt securities convertible into or exchangeable for equity securities or interests in a general or limited partnership or limited liability company, without regard to the voting power or other management or governance rights associated therewith) of any entity which (i) acquires such properties or assets or succeeds (by merger, formation of a joint venture or otherwise) to the business conducted with such properties or assets or controls such acquiror or successor and (ii) is engaged primarily or proposes to engage primarily in one or more businesses similar or complementary to the businesses conducted by the division or group of the Corporation to which were attributed such properties and assets prior to such Disposition, as determined by the Board of Directors. (l) "Tax Event" shall mean, with respect to any series of Common Stock that it has become (or will become, as the context may require) more likely than not that for United States Federal income tax purposes (i) the Corporation or the holders of its stock are, or at any time in the future will be, subject to tax or other adverse tax consequences upon the issuance or receipt of shares of such series of Common Stock or by reason of the existence of such series of Common Stock or (ii) either such series of Common Stock or the GGD Stock is not, or at any time in the future will not be, treated solely as stock of the Corporation. (m) "Tax Law Change" shall mean (i) any enactment of, amendment to, or change in the laws of the United States or any political subdivision thereof (including any announced proposed change by an applicable legislative committee or the chair in such laws), Continuation Sheet - 34 (ii) any promulgation of, amendment to, or change in the regulations under the laws of the United States or any political subdivision or taxing authority thereof or therein (including any announced proposed change in or promulgation of regulations by an administrative agency) or (iii) any official or administrative pronouncement or action or judicial decision interpreting or applying such laws or regulations. For purposes of rendering an opinion as to a Tax Law Change, tax counsel shall assume that any legislative or administrative proposals will be adopted or enacted as proposed. 8. Determinations By The Board Of Directors. Any determinations with respect to any Division or the rights of holders of any series of Common Stock made by the Board of Directors of the Corporation in good faith pursuant to or in furtherance of any provision of these Articles of Organization relating to the Common Stock shall be final and binding on all stockholders of the Corporation. G. DESCRIPTION OF THE PREFERRED STOCK 1. Undesignated Preferred Stock. Shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors may determine, in whole or in part, the preferences, voting powers, qualifications and special or relative rights or privileges of any such series before the issuance of any shares of that series. The Board of Directors shall determine the number of shares constituting each series of Preferred Stock and each series shall have a distinguishing designation. 2. Terms Of The Series A, Series B And Series C Junior Participating Preferred Stock. (a) Authorized Amounts and Designations. Two million (2,000,000) shares of Preferred Stock of the Corporation are designated as Series A Junior Participating Preferred Stock (the "Series A Preferred Stock"), one million (1,000,000) shares of Preferred Stock are designated as Series B Junior Participating Preferred Stock (the "Series B Preferred Stock") and four hundred thousand (400,000) shares of Preferred Stock are designated as Series C Junior Participating Preferred Stock (the "Series C Preferred Stock" and, together with the Series A Preferred Stock, the Series B Preferred Stock and any other series of Preferred Stock so designated by the Corporation's Board of Directors, the "Junior Preferred Stock"). To the extent legally permitted, such numbers of shares may be increased or decreased by vote of the Board of Directors, provided that no decrease shall reduce the number of shares of Junior Preferred Stock of any series to a number less than the number of shares of such series then outstanding plus the number of shares of such series reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into such series of Junior Preferred Stock. (b) Series A Preferred Stock. A description of the Series A Preferred Stock and a statement of its preferences, voting powers, qualifications and special or relative rights or privileges is as follows: (1) Dividends and Distributions. Continuation Sheet - 35 (A) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of all shares of common stock of the Corporation (the "Common Shares"), and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend on shares of the GGD Stock payable in shares of GGD Stock or a subdivision of the outstanding shares of GGD Stock (by reclassification or otherwise), declared on the GGD Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time after December 18, 2000 declare or pay any dividend on shares of GGD Stock payable in shares of GGD Stock, or effect a subdivision or combination or consolidation of the outstanding shares of GGD Stock (by reclassification or otherwise than by payment of a dividend in shares of GGD Stock) into a greater or lesser number of shares of GGD Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of GGD Stock outstanding immediately after such event and the denominator of which is the number of shares of GGD Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in Section IV.G.2(b)(1)(A) immediately after it declares a dividend or distribution on any shares of GGD Stock (other than a dividend payable in shares of GGD Stock), provided that, in the event no dividend or distribution shall have been declared on the GGD Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an Continuation Sheet - 36 amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. (2) Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after December 18, 2000 declare or pay any dividend on any shares of GGD Stock payable in shares of GGD Stock, or effect a subdivision or combination or consolidation of the outstanding shares of GGD Stock (by reclassification or otherwise than by payment of a dividend in shares of GGD Stock) into a greater or lesser number of shares of GGD Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of GGD Stock outstanding immediately after such event and the denominator of which is the number of shares of GGD Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in any vote of the Board of Directors of the Corporation creating a series of Preferred Stock, or by law, the holders of shares of Series A Preferred Stock and the holders of Common Shares and any other capital stock of the Corporation having general voting rights shall vote together as one series on all matters submitted to a vote of stockholders of the Corporation. (C) Except as set forth herein or as otherwise provided by law, holders of Series A Preferred Stock shall have no voting rights. (3) Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of GGD Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time after December 18, 2000 declare or pay any dividend on shares of GGD Stock payable in shares of Continuation Sheet - 37 GGD Stock, or effect a subdivision or combination or consolidation of the outstanding shares of GGD Stock (by reclassification or otherwise than by payment of a dividend in shares of GGD Stock) into a greater or lesser number of shares of GGD Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of GGD Stock outstanding immediately after such event and the denominator of which is the number of shares of GGD Stock that were outstanding immediately prior to such event. (4) Consolidation, Merger, Etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which Common Shares are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of GGD Stock is changed or exchanged. In the event the Corporation shall at any time after December 18, 2000 declare or pay any dividend on any shares of GGD Stock payable in shares of GGD Stock, or effect a subdivision or combination or consolidation of the outstanding shares of GGD Stock (by reclassification or otherwise than by payment of a dividend in shares of GGD Stock) into a greater or lesser number of shares of GGD Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of GGD Stock outstanding immediately after such event and the denominator of which is the number of shares of GGD Stock that were outstanding immediately prior to such event. (c) Series B Preferred Stock. A description of the Series B Preferred Stock and a statement of its preferences, voting powers, qualifications and special or relative rights or privileges is as follows: (1) Dividends and Distributions. (A) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the Series B Preferred Stock with respect to dividends, the holders of shares of Series B Preferred Stock, in preference to the holders of all Common Shares, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on each Quarterly Dividend Payment Date commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series B Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend on shares of the GBS Stock payable in shares of GBS Stock or a subdivision of the outstanding shares of GBS Stock (by reclassification or otherwise), declared on the GBS Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Continuation Sheet - 38 Dividend Payment Date, since the first issuance of any share or fraction of a share of Series B Preferred Stock. In the event the Corporation shall at any time after December 18, 2000 declare or pay any dividend on any shares of GBS Stock payable in shares of GBS Stock, or effect a subdivision or combination or consolidation of the outstanding shares of GBS Stock (by reclassification or otherwise than by payment of a dividend in shares of GBS Stock) into a greater or lesser number of shares of GBS Stock, then in each such case the amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of GBS Stock outstanding immediately after such event and the denominator of which is the number of shares of GBS Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series B Preferred Stock as provided in Section IV.G.2(c)(1)(A) immediately after it declares a dividend or distribution on any shares of GBS Stock (other than a dividend payable in shares of GBS Stock), provided that, in the event no dividend or distribution shall have been declared on the GBS Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series B Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series B Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series B Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series B Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series B Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. (2) Voting Rights. The holders of shares of Series B Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series B Preferred Stock shall entitle the holder thereof to 100 times the number of votes to which the holder of each outstanding share of GBS Stock is then entitled on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after December 18, 2000 declare or pay any dividend on shares of GBS Stock payable in shares of GBS Stock, or effect a subdivision or combination or Continuation Sheet - 39 consolidation of the outstanding shares of GBS Stock (by reclassification or otherwise than by payment of a dividend in shares of GBS Stock) into a greater or lesser number of shares of GBS Stock, then in each such case the number of votes per share to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of GBS Stock outstanding immediately after such event and the denominator of which is the number of shares of GBS Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in any vote of the Board of Directors of the Corporation creating a series of Preferred Stock, or by law, the holders of shares of Series B Preferred Stock and the holders of Common Shares and any other capital stock of the Corporation having general voting rights shall vote together as one series on all matters submitted to a vote of stockholders of the Corporation. (C) Except as set forth herein or as otherwise provided by law, holders of Series B Preferred Stock shall have no voting rights. (3) Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock unless, prior thereto, the holders of shares of Series B Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series B Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of GBS Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except distributions made ratably on the Series B Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time after December 18, 2000 declare or pay any dividend on any shares of GBS Stock payable in shares of GBS Stock, or effect a subdivision or combination or consolidation of the outstanding shares of GBS Stock (by reclassification or otherwise than by payment of a dividend in shares of GBS Stock) into a greater or lesser number of shares of GBS Stock, then in each such case the aggregate amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of GBS Stock outstanding immediately after such event and the denominator of which is the number of shares of GBS Stock that were outstanding immediately prior to such event. (4) Consolidation, Merger, Etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which Common Shares are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series B Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or Continuation Sheet - 40 any other property (payable in kind), as the case may be, into which or for which each share of GBS Stock is changed or exchanged. In the event the Corporation shall at any time after December 18, 2000 declare or pay any dividend on any shares of GBS Stock payable in shares of GBS Stock, or effect a subdivision or combination or consolidation of the outstanding shares of GBS Stock (by reclassification or otherwise than by payment of a dividend in shares of GBS Stock) into a greater or lesser number of shares of GBS Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series B Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of GBS Stock outstanding immediately after such event and the denominator of which is the number of shares of GBS Stock that were outstanding immediately prior to such event. (d) Series C Preferred Stock. A description of the Series C Preferred Stock and a statement of its preferences, voting powers, qualifications and special or relative rights or privileges is as follows: (1) Dividends and Distributions. (A) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the Series C Preferred Stock with respect to dividends, the holders of shares of Series C Preferred Stock, in preference to the holders of Common Shares, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on Quarterly Dividend Payment Date, commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series C Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend on shares of the GMO Stock payable in shares of GMO Stock or a subdivision of the outstanding shares of GMO Stock (by reclassification or otherwise), declared on the GMO Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series C Preferred Stock. In the event the Corporation shall at any time after December 18, 2000 declare or pay any dividend on any shares of GMO Stock payable in shares of GMO Stock, or effect a subdivision or combination or consolidation of the outstanding shares of GMO Stock (by reclassification or otherwise than by payment of a dividend in shares of GMO Stock) into a greater or lesser number of shares of GMO Stock, then in each such case the amount to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of GMO Stock outstanding immediately after such event and the denominator of which is the number of shares of GMO Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series C Preferred Stock as provided in Section IV.G.2(d)(1)(A) immediately after it declares a dividend or distribution on any shares of GMO Stock (other than a dividend payable in Continuation Sheet - 41 shares of GMO Stock), provided that, in the event no dividend or distribution shall have been declared on the GMO Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series C Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series C Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series C Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series C Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series C Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. (2) Voting Rights. The holders of shares of Series C Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series C Preferred Stock shall entitle the holder thereof to 100 times the number of votes to which the holder of each outstanding share of GMO Stock is then entitled on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after December 18, 2000 declare or pay any dividend on any shares of GMO Stock payable in shares of GMO Stock, or effect a subdivision or combination or consolidation of the outstanding shares of GMO Stock (by reclassification or otherwise than by payment of a dividend in shares of GMO Stock) into a greater or lesser number of shares of GMO Stock, then in each such case the number of votes per share to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of GMO Stock outstanding immediately after such event and the denominator of which is the number of shares of GMO Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in any vote of the Board of Directors of the Corporation creating a series of Preferred Stock, or by law, the holders of shares of Series C Preferred Stock and the holders of Common Shares and any other capital stock of the Corporation having general voting rights shall vote together as one series on all matters submitted to a vote of stockholders of the Corporation. Continuation Sheet - 42 (C) Except as set forth herein or as otherwise provided by law, holders of Series C Preferred Stock shall have no voting rights. (3) Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Preferred Stock unless, prior thereto, the holders of shares of Series C Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series C Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of GMO Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Preferred Stock, except distributions made ratably on the Series C Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time after December 18, 2000 declare or pay any dividend on any shares of GMO Stock payable in shares of GMO Stock, or effect a subdivision or combination or consolidation of the outstanding shares of GMO Stock (by reclassification or otherwise than by payment of a dividend in shares of GMO Stock) into a greater or lesser number of shares of GMO Stock, then in each such case the aggregate amount to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of GMO Stock outstanding immediately after such event and the denominator of which is the number of shares of GMO Stock that were outstanding immediately prior to such event. (4) Consolidation, Merger, Etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which Common Shares are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series C Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of GMO Stock is changed or exchanged. In the event the Corporation shall at any time after December 18, 2000 declare or pay any dividend on shares of GMO Stock payable in shares of GMO Stock, or effect a subdivision or combination or consolidation of the outstanding shares of GMO Stock (by reclassification or otherwise than by payment of a dividend in shares of GMO Stock) into a greater or lesser number of shares of GMO Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series C Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of GMO Stock outstanding immediately after such event and the denominator of which is the number of shares of GMO Stock that were outstanding immediately prior to such event. Continuation Sheet - 43 (e) General Provisions. Except as otherwise specifically provided in a particular series of Junior Preferred Stock, the following provisions shall apply to all series of Junior Preferred Stock: (1) Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Junior Preferred Stock are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Junior Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (1) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock; (2) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Junior Preferred Stock, except dividends paid ratably on the Junior Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (3) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Junior Preferred Stock; or (4) redeem, purchase or otherwise acquire for consideration any shares of Junior Preferred Stock, or any shares of stock ranking on a parity with the Junior Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (2) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under Section IV.G.2(e)(1)(A) purchase or otherwise acquire such shares at such time and in such manner. (f) Reacquired Shares. Any shares of Junior Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as shares of the same series of Preferred Stock or as part of a new series of Preferred Stock, subject to the conditions Continuation Sheet - 44 and restrictions on issuance set forth herein, in any vote of the Board of Directors of the Corporation creating a series of Preferred Stock, or as otherwise required by law. (g) Redemption. The shares of Junior Preferred Stock shall not be redeemable. (h) Rank. The Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock shall rank equally with respect to the payment of dividends and the distribution of assets together with any other series of the Corporation's Preferred Stock that specifically provide that they shall rank equally with Junior Preferred Stock. The Junior Preferred Stock shall rank junior with respect to the payment of dividends and the distribution of assets to all series of the Corporation's Preferred Stock that specifically provide that they shall rank prior to the Junior Preferred Stock. Nothing herein shall preclude the Board from creating any series of Preferred Stock ranking on a parity with or prior to the Junior Preferred Stock as to the payment of dividends or the distribution of assets. (i) Amendment. The Articles of Organization of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the holders of Junior Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of each outstanding series of Junior Preferred Stock, voting together as a single series, provided that, any two or more series of Junior Preferred Stock that are adversely affected in the same manner shall vote together as a single class. (j) Fractional Shares. The Junior Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of the Junior Preferred Stock. ARTICLE V The restrictions, if any, imposed by the Articles of Organization upon the transfer of shares of stock of any class are: NONE Continuation Sheet - 45 ARTICLE VI ** Other lawful provisions, if any, for the conduct and regulation of the business and affairs of the corporation, for its voluntary dissolution, or for limiting, defining, or regulating the powers of the corporation, or of its directors or stockholders, or of any class of stockholders: OTHER LAWFUL PROVISIONS A. BOARD OF DIRECTORS 1. CLASSIFICATION. The directors shall be divided into three classes, as nearly equal in number as the then total number of directors constituting the entire Board permits, with the term of office of one class expiring each year. The initial directors of all classes shall be elected by the incorporator and shall serve until their respective successors shall be elected and shall qualify. Thereafter, the directors of the first class shall be elected to hold office for a term expiring at the first annual meeting of stockholders, the directors of the second class shall be elected to hold office for a term expiring at the second annual meeting of stockholders and the directors of the third class shall be elected to hold office for a term expiring at the third annual meeting of stockholders. At each annual meeting of stockholders, successors to the class of directors whose term expires at that meeting shall be elected for a term expiring at the third annual meeting following their election and until their successors shall be elected and qualified, subject to prior death, resignation, retirement or removal. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no event will a decrease in the number of directors shorten the term of any incumbent director. Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the election, terms of office and other features of such directorships shall be governed by the terms of the vote establishing such series, and such directors so elected shall not be divided into classes pursuant to this Article VI unless express provided by such terms. 2. VACANCIES. Except as otherwise determined by the Board of Directors in establishing a series of Preferred Stock as to directors elected by holders of such series, any vacancies in the Board of Directors, including a vacancy resulting from the enlargement of the Board, may be filled by the directors then in office, though less than a quorum. Each director so chosen to fill a vacancy shall be elected to complete the term of office of the director who is being succeeded. In the case of any election of a new director to fill a directorship created by an enlargement of the Board, the Board shall in such election assign the class of directors to which such additional director is being elected, and each director so elected shall hold office for the same term as the other members of the class to which the director is assigned. 3. REMOVAL. Except as otherwise determined by the Board of Directors in establishing a series of Preferred Stock as to directors elected by holders of such series, at any special meeting of the stockholders called at least in part for the purpose, any director or directors may, by the affirmative vote of the holders of at least a majority of the stock entitled to Continuation Sheet - 46 vote for the election of directors, be removed from office for cause. The provisions of this subsection shall be the exclusive method for the removal of directors. B. STOCKHOLDER VOTE REQUIRED FOR CERTAIN ACTIONS The Corporation, by vote of a majority in interest of the stock outstanding and entitled to vote thereon may (i) authorize any amendment to these Articles of Organization, (ii) authorize the sale, lease or exchange of all or substantially all of the Corporation's property and assets, including its goodwill and (iii) approve a merger or consolidation of the Corporation with or into any other corporation; so long as such amendment, sale, lease, exchange, merger or consolidation shall have been approved by the Board of Directors. C. ADDITIONAL PROVISIONS 1. Meetings of the stockholders may be held anywhere within the United State. 2. No contract or other transaction of this corporation with any other person, corporation, association, or partnership shall be affected or invalidated by the fact that (i) this corporation is a stockholder or partner in such other corporation, association, or partnership, or (ii) any one or more of the officers or directors of this corporation is an officer, director or partner of such other corporation, association or partnership, or (iii) any officer or director of this corporation, individually or jointly with others, is a party to or is interested in such contract or transaction. Any director of this corporation may be counted in determining the existence of a quorum at any meeting of the board of directors for the purpose of authorizing or ratifying any such contract or transaction, and may vote thereon, with like force and effect as if he were not so interested or were not an officer, director, or partner of such other corporation, association, or partnership. 3. The corporation may be a partner in any business enterprise which it would have power to conduct itself. 4. The by-laws may provide that the directors may make, amend, or repeal the by-laws in whole or in part, except with respect to any provision thereof which by law, these Articles of Organization, or the by-laws requires action by the stockholders. 5. A director shall not be liable to the corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, except to the extent that the elimination or limitation of liability is not permitted under the Massachusetts Business Corporation Law as in effect when such liability is determined. No amendment or repeal of this provision shall deprive a director of the benefits hereof with respect to any act or omission occurring prior to such amendment or repeal. 6. Except as otherwise required by law, any action required or permitted to be taken by the stockholders of the Corporation must be taken at a duly called annual or special meeting of such holders and may not be taken by any consent in writing by such holders. Continuation Sheet - 47 **If there are no provisions state "None". NOTE: The preceding six (6) articles are considered to be permanent and may ONLY be changed by filing appropriate Articles of Amendment. ARTICLE VII The effective date of the Restated Articles of Organization of the corporation shall be the date approved and filed by the Secretary of the Commonwealth. If a LATER effective date is desired, specify such date which shall nor be more than THIRTY DAYS after the date of filing. ARTICLE VIII THE INFORMATION CONTAINED IN ARTICLE VIII IS NOT A PERMANENT PART OF THE ARTICLES OF ORGANIZATION. a. The street address (post office boxes are not acceptable) of the principal office of the Corporation in MASSACHUSETTS is: One Kendall Square, Cambridge, MA 02139 b. The name, residential address and post office address of each director and officer is as follows:
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS President: Henri A. Termeer 65-3 Commercial Wharf c/o Genzyme Corporation Boston, MA 02110 One Kendall Square Cambridge, MA 02139 Treasurer: Evan M. Lebson 5 Arbetter Drive same as above Framingham, MA 01701 Clerk: Peter Wirth 37 Hancock Street same as above Boston, MA 02114 Directors: Henri A. Termeer same as above same as above Douglas A. Berthiaume 114 Cara Drive same as above N. Andover, MA 01845 Robert J. Carpenter 9 Lowell Road same as above Wellesley, MA 02181 Continuation Sheet - 48 Victor J. Dzau 110 Dudley Road same as above Newton, MA 02159 Constantine E. Anagstopoulos 29 Portland Drive same as above St. Louis, MO 63131 Henry E. Blair 2580 Main Street same as above Barnstable, MA 02630 Charles L. Cooney 35 Chestnut Street same as above Brookline, MA 02139
c. The fiscal year (i.e. tax year) of the corporation shall end on the last day of the month of: December d. The name and business address of the resident agent, if any, of the corporation is: NONE ** We further certify that the foregoing Restated Articles of Organization affect no amendments to the Articles of Organization of the corporation as heretofore amended, except amendments to the following article. Briefly describe amendments below: Article IV: (1) Undesignate each of the Genzyme Surgical Products Division Common Stock and the Genzyme Tissue Repair Division Common Stock as a series of common stock; (2) Designate Genzyme Biosurgery Division Common Stock as a series of common stock; (3) Undesignate each of the Series B Junior Participating Preferred Stock and Series D Junior Participating Preferred Stock as a series of preferred stock; and (4) Designate a new Series B Junior Participating Preferred Stock as a series of preferred stock. SIGNED UNDER THE PENALTIES OF PERJURY, this 18th day of December, 2000, /s/ Michael S. Wyzga Senior Vice-President ---------------- /s/ Peter Wirth Clerk ----------- Continuation Sheet - 49 THE COMMONWEALTH OF MASSACHUSETTS RESTATED ARTICLES OF ORGANIZATION (GENERAL LAWS, CHAPTER 156B, SECTION 74) I hereby approve the within Restated Articles Of Organization and, the filing fee in the Amount of $_________ having been paid, said Articles are deemed to have been filed with me This ________ day of ___________, 2000. EFFECTIVE DATE:_____________________________ WILLIAM FRANCIS GALVIN SECRETARY OF THE COMMONWEALTH TO BE FILLED IN BY CORPORATION PHOTOCOPY OF DOCUMENTS TO BE SENT TO: PAUL LAURINO, ESQUIRE PALMER & DODGE LLP ONE BEACON STREET, BOSTON, MA 02108 TELEPHONE: 617/573-0510 EX-3 3 a2033583zex-3.txt EXHIBIT 3 EXHIBIT 3 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. 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 Policies - 2 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 Policies - 3 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. Policies - 4 (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 Policies - 5 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 Policies - 6 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. Policies - 7 -----END PRIVACY-ENHANCED MESSAGE-----