-----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, I4DMpVbPgY04T0VcljLZiFE3U6sxHrOPueS8cXuQFNHkzwxVHlM35EaN9hKu/IkE SVrIf7tPkl7LBXuP4Fp8NQ== 0000950135-98-004317.txt : 19980723 0000950135-98-004317.hdr.sgml : 19980723 ACCESSION NUMBER: 0000950135-98-004317 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19980721 SROS: NASD 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: S-3 SEC ACT: SEC FILE NUMBER: 333-59513 FILM NUMBER: 98669231 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 S-3 1 GENZYME CORPORATION 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 1998. REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ GENZYME CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MASSACHUSETTS 06-1047163 (STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NUMBER) ORGANIZATION)
ONE KENDALL SQUARE, CAMBRIDGE, MASSACHUSETTS 02139 (617) 252-7500 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ PETER WIRTH EXECUTIVE VICE PRESIDENT AND CHIEF LEGAL OFFICER GENZYME CORPORATION ONE KENDALL SQUARE CAMBRIDGE, MASSACHUSETTS 02139 (617) 252-7500 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) WITH COPIES TO: JOHN L. WHITLOCK, ESQ. PALMER & DODGE LLP ONE BEACON STREET BOSTON, MASSACHUSETTS 02108 (617) 573-0100 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
- ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- PROPOSED PROPOSED TITLE OF EACH CLASS OF AMOUNT TO MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER UNIT OFFERING PRICE(1) REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------------- 5 1/4% Convertible Subordinated Notes Due 2005............................. $250,000,000 100% $250,000,000 $73,750.00 - ------------------------------------------------------------------------------------------------------------------------------- General Division Common Stock, $0.01 per share............................ 6,313,131(2) -- -- $0.00(3) - ------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o). (2) Plus such additional indeterminate number of shares of Genzyme General Division Common Stock as shall be required for issuance upon conversion of the Notes being registered hereunder due to an adjustment in the conversion price. Includes associated purchase rights which currently are evidenced by certificates for shares of Genzyme General Division Common Stock and automatically trade with such shares. (3) Pursuant to Rule 457(i), there is no filing fee with respect to the shares of Genzyme General Division Common Stock issuable upon conversion of the Notes because no additional consideration will be received in connection with the exercise of the conversion privilege. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 INFORMATION CONTAINED HEREIN IS SUBJECT TO CHANGE, COMPLETION OR AMENDMENT WITHOUT NOTICE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE PROSPECTUS IS DELIVERED IN FINAL FORM. SUBJECT TO COMPLETION, DATED , 1998 [GENZYME LOGO] $250,000,000 PRINCIPAL AMOUNT OF 5 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2005 6,313,131 SHARES OF GENZYME GENERAL DIVISION COMMON STOCK This Prospectus relates to the offer and sale of $250,000,000 aggregate principal amount of 5 1/4% Convertible Subordinated Notes Due 2005 (the "Notes") of Genzyme Corporation (the "Company"), a Massachusetts corporation, issued to the initial purchasers of the Notes (the "Initial Purchasers") in a private placement consummated in May 1998, and the offer and sale of 6,313,131 shares of Genzyme General Division Common Stock, $0.01 par value per share (the "GGD Stock"), currently issuable upon conversion of such Notes plus such additional indeterminate number of shares of GGD Stock as may become issuable upon conversion of the Notes due to adjustments in the conversion price (the "Conversion Shares"). The Notes and the Conversion Shares may be offered from time to time for the accounts of beneficial holders of the Notes or Conversion Shares named herein or in supplements to this Prospectus (the "Selling Securityholders"). See "PLAN OF DISTRIBUTION." The Notes are convertible, at any time at or before maturity, unless previously redeemed, into shares of GGD Stock, at a conversion price of $39.60 per share, subject to adjustment in certain events. Interest on the Notes is payable semi-annually on June 1 and December 1 of each year, commencing on December 1, 1998. The Notes mature on June 1, 2005. The Notes are not redeemable by the Company prior to June 10, 2001. Thereafter, the Notes are redeemable at the option of the Company, in whole or in part, at the redemption prices set forth in this Prospectus, plus accrued interest. Upon a Fundamental Change (as defined herein), each holder of Notes has the right, subject to the rights of holders of Senior Indebtedness (as defined herein), to require the Company to repurchase all or a portion of such holder's Notes at a purchase price equal to 100% of the principal amount thereof, plus accrued interest. See "DESCRIPTION OF NOTES -- Repurchase at Option of Holder Upon a Fundamental Change." The Notes are unsecured obligations of the Company subordinated to all existing and future Senior Indebtedness. The Indenture does not restrict the incurrence of indebtedness, including Senior Indebtedness, by the Company or its subsidiaries. See "DESCRIPTION OF NOTES -- Subordination." The Notes do not provide for a sinking fund. The GGD Stock is traded on the Nasdaq National Market under the symbol "GENZ." On July , 1998, the closing per share price of GGD Stock as reported by Nasdaq was $ per share. The Notes have been designated for trading in the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market. Notes resold pursuant to the Registration Statement (of which this Prospectus is a part) will no longer be eligible for trading in the PORTAL Market. The Notes and the Conversion Shares may be offered by the Selling Securityholders from time to time in open-market or privately-negotiated transactions, or by a combination of such methods of sale, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at negotiated prices or at fixed prices. The Selling Securityholders may effect such transactions to or through brokers-dealers, and such brokers-dealers may receive compensation in the form of discounts, concessions or commissions from the Selling Securityholders, the purchasers of the securities or both (which compensation to a particular broker-dealer might be in excess of customary commissions). See "THE SELLING SECURITYHOLDERS" and "PLAN OF DISTRIBUTION." The Company will not receive any of the proceeds from the sale of the Notes or Conversion Shares. The Company, however, has agreed to bear certain expenses in connection with the registration of the Notes and Conversion Shares. The Company has also agreed to indemnify the Selling Shareholders against certain liabilities, including certain liabilities under the Securities Act of 1933, as amended (the "Securities Act"). SEE "RISK FACTORS" BEGINNING ON PAGE 4 HEREIN FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is , 1998. 3 THE COMPANY GENERAL Genzyme is a biotechnology company that develops innovative products and services for major unmet medical needs. Genzyme has three divisions: Genzyme General Division ("Genzyme General"), which develops and markets therapeutic and surgical products and diagnostic services and products; Genzyme Tissue Repair Division ("Genzyme Tissue Repair" or "GTR"), which develops and markets biological products for the treatment of cartilage damage, severe burns, chronic skin ulcers and neurodegenerative diseases; and Genzyme Molecular Oncology Division ("Genzyme Molecular Oncology" or "GMO"), which was formed in June 1997 in connection with the acquisition of PharmaGenics, Inc. ("PharmaGenics") and develops gene-based approaches to cancer therapy through genomics, gene therapy and a small molecule drug discovery program. Genzyme has three outstanding series of common stock, each of which is intended to reflect the value and track the performance of one of Genzyme's three divisions: Genzyme General Division Common Stock, Genzyme Tissue Repair Division Common Stock ("GTR Stock") and Genzyme Molecular Oncology Division Common Stock ("GMO Stock"). GGD Stock and GTR Stock are listed on the Nasdaq National Market under the symbols "GENZ" and "GENZL," respectively. GMO Stock is not yet publicly traded. For purposes of financial statement presentation, all of the Company's programs, products, assets and liabilities are allocated to Genzyme General, Genzyme Tissue Repair or Genzyme Molecular Oncology. Notwithstanding this allocation, Genzyme continues to hold title to all of the assets and is responsible for all of the liabilities allocated to each of the divisions. Holders of GGD Stock, GTR Stock and GMO Stock have no specific claim against the assets attributed to the division whose performance is associated with the series of stock they hold. Liabilities or contingencies of any division that affect Genzyme's resources or financial condition could affect the financial condition or results of operations of all three divisions. For additional information concerning Genzyme and its businesses, please refer to the documents listed under "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." RECENT DEVELOPMENTS Sale of Research Products Business On July 1, 1998, Genzyme sold the primary assets of its research products business to TECHNE Corporation for approximately $24.8 million in cash, $17.0 million of TECHNE common stock and estimated royalties over the next five years of approximately $23.7 million. The gain from the sale of aproximately $20 million after taxes, excluding royalties, will be recorded in the third quarter. Royalty income will be recorded as earned. This business, which was part of Genzyme's diagnostics products unit, consisted of a product line of over 350 recombinant proteins, antibodies and human, mouse and rat ELISA research kits. Genzyme generated approximately $15 million in revenue from this product line during the year ended December 31, 1997. FDA Advisory Committee Thyrogen(R) Hormone Recommendation On May 15, 1998, an advisory committee to the U.S. Food and Drug Administration (the "FDA") recommended approval of Genzyme General's Thyrogen(R) recombinant human thyroid stimulating hormone for use in the evaluation of patients being tested for thyroid cancer metastases. Recognizing that diagnostic testing with Thyrogen(R) hormone is not as sensitive as testing after patients have been withdrawn from their thyroid hormone supplements, the FDA's Endocrinologic and Metabolic Drugs Advisory Committee voted 8-3 to recommend approval of Thyrogen(R) hormone for use in conducting thyroid scanning and thyroglobulin testing in a broad group of patients who, in the judgment of treating physicians, would benefit from the avoidance of hypothyroidism. The panel also voted 11-0 to recommend approval of Thyrogen(R) hormone for use in patients who otherwise would be examined solely with a serum thyroglobulin test without undergoing withdrawal from hormone supplements. In addition, the panel unanimously recommended approval of Thyrogen(R) hormone for use with patients who, for medical reasons, cannot be withdrawn from hormone 2 4 supplements, or who cannot raise their own thyroid stimulating hormone levels adequately. On June 15, 1998, the FDA notified Genzyme that it had extended to September 15, 1998 the deadline for taking action on Genzyme's new drug application for Thyrogen(R) hormone. The advisory committee's recommendation will be considered by the FDA in its final review of Genzyme General's new drug application for Thyrogen(R) hormone. The recommendation is not binding on the FDA. GTR Long-Term Financing Plan Genzyme Corporation recently established a long-term financing plan to provide up to $66 million for the continued development of Genzyme Tissue Repair's product portfolio and research and development programs. As part of the long-term financing plan, Genzyme's Board of Directors (the "Genzyme Board") increased the amount of the equity line of credit available from Genzyme General to Genzyme Tissue Repair from $12 million to $50 million and Genzyme Tissue Repair sold a manufacturing facility to Genzyme General for approximately $16 million in cash. Under the terms of the equity line, Genzyme Tissue Repair may draw down funds as needed on a quarterly basis in exchange for GTR Designated Shares, as defined under "DESCRIPTION OF GENZYME CAPITAL STOCK -- GTR Designated Shares and GMO Designated Shares." 3 5 RISK FACTORS Statements made in this Prospectus relating to plans for sales and marketing, product development, dividend policy, the timing of regulatory approvals, or that otherwise relate to future periods, are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). When used in this Prospectus, the words "anticipates," "expects," "intends" and similar expressions are intended to identify forward-looking statements. Such statements are subject to a number of risks and uncertainties. Actual results could differ materially from those anticipated in the forward-looking statements as a result of certain risks described below or elsewhere in this Prospectus (including the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, as amended (the "1997 10-K"), and other documents incorporated herein by reference). Such risks should be considered carefully in evaluating an investment in the Notes or GGD Stock. RISKS RELATED TO GENZYME AND THE GENERAL DIVISION The Notes are convertible only into shares of GGD Stock. The following risk factors relating to Genzyme General, as well as the Company generally, should be considered carefully in contemplating an investment in the Notes or GGD Stock. Dependence on Cerezyme(R) Enzyme and Ceredase(R) Enzyme Sales Genzyme General's results of operations are highly dependent upon the sales of Cerezyme(R) enzyme and Ceredase(R) enzyme. Sales of Cerezyme(R) enzyme and Ceredase(R) enzyme totaled $332.7 million for the year ended December 31, 1997 and $93.5 million for the three months ended March 31, 1998, representing 63% and 67%, respectively, of Genzyme General's product revenue for such periods. Genzyme produces Ceredase(R) enzyme from an extract of human placental tissue supplied by a French company that is the only significant commercial source of this material. The current supply available is not sufficient to produce enough Ceredase(R) enzyme to supply all known patients. To address supply constraints, Genzyme developed Cerezyme(R) enzyme, a recombinant form of the enzyme. Patients receiving Ceredase(R) enzyme are being converted to Cerezyme(R) enzyme; however, Genzyme General will continue to manufacture Ceredase(R) enzyme until the process of patient conversion is completed. Any disruption in the supply or manufacturing process of Cerezyme(R) enzyme may have a material adverse effect on revenue. In addition, Genzyme General may be required to record a charge to earnings for the equipment used for and the inventory of Ceredase(R) enzyme remaining upon completion of the patient conversion process, and, if the conversions proceed more rapidly than anticipated, the remaining inventory of Ceredase(R) enzyme and the corresponding charge to earnings could be material. Future Capital Needs Although Genzyme currently has substantial cash resources, it has committed to utilize a portion of such funds for certain purposes, such as (i) continuing the development and completing the market introduction in the U.S. and Europe of its line of biomaterial products based on hyaluronic acid for use in limiting the formation of post-operative adhesions (the "Sepra Products"), (ii) continued marketing of Carticel(TM) autologous cultured chondrocytes and developing, producing and marketing other products through GTR and (iii) making certain payments to third parties in connection with strategic collaborations. Genzyme had approximately $255.2 million in cash, cash equivalents and short and long-term investments (excluding investments in equity securities) at March 31, 1998 ($498.6 million when adjusted for the proceeds received by the Company from the initial sale of the Notes). As of March 31, 1998, approximately $113.0 million was outstanding under Genzyme's $225.0 million revolving credit facility with a group of commercial banks, $95.0 million of which was allocated to Genzyme General and $18.0 million of which was allocated to GTR. Amounts borrowed under this facility are payable on November 15, 1999. Genzyme's cash resources will be diminished upon repayment of amounts borrowed, plus accrued interest, under this credit facility. In addition, in February 1997 Genzyme privately placed a note with an aggregate principal amount of $13.0 million, which is convertible into shares of GTR Stock (the "GTR Note"), to fund GTR's operations 4 6 and in August 1997 Genzyme privately placed an aggregate principal amount of $20.0 million of debentures convertible into GMO Stock (the "GMO Debentures") to fund GMO's operations. Pursuant to the terms of both the GTR Note and the GMO Debentures, the holders will, in some circumstances, receive cash from Genzyme. To the extent cash is used to pay the principal and accrued interest on the GTR Note or GMO Debentures, the Company's cash reserves will also be diminished. As a result of these commitments and contingencies, Genzyme may have to obtain additional financing which could take the form of Senior Indebtedness, to which the Notes would be subordinated. There can be no assurance that any such additional financing will be available on favorable terms, if at all. Risks Inherent in International Operations Foreign operations of Genzyme accounted for 36% of consolidated net sales in 1997 as compared to 35% in each of 1996 and 1995. In addition, Genzyme has direct investments in a number of subsidiaries in foreign countries (primarily in Europe and Japan). Financial results of Genzyme could be adversely affected by fluctuations in foreign exchange rates. Fluctuations in the value of foreign currencies affect the dollar value of Genzyme's net investment in foreign subsidiaries, with these fluctuations being included in a separate component of stockholders' equity. Operating results of foreign subsidiaries are translated into U.S. dollars at average monthly exchange rates. For the year ended December 31, 1997, the impact of such transactions on operating results was not significant; however, Genzyme reported a cumulative foreign currency translation amount of $12.4 million in stockholders' equity as a result of foreign currency adjustments, and there can be no assurance that the Company will not incur additional adjustments in future periods. In addition, the U.S. dollar value of transactions based in foreign currency (collections on foreign sales or payments for foreign purchases) also fluctuates with exchange rates. The largest foreign currency exposure results from activity in Dutch guilders, British pounds, French francs, German marks, Spanish pesetas, Italian lira and Japanese yen. Genzyme has not hedged net foreign investments in the past, although it may engage in hedging transactions to manage and reduce its foreign exchange risk, subject to certain restrictions imposed by the Genzyme Board. There can be no assurance that Genzyme's attempts to manage its foreign currency exchange risk will be successful. Uncertainty Regarding Patents and Protection of Proprietary Technology Genzyme's success depends, to a large extent, on its ability to maintain a competitive technological position in its product areas. Proprietary rights relating to Genzyme's products and services are protected from unauthorized use by third parties only to the extent that they are covered by patents or are maintained in confidence as trade secrets. Genzyme has filed for patents and has rights to numerous patents and patent applications worldwide. While certain of Genzyme's patents have been allowed or issued, there can be no assurance that these allowed and issued patents or additional patents allowed or issued to Genzyme will effectively protect the proprietary technology of Genzyme. In addition, patent litigation is widespread in the biotechnology industry and it is not possible to predict how any such litigation will affect Genzyme. No consistent policy has emerged from the U.S. Patent and Trademark Office regarding the breadth of claims allowed in biotechnology patents and, therefore, the degree of future protection for Genzyme's proprietary rights is uncertain. The allowance of broader claims may increase the incidence and cost of patent interference proceedings in the U.S. and the risk of infringement litigation in the U.S. and abroad. Conversely, the allowance of narrower claims, while reducing the risk of infringement, may limit the value of Genzyme's proprietary rights under its patents, licenses and pending patent applications. Genzyme attempts to monitor the patent filings of its competitors in an effort to guide the design and development of its products to avoid infringement. Notwithstanding these efforts, there can be no assurance that the patents issued or licensed to Genzyme will remain free of challenge by third parties. In addition, patent applications filed by third parties may, if issued, cover the Company's products and services as ultimately developed, which could have an adverse impact on the Company's results of operations in amounts that cannot presently be determined. Genzyme may, depending on the final formulation of such products and services, need to acquire licenses to, or contest the validity of, such patents. For example, Genzyme may need 5 7 to acquire patent rights from third parties that cover particular diagnostic and/or therapeutic gene sequences or that cover aspects of adjuvant therapies such as compositions of matter or methods of use related to the administration of cytokines as immunostimulants in combination with a cancer therapy. In gene therapy, Genzyme may need to license a number of patents covering different elements of the technique, such as those relating to a particular viral or non-viral vector or methods for its delivery. The extent to which Genzyme may need to license such rights or contest the validity of such patents depends on the scope and validity of such patents and ultimately on the final design or formulation of its products and services under development. The cost and ability to license any such rights and the likelihood of successfully contesting the validity of such patents are uncertain. Genzyme has also relied upon trade secrets, proprietary know-how and continuing technological innovation to develop and maintain its competitive position. There can be no assurance that others will not independently develop such know-how or otherwise obtain access to Genzyme's technology. While Genzyme's employees, consultants and corporate partners with access to proprietary information are generally required to enter into confidentiality agreements, there can be no assurance that these agreements will be honored. Certain of Genzyme's consultants have developed portions of Genzyme's proprietary technology at their respective universities or in governmental laboratories. There can be no assurance that such universities or governmental authorities will not assert rights to intellectual property arising out of university or government based research conducted by such consultants. Regulation by Government Agencies The production and sale of health care products and provision of health care services are highly regulated. In particular, human therapeutic and diagnostic products are subject to pre-marketing approval by the FDA and comparable agencies in foreign countries. The process of obtaining these approvals varies according to the nature and use of the product and can involve lengthy and detailed laboratory and clinical testing, sampling activities and other costly and time-consuming procedures. Regulation of Genzyme General products and services could also limit Genzyme General's reimbursement for its products and services and otherwise materially affect the results of operations of Genzyme General. Additional regulatory regimes, in the U.S. and internationally, affect the Company's work in gene therapy and the provision of cancer diagnostic services. There can be no assurance that any of the required regulatory approvals will be granted on a timely basis, if at all. Certain of Genzyme's products, including Cerezyme(R) enzyme and Ceredase(R) enzyme, have been designated as orphan drugs under the Orphan Drug Act, which provides incentives to manufacturers to develop and market drugs for rare diseases. The Orphan Drug Act generally entitles the first developer that receives FDA marketing approval for an orphan drug to a seven-year exclusive marketing period in the United States for that product. Legislation has been periodically introduced in recent years, however, to amend the Orphan Drug Act. Such legislation has generally been directed to shortening the period of automatic market exclusivity and granting certain market rights to simultaneous developers of a drug. The effect on Genzyme of any amendments ultimately adopted cannot be assessed at this time. No Assurance of Commercial Success of the Sepra Products In August 1996, Genzyme received marketing approval from the FDA for Seprafilm(R) bioresorbable membrane and commenced commercial sales of Seprafilm(R) bioresorbable membrane in the U.S. on behalf of Genzyme Ventures II. The successful commercialization of Seprafilm(R) bioresorbable membrane and other Sepra Products will depend on many factors, including: (i) the content and timing of decisions made by the FDA and other regulatory authorities, (ii) market acceptance of the Sepra Products by surgeons and hospitals administrators, (iii) Genzyme General's ability to deploy its sales force to market the Sepra Products, (iv) Genzyme General's ability to supply sufficient product to meet market demand, (v) the number and relative efficacy of competitive products that may subsequently enter the market and (vi) the degree to which third party reimbursement is available for the Sepra Products. There can be no assurance that Genzyme General will be successful in its efforts to commercialize the Sepra Products and Genzyme General may cease 6 8 development of one or more of the Sepra Products at any time if demand proves inadequate. In January 1998, Genzyme announced that it had discontinued development of Sepracoat(TM) coating solution for the U.S. market. Technology Transferred to Genzyme Development Partners, L.P. ("GDP") Genzyme organized GDP, a special purpose research and development entity, and transferred technology and commercial rights to the Sepra Products that Genzyme previously had under development. Genzyme has an option to purchase the limited partnership interests in GDP under certain circumstances. It is uncertain at this time whether Genzyme will exercise this option. If Genzyme does not exercise this option, it will have limited rights in revenues generated from the sale of GDP's products. If Genzyme does exercise this option, it will be required to make substantial cash payments or to issue shares of GGD Stock, or both. Cash payments will diminish Genzyme's capital resources. Payments in GGD Stock could result in dilution to holders of GGD Stock and could negatively affect the market price of such stock. Uncertainty Regarding Success of Clinical Trials and Other Risks in Product Development Several of Genzyme's products are currently in or will require clinical trials to test safety and efficacy in humans for various conditions. There can be no assurance that Genzyme will not encounter problems in clinical trials that will cause it to delay or suspend these clinical trials. In addition, there can be no assurance that such clinical testing, if completed, will ultimately show these products to be safe and efficacious. Product development involves a high degree of risk, and returns to investors are dependent upon successful development of Genzyme's products. There can be no assurance that development of any product will be successfully completed or that FDA approval of any of Genzyme's products under development will be obtained. Rapid Technological Change The field of biotechnology is expected to continue to undergo significant and rapid technological change. Although Genzyme General will seek to expand its technological capabilities in order to remain competitive, there can be no assurance that research and discoveries by others will not render Genzyme General's products or services obsolete. Third Party Reimbursement and Health Care Cost Containment Initiatives A majority of Genzyme General's revenues are attributable directly or indirectly to payments received from third party payers, including government health administration authorities and private health insurers. Significant uncertainty exists as to the reimbursement status of newly approved health care products, and third party payers are increasingly challenging the prices charged for health care products and services. Third party payers are also increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement for new therapeutic products and by refusing in some cases to provide coverage for uses of approved products for disease indications for which the FDA has not granted marketing approval. There can be no assurance that third party insurance coverage will be available for any new products or services developed by Genzyme General. If adequate coverage and reimbursement are not provided by government and other third party payers for Genzyme General's products and services, its results of operations may be materially adversely affected. In addition, Congress has from time to time discussed the possible implementation of broad based health care cost containment measures. While these discussions have not led to the enactment of any specific health care cost containment legislation, it is possible that health care measures will again be proposed in Congress. The effects on Genzyme General of any such measures that are ultimately adopted cannot be predicted at this time. 7 9 Product Liability and Limitations of Insurance The Company may be subject to product liability claims in connection with the use or misuse of its products during testing or after commercialization. While the Company has taken, and continues to take, what it believes are appropriate precautions, there can be no assurance that Genzyme General will avoid significant liability exposure. Genzyme has only limited amounts of product liability insurance and there can be no assurance that such insurance will provide sufficient coverage against any or all potential product liability claims. If Genzyme attempts to obtain additional insurance in the future, there can be no assurance that it will be able to do so on acceptable terms, if at all, or that such insurance will provide adequate coverage against claims asserted. Year 2000 Many computer systems experience problems handling dates beyond the year 1999. Therefore, some computer hardware and software will need to be modified prior to the year 2000 in order to remain functional. The Company is assessing the internal readiness of its computer systems for handling the year 2000. The Company expects to implement successfully the systems and programming changes necessary to address year 2000 issues, and does not believe that the cost of such actions will have a material adverse effect on the Company's results of operations or financial condition. There can be no assurance, however, that there will not be a delay in, or increased costs associated with, the implementation of such changes, and the Company's inability to implement such changes could have an adverse effect on future results of operations. RISKS RELATED TO THE SECURITIES An investment in the Notes or Conversion Shares involves a high degree of risk. Accordingly, the following risk factors should be considered carefully in contemplating such an investment. Future Capital Needs See "-- Risks Related to Genzyme and the General Division -- Future Capital Needs." If future financing is needed and available, Genzyme may elect to obtain such financing in the form of Senior Indebtedness, to which the Notes would be subordinated. Subordination The Notes are general, unsecured obligations of the Company, subordinated in right of payment to all existing and future Senior Indebtedness of the Company. Under the Indenture, generally, the Company is not permitted to pay the principal of, or premium, if any, or interest on or repurchase, redeem or otherwise retire any Notes in the event of a default in the payment of any principal of, premium, if any, or interest on any Senior Indebtedness of the Company when it becomes due and payable, whether at maturity or at a date fixed for prepayment or by acceleration or otherwise, unless and until such payment default has been cured or waived or shall have ceased to exist, or, in the event of certain other defaults with respect to Senior Indebtedness, until the earlier of the date on which such default has been cured or waived or shall have ceased to exist, or the 179th day after notice of such default is given. In addition, the Notes are effectively subordinated to all of the creditors of the Company's subsidiaries, including trade creditors. As of March 31, 1998, the Company and its subsidiaries had an aggregate of $135,913,000 of consolidated indebtedness and other obligations that would have effectively ranked senior to the Notes. The Indenture does not restrict the incurrence of Senior Indebtedness or other indebtedness by the Company or any of its subsidiaries. See "DESCRIPTION OF NOTES -- Subordination." Upon any distribution of the assets of the Company pursuant to any insolvency, bankruptcy, dissolution, winding up, liquidation or reorganization, the payment of the principal of and interest on the Notes will be subordinated to the extent provided in the Indenture to the prior payment in full of all Senior Indebtedness. In addition, the Company may not repurchase any Notes in certain circumstances involving a Fundamental Change if at such time the subordination provision of the Indenture would prohibit the Company from making payments of principal in respect of the Notes. 8 10 Limitations on Repurchase of Notes Upon a Fundamental Change In the event of a Fundamental Change, each holder of Notes will have the right, at the holder's option, to require the Company to repurchase all or any part of such holder's Notes. If a Fundamental Change were to occur, there can be no assurance that the Company would be able to pay the repurchase price for all Notes tendered. The Company's revolving credit agreement contains, and any future credit agreements or other agreements relating to the other indebtedness to which the Company becomes a party may contain, restrictions on or prohibitions of such repurchases. In the event a Fundamental Change occurs at a time when the Company is prohibited from purchasing Notes, the Company could seek the consent of its lenders to the purchase of the Notes or could attempt to refinance the borrowings that contain such prohibition. If the Company does not obtain such a consent or repay such borrowings, the Company would remain prohibited from purchasing Notes. In such case, the Company's failure to repurchase the Notes would constitute an Event of Default under the Indenture whether or not such repurchase is permitted by the subordination provisions of the Indenture. Any such default may, in turn, cause a default under Senior Indebtedness of the Company. Moreover, the occurrence of a Fundamental Change in and of itself may constitute an event of default under Senior Indebtedness of the Company. As a result, in each case, any repurchase of the Notes would, absent a waiver, be prohibited under the subordination provisions of the Indenture until the Senior Indebtedness is paid in full. See "DESCRIPTION OF NOTES -- Subordination" and "RISK FACTORS -- Risks Related to the Notes -- Subordination." The term "Fundamental Change" is limited to certain specified transactions and may not include other events that might adversely affect the financial condition of the Company, nor would the requirement that the Company offer to repurchase the Notes upon a Fundamental Change necessarily afford holders of the Notes protection in the event of a highly leveraged transaction, reorganization, merger or similar transaction involving the Company. See "DESCRIPTION OF NOTES." Increased Leverage The sale of the Notes increased the ratio of the Company's total debt to total capitalization from 14%, at March 31, 1998, to 28% on a pro forma basis. As a result of this increased leverage, the Company's principal and interest obligations increased substantially. The degree to which the Company is leveraged could adversely affect the Company's ability to obtain additional financing for working capital, acquisitions or other purposes and could make it more vulnerable to economic downturns and competitive pressures. The Company's increased leverage could also adversely affect its liquidity, as a substantial portion of available cash from operations may have to be applied to meet debt service requirements and, in the event of a cash shortfall, the Company could be forced to reduce other expenditures and forego potential acquisitions to be able to meet such requirements. Absence of Public Market for the Notes There is no existing public market for the Notes and there can be no assurance as to the liquidity of any market that may develop for the Notes, the ability of the holders to sell their Notes or the price at which holders of the Notes may be able to sell their Notes. Future trading prices of the Notes will depend on many factors, including, among other things, prevailing interest rates, the Company's operating results, the price of the GGD Stock and the market for similar securities. The Notes have been designated for trading in the PORTAL Market; however, the Company has not applied, and does not intend to apply, for listing of the Notes on any securities exchange. Furthermore, Notes resold pursuant to this Registration Statement will no longer be eligible for trading in the PORTAL Market. Volatility of Prices; Absence of Dividends The market prices for Genzyme's securities have been volatile. Factors such as announcements of technological innovations or new commercial products by Genzyme or its competitors, governmental regulation, patent or proprietary rights developments, public concern as to the safety or other implications of biotechnology products and industry and market conditions in general may have a significant impact on the 9 11 market price of Genzyme's securities, including the Notes and the GGD Stock. No cash dividends have been paid to date on GGD Stock, nor does Genzyme General anticipate paying cash dividends on such stock in the foreseeable future. RISKS RELATED TO GENZYME TRACKING STOCK Prior to June 18, 1997, Genzyme had outstanding two classes of common stock, GGD Stock and GTR Stock. Effective June 18, 1997, the GGD Stock and GTR Stock were redesignated as separate series of a single class of common stock and a new series of the same class of common stock, GMO Stock, was issued. As a result, Genzyme currently has three series of common stock outstanding: GGD Stock, GTR Stock and GMO Stock, which are intended to reflect the value and track the performance of Genzyme's three operating divisions: Genzyme General, GTR and GMO. The Notes are convertible only into shares of GGD Stock. Accordingly, prospective purchasers of the Notes should carefully consider the following factors in evaluating an investment in the Notes. Stockholders of One Company; Financial Impacts on One Division Could Affect the Others Genzyme General, GTR and GMO are each divisions of Genzyme. Notwithstanding the allocation of Genzyme's products and programs among divisions for financial statement presentation purposes and allocation of equity interests, Genzyme continues to hold title to all of the assets and is responsible for all of the liabilities allocated to each of its divisions. Holders of each series of Genzyme common stock have no specific claim against the assets attributed for financial statement presentation purposes to the division whose performance is associated with the series of stock they hold. Liabilities or contingencies of any division that affect Genzyme's resources or financial condition could affect the financial condition or results of operations of the other divisions. Prospective purchasers of the Notes should, therefore, read Genzyme's consolidated financial statements in conjunction with the financial statements of Genzyme General, which are included in the 1997 10-K and the Company's Quarterly Reports on Form 10-Q incorporated herein by reference. See "CERTAIN DOCUMENTS INCORPORATED BY REFERENCE." No Rights or Additional Duties With Respect to the Divisions; Potential Conflicts Holders of each series of Genzyme common stock have only the rights of stockholders of Genzyme and, except in limited circumstances, do not have any rights specifically related to the division to which such series of common stock relates. The existence of separate series of common stock may give rise to occasions when the interests of holders of each series of Genzyme common stock may diverge or appear to diverge. Although Genzyme is aware of no precedent concerning the manner in which Massachusetts law would be applied to the duties of a board of directors in the context of multiple series of common stock with divergent interests, Genzyme believes, based on the advice of counsel, that a Massachusetts court would hold that a board of directors owes an equal duty to all stockholders regardless of class or series and does not have separate or additional duties to any group of stockholders. That duty is the fiduciary duty to act in good faith and in a manner it reasonably believes to be in the best interests of the corporation. Genzyme has been advised that, under Massachusetts law, a good faith determination by a disinterested and adequately informed board of directors that an action is in the best interests of the corporation, taking into account the interests of the holders of each series of common stock and the alternatives reasonably available, should represent an appropriate defense to any challenge by or on behalf of the holders of any series of common stock that such action could have a disparate effect on different series of common stock. However, a Massachusetts court hearing a case involving such a challenge may decide to apply principles of Massachusetts law other than those described above, or may develop new principles of Massachusetts law, in order to decide such a case. Disproportionate ownership interests of members of the Genzyme Board in any series of common stock or disparities in the value of such stock could create or appear to create potential conflicts of interest when directors are faced with decisions that could have different implications for each series of common stock. Nevertheless, Genzyme believes that a director would be able to discharge his or her fiduciary responsibilities 10 12 even if his or her interests in shares of such series were disproportionate or had disparate values. The Genzyme Board may also from time to time establish one or more committees to review matters presented to it that raise conflict issues, which committee(s) would report to the full Genzyme Board on such matters. No Additional Separate Voting Rights Holders of each series of Genzyme common stock vote together as a single class on all matters as to which common stockholders generally are entitled to vote (including the election of directors). Except in certain limited circumstances provided under Massachusetts law, in Genzyme's Restated Articles of Organization (the "Genzyme Charter"), and in the management and accounting policies adopted by the Genzyme Board, holders of each series of common stock have no right to vote on matters separately. Accordingly, except in limited circumstances, holders of shares of one series of common stock could not bring a proposal to a vote of the holders of that series of common stock only, but would be required to bring any proposal to a vote of all common stockholders. On all matters as to which common stockholders generally are entitled to vote, each share of GGD Stock has one vote, each share of GTR Stock has, through December 31, 1998, .33 vote and each share of GMO Stock has, through December 31, 1998, .25 vote. On January 1, 1999 and on January 1 every two years thereafter, the number of votes to which each share of GTR Stock and GMO Stock is entitled will be adjusted to equal the ratio of the Fair Market Value (as defined herein) of one share of GTR Stock and GMO Stock, respectively, to the Fair Market Value of one share of GGD Stock as of such date. Fair Market Value as of any date means the average of the daily closing prices as reported by the Nasdaq National Market (or the appropriate exchange or other market on which such shares are then traded) for the 20 consecutive trading days commencing on the 30th trading day prior to such date. In the event such closing prices are unavailable, Fair Market Value will be determined by the Genzyme Board. Certain matters as to which the holders of common stock are entitled to vote may involve a divergence or the appearance of a divergence in the interests of holders of each series of Genzyme common stock. If, when a stockholder vote is taken on any matter as to which a separate vote by each series is not required and the holders of any series of common stock would have more than the number of votes required to approve any such matter, the holders of that series would control the outcome of the vote on such matter. Holders of GGD Stock, GTR Stock and GMO Stock currently have approximately 91.1%, 7.7% and 1.2%, respectively, of the total voting power of Genzyme. As a result, on matters which are submitted to a vote of common stockholders, the preferences of the holders of GGD Stock are likely to dominate and determine the outcome of such vote unless and until the relative number of shares outstanding and/or the market value of each series of Genzyme common stock materially changes. See "DESCRIPTION OF GENZYME CAPITAL STOCK -- Voting Rights." Exchange of GTR Stock and GMO Stock The Genzyme Board can, in its sole discretion, determine to exchange shares of GTR Stock and GMO Stock for cash or shares of GGD Stock (or any combination thereof) at a 30% premium over Fair Market Value of the GTR Stock or GMO Stock at any time. In addition, following a disposition of all or substantially all of the assets of GTR or GMO, the shares of GTR Stock or GMO Stock, as the case may be, are subject to mandatory exchange by Genzyme for cash and/or shares of GGD Stock at a 30% premium over Fair Market Value of such series of common stock as determined by the trading prices during a specified period prior to public announcement of the disposition. Consequently, holders of GTR Stock and GMO Stock may receive a greater or lesser premium for their shares than any premium paid by a third party buyer of all or substantially all of the assets of GTR or GMO. See "Management and Accounting Policies Governing the Relationship of Genzyme Divisions -- Open Market Purchases of Shares of Common Stock" set forth in Exhibit 99.1 to the 1997 10-K. 11 13 No Adjustment to Liquidating Distributions In the event of a voluntary or involuntary dissolution, liquidation or winding up of the affairs of Genzyme (other than pursuant to a merger, business combination or sale of substantially all assets), holders of outstanding shares of each series of Genzyme common stock would receive the assets, if any, remaining for distribution to common stockholders on a per share basis in proportion to the respective per share liquidation units of such series. [On June 30, 1998,] each share of GGD Stock had 100 liquidation units, each share of GTR Stock had 58 liquidation units and each share of GMO Stock had 25 liquidation units. Because the liquidation units will not be adjusted to reflect changes in the relative market value or performance of each of the divisions of Genzyme, the per share liquidating distribution to a holder of GGD Stock, GTR Stock or GMO Stock is not likely to correspond to the value of the assets of Genzyme General, GTR or GMO, respectively, at the time of a dissolution, liquidation or winding up of Genzyme. Management and Accounting Policies Subject to Change The Genzyme Board has adopted certain management and accounting policies applicable to the preparation of the financial statements of the divisions of Genzyme, the allocation of corporate expenses, assets and liabilities and other accounting matters, the reallocation of assets between divisions and other matters. These policies may, except as stated therein, be modified or rescinded in the sole discretion of the Genzyme Board without the approval of Genzyme's stockholders, subject to the Genzyme Board's fiduciary duty to all holders of Genzyme's capital stock. The Genzyme Board may also adopt additional policies depending upon the circumstances. See "Management and Accounting Policies Governing the Relationship of Genzyme Divisions" set forth in Exhibit 99.1 to the 1997 10-K. Non-Compete Policy The Genzyme Board has adopted a policy providing that the Company will not develop products and services outside of GTR or GMO that compete with products and services being developed or sold by GTR or GMO, other than through joint ventures in which GTR or GMO participates. For a discussion of this and other matters regarding policies relating to the divisions, see "Management and Accounting Policies Governing the Relationship of Genzyme Divisions" set forth in Exhibit 99.1 to the 1997 10-K. Use of Operating Losses by Other Genzyme Divisions Genzyme's management and accounting policies provide that to the extent any division of Genzyme is unable to utilize its operating losses or other projected tax benefits to reduce its current or deferred income tax expense, such losses or benefits may be reallocated to another division on a quarterly basis for financial reporting purposes. Accordingly, although the actual payment of taxes is a corporate liability of Genzyme as a whole, separate financial statements will be prepared for each division and any losses that cannot be utilized by a division will be allocated among the profitable divisions rather than carried forward to reduce the future tax liability of the division generating the losses. This could result in a division with losses (such as GTR and GMO currently) being charged a greater portion of the total corporate tax liability and reporting lower earnings after taxes in the future than would have been the case if such division had retained its losses or other benefits in the form of a net operating loss carryforward. See "Management and Accounting Policies Governing the Relationship of Genzyme Divisions" set forth in Exhibit 99.1 to the 1997 10-K. 12 14 RATIO OF EARNINGS TO FIXED CHARGES The ratio of earnings to fixed charges is calculated by dividing (x) the sum of (i) net income (loss) before income taxes and extraordinary credits and (ii) fixed charges (excluding capitalized interest), by (y) fixed charges. Fixed charges consist of interest (expensed and capitalized), amortization of debt issuance costs and conversion features, and the estimated interest portion of rent expense. The Company's consolidated ratio of earnings to fixed charges for the fiscal years ended December 31, 1994, 1995 and 1997 were 2.6x, 3.5x and 2.3x, respectively; and the consolidated ratio of earnings to fixed charges for the three months ended March 31, 1998 was 2.1x. The ratio of earnings to fixed charges is not presented for the years ended December 31, 1993 and 1996 because in such years fixed charges exceeded earnings (as set forth above) by $17.4 million and $72.3 million, respectively, due primarily to (i) in 1993, charges for in-process research and development of $49.0 million and charges for goodwill impairment and restructuring costs of $26.5 million and (ii) in 1996, charges for in-process research and development of $130.6 million. USE OF PROCEEDS The Company will not receive any proceeds from the sale of the Notes or the shares of GGD Common Stock offered hereby. 13 15 CAPITALIZATION The following table sets forth cash, cash equivalents, short- and long-term investments and capitalization of the Company as of March 31, 1998, actual and as adjusted for the initial sale of the Notes:
AS OF MARCH 31, 1998 ------------------------- ACTUAL AS ADJUSTED ---------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PAR VALUE) Cash, cash equivalents, short- and long-term investments(1)............................................ $ 255,182 $ 498,632 ========== ========== Long-term debt less current maturities: Revolving credit facility(2)................................ $ 113,000 $ 113,000 Convertible subordinated notes offered hereby............... -- 250,000 Other long-term debt........................................ 22,233 22,233 Convertible debentures, net(3).............................. 31,285 31,285 ---------- ---------- Total long-term debt less current maturities........... 166,518 416,518 Stockholders' equity(4): Genzyme General Division Common Stock, $.01 par value 200,000,000 shares authorized; 78,387,907 issued.......... 784 784 Genzyme Tissue Repair Division Common Stock, $.01 par value 40,000,000 shares authorized; 20,145,650 issued and outstanding............................................... 201 201 Genzyme Molecular Oncology Division Common Stock, $.01 par value 40,000,000 shares authorized; 3,928,572 issued and outstanding............................................... 39 39 Additional paid-in capital -- Genzyme General............... 905,601 905,601 Additional paid-in capital -- Genzyme Tissue Repair......... 171,259 171,259 Additional paid-in capital -- Genzyme Molecular Oncology.... 34,545 34,545 Treasury stock -- at cost Genzyme General Division Common Stock, 106,358 shares..................................... (901) (901) Accumulated deficit......................................... (68,562) (68,562) Foreign currency translation adjustments.................... (13,147) (13,147) Unrealized net gains on investments......................... 1,776 1,776 ---------- ---------- Total stockholders' equity............................. 1,031,595 1,031,595 ---------- ---------- Total capitalization.............................. $1,198,113 $1,448,113 ========== ==========
- --------------- (1) Cash, cash equivalents, short- and long-term investments excludes investments in equity securities. (2) This credit line is with a group of banks and allows borrowing by the Company up to $225.0 million (the "Revolving Credit Facility"). As of March 31, 1998, Genzyme had $113.0 million outstanding under the Revolving Credit Facility. (3) In February 1997, GTR raised $13.0 million (before fees and expenses) through the private placement of a 5% convertible note (the "GTR Note") due February 27, 2000 to an affiliate of Credit Suisse First Boston Corporation. The GTR Note is convertible into shares of GTR Stock, at the option of the holder, at a discount to the market price for such shares. In the first quarter of 1997, GTR recorded $11.5 million of proceeds attributed to the value of the debt and $1.5 million attributed to the value of the conversion feature (recorded as an increase to division equity). The debt will be accreted to its $13.0 million face value by a charge to interest expense of $1.5 million over the term of the initial 15 month conversion period. As of March 31, 1998, GTR had accreted $1.4 million of the value of the conversion feature. In August 1997, GMO raised $20.0 million (before offering discounts and expenses) through the private placement of 6% convertible debentures (the "GMO Debentures") due August 28, 2002. The GMO Debentures are convertible into shares of GMO Stock, at the option of the holders, beginning on the 91st day after the effective date of a registration statement covering the initial public offering of GMO Stock 14 16 (the "GMO IPO") at a discount to the market price for such shares. In the third quarter of 1997, GMO recorded $16.5 million of proceeds attributed to the value of the debt and $3.5 million attributed to the value of the conversion feature (recorded as an increase to division equity). The debt will be accreted to its $20.0 million face value by a charge to the interest expense of $3.5 million over the term of the initial 15 month conversion period. As of March 31, 1998, GMO had accreted $1.1 million of the value of the conversion feature. If the effective date of the GMO IPO does not occur before August 29, 1998, at the holders' option, the GMO Debentures may be exchanged for 5% convertible debentures (the "GGD Debentures") due 2003. If the GMO IPO is completed before August 29, 1998 but the aggregate proceeds from the offering are less than $15.0 million or GMO's market capitalization is below $90.0 million, at the holders' option, 50% of the GMO Debentures may be exchanged for the GGD Debentures. The exchange option must be exercised within 30 business days of the event triggering the right of exchange. The GGD Debentures, if issued, will be convertible at the option of the holder at any time prior to maturity into shares of GGD Stock at a 13% premium to the average closing bid price of GGD Stock as reported by the Nasdaq National Market for the five trading days immediately preceding the issue date. (4) Excludes (i) 12,683,417 shares of GGD Stock reserved for issuance upon exercise of outstanding stock options and warrants, (ii) 2,711,188 and 833,774 outstanding shares of GTR Stock reserved for issuance upon exercise of outstanding stock options and GTR Designated Shares (as defined herein), respectively, and (iii) 870,305 and 6,000,000 shares of GMO Stock reserved for issuance upon exercise of outstanding stock options and GMO Designated Shares (as defined herein), respectively. 15 17 DESCRIPTION OF REVOLVING CREDIT FACILITY In November 1996, Genzyme refinanced its existing $215.0 million line of credit with a Revolving Credit Facility made available through a group of commercial banks administered by Fleet National Bank. Under the terms of the Revolving Credit Facility, Genzyme may request loans up to a maximum aggregate principal amount outstanding at any time of $225.0 million. Amounts drawn under this facility may be allocated to Genzyme General, GTR or GMO. As of March 31, 1998, Genzyme had $113.0 million of debt outstanding under the Revolving Credit Facility, which had been allocated $95.0 million to Genzyme General and $18.0 million to GTR. Amounts borrowed under the Revolving Credit Facility are payable on November 15, 1999. In December 1996, Genzyme entered into an interest rate swap contract (the "Interest Rate Swap Contract") to effectively convert the variable interest rate on $100.0 million of borrowings under the Revolving Credit Facility to fixed interest rates. Net payments made or received under the Interest Rate Swap Contract are recorded as interest expense. The Revolving Credit Facility imposes certain financial covenants and other restrictions that, among other things, require Genzyme to maintain certain levels of earnings, liquidity and leverage ratios and limit Genzyme's and its subsidiaries' ability to (i) incur additional indebtedness, (ii) incur liens on their property, (iii) make certain investments, (iv) engage in certain sales of assets, (v) engage in acquisitions that do not meet specified criteria and (vi) enter into certain transactions of merger or consolidation. If Genzyme defaults on the covenants, the Revolving Credit Facility is payable on demand. In connection with the offering of the Notes, the Revolving Credit Facility was amended to permit the issuance of the Notes. The stock of Genzyme Securities Corporation is pledged as collateral for the Revolving Credit Facility. Amounts borrowed under the Revolving Credit Facility bear interest at LIBOR plus an applicable margin pursuant to the terms and conditions defined in the credit agreement As of March 31, 1998, the interest rate on amounts outstanding under the Revolving Credit Facility was approximately 6.06%. Genzyme pays a commitment fee ranging from .15% to .375% on the unused portion of the Revolving Credit Facility. Amounts owed under the Revolving Credit Facility represent Senior Indebtedness, as defined in the Indenture relating to the Notes. 16 18 DESCRIPTION OF NOTES The Notes were issued under an Indenture dated as of May 22, 1998 (the "Indenture"), between the Company and State Street Bank and Trust Company, as Trustee (the "Trustee"). A copy of the Indenture is included as an exhibit to the Registration Statement of which this Prospectus forms a part. The statements under this caption relating to the Indenture and the Notes are summaries and do not purport to be complete. Such summaries make use of certain terms defined in the Indenture and are qualified in their entirety by express reference to the Indenture. The terms of the Notes include those made a part of the Indenture by reference to the Trust Indenture Act of 1939, as amended. For purposes of this section, the term "Company" means only Genzyme Corporation and not its subsidiaries. GENERAL The Notes are general unsecured obligations of the Company limited to an aggregate principal amount of $250,000,000. The Notes bear interest at an annual rate of 5 1/4%, mature on June 1, 2005 (unless earlier redeemed at the option of the Company, converted into GGD Stock at the option of the holder or repurchased by the Company at the option of the holder upon a Fundamental Change) and are subordinated obligations of the Company. Interest is payable semiannually, on June 1 and December 1, commencing December 1, 1998, to the registered holders of record on the preceding May 15 and November 15, respectively. Interest is calculated on the basis of a 360-day year of twelve 30-day months. Although the Notes are general obligations of the Company, principal and interest is paid from funds allocated for financial statement presentation purposes to Genzyme General. Holders of the Notes have no specific claim against the assets attributable to Genzyme General. See "-- Book-Entry; Delivery and Form" for information regarding the form, documents and mechanics for transferring the Notes. The Indenture contains no restrictions on the payment of dividends or the repurchase of securities of the Company or any financial covenants. The Indenture contains no covenants or other provisions to afford protection to holders of Notes in the event of a highly leveraged transaction or a change in control of the Company except to the extent described under "-- Repurchase at Option of Holder Upon a Fundamental Change." CONVERSION RIGHTS The Notes are convertible at their principal amount into GGD Stock at any time prior to the business day prior to redemption or the business day prior to maturity, in whole or from time to time in part (in denominations of $1,000 and integral multiples thereof), at the option of the holder thereof, initially at a conversion price of $39.60, subject to adjustment as described below. The right of conversion attaching to any Note may be exercised (a) if such Note is represented by a Global Note, by book-entry transfer to the conversion agent (which will initially be the Trustee) through the facilities of DTC, or (b) if such Note is represented by a definitive Note, by delivery of such Note at the specified office of the conversion agent, accompanied, in either case, by a duly signed and completed notice of conversion and appropriate endorsements and transfer documents if required by the Conversion Agent. The conversion date is the date on which the Note and all of the items required for conversion have been so delivered and the requirements for conversion have been met. A holder delivering a Note for conversion is required to pay any taxes or duties payable in respect of the issue or delivery of the GGD Stock upon conversion in a name other than that of the holder. The conversion privilege and price is subject to adjustment upon the occurrence of certain events, including (i) the issuance of capital stock of the Company as a dividend (or other distribution) on the GGD Stock, (ii) the distribution to all holders of GGD Stock of rights or warrants entitling them to subscribe for or purchase GGD Stock at less than the current market price (as defined in the Indenture) on the record date for such issuance, (iii) subdivisions, combinations and certain reclassifications of GGD Stock, (iv) certain distributions to all holders of GGD Stock of cash, debt securities (or other evidence of indebtedness) or other 17 19 assets (excluding dividends or distributions described in clauses (i) or (ii) above or (v) below), (v) a dividend or other distribution consisting exclusively of cash to all holders of GGD Stock, excluding (A) cash dividends that do not exceed the per share amount of the immediately preceding regular cash dividend (as adjusted to reflect any of the events referred to in clauses (i) through (vi) of this sentence) and (B) cash dividends to the extent that the annualized per share amount thereof does not exceed 15% of the current market price of GGD Stock as of the trading day immediately preceding the date of declaration of such dividend; and (vi) payment to holders of GGD Stock in respect of a tender or exchange offer (other than an odd-lot offer) by the Company or any subsidiary of the Company for GGD Stock at a price in excess of 110% of the current market price of GGD Stock on the last date tenders or exchanges may be made pursuant to such tender or exchange offer. No adjustment in the conversion price is required unless such adjustment would require a change of at least 1% in the conversion price then in effect; provided that any adjustment that would otherwise be required to be made shall be carried forward and taken into account in any subsequent adjustment. The Company from time to time may voluntarily reduce the conversion price for a period of at least twenty days. Fractional shares of GGD Stock will not be issued upon conversion, but, in lieu thereof, the Company will issue a check for the current market value of such fractional shares rounded to the nearest cent based upon the market price of the GGD Stock. No payment or adjustment will be made for interest accrued on a converted Note or for dividends or distributions on any GGD Stock issued upon conversion of any Note. Subject to the rights of holders of the Notes described below under "-- Repurchase at Option of Holder Upon a Fundamental Change," if the Company consolidates with or merges into, or transfers or leases all or substantially all of its assets to, any person, or is a party to a merger that reclassifies or changes its outstanding GGD Stock, the holder of each Note then outstanding shall after such consolidation, merger, transfer or lease have the right to convert such Note into the kind and amount of shares of securities, cash or other assets that such holder would have been entitled to receive upon such consolidation, merger, transfer or lease if such holder had held the GGD Stock issuable upon the conversion of such Note immediately prior to such consolidation, merger, transfer or lease (assuming, in a case in which the Company's stockholders may exercise rights of election, that a holder of Notes would not have exercised any rights of election as to the stock, other securities or other property or assets receivable in connection therewith and received per share the kind and amount received per share by a plurality of nonelecting shares). REDEMPTION AT THE COMPANY'S OPTION The Notes may not be redeemed prior to June 10, 2001 and are redeemable, subject to the subordination provisions described below, on such date and thereafter at the option of the Company, as a whole or from time to time in part, at the following prices (expressed as percentages of the principal amount) plus accrued interest to, but not including, the redemption date: 102.63% if redeemed on or before May 31, 2002 and thereafter as follows if redeemed during the 12-month period beginning on June 1 of the years set forth below:
YEAR PERCENTAGE - ---- ---------- 2002............................................ 101.75% 2003............................................ 100.88% 2004............................................ 100.00%
Notice of redemption at the Company's option will be mailed at least 30 days, but not more than 60 days, before the redemption date to the address of each holder of Notes to be redeemed as set forth in the note register. If fewer than all the Notes are to be redeemed, selection of Notes for redemption will be made by the Trustee by lot, or in its discretion, on a pro rata basis (unless the Company specifically directs the Trustee otherwise) in integral multiples of $1,000. If any Notes are to be redeemed in part only, the notice of redemption relating to such Notes shall state the portion of the principal amount to be redeemed. In that case, new Notes in principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon surrender to the Trustee of the original Notes. No sinking fund is provided for the Notes. 18 20 REPURCHASE AT OPTION OF HOLDER UPON A FUNDAMENTAL CHANGE If a Fundamental Change occurs, each holder of Notes has the right, at the holder's option, to require the Company to repurchase all of such holder's Notes, or any portion thereof that is an integral multiple of $1,000, on the date (the "Repurchase Date") selected by the Company that is not less than ten nor more than 30 days after the Final Surrender Date (as defined below), at a price equal to 100% of the principal amount of the Notes, plus accrued interest to the Repurchase Date. The Company may not purchase any Note pursuant to the preceding paragraph at any time when the subordination provisions of the Indenture otherwise would prohibit the Company from making payments of principal in respect of the Notes. Unless the Company shall previously have called for redemption of all of the Notes, within 30 days after the occurrence of a Fundamental Change, the Company is obligated to deliver to the Trustee and mail (or cause the Trustee to mail) to all holders of record of the Notes a notice (the "Company Notice") describing, among other things, the occurrence of such Fundamental Change and of the repurchase right arising as a result thereof. The Company must cause a copy of the Company Notice to be published in a newspaper of general circulation in the Borough of Manhattan, The City of New York. To exercise the repurchase right, a holder of Notes must, on or before the date which is, subject to any contrary requirements of applicable law, 60 days after the date of mailing of the Company Notice (the "Final Surrender Date"), give irrevocable written notice of the holder's exercise of such right and surrender the Notes (if such Note is represented by a Global Note, by book-entry transfer to the conversion agent through the facilities of DTC) with respect to which the right is being exercised, duly endorsed for transfer to the Company, at any place where principal is payable. The submission of such notice together with such Notes pursuant to the exercise of a repurchase right will be irrevocable on the part of the holder (unless the Company fails to repurchase the Notes on the repurchase date) and the right to convert the Notes will expire upon such submission. The term "Fundamental Change" means any of the following: (i) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becoming the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of Voting Shares (as defined below) of the Company entitled to exercise more than 50% of the total voting power of all outstanding Voting Shares of the Company (including any right to acquire Voting Shares that are not then outstanding of which such person or group is deemed the beneficial owner); or (ii) a change in the Board of Directors of the Company in which the individuals who constituted the Board of Directors of the Company at the beginning of the two-year period immediately preceding such change (together with any other director whose election by the Board of Directors of the Company or whose nomination for election by the shareholders of the Company was approved by a vote of at least two-thirds of the directors then in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors then in office; or (iii) any consolidation of the Company with, or merger of the Company into, any other person, any merger of another person into the Company, or any sale or transfer of all or substantially all of the assets of the Company to another person (other than (a) a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of GGD Stock, (b) a merger which is effected solely to change the jurisdiction of incorporation of the Company or (c) any consolidation with or merger of the Company into a wholly owned subsidiary of the Company, or any sale or transfer by the Company of all or substantially all of its assets to one or more of its wholly owned subsidiaries, in any one transaction or a series of transactions, provided, in any such case, that the resulting corporation or each such subsidiary assumes or guarantees the Company's obligations under the Notes, provided, however, that a Fundamental Change shall not occur with respect to any such transaction if either (i) the last sale price of the GGD Stock for any five trading days during the ten trading days immediately preceding the public announcement by the Company of such transaction is at least equal to 105% of the conversion price in effect on such trading day or (ii) the consideration in such transaction to the holders of GGD 19 21 Stock consists of cash, securities that are, or immediately upon issuance will be, listed on a national securities exchange or quoted on the Nasdaq National Market, or a combination of cash and such securities, and the aggregate fair market value of such consideration (which, in the case of such securities, shall be equal to the average of the last sale prices of such securities during the ten consecutive trading days commencing with the sixth trading day following consummation of the transaction) is at least 105% of the conversion price in effect on the date immediately preceding the closing date of such transaction. "Voting Shares" is defined to mean all outstanding shares of any class or series (however designated) of capital stock entitled to vote generally in the election of members of the Board of Directors and includes, without limitation, the GGD Stock, the GTR Stock and the GMO Stock. The right to require the Company to repurchase the Notes as a result of the occurrence of a Fundamental Change could create an event of default under existing or future Senior Indebtedness of the Company, as a result of which any repurchase could, absent a waiver, be blocked by the subordination provisions of the Notes. See "-- Subordination." Failure by the Company to repurchase the Notes when required will result in an Event of Default (as defined below) with respect to the Notes whether or not such repurchase is permitted by the subordination provisions. The holders' repurchase right upon the occurrence of a Fundamental Change could, in certain circumstances, make more difficult or discourage a potential takeover of the Company and, thus, removal of incumbent management. The Fundamental Change repurchase right, however, is not the result of management's knowledge of any specific effort to accumulate shares of GGD Stock or to obtain control of the Company by means of a merger, tender offer, solicitation or otherwise. Instead, the Fundamental Change purchase feature is a standard term contained in other similar debt offerings and the terms of such feature have resulted from negotiations between the Company and the Initial Purchasers. The Company could in the future enter into certain transactions, including highly leveraged recapitalizations, that would not constitute a Fundamental Change and would, therefore, not provide the holders with the protection of requiring the Company to repurchase the Notes. Rule l3e-4 under the Exchange Act requires the dissemination of certain information to securityholders in the event of an issuer tender offer and may apply in the event that the repurchase option becomes available to holders of the Notes. The Company will comply with this rule to the extent applicable at that time. SUBORDINATION The payment of the principal of, and premium, if any, and interest on, the Notes is subordinated in right of payment to the extent set forth in the Indenture to the prior payment in full of amounts then due on all Senior Indebtedness, as defined in the Indenture. In addition, the Notes are effectively subordinated in right of payment to third party indebtedness of the Company's subsidiaries. As of March 31, 1998, the Company and its subsidiaries had an aggregate of $135,913,000 of consolidated indebtedness and other obligations that would have ranked senior to the Notes. Upon the maturity of Senior Indebtedness, whether by acceleration or otherwise, or any distribution of assets of the Company resulting from any liquidation, dissolution, winding up, reorganization or any insolvency proceedings of the Company, the holders of all Senior Indebtedness will be entitled to receive payment in full before the holders of the Notes will be entitled to receive any payment of the principal of, or premium, if any, or interest on, the Notes. Upon the happening of a default or event of default in the payment of the principal, premium, if any, or interest on the Senior Indebtedness, then, unless such default or event of default has been cured or waived or shall have ceased to exist, no payment shall be made by the Company with respect to the principal, premium, if any, or interest on (or otherwise in respect of) the Notes or to acquire any of the Notes. Upon the happening of a default or event of default in respect of the Senior Indebtedness (other than a default or event of default in payment of the principal, premium, if any, or interest on the Senior Indebtedness) and if the Trustee and the Company receives a notice of such default or event of default from the holders of the Senior Indebtedness or their representative (a "Payment Blockage Notice"), then no payment shall be made by the Company with respect to the principal, premium, if any, or interest on (or otherwise in respect of) the Notes until the earlier of (i) the date on which such default or 20 22 event of default shall have been cured or waived or shall have ceased to exist or (ii) the 179th day after the date of such receipt of such Payment Blockage Notice. No more than one Payment Blockage Notice shall be effective during any 365 consecutive day period. No such default or event of default that existed upon first delivery of any Payment Blockage Notice shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default or event of default shall have been cured or waived for a period of 180 consecutive days. See "RISK FACTORS -- Risks Related to the Notes -- Subordination" and "-- Limitations on Repurchase of Notes Upon a Fundamental Change." By reason of such subordination, in the event of insolvency, holders of the Notes may recover less, ratably, than other creditors of the Company. "Senior Indebtedness" is defined to mean: (a) the principal of, interest (including interest during bankruptcy and similar proceedings) on and any other amounts owing with respect to (i) any indebtedness of the Company, now or hereafter outstanding, in respect of borrowed money (other than the Notes), (ii) any indebtedness of the Company, now or hereafter outstanding evidenced by a bond, note, debenture, capitalized lease, letter of credit reimbursement agreement or other similar instrument, (iii) any other written obligation of the Company, now or hereafter outstanding. to pay money issued or assumed as all or part of the consideration for the acquisition of property, assets or securities and (iv) any guaranty or endorsement (other than for collection or deposit in the ordinary course of business) or discount with recourse of, or other agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire, to supply or advance funds or to become liable with respect to (directly or indirectly), any indebtedness or obligation of any person of the type referred to in the preceding subclauses (i), (ii) and (iii) now or hereafter outstanding and (b) any refundings, renewals or extensions of any indebtedness or other obligation described in clause (a); unless, in the case of any of the foregoing, the instrument, lease or other document creating or evidencing the same expressly provides that such indebtedness or obligation by its terms is not senior in right of payment to the Notes. The Indenture does not contain any limitation or restriction on the issuance of Senior Indebtedness or other indebtedness or securities of the Company or its subsidiaries. The Indenture permits the Trustee and any paying agent to become a creditor of the Company and to own Notes and does not preclude the Trustee or any such paying agent from enforcing its rights as a creditor, including rights as a holder of Senior Indebtedness. See "-- Concerning the Trustee." In the event that any holder of Notes receives any payment or distribution of assets of the Company of any kind in contravention of the subordination provisions of the Indenture in respect of the Notes before all Senior Indebtedness is paid in full, then such payment or distribution will be held by the recipient in trust for the benefit of holders of Senior Indebtedness of the Company and shall pay it over to them as their interests may appear. Any right of the Company to receive assets of any of its subsidiaries upon their liquidation or reorganization (and the consequent right of the holders of the Notes to participate in these assets) will be effectively subordinated to the claims of that subsidiary's creditors (including trade creditors), except to the extent that the Company is itself recognized as a creditor of such subsidiary, in which case the claims of the Company would still be subordinate to any security interests in the assets of such subsidiary and any indebtedness of such subsidiary senior to that held by the Company and would be subject to judicial power to subordinate the Company's claim to those of other creditors of such subsidiary in certain cases. The Company is obligated to pay reasonable compensation to the Trustee and to indemnify the Trustee against any losses, liabilities or expenses incurred by it in connection with its duties under the Indenture. The Trustee's claims for such payments will be senior to those of holders of the Notes in respect of all funds collected or held by the Trustee. EVENTS OF DEFAULT AND NOTICE THEREOF The following are Events of Default: (a) a default in the payment of any interest on any Note continues for 30 days or more after such payment is due, whether or not such payment is prohibited by the subordination provisions of the Indenture, (b) a default in the payment of principal of or premium, if any, on any Note or of the repurchase price in respect of any Note when due, whether or not such payment is prohibited by the subordination provisions of the Indenture, (c) a default in the performance of any other covenant or 21 23 agreement of the Company in the Indenture that continues for 60 days after written notice to the Company by the Trustee or the holders of at least 25% in principal amount of outstanding Notes, (d) failure by the Company to make any payment when due, including any applicable grace period, in respect of indebtedness for borrowed money of the Company, which payment is in an amount in excess of $20.0 million, (e) default by the Company with respect to any indebtedness for borrowed money of the Company, which default results in acceleration of any such indebtedness which is in an amount in excess of $20.0 million, and (f) certain events of bankruptcy, insolvency or reorganization. If an Event of Default shall occur and be continuing and if it is known to the Trustee, the Trustee is required to mail to each holder of the Notes a notice of the Event of Default within 90 days after such default occurs. Except in the case of a default in payment of the principal of or premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as the Trustee in good faith determines that withholding the notice is in the interests of the holders of the Notes. If an Event of Default shall occur and be continuing, the Trustee or the holders of not less than 25% in principal amount of outstanding Notes may declare the principal of, and accrued interest on, all the Notes to be due and payable immediately. If the Event of Default relates to bankruptcy, insolvency or reorganization, the Notes shall automatically become due and payable immediately, subject to applicable law. Holders of the Notes may not enforce the Indenture or Notes except as provided in the Indenture. Subject to the provisions of the Indenture relating to the duties of the Trustee in case an Event of Default shall occur and be continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any holders of the Notes, unless the holders shall have offered the Trustee indemnity reasonably satisfactory to it. Subject to the indemnification provisions and certain limitations contained in the Indenture, the holders of a majority in principal amount of the Notes at the time outstanding will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. Those holders may, in certain cases, waive any default except a default in payment of principal of, or premium, if any, or interest on, any Note or a failure to comply with certain provisions of the Indenture relating to conversion of the Notes. The Company is required to furnish the Trustee annually with a certificate as to its compliance with the conditions and covenants provided for in the Indenture. DISCHARGE The Indenture provides that the Company may terminate its obligations under the Indenture at any time by delivering all outstanding Notes to the Trustee for cancellation if the Company has paid all sums payable by it under the Indenture. At any time within one year before the maturity of the Notes or the redemption of all the Notes, the Company may terminate its substantive obligations under the Indenture, other than its obligations to pay the principal of, and interest on, the Notes, by depositing with the Trustee money or U.S. Government obligations sufficient to pay all remaining indebtedness on the Notes when due. MERGER AND CONSOLIDATION The Company may not consolidate or merge with or into, or sell, lease, convey or otherwise dispose of all or substantially all of its assets to, another corporation, person or entity unless (i) the Company is the surviving person or the successor or transferee is a corporation organized under the laws of the United States, any state thereof or the District of Columbia, or a corporation or comparable legal entity organized under the laws of a foreign jurisdiction and whose equity securities are listed on a national securities exchange in the United States or authorized for quotation on the Nasdaq National Market, (ii) the successor assumes all the obligations of the Company under the Notes and the Indenture (except under certain circumstances, conversion obligations) and enters into a supplemental indenture and (iii) after such transaction no Event of Default exists. 22 24 MODIFICATION AND WAIVER Subject to certain exceptions, supplements of and amendments to the Indenture or the Notes may be made by the Company and the Trustee with the consent of the holders of not less than a majority in aggregate principal amount of the outstanding Notes and any existing default or compliance with any provisions may be waived with the consent of the holders of a majority in aggregate principal amount of the outstanding Notes. Without the consent of any holders of the Notes, the Company and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to provide for the assumption of the Company's obligations to holders of the Notes and to make certain changes with respect to conversion rights in case of a merger or acquisition otherwise in compliance with the Indenture or to make any change that does not materially adversely affect the rights of any holder of the Notes. Without the consent of the holders of each Note affected thereby, an amendment, supplement or waiver may not (a) change the stated maturity date of the principal of, or interest on, any Note, or adversely affect the right to convert any Note, (b) reduce the principal amount or repurchase price of, or interest or premium, if any, on, any Note, (c) change the currency for payment of principal of, or interest on, any Note, (d) impair the right to institute suit for the enforcement of any payment on or with respect to any Note, (e) modify the subordination provisions of the Indenture in a manner adverse to the holders, (f) reduce the above stated percentage of outstanding Notes necessary to amend or supplement the Indenture or waive defaults or compliance or (g) modify (with certain exceptions) any provisions of the Indenture relating to modification and amendment of the Indenture or waiver of compliance with conditions and defaults thereunder. CONCERNING THE TRUSTEE State Street Bank and Trust Company, the Trustee under the Indenture, has been appointed by the Company as the initial paying agent, conversion agent and registrar ("Registrar") with regard to the Notes. The Company and its subsidiaries may maintain deposit accounts and conduct other banking transactions with the Trustee or its affiliates in the ordinary course of business, and the Trustee and its affiliates may from time to time in the future provide the Company with banking and financial services in the ordinary course of their business. In case an Event of Default shall occur (and shall not be cured) and holders of the Notes have notified the Trustee, the Trustee will be required to exercise its powers with the degree of care and skill that a prudent person would exercise under the circumstances in the conduct of such person's own affairs. Subject to such provisions, the Trustee is under no obligation to exercise any of its rights or powers under the Indenture at the request of any of the holders of Notes, unless the holders shall have offered to the Trustee indemnity reasonably satisfactory to it. GOVERNING LAW The Indenture and Notes are governed by and construed in accordance with the laws of the State of New York, without giving effect to such State's conflicts of law principles. BOOK-ENTRY; DELIVERY AND FORM The Depository Trust Company ("DTC") will act as securities Depositary for the Notes. The Notes have been issued in fully registered form, without coupons, in denominations of $1,000 principal amount and multiples thereof. The Notes are evidenced by the Global Notes deposited with the trustee as custodian for DTC and registered in the name of Cede & Co. as DTC's partnership nominee. Record ownership of the Global Notes may be transferred, in whole or in part, only to another nominee of DTC or to a successor of DTC or its nominee. Interests in the Global Note will trade in DTC's Same-Day Funds Settlement System and secondary market trading activity in such interests will therefore settle in immediately available funds, subject in all cases to the rules and procedures of DTC and its participating organizations ("Participants"). EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTE WILL NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE. THE LAWS OF SOME STATES REQUIRE 23 25 THAT CERTAIN PERSONS TAKE PHYSICAL DELIVERY IN DEFINITIVE FORM OF SECURITIES THAT THEY OWN. CONSEQUENTLY, THE ABILITY TO TRANSFER BENEFICIAL INTERESTS IN A GLOBAL NOTE TO SUCH PERSONS MAY BE LIMITED TO THAT EXTENT. BECAUSE DTC CAN ACT ONLY ON BEHALF OF THE PARTICIPANTS, WHICH IN TURN ACT ON BEHALF OF THE INDIRECT PARTICIPANTS AND CERTAIN BANKS, THE ABILITY OF A PERSON HAVING BENEFICIAL INTERESTS IN A GLOBAL NOTE TO PLEDGE SUCH INTERESTS TO PERSONS OR ENTITIES THAT DO NOT PARTICIPATE IN THE DTC SYSTEM, OR OTHERWISE TAKE ACTIONS IN RESPECT OF SUCH INTERESTS, MAY BE AFFECTED BY THE LACK OF A PHYSICAL CERTIFICATE EVIDENCING SUCH INTERESTS. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its Participants deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. "Direct Participants" include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain custodial relationships with Direct Participants, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Commission. Purchases of Notes within the DTC system must be made by or through Direct Participants, which will receive a credit for the Notes on DTC's records. The ownership interest of each actual purchaser of each Note ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners purchased Notes. Transfers of ownership interests in the Notes are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Notes, except in the event that use of the book-entry system for the Notes is discontinued. To facilitate transfers, all Notes deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Notes with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Notes; DTC's records reflect only the identity of the Direct Participants to whose accounts such Notes are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners and the voting rights of Direct Participants, Indirect Participants and Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices will be sent to Cede & Co. as the registered holder of the Notes. If less than all of the Notes are being redeemed, DTC's current practice is to determine by lot the amount of the interest of each Direct Participant to be redeemed. Although voting with respect to the Notes is limited to the holders of record of the Notes, in those instances in which a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to Notes. Under its usual procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the Trustee as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts such Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy). 24 26 Payments of principal of and any premium and interest on the Notes will be made by the Trustee to Cede & Co., as DTC's partnership nominee. DTC's practice is to credit Direct Participants' accounts on the relevant payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payments on such payment date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices and will be the responsibility of such Participant and not of DTC or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of distributions to DTC is the responsibility of the Trustee, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursements of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities Depositary with respect to any of the Notes at any time by giving reasonable notice to the Company. In the event that a successor securities Depositary is not obtained, definitive certificates representing such Notes are required to be printed or delivered. The Company, at its option, may decide to discontinue use of the system of book-entry transfers through DTC (or a successor Depositary). The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Company believes to be accurate, but the Company assumes no responsibility for the accuracy thereof. The Company has no responsibility for the performance by DTC or its Participants of their respective obligations as described herein or under the rules and procedures governing their respective operations. A Global Note is exchangeable for definitive Notes in registered certificated form if (i) DTC (x) notifies the Company that it is unwilling or unable to continue as depository for the Global Note and the Company thereupon fails to appoint a successor depository or (y) has ceased to be a clearing agency registered under the Exchange Act, (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Notes in certificated form or (iii) there shall have occurred and be continuing a Default or an Event of Default with respect to the Notes. In all cases, certificated Notes delivered in exchange for any Global Note or beneficial interests therein will be registered in the names, and issued in any approved denominations, requested by or on behalf of DTC (in accordance with its customary procedures). 25 27 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The following is a general discussion of certain United States federal income tax considerations relevant to holders of the Notes and shares of GGD Stock issuable upon conversion of the Notes. This discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations promulgated thereunder, Internal Revenue Service ("IRS") rulings and judicial decisions now in effect, all of which are subject to change (possibly with retroactive effect) or to different interpretations. This discussion does not purport to deal with all aspects of United States federal income taxation that may be relevant to a particular investor's decision to purchase the Notes or acquire shares of GGD Stock issuable upon conversion of the Notes, and it is not intended to be wholly applicable to all categories of investors, some of which (such as dealers in securities, banks, insurance companies, tax-exempt organizations and persons holding the Notes as a position in a "straddle", hedge, conversion transaction or otherwise as an integrated investment) may be subject to special rules. In addition, this discussion is limited to persons that purchase the Notes pursuant to this Prospectus and hold the Notes and will hold GGD shares as "capital assets" within the meaning of Section 1221 of the Code. PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE GGD STOCK. As used herein, the term "United States Holder" means a beneficial owner of the Notes that is, for United States federal income tax purposes, (i) a citizen or resident (as defined in Section 7701(b) of the Code) of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or political subdivision thereof, (iii) an estate the income of which is subject to United States federal income taxation regardless of its source, or (iv) a trust whose administration is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust. A "Non-United States Holder" is any holder of Notes that is not a United States Holder. UNITED STATES HOLDERS PAYMENT OF INTEREST Interest on a Note generally will be includable in the income of a United States Holder as ordinary income at the time such interest is received or accrued, in accordance with such United States Holder's regular method of accounting for United States federal income tax purposes. CONVERSION OF NOTES INTO GGD STOCK In general, a United States Holder will not recognize income, gain or loss upon a conversion of the Notes into shares of GGD Stock except with respect to cash received in lieu of a fractional share of GGD Stock. Such holder's adjusted tax basis in the GGD Stock received on conversion of a Note will equal the holders's adjusted tax basis in the Note at the time of conversion, reduced by the portion of the adjusted tax basis of the Note allocated to any fractional share of GGD Stock exchanged for cash. A United States Holder's holding period in the GGD Stock received on conversion of Notes will include the period during which the converted Notes were held. Cash received in lieu of a fractional share of GGD Stock upon conversion of a Note will be treated as a payment in exchange for the fractional share of GGD Stock. Accordingly, the receipt of cash in lieu of a fractional share of GGD Stock generally will result in capital gain or loss, measured by the difference between the cash received for the fractional share and the United States Holder's adjusted tax basis in the fractional share interest. The conversion price of the Notes is subject to adjustment under certain circumstances. See "DESCRIPTION OF NOTES -- Conversion Rights." Section 305 of the Code and the Treasury Regulations issued thereunder may treat the United States Holders of the Notes as having received a constructive distribution, 26 28 taxable as ordinary income to the extent of the Company's current and accumulated earnings and profits, if and to the extent that certain adjustments in the conversion price, or failure to make such an adjustment, that may occur in limited circumstances (particularly an adjustment to reflect a taxable dividend to holders of GGD Stock) increase the proportionate interest of a holder of Notes in the fully diluted GGD Stock, whether or not such holder ever exercises its conversion privilege. Generally, a United States Holder's tax basis in a Note will be increased by the amount of any such constructive dividend. The Company believes that the GGD Stock should be treated as common stock of the Company. United States Holders should be aware, however, that there are no United States federal income tax regulations, court decisions or published IRS rulings bearing directly on the characterization of the GGD Stock. In addition, the IRS has announced that it will not issue any advance rulings regarding the United States federal income tax consequences of stock such as the GGD Stock that has certain voting and liquidation rights in an issuing corporation, but whose dividend rights are determined by reference to the earnings and profits of a segregated portion of the issuing corporation's assets. It is possible that the IRS might take the position that the GGD Stock represents property other than stock of the Company, with the result that (i) a portion of the purchase price of the Notes could be allocated to the conversion right, potentially resulting in the Notes being issued with original issue discount, and (ii) the conversion of Notes into shares of GGD Stock would be a taxable transaction. MARKET DISCOUNT Under the market discount rules, if a United States Holder purchases a Note at market discount (i.e., at a price below its principal amount) in excess of a statutorily-defined de minimis amount and thereafter recognizes gain upon a disposition or retirement of the Note, then the lesser of the gain recognized or the portion of the market discount that accrued on a straight-line basis (or, if elected, on a constant interest rate basis) generally will be treated as ordinary income at the time of the disposition. Any accrued market discount not previously taken into income prior to a conversion of a Note, however, should (under Treasury Regulations not yet issued) carry over to the GGD Stock received on conversion and be treated as ordinary income upon a subsequent disposition of such GGD Stock to the extent of any gain recognized on such disposition. In addition, absent an election to include market discount in income as it accrues, a United States Holder of a market discount debt instrument may be required to defer a portion of any interest expense that otherwise may be deductible on any indebtedness incurred or maintained to purchase or carry such debt instrument until the holder disposes of the debt instrument in a taxable transaction. AMORTIZABLE BOND PREMIUM If a United States Holder of a Note acquires a Note at a cost that is in excess of its principal amount, the United States Holder may elect under Section 171 of the Code to amortize the excess cost (as an offset to interest income) on a constant interest rate basis over the term of such Note. (If a smaller amortization allowance would result, the amortization is determined instead by reference to an earlier call date and price.) If the United States Holder makes an election to amortize bond premium, the tax basis of all such holder's Notes will be reduced by the allowable bond premium amortization. The amortization election would apply to all debt instruments held or subsequently acquired by the electing purchaser and cannot be revoked without permission from the Service. On conversion of a Note into shares of GGD Stock, no additional amortization of any bond premium would be allowed, and any remaining premium would be added to the United States Holder's basis in the GGD stock received. SALE, EXCHANGE OR RETIREMENT OF NOTES Each United States Holder of Notes generally will recognize gain or loss upon the sale, exchange, redemption, repurchase, retirement or other disposition of the Notes (not including a conversion of the Notes into GGD Stock) equal to the difference (if any) between (i) the amount of cash and the fair market value of any property received (except to the extent that such cash or other property is attributable to the payment of accrued interest not previously included in income, which amount will be taxable as ordinary income) and (ii) such holder's adjusted tax basis in those Notes (including any market discount previously included in 27 29 income by the holder). Each United States Holder of GGD Stock into which the Notes are converted, in general, will recognize gain or loss upon the sale, exchange or other disposition of the GGD Stock measured under rules similar to those described in the preceding sentence for the Notes. Any such gain or loss recognized on the sale, exchange, repurchase, retirement or other disposition of a Note or share of GGD Stock should generally be capital gain or loss (except as discussed under "-- Market Discount" above), and would be subject to tax at the short-term, mid-term or long-term capital gain tax rate, depending on the period for which the Notes are held. A United States Holder's initial tax basis in a Note will be the purchase price paid therefor. The deductibility of capital losses is subject to limitation. DISTRIBUTIONS Distributions, if any, made on any GGD Stock received upon conversion of the Notes generally will be includable in the income of a United States Holder as ordinary income to the extent of the Company's current and accumulated earnings and profits. Such distributions may be eligible for the dividends-received deduction in the case of United States Holders that are domestic corporations, subject to applicable limitations. To the extent that the amount of any distribution exceeds the Company's current and accumulated earnings and profits, the distribution first will be treated as a tax-free return of capital until the United States Holder's adjusted basis in the GGD Stock is reduced to zero, and the balance in excess of adjusted basis will be taxed as capital gain. INFORMATION REPORTING AND BACKUP WITHHOLDING A United States Holder of Notes or GGD Stock may be subject to backup withholding at a rate of 31% with respect to certain reportable payments, including interest payments, dividend payments and, under certain circumstances, principal payments on the Notes or proceeds of the sale of the Notes or the GGD Stock. These backup withholding rules apply if the holder, among other things, (i) fails to furnish a social security number or other taxpayer identification number ("TIN") certified under penalties of perjury within a reasonable time after the request therefor, (ii) furnishes an incorrect TIN, (iii) fails to report properly interest or dividends or (iv) under certain circumstances, fails to provide a certified statement, signed under penalties of perjury, that the TIN furnished is the correct number and that such holder is not subject to backup withholding. A United States Holder who does not provide the Company with its correct TIN also may be subject to penalties imposed by the IRS. Any amount withheld from a payment to a United States Holder under the backup withholding rules is creditable against such holder's United States federal income tax liability, provided the required information is furnished to the IRS. Backup withholding will not apply, however, with respect to payments made to certain holders, including corporations and tax-exempt organizations, provided their exemption from backup withholding is properly established. The Company will report to the United States Holders of Notes and GGD Stock and to the IRS the amount of any reportable payments for each calendar year and the amount of tax withheld, if any, with respect to such payments. NON-UNITED STATES HOLDERS PAYMENT OF INTEREST Generally, interest income of a Non-United States Holder that is not effectively connected with a United States trade or business or attributable to a permanent establishment in the United States will be subject to a withholding tax at a 30% rate (or, if applicable, a lower treaty rate). However, interest paid on a Note by the Company or any Paying Agent to a Non-United States Holder will qualify for the "portfolio interest exemption" and therefore, subject to the discussion of backup withholding below, will not be subject to United States federal income tax or withholding tax, provided that (i) the Non-United States Holder does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote, (ii) the Non-United States Holder is not a controlled foreign corporation that is related to the Company actually or constructively through stock ownership, (iii) the Non-United States 28 30 Holder is not a bank which acquired the Notes in consideration for an extension of credit made pursuant to a loan agreement entered into in the ordinary course of business and (iv) either (a) the beneficial owner of the Note, under penalties of perjury, provides the Company or its agent with a Form W-8 (or a suitable substitute form) that includes its name and address and certifies that it is not a United States person or (b) a securities clearing organization, bank, or other financial institution that holds customers' securities in the ordinary course of its trade or business certifies to the Company or its agent, under penalties of perjury, that such a Form W-8 (or a suitable substitute) statement has been received by it from the Non-United States Holder or a qualifying intermediary and furnishes to the Company or its agent a copy thereof. Recently adopted Treasury regulations (the "Withholding Regulations") will change the methods for satisfying the certification requirement described in clause (iv) above. The Withholding Regulations also will require, in the case of Notes held by a foreign partnership that (i) this certification generally be provided by the partners rather than by the foreign partnership and (ii) the foreign partnership provide certain information, including a United States employer identification number. A look-through rule would apply in the case of tiered partnerships. The Withholding Regulations are effective for payments made after December 31, 1999. A Non-United States Holder will generally be subject to tax in the same manner as a United States corporation or resident with respect to interest income if it is effectively connected with the conduct of trade or business in the United States (or is attributable to a permanent establishment in the United States, if a tax treaty applies). Such income received by a Non-United States Holder that is a corporation may in certain circumstances be subject to an additional "branch profits tax" at a 30% rate or, if applicable, a lower treaty rate. To claim the benefit of a tax treaty or to claim exemption from withholding because the income is effectively connected to a U.S. trade or business, the Non-United States Holder must provide a properly executed Form 1001 or 4224, as applicable, prior to the payment of interest. Under the Withholding Regulations, the Non-United States Holder would need to provide a properly executed Form W-8 in either instance. SALE, EXCHANGE OR RETIREMENT OF NOTES A Non-United States Holder generally will not be subject to United States federal income tax or withholding tax on gain realized on the sale or exchange of Notes unless (i) the Non-United States Holder is an individual who was present in the United States for 183 days or more during the taxable year and to whom such gain is U.S. source, (ii) the gain is effectively connected with the conduct of a trade or business of the holder in the United States (or is attributable to a permanent establishment in the United States, if a tax treaty applies), (iii) the Non-United States Holder is subject to tax pursuant to the provisions of the Code applicable to certain United States expatriates or, (iv) under certain circumstances, which the Company does not expect to be applicable, the Note is a "United States real property interest," within the meaning of section 897 of the Code. CONVERSION OF NOTES INTO GGD STOCK In general, no United States federal income tax or withholding tax will be imposed upon the conversion of a Note into GGD Stock by a Non-United States Holder, except with respect to the receipt of cash in lieu of fractional shares by Non-United States Holders upon conversion of a Note, where any of the conditions described above under "Non-United States Holders -- Sale, Exchange or Retirement of Notes" is satisfied. SALE OR EXCHANGE OF GGD STOCK A Non-United States Holder will generally not be subject to United States federal income tax or withholding tax on the sale or exchange of GGD Stock unless any of the conditions above under "Non-United States Holders -- Sale, Exchange or Retirement of Notes" is satisfied. 29 31 DIVIDENDS ON THE GGD STOCK Under current Treasury Regulations, dividends paid on shares of GGD Stock held by a Non-United States Holder and not effectively connected with the conduct of a trade or business in the United States (or attributable to a permanent establishment in the United States) by such holder will generally be subject to United States withholding tax at a rate of 30%, or such lower rate as may be provided by an applicable tax treaty, but generally will not be subject to any additional information reporting or backup withholding. Except to the extent that an applicable tax treaty otherwise provides, a Non-United States Holder will be subject to tax in the same manner as a United States Holder on dividends paid that are effectively connected with the conduct of a trade or business in the United States by the Non-United States Holder (or is attributable to a permanent establishment in the United States, if a tax treaty applies). If such Non-United States Holder is a foreign corporation, it may also be subject to a United States "branch profits tax" on such effectively connected income at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. Under the Withholding Regulations, effective for payments made after December 31, 1999, a holder who is not a United States person who wishes to claim the benefit of an applicable tax treaty rate will be required to satisfy applicable certification requirements. In the case of GGD Stock held by a foreign partnership, the Withholding Regulations will require that (i) this certification generally be provided by the partners rather than by the foreign partnership and (ii) the foreign partnership provide certain information, including a United States employer identification number. A look-through rule would apply in the case of tiered partnerships. DEATH OF A NON-UNITED STATES HOLDER A Note held by an individual who is not a citizen or resident of the United States at the time of death will not be includable in the decedent's gross estate for United States estate tax purposes, provided that such holder or beneficial owner did not at the time of death actually or constructively own 10% or more of the combined voting power of all classes of stock of the Company entitled to vote, and provided that, at the time of death, payments with respect to such Note would not have been effectively connected with the conduct by such Non-United States Holder of a trade or business within the United States. GGD Stock actually or beneficially held (other than through a foreign corporation) by a Non-United States Holder at the time of his or her death (or previously transferred subject to certain retained rights or powers or transferred by gift within three years of death) will be subject to United States federal estate tax unless otherwise provided by an applicable estate tax treaty. INFORMATION REPORTING AND BACKUP WITHHOLDING United States information reporting requirements and backup withholding tax will not apply to payments on a Note to a Non-United States Holder if the statement described in "Non-United States Holders -- Payment of Interest" is duly provided by such Holder, provided that the payor does not have actual knowledge that the Holder is a United States person. Under current Treasury Regulations, information reporting requirements and backup withholding tax will not apply to any payment of the proceeds of the sale of a Note or any payment of the proceeds of the sale of GGD Stock effected outside the United States by a foreign office of a "broker" (as defined in applicable Treasury Regulations), unless such broker is (i) a United States person, (ii) a foreign person that derives 50% or more of its gross income for certain periods from activities that are effectively connected with the conduct of a trade or business in the United States or (iii) a controlled foreign corporation for United States federal income tax purposes. Payment of the proceeds of any such sale effected outside the United States by a foreign office of any broker that is described in (i), (ii) or (iii) of the preceding sentence will not be subject to backup withholding tax, but will be subject to information reporting requirements unless such broker has documentary evidence in its records that the beneficial owner is a Non-United States Holder and certain other conditions are met, or the beneficial owner otherwise establishes an exemption. Payment of the proceeds of any such sale 30 32 to or through the United States office of a broker is subject to information reporting and backup withholding requirements, unless the beneficial owner of the Note provides the statement described in "Non-United States Holders -- Payment of Interest" or otherwise establishes an exemption. If paid to an address outside the United States, dividends on GGD Stock held by a Non-United States Holder will generally not be subject to the information reporting and backup withholding requirements described in this section, provided that the payor does not have actual knowledge that the Holder is a United States person. However, under the Withholding Regulations, dividend payments made after December 31, 1999 will be subject to information reporting and backup withholding unless applicable certification requirements are satisfied. See the discussion above with respect to rules applicable to foreign partnerships under the Withholding Regulations. 31 33 DESCRIPTION OF GENZYME CAPITAL STOCK The following descriptions are qualified in their entirety by reference to the Genzyme Charter which is an exhibit to the Registration Statement of which this Prospectus forms a part. INTRODUCTION Genzyme is authorized to issue 390 million shares of common stock, of which 200 million shares have been designated GGD Stock, 40 million shares have been designated GTR Stock, 40 million shares have been designated GMO Stock and 110 million shares remain undesignated as to series. In addition, Genzyme is authorized to issue 10 million shares of preferred stock. Each designated series of Genzyme common stock has the voting powers, qualifications and rights described below. DIVIDENDS Genzyme has never paid any cash dividends on shares of its capital stock. Genzyme currently intends to retain its earnings to finance future growth and, therefore, does not anticipate paying any cash dividends on Genzyme common stock in the foreseeable future. Dividends on each series of Genzyme common stock may be declared and paid only out of the lesser of funds of Genzyme legally available therefor and the Available GGD Dividend Amount (with respect to the GGD Stock), the Available GTR Dividend Amount (with respect to the GTR Stock) or the Available GMO Dividend Amount (with respect to the GMO Stock)(each term as defined below). Under the Massachusetts Business Corporation Law (the "MBCL"), the payment of dividends is permitted if the corporation is not insolvent, the dividend payment does not render the corporation insolvent, and the dividend payment does not violate the corporation's articles of organization. Subject to such limitations, the Genzyme Board may, in its sole discretion, declare and pay dividends exclusively on any series of Genzyme common stock, in equal or unequal amounts, notwithstanding the amounts available for the payment of dividends on each series, the respective voting and liquidation rights of each series, the amounts of prior dividends declared on each series or any other factor. As stated above, in addition to the statutory limitations under the MBCL, dividends on the GGD Stock, the GTR Stock and the GMO Stock are limited to an amount not in excess of the Available GGD Dividend Amount, the Available GTR Dividend Amount or the Available GMO Dividend Amount, respectively. The "Available Dividend Amount" with respect to a particular series of Genzyme common stock is defined to mean generally the greater of (i) the excess of (a) the greater of (X) the fair value of the net assets allocated to the division represented by such series of Genzyme common stock and (Y) an amount equal to stockholders' equity allocated to such division as of June 30, 1994, in the case of the GGD Stock and the GTR Stock, and September 30, 1996, in the case of the GMO Stock, increased or decreased, as appropriate, to reflect, after such date (1) the net income or loss of such division, (2) any dividends or other distributions (including by reclassification or exchange) declared or paid with respect to, or repurchases or issuances of, any shares of capital stock attributed to such division, but excluding dividends or other distributions paid in shares of capital stock attributed to such division to the holders thereof and (3) any other adjustments to the stockholders' equity of such division made in accordance with generally accepted accounting principles, over (b) the aggregate par value of all outstanding shares of capital stock attributed to such division and 32 34 (ii) the amount legally available for the payment of dividends determined in accordance with Massachusetts law applied as if such division were a separate corporation. EXCHANGE OF GTR STOCK AND GMO STOCK The GTR Stock or the GMO Stock may be exchanged for any combination of cash and/or GGD Stock upon the terms described below. Genzyme cannot predict the impact on the market prices of each series of Genzyme common stock of its ability to effect such exchanges. OPTIONAL EXCHANGE. The Genzyme Board may at any time exchange all outstanding shares of GTR Stock or GMO Stock for any combination of cash and/or GGD Stock having a Fair Market Value equal to 130% of the Fair Market Value of the GTR Stock or GMO Stock, as the case may be, such Fair Market Value being determined by the trading prices during a specified period prior to the first public announcement by Genzyme of such exchange. The foregoing provision allows Genzyme the flexibility to redeem all outstanding shares of GTR Stock and/or GMO Stock and leave outstanding one or two series of Genzyme common stock that would, collectively, represent the residual equity interest in all of Genzyme's businesses. The optional exchange could be exercised at any future time if the Genzyme Board determined that, under the facts and circumstances then existing, an equity structure consisting of three series of common stock was no longer in the best interests of all of Genzyme's stockholders. Such exchange may be completed, however, at a time that is disadvantageous to the holders of a particular series of Genzyme common stock. The right of the Genzyme Board to exchange at any time all outstanding shares of GTR Stock or GMO Stock for any combination of cash and/or GGD Stock having a Fair Market Value equal to 130% of the Fair Market Value of the GTR Stock or the GMO Stock does not preclude the Genzyme Board from making an offer to exchange such shares on terms other than those provided in the Genzyme Charter. Although any alternative offer would be subject to acceptance by holders of the shares to be exchanged, such offer could be made on terms less favorable than those provided in the Genzyme Charter. See "RISK FACTORS -- Risks Related to Genzyme Tracking Stock -- No Rights or Additional Duties With Respect to the Divisions; Potential Conflicts." MANDATORY EXCHANGE. In the event of the disposition, in one transaction or a series of related transactions, by Genzyme of all or substantially all of the properties and assets allocated to GTR or GMO (other than in connection with the sale by Genzyme of all or substantially all of its properties and assets) to any person, entity or group (other than (i) a wholly-owned subsidiary of Genzyme or (ii) any entity formed at the direction of Genzyme in connection with obtaining financing for the programs or products of GTR or GMO, as the case may be), Genzyme will be required to exchange each outstanding share of GTR Stock or GMO Stock for any combination of cash and/or GGD Stock having a Fair Market Value equal to 130% of the Fair Market Value of GTR Stock or GMO Stock, as the case may be, as determined by the trading prices during a specified period prior to the first public announcement by Genzyme of such disposition. See "RISK FACTORS -- Risks Related to Genzyme Tracking Stock -- Exchange of GTR Stock and GMO Stock." VOTING RIGHTS Holders of shares of each series of Genzyme common stock vote together as a single class on all matters as to which common stockholders generally are entitled to vote (including the election of directors). On all such matters, each share of GGD Stock has one vote, each share of GTR Stock has, through December 31, 1998, .33 vote, and each share of GMO Stock has, through December 31, 1998, .25 vote. Holders of outstanding GGD Stock, GTR Stock and GMO Stock currently have approximately 91.1%, 7.7% and 1.2%, respectively, of the total voting power of Genzyme. On January 1, 1999 and on each January 1 every two years thereafter, the number of votes to which each share of GTR Stock and GMO Stock is entitled will be adjusted to equal the ratio of the Fair Market Value of one share of GTR Stock or GMO Stock, as the case may be, to the Fair Market Value of one share of GGD Stock as of such date. If no shares of GGD Stock are outstanding on such date, then all other series of Genzyme common stock outstanding on such date will have a number of votes such that each share of the series of common stock that has the highest Fair Market Value per share on such date (the "Base Series") will have one vote, and each share of each other series of outstanding common 33 35 stock will have the number of votes determined according to the immediately preceding sentence, treating, for such purpose, the Base Series as the GGD Stock in such sentence. The voting rights of the GTR Stock and the GMO Stock will be appropriately adjusted so as to avoid dilution in the aggregate voting rights of any series of Genzyme common stock in the event the outstanding shares of any series are subdivided (by stock split, reclassification or otherwise) or combined (by reverse stock split, reclassification or otherwise), or in the event of the issuance of shares of any series as a dividend or a distribution to holders of shares of such series. If shares of only one series of Genzyme common stock are outstanding, or if shares of any series of Genzyme common stock are entitled to vote separately as a class, each share of that series would have one vote. The relative voting rights of each series of Genzyme common stock are adjusted from time to time as described above so that a holder's voting rights may more closely reflect the market value of such holder's equity investment in Genzyme. Adjustments in the relative voting rights of each class of Genzyme common stock may influence an investor interested in acquiring and maintaining a fixed percentage of Genzyme's voting power to acquire such percentage of all series of Genzyme common stock, and will limit the ability of investors in one series to acquire for the same consideration relatively greater or lesser voting power per share than investors in the other series. To the extent the relative market values of each series of Genzyme common stock change prior to the first such adjustment or in between any adjustments, however, an investor in one series of Genzyme common stock may acquire relatively more or less voting power for the same consideration when compared with investors in another series of Genzyme common stock. In addition to voting together as a single class of stock, the Genzyme Charter requires the approval by the holders of the affected series of Genzyme common stock at a meeting at which a quorum is present and the votes cast in favor of the proposal exceed those cast against to: (i) allow any proceeds from the disposition of the properties or assets allocated to any division to be used in the business of the other division without fair compensation, (ii) allow any properties or assets allocated to any division to be used in the business of another division or for the declaration or payment of any dividend or distribution on any series of Genzyme common stock not attributed to such division without fair compensation, (iii) issue shares of any series of Genzyme common stock without allocating the proceeds of such issuance to the division represented by such series of Genzyme common stock (provided, however, that Genzyme may without such approval issue GTR Designated Shares and GMO Designated Shares), (iv) change the rights or preferences of any series of Genzyme common stock so as to affect the series adversely or (v) effect any merger or business combination involving Genzyme as a result of which (a) the holders of all series of Genzyme common stock shall no longer own, directly or indirectly, at least fifty percent (50%) of the voting power of the surviving corporation and (b) the holders of all series of Genzyme common stock do not receive the same form of consideration, distributed among such holders in proportion to the market capitalization of each series of Genzyme common stock as of the date of the first public announcement of such merger or business combination. In addition to the voting rights provided in the Genzyme Charter, the approval of the holders of a majority of the outstanding shares of each series of Genzyme common stock, voting together as a single class, is required under the current MBCL to approve any amendment to the articles of organization that would alter or change the powers, preferences or special rights of the shares of such series so as to affect them adversely. The MBCL does not currently provide for any other separate voting rights for a series of common stock. Consequently, because most matters brought to a stockholder vote will only require the approval of a majority of all of Genzyme's outstanding capital stock entitled to vote on such matters (including all series of common stock) voting together as a single class and because the holders of GGD Stock will initially have more than the number of votes required to approve any such matter, such holders would be in a position to control the 34 36 outcome of the vote on such a matter. See "RISK FACTORS -- Risks Related to Genzyme Tracking Stock -- No Additional Separate Voting Rights." LIQUIDATION RIGHTS In the event of a voluntary or involuntary dissolution, liquidation or winding up of the affairs of Genzyme, after Genzyme has satisfied or made provision for its debts and obligations and for payment to the holders of shares of any series of capital stock having preferential rights to receive distributions of the net assets of Genzyme, the holders of Genzyme common stock are entitled to receive the net assets, if any, remaining for distribution to common stockholders on a per share basis in proportion to the respective per share liquidation units of such series and will have no direct claim against any particular assets of Genzyme or any of its subsidiaries. [On June 30, 1998,] each share of GGD Stock had 100 liquidation units, each share of GTR Stock had 58 liquidation units and each share of GMO Stock had 25 liquidation units. The liquidation units of the GTR Stock and the GMO Stock will be appropriately adjusted so as to avoid dilution in the aggregate liquidation rights of any series in the event the outstanding shares of any series are subdivided (by stock split, reclassification or otherwise) or combined (by reverse stock split, reclassification or otherwise), or in the event of the issuance of shares of any series as a dividend or a distribution to holders of shares of that series, but will not otherwise be adjusted. A merger or business combination involving Genzyme or a sale of all or substantially all of the assets of Genzyme will not be treated as a liquidation. Genzyme may not, however, without approval by the holders of the GTR Stock and the GMO Stock voting as separate series of stock, effect any merger or business combination involving Genzyme as a result of which (i) the holders of all series of Genzyme common stock shall no longer own, directly or indirectly, at least fifty percent of the voting power of the surviving corporation and (ii) the holders of each series of Genzyme common stock do not receive the same form of consideration, distributed among such holders in proportion to the market capitalization of each series of common stock as of the date of the first public announcement of such merger or business combination. GTR DESIGNATED SHARES AND GMO DESIGNATED SHARES GTR Designated Shares and GMO Designated Shares are authorized shares of GTR Stock and GMO Stock, respectively, which are not issued and outstanding, but which the Genzyme Board may from time to time issue, sell or otherwise distribute without allocating the proceeds or other benefits of such issuance, sale or distribution to GTR or GMO, respectively. The shares of GTR Stock and GMO Stock that are issuable with respect to the GTR Designated Shares and the GMO Designated Shares, respectively, are not outstanding shares of GTR Stock or GMO Stock, are not eligible to receive dividends and cannot be voted by Genzyme. As of December 31, 1997, there were 885,053 GTR Designated Shares, representing a potential 5.6% equity interest in GTR. The number of GTR Designated Shares from time to time will be: (i) adjusted as appropriate to reflect subdivisions (by stock split or otherwise) and combinations (by reverse stock split or otherwise) of the GTR Stock and dividends or distributions of shares of GTR Stock to holders of GTR Stock and other reclassifications of GTR Stock; (ii) decreased by (a) the number of any shares of GTR Stock issued by Genzyme, the proceeds of which are allocated to Genzyme General, (b) the number of any shares of GTR Stock issued upon the exercise or conversion of securities convertible into GTR Stock that are attributed to Genzyme General and (c) the number of any shares of GTR Stock issued by Genzyme as a dividend or distribution or by reclassification, exchange or otherwise to holders of GGD Stock; and (iii) increased by (a) the number of any outstanding shares of GTR Stock repurchased by Genzyme, the consideration for which was allocated to Genzyme General, (b) one for each $10.00 reallocated from Genzyme General to GTR from time to time in satisfaction of the purchase option of Genzyme General set forth in section 4.18 of the Agreement and Plan of Reorganization among Genzyme, Phoenix Acquisition Corporation and BioSurface Technology, Inc. dated as of July 25, 1994, up to a maximum $30 million, and (c) the number of shares of GTR Stock equal to the fair value (as 35 37 determined by the Genzyme Board) of assets or properties allocated to Genzyme General that are reallocated to GTR (other than reallocations that represent sales at fair value between such divisions or reallocations described in clause (b) above) divided by the Fair Market Value of one share of GTR Stock as of the date of such reallocation. The Genzyme Charter prohibits the taking of any action which would have the effect of reducing the number of GTR Designated Shares to a number which is less than zero. As of December 31, 1997, there were 6,000,000 GMO Designated Shares, representing a potential 60.4% equity interest in GMO. The number of GMO Designated Shares from time to time will be: (i) adjusted as appropriate to reflect subdivisions (by stock split or otherwise) and combinations (by reverse stock split or otherwise) of the GMO Stock and dividends or distributions of shares of GMO Stock to holders of GMO Stock and other reclassifications of GMO Stock; (ii) decreased by (a) the number of any shares of GMO Stock issued by Genzyme, the proceeds of which are allocated to Genzyme General, (b) the number of any shares of GMO Stock issued upon the exercise or conversion of securities convertible into GMO Stock that are attributed to Genzyme General and (c) the number of any shares of GMO Stock issued by Genzyme as a dividend or distribution or by reclassification, exchange or otherwise to holders of GGD Stock; and (iii) increased by (a) the number of any outstanding shares of GMO Stock repurchased by Genzyme, the consideration for which was allocated to Genzyme General; (b) the number of shares of GMO Stock equal to the fair value (as determined by the Genzyme Board) of assets or properties allocated to Genzyme General that are reallocated to GMO (other than reallocations that represent sales at fair value between such divisions) divided by the Fair Market Value of one share of GMO Stock as of the date of such reallocation; (c) with respect to amounts drawn under an equity line of credit approved by the Genzyme Board providing for the allocation of up to $25 million in cash from Genzyme General to GMO (the "GMO Equity Line"), a number equal to the sum of the quotients obtained by dividing (A) the amount of each advance under the GMO Equity Line by (B) $7.00 plus or minus a daily proration of the difference between the price to the public in the GMO IPO at $7.00, assuming straight line appreciation or depreciation in the value of the GMO Stock over the period from the closing date of the acquisition of PharmaGenics, Inc. to the closing date of the GMO IPO; and, thereafter, upon each advance made under the GMO Equity Line, a number equal to the quotient obtained by dividing (X) the amount of each such advance by (Y) the Fair Market Value of the GMO Stock on the date of such advance; or (d) the number of shares of GMO Stock into which the Genzyme Board elects to convert the promissory note dated February 10, 1997 issued by PharmaGenics, Inc. to Genzyme. The Genzyme Charter prohibits the taking of any action which would have the effect of reducing the number of GMO Designated Shares to a number which is less than zero. Whenever additional shares of any series of common stock are issued and sold by Genzyme, Genzyme will identify (i) the number of such shares issued and sold for the account of the division to which they relate, the proceeds of which will be allocated to and reflected in the financial statements of such division and (ii) the number of such shares issued and sold from the GTR Designated Shares or the GMO Designated Shares, which shall reduce the number of GTR Designated Shares or GMO Designated Shares, as the case may be, and the proceeds of which may be used for any proper corporate purpose. In the event Genzyme repurchases outstanding shares of GTR Stock or GMO Stock, it will identify the number of shares that are repurchased for consideration that was allocated to Genzyme General and the number of GTR Designated Shares or GMO Designated Shares may increase accordingly. 36 38 DETERMINATIONS BY THE GENZYME BOARD Any determination made by the Genzyme Board in good faith under any of the provisions described above will be final and binding on all stockholders of Genzyme. "ANTI-TAKEOVER" PROVISIONS CONTRACTUAL MEASURES. The Genzyme Charter and the By-Laws of Genzyme (the "By-Laws") contain provisions that could discourage potential takeover attempts and prevent stockholders from changing Genzyme's management, including authorization of the Genzyme Board to issue shares of common stock and preferred stock in series, enlarge the size of the Genzyme Board and fill any vacancies on the Genzyme Board, and restrictions on the ability of stockholders to call a special meeting of stockholders, bring business before an annual meeting and nominate candidates for election as directors. Genzyme also has agreements with certain officers containing change of control provisions. In addition, Genzyme has a stockholder rights plan. Under this plan, each outstanding share of GGD Stock, GTR Stock and GMO Stock also represents a right that, under certain circumstances, may trade separately from the GGD Stock, GTR Stock and GMO Stock, respectively. The rights, which are not currently exercisable, under certain circumstances will permit their holders (other than an acquiror) to purchase at a favorable price large amounts of GGD Stock, GTR Stock and GMO Stock or securities of a successor to Genzyme with the result that an acquiror's interest in Genzyme would be substantially diluted. The description and terms of the rights are set forth in an Amended and Restated Rights Agreement between Genzyme and American Stock Transfer and Trust Company as Rights Agent. BUSINESS COMBINATION STATUTE. The Massachusetts "Business Combination" statute provides that, if a person acquires 5% or more of the stock of a Massachusetts corporation without the approval of its board of directors (an "interested stockholder"), he or she may not engage in certain transactions with the corporation for a period of three years. There are certain exceptions to this prohibition; for example, if the board of directors approves the acquisition of stock or the transaction prior to the time that the person became an interested stockholder, or if the interested stockholder acquires 90% of the voting stock of the corporation (excluding voting stock owned by directors who are also officers and certain employee stock plans) in one transaction, or if the transaction is approved by the board of directors and by the affirmative vote of two-thirds of the outstanding voting stock which is not owned by the interested stockholder, the prohibition does not apply. Genzyme is subject to the Massachusetts Business Combination statute unless it elects not to be governed by the statute in the Genzyme Charter or the By-Laws. Genzyme has not made such election and does not currently intend to make such an election. CONTROL SHARE ACQUISITION STATUTE. The Massachusetts "Control Share Acquisition" statute provides that a person (the "acquiror") who makes a bona fide offer to acquire, or acquires, shares of stock of a corporation that when combined with shares already owned, would increase the acquiror's ownership to at least 20%, 33 1/3% or a majority of the voting stock of the corporation, must obtain the approval of a majority in interest of the shares held by all stockholders, excluding shares held by the acquiror and the officers and inside directors of the corporation, in order to vote the shares acquired. The statute does not require the acquiror to consummate the purchase before the stockholder vote is taken. The Control Share Acquisition statute permits a Massachusetts corporation to elect not to be governed by these provisions by including such an election in its articles of incorporation or by-laws. The By-Laws contain a provision pursuant to which Genzyme elected not to be governed by the Massachusetts Control Share Acquisition statute. However, if at a future date the Genzyme Board determines that it is in the best interests of Genzyme and its stockholders that Genzyme be governed by the statute, the By-Laws may be amended to permit it to be governed by such statute. Any such amendment, however, would apply only to acquisitions crossing the thresholds which occur after the effective date of such amendment. 37 39 RIGHTS OF CERTAIN HOLDERS The holders of an aggregate of 3,163,032 shares of Genzyme capital stock are entitled to certain registration rights with respect to such shares. Notwithstanding the existence of these rights, all of such shares, if held by nonaffiliates of the Company, are eligible for unrestricted resale under the Securities Act. TRANSFER AGENT AND REGISTRAR American Stock Transfer and Trust Company is the registrar and transfer agent for each series of Genzyme common stock. 38 40 MANAGEMENT AND ACCOUNTING POLICIES GOVERNING THE RELATIONSHIP OF GENZYME DIVISIONS The Genzyme Board has adopted certain policies to govern the management of Genzyme General, GTR and GMO. A description of these policies can be found in Exhibit 99.1 to the 1997 10-K, which is incorporated herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." Except as otherwise provided in the policies, the Genzyme Board may further modify or rescind the policies in its sole discretion without approval of the stockholders, subject only to the Genzyme Board's fiduciary duty to Genzyme's stockholders. The Genzyme Board may also adopt additional policies depending upon the circumstances. Any determination of the Genzyme Board to modify or rescind the policies, or to adopt additional policies, including any such decision that would have disparate impacts upon holders of the common stock representing the three divisions, would be governed by the principles of Massachusetts law discussed under "RISK FACTORS -- Risks Related to Genzyme Tracking Stock -- No Rights or Additional Duties With Respect to the Divisions; Potential Conflicts." In addition, generally accepted accounting principles require that any change in policy be preferable (in accordance with such principles) to the previous policy. 39 41 SELLING SECURITYHOLDERS The Company issued and sold the Notes to Credit Suisse First Boston Corporation, Cowen & Company and Goldman, Sachs & Co. (the "Initial Purchasers") on May 22, 1998 pursuant to a private placement exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof. The Notes were sold by the Initial Purchasers in transactions exempt from the registration requirements of the Securities Act, to persons reasonably believed by such Initial Purchasers to be "qualified institutional buyers" (as defined in Rule 144A under the Securities Act). The Registration Statement of which the Prospectus is a part has been filed pursuant to Rule 415 under the Securities Act to afford the Selling Securityholders the opportunity to sell Notes and Conversion Shares in public transactions rather than pursuant to exemptions from the registration requirements of the Securities Act. The following table sets forth information concerning the aggregate principal amount of Notes beneficially owned by each Selling Securityholder, as of , 1998, and the number of shares of GGD Stock issuable upon conversion of Notes held thereby, which may be offered from time to time pursuant to this Prospectus. Other than their ownership of such securities, none of the Selling Securityholders has had any material relationship with the Company within the past three years. The table below has been prepared on the basis of the information furnished to the Company by DTC and/or by or on behalf of the Selling Securityholders. Any or all of the Notes or shares of GGD Stock listed below may be offered for sale by the Selling Securityholders from time to time.
PRINCIPAL AMOUNT UNDERLYING SHARES OF PERCENTAGE OF OF NOTES GGD STOCK OR GGD STOCK BENEFICIALLY PERCENTAGE ADDITIONAL SHARES OF OUTSTANDING OWNED THAT OF NOTES GGD STOCK THAT AFTER THE NAME(1) MAY BE SOLD OUTSTANDING MAY BE SOLD(2) OFFERING(3) ------- ---------------- ----------- -------------------- ------------- ................................. $ Unnamed holders of Notes or any future transferees, pledgees, donees or successors of or from such unnamed holders(4)........
- --------------- (1) The Selling Securityholders and the amount of Notes held by them are set forth herein as of July , 1998 and will be updated as required. (2) Assumes conversion of the full amount of Notes held by such holder at the initial rate of 25.2525 shares of GGD Sock per $1,000 in principal amount of Notes. The conversion rate and the number of shares of GGD Stock issuable upon conversion of the Notes are subject to adjustment under certain circumstances. See "DESCRIPTION OF NOTES -- Conversion Rights." Accordingly, the number of shares of GGD Stock issuable upon conversion of the Notes may increase or decrease from time to time. Under the terms of the Indenture, fractional shares will not be issued upon conversion of the Notes; cash will be paid in lieu of fractional shares, if any. (3) Based upon shares of GGD Stock outstanding as of , 1998, treating as outstanding the total number of shares of GGD Stock shown as being issuable upon the assumed conversion by the named Selling Securityholder of the full amount of such Selling Securityholder's Notes but not assuming the conversion of the Notes of any other Selling Securityholder. (4) Assumes that the unnamed holders of the Notes or any future transferees, pledgees, donees or successors of or from any such unnamed holder do not beneficially own any GGD Stock other than the GGD Stock issuable upon conversion of the Notes at the initial conversion rate. No such unnamed holder may offer Notes pursuant to this Prospectus until such unnamed holder is included as a Selling Securityholder in a supplement to this Prospectus in accordance with the Registration Rights Agreements (as defined in "PLAN OF DISTRIBUTION"). Because the Selling Securityholders may, pursuant to this Prospectus, offer all or some portion of the Notes and GGD Stock they presently hold or, with respect to the GGD Stock, have the right to acquire upon conversion of such Notes, no estimate can be given as to the amount of the Notes and GGD Stock that will be 40 42 held by the Selling Securityholders upon termination of any such sales. In addition, the Selling Securityholders identified above may have sold, transferred or otherwise disposed of all or a portion of their Notes and GGD Stock since the date on which they provided the information regarding their Notes and GGD Stock, in transactions exempt from the registration requirements of the Securities Act. Only Selling Securityholders identified above who have complied with the conditions to being included as Selling Securityholders under the Registration Rights Agreement and who beneficially own the Notes and the GGD Stock set forth opposite each such Selling Securityholder's name in the foregoing table on the effective date of the Registration Statement may sell such Notes and GGD Stock pursuant to this Prospectus. The Company may from time to time, in accordance with the Registration Rights Agreement, include additional Selling Securityholders in supplements to this Prospectus. 41 43 PLAN OF DISTRIBUTION In connection with the sale of Notes to the Initial Purchasers, the Company agreed pursuant to a Registration Rights Agreement (the "Registration Rights Agreement"), to file with the Commission the Registration Statement of which this Prospectus forms a part. The Registration Statement covers resales of the Notes and the Conversion Shares (the "Registrable Securities") by the Selling Securityholders. The Company has agreed to use its reasonable best efforts to keep the Registration Statement effective until two years from its effective date (or such earlier date when the Selling Securityholders have sold the Registrable Securities or are able to sell all such securities immediately without restriction pursuant to Rule 144(k) under the Securities Act or any successor rule thereto or otherwise). The Company is permitted to suspend the use of this Prospectus during certain periods of time. If the Registration Statement ceases to be effective or usable (subject to certain exceptions described in the Registration Rights Agreement), additional interest, at the rate of 0.5% per annum, may accrue on the Notes. The Registration Rights Agreement provides that holders of at least 25% of the then outstanding Notes may elect to have one underwritten offering of the Notes. The managing underwriter(s) for any such offering must be selected by holders of a majority of the Notes to be included in the underwritten offering and must be reasonably acceptable to the Company. The specific provisions relating to the registration rights described above are contained in the Registration Rights Agreement, and the foregoing summary is qualified in its entirety by the provisions of such agreement which is included as an exhibit to the Registration Statement. Sales of the Notes and the Conversion Shares may be effective by or for the account of the Selling Securityholders from time to time in transactions (which may include block transactions in the case of the Conversion Shares) on any exchange or market on which such securities are listed or quoted, in negotiated transactions, through a combination of such methods of sale, or otherwise, at fixed prices that may be changed, at market prices prevailing at the time of sale, at prices related to prevailing market prices, or at negotiated prices. The Selling Securityholders may effect such transactions by selling the Notes or Conversion Shares directly to purchasers, to or through broker-dealers who may purchase Notes or Conversion Shares as principals and thereafter sell the Notes or Conversion Shares, through a combination of such methods of sale, or otherwise. Broker-dealers engaged by Selling Securityholders may receive compensation in the form of discounts, concessions or commissions from the Selling Securityholders, the purchasers of the Notes or Conversion Shares for whom such broker-dealers may act as agents or to whom they may sell as principals, or both (which compensation as to a particular broker-dealer might be in excess of customary commissions). The Selling Securityholders and any broker-dealers, agents or underwriters that participate with the Selling Securityholders in the distribution of the Notes or Conversion Shares may be deemed to be "underwriters" within the meaning of the Securities Act. Any commissions paid or any discounts or concessions allowed to any such persons, and any profits received on the resale of the Notes or Conversion Shares offered hereby may be deemed to be underwriting commissions or discounts under the Securities Act. To the extent required, the Company will amend or supplement this Prospectus to disclose material arrangements regarding the plan of distribution. If, for example, pursuant to the terms of the Registration Rights Agreement, the Note holders elect to sell Registrable Securities in an underwritten offering, a prospectus supplement accompanying this Prospectus will set forth, to the extent required, the aggregate principal amount of Notes and number of Conversion Shares being offered, the name or names of the Selling Securityholders, and the terms of the offering, including the name or names of the underwriters, any discounts, concessions or commissions and other terms constituting compensation from the Selling Securityholders, and any discounts, concessions or commissions allowed or reallowed or paid to dealers. In such an underwritten offering, the Notes and/or Conversion Shares will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The Notes and/or Conversion Shares may be offered to the public either through underwriting syndicates represented by one or more managing underwriters or directly by one or more firms acting as underwriters. In connection with such a sale of Notes and/or Conversion Shares, the underwriters may receive compensation from the Selling Securityholders in the form of underwriting discounts or commissions and may also receive commissions from purchasers of the Notes and/or Conversion Shares for whom they may act as agent. Underwriters may sell the Notes and/or 42 44 Conversion Shares to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agents. Unless otherwise set forth in the prospectus supplement relating thereto, the obligations of any underwriters to purchase the Notes and/or Conversion Shares will be subject to certain conditions precedent, and the underwriters will be obligated to purchase all such Notes and/or Conversion Shares if any are purchased. Underwriters may be entitled under agreements with the Company to indemnification against certain civil liabilities, including liabilities under the Securities Act, or to contribution with respect to payments which such agents, dealers or underwriters may be required to make in respect thereof. Such underwriters may engage in transactions with, or perform services for, the Company for customary compensation. Pursuant to the Registration Rights Agreement, the Company has agreed to pay certain expenses incident to the offer and sale of the Notes and Conversion Shares offered by the Selling Securityholders hereby, including the fees of one counsel to the Selling Securityholders. The Selling Securityholders, however, will pay any underwriting discounts and selling commissions. The Company has agreed to indemnify the Selling Securityholders against certain liabilities, including liabilities under the Securities Act, and to contribute to payments the Selling Securityholders may be required to make in respect thereof. To comply with the securities laws of certain jurisdictions, the Notes and Conversion Shares offered hereby may need to be offered or sold in such jurisdictions only through registered or licensed brokers or dealers. Under applicable rules and regulations under the Exchange Act, any person engaged in a distribution of the Notes or the Conversion Shares may be limited in its ability to engage in market activities with respect to such Notes or Conversion Shares. Each Selling Securityholder, for example, will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, which provisions may limit the timing of purchase and sales of any of the Notes and Conversion Shares by the Selling Securityholder. The foregoing may affect the marketability of the Notes and Conversion Shares. The Company's outstanding GGD Stock is included for quotation for trading on the Nasdaq National Market, and application has been made to include for quotation the shares of GGD Stock issuable upon conversion of the Notes on Nasdaq. The Notes have been designated for trading in the PORTAL Market; however, the Company has not applied, and does not intend to apply, for listing of the Notes on any securities exchange. Furthermore, Notes resold pursuant to this Registration Statement will no longer be eligible for trading in the PORTAL Market. No assurance can be given that there will be a market for the Notes sold pursuant to this Prospectus, or that if such market does develop, that it will continue to provide holders of such Notes with liquidity for such investment or will continue for the duration the Notes are outstanding. LEGAL MATTERS The validity of the Notes offered hereby will be passed upon for the Company by Palmer & Dodge LLP, Boston, Massachusetts, counsel for the Company. EXPERTS The consolidated balance sheets of Genzyme as of December 31, 1996 and 1997 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1997 included in Genzyme's Annual Report on Form 10-K for the year ended December 31, 1997, as amended, and the financial statement schedule appearing therein, incorporated by reference into this Prospectus, have been incorporated herein in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of that firm as experts in accounting and auditing. The combined balance sheets of Genzyme General and GTR as of December 31, 1996 and 1997, and the related combined statements of operations and cash flows for each group for each of the three years in the period ended December 31, 1997 included in Genzyme's Annual Report on Form 10-K for the year ended December 31, 1997, as amended, and the financial statement schedule appearing therein, have also been 43 45 incorporated herein in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of that firm as experts in accounting and auditing. The combined balance sheets of GMO as of December 31, 1996 and 1997, and the related combined statements of operations and cash flows for each of the three years in the period ended December 31, 1997 included in Genzyme's Annual Report on Form 10-K for the year ended December 31, 1997, as amended, have also been incorporated herein in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of that firm as experts in accounting and auditing. AVAILABLE INFORMATION Genzyme is subject to the informational requirements of the Exchange Act, and, in accordance therewith, files periodic reports, proxy statements and other information with the Commission. Reports, proxy and information statements filed pursuant to Sections 14(a) and 14(c) of the Exchange Act and other information filed with the Commission, as well as copies of the Registration Statement, can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the following Regional Offices of the Commission: Midwest Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60611; and Northeast Regional Office, 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such material can also be obtained at prescribed rates from the Public Reference Section of the Commission at its principal office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. Such material may also be accessed electronically by means of the Commission's home page on the Internet at http://www.sec.gov. This Prospectus constitutes a part of a Registration Statement filed by the Company with the Commission under the Securities Act. This Prospectus omits certain of the information contained in the Registration Statement in accordance with the rules and regulations of the Commission. Reference is hereby made to the Registration Statement and related exhibits for further information with respect to the Company, its Notes and the Conversion Shares. Statements contained herein concerning the provisions of any document are not necessarily complete and, in each instance, reference is made to the copy of such document filed as an exhibit to the Registration Statement or otherwise filed with the Commission. Each such statement is qualified in its entirety by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE Genzyme incorporates herein by reference the following documents previously filed with the Commission (File No. 0-14680) pursuant to the Exchange Act: (i) its Annual Report on Form 10-K for the fiscal year ended December 31, 1997, as amended by its Form 10-K/A filed with the Commission on April 27, 1998; (ii) its Quarterly Report on Form 10-Q for the quarter ended March 31, 1998; and (iii) its Current Report on Form 8-K, dated May 19, 1998; (iv) the description of GGD Stock and GGD Stock Purchase Rights contained in Genzyme's Registration Statement on Form 8-A filed with the Commission on June 18, 1997. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to termination of the offering made hereby shall be deemed to be incorporated in this Prospectus by reference and to be a part hereof from the respective dates of the filing of such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any subsequently filed document which also is, or is deemed to be, incorporated by reference herein, modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute part of this Prospectus. The Company hereby undertakes to provide without charge to each person to whom a copy of this Prospectus has been delivered, upon the written or oral request of any such person, a copy of any and all of the documents referred to above which have been or may be incorporated in this Prospectus by reference, other than exhibits to such documents which are not specifically incorporated by reference into such documents. Requests for such copies should be directed to the executive offices of the Company, One Kendall Square, Cambridge, Massachusetts 02139, Attention: Shareholder Services, telephone (617) 252-7526. 44 46 - ------------------------------------------------------ - ------------------------------------------------------ NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY INITIAL PURCHASER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE NOTES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE. ------------------------ TABLE OF CONTENTS
PAGE The Company............................ 2 Risk Factors........................... 4 Ratio of Earnings to Fixed Charges..... 13 Use of Proceeds........................ 13 Capitalization......................... 14 Description of Revolving Credit Facility............................. 16 Description of Notes................... 17 Certain Federal Income Tax Considerations....................... 26 Description of Genzyme Capital Stock... 32 Management and Accounting Policies Governing the Relationship of Genzyme Divisions............................ 39 Selling Securityholders................ 40 Plan of Distribution................... 42 Legal Matters.......................... 43 Experts................................ 43 Available Information.................. 44 Incorporation of Certain Documents by Reference............................ 44
- ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ [GENZYME LOGO] $225,000,000 5 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2005 6,313,131 SHARES OF GENERAL DIVISION COMMON STOCK - ------------------------------------------------------ - ------------------------------------------------------ 47 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The expenses to be borne by Genzyme in connection with this offering of Notes and Conversion Shares are estimated as follows: SEC registration fee........................................ $ 73,750 Printing Expenses........................................... 50,000 Accounting fees and expenses................................ 2,500 Legal fees and expenses..................................... 15,000 Transfer Agent and Registrar fees........................... 0 Miscellaneous expenses...................................... 750 -------- Total............................................. $142,000 ========
All of the above figures, except the SEC registration fee, are estimates. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 67 of chapter 156B of the Massachusetts Business Corporation Law grants Genzyme the power to indemnify any director, officer, employee or agent to whatever extent permitted by Genzyme's Amended and Restated Articles of Organization, By-Laws or a vote adopted by the holders of a majority of the shares entitled to vote thereon, unless the proposed indemnitee has been adjudicated in any proceeding not to have acted in good faith in the reasonable belief that his or her actions were in the bet interests of Genzyme or, to the extent that the matter for which indemnification may include payment by Genzyme of expenses incurred in defending a civil or criminal action or proceeding in advance of the final disposition of such action or proceeding, upon receipt of an undertaking by the person indemnified to repay such payment if he or she shall be adjudicated to be not entitled to indemnification under the statute. Article VI of Genzyme's By-Law provides that Genzyme shall, to the extent legally permissible, indemnify each person who may serve or who has served at any time as a director or officer of Genzyme or of any of its subsidiaries, or who at the request of Genzyme may serve or at any time has served as a director, officer or trustee of, or in a similar capacity with, another organization or an employee benefit plan, against all expenses and liabilities (including counsel fees, judgments, fines, excise taxes, penalties and amounts payable in settlements) reasonably incurred by or imposed upon such person in connection with any threatened, pending or completed action, suit or other proceeding, whether civil, criminal, administrative or investigative, in which he or she may become involved by reason of his or her serving or having served in such capacity (other than a proceeding voluntarily initiated by such person unless he or she is successful on the merits, the proceeding was authorized by Genzyme or the proceeding seeks a declaratory judgment regarding his or her own conduct); provided that no indemnification shall be provided for any such person with respect to any matter as to which he or she shall have been finally adjudicated in any proceeding not to have acted in good faith in the reasonable belief that his or her action was in the best interests of the corporation or, to the extent such matter relates to service with respect to any employee benefit plan, in the best interests of the participants or beneficiaries of such employee of such employee benefit plan; and provided, further, that as to any matter disposed of by a compromise payment by such person, pursuant to a consent decree or otherwise, the payment and indemnification thereof have been approved by the corporation, which approval shall not unreasonably be withheld, or by a court of competent jurisdiction. Such indemnification shall include payment by Genzyme of expenses incurred in defending a civil or criminal action or proceeding in advance of the final disposition of such action or proceeding, upon receipt of an undertaking by the person indemnified to repay such payment if he or she shall be adjudicated to be not entitled to indemnification under Article VI, which undertaking may be accepted without regard to the financial ability of such person to me repayment. II-1 48 The indemnification provided for in Article VI is a contract right inuring to the benefit of the directors, officers and other entitled to indemnification. In addition, the indemnification is expressly not exclusive of any other rights to which such director, officer of other person may be entitled by contract or otherwise under law, and inures to the benefit of the heirs, executors and administrators of such a person. Genzyme also has in place agreements with certain officers and directors which affirm Genzyme's obligation to indemnify them to the fullest extent permitted by law and contain various procedural and other provisions which expand the protection afforded by Genzyme's By-Laws. Section 13(b)(1 1/2) of chapter 156B of the Massachusetts Business Corporation Law provides that a corporation may, in its articles of organization, eliminate a director's personal liability to the corporation and its stockholders for monetary damages for breaches of fiduciary duty, except in circumstances involving (i) a breach of the director's duty of loyalty to the corporation or its stockholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) unauthorized distributions and loans to insiders and (iv) transaction from which the director derived an improper personal benefit. Article VI.C.5. of Genzyme's Amended and Restated Articles of Organization provides that no director shall be personally liable to Genzyme or its stockholders for monetary damages for any breach of fiduciary duty as a director, except to the extent that such exculpation is not permitted under the Massachusetts Business Corporation Law as in effect when such liability is determined. ITEM 16. EXHIBITS See Exhibit Index immediately following signature page. ITEM 17. UNDERTAKINGS (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high value and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; and (iii) To include any material information with respect to the plan of distribution to previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the Registration Statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of the Exchange Act that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-2 49 (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) If the registrant is a foreign private issuer, to file a post-effective amendment to the registration statement to include any financial statements required by Rule 3-19 of Regulation S-X at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Securities Act need not be furnished, provided, that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, with respect to registration statements on Form F-3, a post-effective amendment need not be filed to include financial statements and information required by Section 10(a)(3) of the Securities Act or Rule 3-19 of Regulation S-X if such financial statements and information are contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated in the Form F-3. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of any employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions referred to in Item 15 hereof, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-3 50 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cambridge, Commonwealth of Massachusetts, on July 21, 1998. GENZYME CORPORATION By: /s/ DAVID J. MCLACHLAN ------------------------------------ David J. McLachlan, Executive Vice President Finance and Chief Financial Officer POWER OF ATTORNEY We, the undersigned officers and directors of Genzyme Corporation, hereby severally constitute and appoint each of Henri A. Termeer and David J. McLachlan our true and lawful attorneys, with full power to them in any and all capacities, to sign any amendments to this Registration Statement on Form S-3 (including pre- and post-effective amendments), and any related Rule 462(b) registration statement or amendment thereto, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ HENRI A. TERMEER Director and Principal Executive July 21, 1998 - --------------------------------------------------- Officer Henri A. Termeer /s/ DAVID J. MCLACHLAN Principal Financial and July 21, 1998 - --------------------------------------------------- Accounting Officer David J. McLachlan /s/ CONSTANTINE E. ANAGNOSTOPOULOS Director July 17, 1998 - --------------------------------------------------- Constantine E. Anagnostopoulos /s/ DOUGLAS A. BERTHIAUME Director July 21, 1998 - --------------------------------------------------- Douglas A. Berthiaume /s/ HENRY E. BLAIR Director July 21, 1998 - --------------------------------------------------- Henry E. Blair /s/ ROBERT J. CARPENTER Director July 21, 1998 - --------------------------------------------------- Robert J. Carpenter /s/ CHARLES L. COONEY Director July 21, 1998 - --------------------------------------------------- Charles L. Cooney /s/ HENRY R. LEWIS Director July 17, 1998 - --------------------------------------------------- Henry R. Lewis
II-4 51 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- ----------- *1.1 Form of Underwriting Agreement. 4.1 Restated Articles of Organization of Genzyme, as amended. Filed as Exhibit 1 to Genzyme's Registration Statement on Form 8-A filed with the Commission on June 18, 1997, and incorporated herein by reference. 4.2 By-laws of Genzyme. Filed as Exhibit 3.2 to Genzyme's Form 8-K dated December 31, 1991 (File No. 0-14680), and incorporated herein by reference. 4.3 Indenture, dated as of May 22, 1998, between Genzyme and State Street Bank and Trust Company, as Trustee, including the form of Note. Filed herewith. 4.4 Registration Rights Agreement, dated as of May 19, 1998, among Genzyme, Credit Suisse First Boston Corporation, Goldman, Sachs & Co. and Cowen & Company. Filed herewith. 4.5 Purchase Agreement, dated as of May 19, 1998, among Genzyme, Credit Suisse First Boston Corporation, Goldman, Sachs & Co. and Cowen & Company. Filed herewith. 4.6 Series Designation for Genzyme Molecular Oncology Division Common Stock, $.01 par value. Filed as Exhibit 2 to Genzyme's Registration Statement on Form 8-A filed with the Commission on June 18, 1997, and incorporated herein by reference. 4.7 Series Designation for the Series A, Series B and Series C Junior Participating Preferred Stock, $.01 par value, of Genzyme. Filed as Exhibit 3 to Genzyme's Registration Statement on Form 8-A filed with the Commission on June 18, 1997, and incorporated herein by reference. 4.8 Amended and Restated Rights Agreement dated as of June 12, 1997 between Genzyme and American Stock Transfer and Trust Company. Filed as Exhibit 5 to Genzyme's Registration Statement on Form 8-A filed with the Commission on June 18, 1997, and incorporated herein by reference. 4.9 Specimen Callable Warrant to purchase Genzyme Common Stock issued to shareholders of Neozyme II. Filed as Exhibit 28.6 to Genzyme's Form 10-Q for the quarter ended March 31,1992, and incorporated herein by reference. 4.10 Warrant issued to Richard Warren, Ph.D. Filed as Exhibit 4 to the Form 8-K of IG Laboratories, Inc. dated October 11, 1990 (File No. 0-18439), and incorporated herein by reference. 4.11 Genzyme Common Stock Purchase Warrant No. A-1 dated July 31, 1997 issued to Canadian Medical Discoveries Fund, Inc. ("CMDF"). Filed as Exhibit 10.2 to Genzyme's Form 10-Q for the quarter ended September 30, 1997, and incorporated herein by reference. 4.12 Genzyme Common Stock Purchase Warrant No. A-2 dated July 31, 1997 issued to CMDF. Filed as Exhibit 10.3 to Genzyme's Form 10-Q for the quarter ended September 30, 1997, and incorporated herein by reference. 4.13 Genzyme Common Stock Purchase Warrant No. A-3 dated July 31, 1997 issued to CMDF. Filed as Exhibit 10.3 to Genzyme's Form 10-Q for the quarter ended September 30, 1997, and incorporated herein by reference. 4.14 Registration Rights Agreement dated as of July 31, 1997 by and between Genzyme and CMDF. Filed as Exhibit 10.1 to Genzyme's Form 10-Q for the quarter ended September 30, 1997, and incorporated herein by reference. 4.15 Genzyme Molecular Oncology Division Convertible Debenture dated August 29, 1997, including a schedule with respect thereto filed pursuant to Instruction 2 to Item 601 of Regulation S-K. Filed as Exhibit 10.6 to Genzyme's Form 10-Q for the quarter ended September 30, 1997, and incorporated herein by reference. 4.16 Form of Genzyme General Division Convertible Debenture. Filed as Exhibit 10.7 to Genzyme's Form 10-Q for the quarter ended September 30, 1997, and incorporated herein by reference. 4.17 Registration Rights Agreement dated as of August 29, 1997 by and among Genzyme and the entities listed on the signature pages thereto. Filed as Exhibit 10.8 to Genzyme's Form 10-Q for the quarter ended September 30, 1997, and incorporated herein by reference. 4.18 Warrant Agreement between Genzyme and Comdisco, Inc. Filed as Exhibit 10.22 to a Form 10 of PharmaGenics, Inc. ("PharmaGenics") (File No. 0-20138), and incorporated herein by reference.
II-5 52
EXHIBIT NO. DESCRIPTION - ----------- ----------- 4.19 Form of Genzyme Corporation Convertible Note dated February 28, 1997 issued to Credit Suisse First Boston (Hong Kong) Ltd. ("CSFB"). Filed as Exhibit 4.14 to Genzyme's Form 10-K/A for the year ended December 31, 1997 filed with the Commission on April 27, 1998, and incorporated herein by reference. 4.20 Registration Rights Agreement dated February 27, 1997 by and between Genzyme and CSFB. Filed as Exhibit 4.15 to Genzyme's Form 10-K/A for the year ended December 31, 1997 filed with the Commission on April 27, 1998, and incorporated herein by reference. 5.1 Opinion of Palmer & Dodge LLP. Filed herewith. 12.1 Statements regarding Computation of Ratio of Earnings to Fixed Charges. Filed herewith. 23.1 Consent of PricewaterhouseCoopers LLP, independent accountants to Genzyme Corporation. Filed herewith. 23.2 Consent of Palmer & Dodge LLP (included in Exhibit 5.1 hereto). 24.1 Power of Attorney (included on signature page). 25.1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939, as amended, on Form T-1 of State Street Bank and Trust Company. Filed herewith.
- --------------- * To be filed by amendment or incorporated by reference in connection with any underwritten offering. II-6 EX-4.3 2 INDENTURE 1 EXHIBIT 4.3 GENZYME CORPORATION and STATE STREET BANK AND TRUST COMPANY, as Trustee ------------------ INDENTURE Dated as of May 22, 1998 ------------------ 5-1/4% Convertible Subordinated Notes Due 2005 2 CROSS-REFERENCE TABLE Trust Indenture Indenture Act Section Section ----------- ------- Section 310(a)(1).................................................. 8.10 (a)(2).................................................... 8.10 (a)(3).................................................... N.A. (a)(4).................................................... N.A. (a)(5).................................................... N.A. (b)....................................................... 8.08; 8.10 (c)....................................................... N.A. Section 311(a)...................................................... 8.11 (b)....................................................... 8.11 (c)....................................................... N.A. Section 312(a) ..................................................... 2.05 (b)....................................................... 13.03 (c)....................................................... 13.03 Section 313(a)...................................................... 8.06 (b)(1).................................................... N.A. (b)(2).................................................... 8.06 (c)....................................................... 8.06 (d)....................................................... 8.06 Section 314(a)..................................................... 5.02; 5.03 (b)....................................................... N.A. (c)(1).................................................... 13.04 (c)(2).................................................... 13.04 (c)(3).................................................... N.A. (d)....................................................... N.A. (e)....................................................... 13.05 (f)....................................................... N.A. Section 315(a)..................................................... 8.01(b) (b)....................................................... 8.05 (c)....................................................... 8.01(a) (d)....................................................... 8.01(c) (e)....................................................... 7.11 Section 316(a)(last sentence)....................................... 2.09 (a)(1)(A)................................................. 7.05 (a)(1)(B)................................................. 7.04 (a)(2).................................................... N.A. (b)....................................................... 7.07 (c)....................................................... N.A. Section 317(a)(1)................................................... 7.08 (a)(2).................................................... 7.09 (b)....................................................... 2.04 Section 318(a)..................................................... 13.01 - ---------- N.A. means Not Applicable. NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. 3 TABLE OF CONTENTS Article Section Heading Page - ------- ------- ------- ---- ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE 1.01. Definitions.............................................. 1 1.02. Other Definitions........................................ 4 1.03. Incorporation by Reference of Trust Indenture Act........ 5 1.04. Rules of Construction.................................... 5 ARTICLE 2. THE SECURITIES 2.01. Form and Dating......................................... 6 2.02. Execution and Authentication............................ 6 2.03. Registrar, Paying Agent, Conversion Agent, New York Presenting Agent and Securities Custodian.................................. 7 2.04. Payment on Securities; Paying Agent to Hold Money in Trust................................... 8 2.05. Securityholder Lists.................................... 9 2.06. Transfer and Exchange................................... 9 2.07. Replacement Securities.................................. 13 2.08. Outstanding Securities.................................. 13 2.09. Treasury Securities..................................... 13 2.10. Temporary Securities.................................... 14 2.11. Cancellation............................................ 14 2.12. Defaulted Interest...................................... 14 2.13. CUSIP Numbers........................................... 14 ARTICLE 3. REDEMPTION 3.01. Notices to Trustee...................................... 15 3.02. Selection of Securities to Be Redeemed.................. 15 3.03. Notice of Redemption.................................... 15 3.04. Effect of Notice of Redemption.......................... 17 3.05. Deposit of Redemption Price............................. 17 3.06. Securities Redeemed in Part............................. 17 ARTICLE 4. REPURCHASE OF SECURITIES AT THE OPTION OF THE HOLDERS UPON A FUNDAMENTAL CHANGE 4.01. Repurchase upon Fundamental Change...................... 17 4.02. Notices, Etc............................................ 18 4.03. Exercising Repurchase Right............................. 18 4.04. Certain Definitions..................................... 19 -i- 4 Article Section Heading Page - ------- ------- ------- ---- ARTICLE 5. COVENANTS 5.01. Payment of Securities................................... 21 5.02. SEC Reports............................................. 22 5.03. Compliance Certificate.................................. 22 5.04. Corporate Existence..................................... 22 5.05. Notice of Defaults...................................... 23 5.06. Further Instruments and Acts............................ 23 5.07. Resale of Certain Securities; Reporting Issuer.......... 23 5.08. Registration Rights..................................... 23 ARTICLE 6. SUCCESSORS 6.01. When Company May Merge, Etc............................. 25 ARTICLE 7. DEFAULTS AND REMEDIES 7.01. Events of Default....................................... 26 7.02. Acceleration............................................ 27 7.03. Other Remedies.......................................... 28 7.04. Waiver of Past Defaults................................. 28 7.05. Control by Majority..................................... 28 7.06. Limitation on Suits..................................... 29 7.07. Rights of Holders to Receive Payment.................... 29 7.08. Collection Suit by Trustee.............................. 30 7.09. Trustee May File Proofs of Claim........................ 30 7.10. Priorities.............................................. 30 7.11. Undertaking for Costs................................... 31 ARTICLE 8. TRUSTEE 8.01. Duties of Trustee....................................... 31 8.02. Rights of Trustee....................................... 32 8.03. Individual Rights of Trustee............................ 33 8.04. Trustee's Disclaimer.................................... 33 8.05. Notice of Defaults...................................... 33 8.06. Reports by Trustee to Holders........................... 34 8.07. Compensation and Indemnity.............................. 34 8.08. Replacement of Trustee.................................. 35 8.09. Successor Trustee, Agents by Merger, Etc................ 36 8.10. Eligibility; Disqualification........................... 36 8.11. Preferential Collection of Claims Against Company....... 37 ARTICLE 9. DISCHARGE OF INDENTURE 9.01. Termination of Company's Obligations.................... 37 9.02. Application of Trust Money.............................. 38 -ii- 5 Article Section Heading Page - ------- ------- ------- ---- 9.03. Repayment to Company.................................... 38 9.04. Indemnity for Government Obligations.................... 39 9.05. Reinstatement........................................... 39 ARTICLE 10. AMENDMENTS, SUPPLEMENTS AND WAIVERS 10.01. Without Consent of Holders.............................. 39 10.02. With Consent of Holders................................. 40 10.03. Compliance with Trust Indenture Act..................... 41 10.04. Revocation and Effect of Consents....................... 41 10.05. Notation on or Exchange of Securities................... 41 10.06. Trustee to Sign Amendments, Etc......................... 41 ARTICLE 11. CONVERSION 11.01. Conversion Privilege.................................... 42 11.02. Conversion Procedure.................................... 43 11.03. Fractional Shares....................................... 44 11.04. Taxes on Conversion..................................... 44 11.05. Company to Provide Stock................................ 44 11.06. Adjustment for Change in Capital Stock.................. 45 11.07. Adjustment for Rights Issue............................. 45 11.08. Adjustment for Certain Distributions.................... 46 11.09. Adjustment for All Cash Distribution.................... 47 11.10. Adjustment for Tender or Exchange Offer................. 48 11.11. Current Market Price.................................... 50 11.12. When Adjustment May Be Deferred......................... 50 11.13. When No Adjustment Required............................. 50 11.14. Notice of Adjustment.................................... 51 11.15. Voluntary Reduction..................................... 51 11.16. Notice of Certain Transactions.......................... 51 11.17. Provisions in Case of Consolidation, Merger of the Company or Transfer or Lease..................................... 52 11.18. Company Determination Final............................. 53 11.19. Trustee's Disclaimer.................................... 53 ARTICLE 12. SUBORDINATION 12.01. Agreement to Subordinate................................ 53 12.02. Certain Definitions..................................... 53 12.03. Liquidation; Dissolution; Bankruptcy.................... 54 12.04. Company Not to Make Payments with Respect to Securities in Certain Circumstances......................................... 55 12.05. Acceleration of Securities.............................. 56 12.06. When Distribution Must Be Paid Over..................... 56 12.07. Notice by Company....................................... 56 12.08. Subrogation............................................. 56 12.09. Relative Rights......................................... 56 -iii- 6 Article Section Heading Page - ------- ------- ------- ---- 12.10. Subordination May Not Be Impaired by Company............ 57 12.11. Distribution or Notice to Representative................ 57 12.12. Rights of Trustee and Paying Agent...................... 57 ARTICLE 13. MISCELLANEOUS 13.01. Trust Indenture Act Controls............................ 59 13.02. Notices................................................. 59 13.03. Communications by Holders with Other Holders............ 60 13.04. Certificate and Opinion as to Conditions Precedent...... 60 13.05. Statements Required in Certificate or Opinion........... 60 13.06. Rules by Trustee and Agents............................. 61 13.07. Legal Holidays.......................................... 61 13.08. Governing Law........................................... 61 13.09. No Recourse Against Others.............................. 61 13.10. Successors.............................................. 61 13.11. Counterpart Originals................................... 62 13.12. Severability............................................ 62 SIGNATURES APPENDIX 1 RULE 144A/REGULATION S APPENDIX EXHIBIT A - FORM OF GLOBAL SECURITY EXHIBIT B - FORM OF DEFINITIVE SECURITY - ---------- Note: This Table of Contents shall not, for any purpose, be deemed to be a part of the Indenture. -iv- 7 INDENTURE dated as of May 22, 1998, between GENZYME CORPORATION, a Massachusetts corporation (the "Company"), and State Street Bank and Trust Company, a Massachusetts banking corporation (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's 5-1/4% Convertible Subordinated Notes Due 2005 (the "Securities"): ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. "Affiliate" means any person, directly or indirectly, controlling or controlled by or under direct or indirect common control with the Company. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent" means any Registrar, Paying Agent, Conversion Agent, New York Presenting Agent or Co-Registrar. "Beneficial Holder" means each participant in the Depository who holds an interest in a Security as indicated in the Participants List (provided, however, that the Trustee shall be under no duty to make any inquiry regarding the accuracy of the Participants List). "Board of Directors" or "Board" means the Board of Directors of the Company or any duly authorized committee of the Board. "Company" means the party named as such above. until a successor replaces it pursuant to the applicable provisions hereof and thereafter means the successor. "Default" means any event which is, or after notice or passage of time would be, an Event of Default. 8 -2- "Depository" means, with respect to the Securities issuable or issued in whole or in part in global form, the person specified in Section 2.03 as the Depository with respect to the Securities, until a successor shall have been appointed and become such pursuant to the applicable provisions of this Indenture, and, thereafter, "Depository" shall mean or include such successor. "Genzyme General" means Genzyme Corporation's General Division. "GMO Stock" means shares of the series designated as Genzyme Molecular Oncology Division Common Stock of the Company. "GTR Stock" means shares of the series designated as Genzyme Tissue Repair Division Common Stock of the Company. "Holder" or "Securityholder" means the person in whose name a Security is registered on the Registrar's books. "Indenture" means this Indenture, as amended or supplemented from time to time. "Officer" means the Chairman, the President, any Executive or Senior Vice President, the Treasurer or the Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers. See Sections 13.04 and 13.05. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company. See Sections 13.04 and 13.05. "Over-Allotment Option" means the option granted by the Company to the Initial Purchasers to purchase up to $25,000,000 aggregate principal amount of additional Securities pursuant to the Purchase Agreement, dated May 19, 1998, between such parties. "Participants List" means the position listings showing persons that have a beneficial interest in the Securities evidenced by the Security in global form held by the Depository and the amount of such interest, but only to the extent that a copy thereof is furnished by the Depository to the Trustee. 9 -3- "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof and, for purposes of Article 4, shall have the additional meaning set forth in Section 4.04(c). "Quoted Prices" of the GGD Stock means the last sale price regular way or, in case no such sale takes place on such day, the average of the closing bid and asked prices regular way, in either case on the New York Stock Exchange Composite Tape, or, if the GGD Stock is not listed or admitted to trading on such Exchange, on the national securities exchange in or nearest the City of New York on which the GGD Stock is listed or admitted to trading, or if the GGD Stock is not listed or admitted to trading on any national securities exchange, the last sale price regular way or, in case no such sale takes place on such day, the average of the highest reported bid and lowest reported asked prices as furnished by the National Association of Securities Dealers, Inc. through Nasdaq or a similar organization if Nasdaq is no longer reporting such information, or if on any such Trading Day the GGD Stock is not quoted by any such organization, the average of the highest reported bid and lowest reported asked prices as available in any other over-the-counter market, or if on such Trading Day the GGD Stock is not reported in any such market, the fair value of a share of GGD Stock on such day, as determined in good faith by, and evidenced by a resolution of, the Board of Directors. "Record Date," for purposes of Section 11.07, has the meaning set forth in such Section and, for purposes of Section 11.08, has the meaning set forth in such Section. "SEC" means the Securities and Exchange Commission. "Securities" means the Securities described above issued, authenticated and delivered under this Indenture. "Securities Act" means the Securities Act of 1933, as amended. "Securities Custodian" means State Street Bank and Trust Company, as custodian with respect to the Securities in global form, or any successor entity thereto. "Subsidiary" means a corporation, a majority of the voting stock of which is owned, directly or indirectly, by the 10 -4- Company or by one or more Subsidiaries, or by the Company and one or more other Subsidiaries. "TIA" means the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 and as in effect on the date of this Indenture, except to the extent any amendment to the Trust Indenture Act expressly provides for application of the Trust Indenture Act as in effect on another date. "Trading Day" means each Monday, Tuesday, Wednesday, Thursday and Friday other than any day on which securities are not traded on the principal exchange or market on which the securities in question are traded. "Trust Officer" means any officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Trustee" means the party named as such above until a successor replaces it pursuant to the applicable provisions hereof and thereafter means the successor. SECTION 1.02. Other Definitions. Defined Term In Section - ---- ---------- "Agent Members" ................................................... App. 1 "Bankruptcy Law" .................................................. 7.01 "Capital Stock".................................................... 4.04 "Company Notice" .................................................. 4.02 "Conversion Agent" ................................................ 2.03 "Current Market Price" ............................................ 11.11 "Custodian" ....................................................... 7.01 "Event of Default" ................................................ 7.01 "Exchange Act" .................................................... 4.04 "Expiration Time".................................................. 11.10 "Final Surrender Date" ............................................ 4.03 "Fundamental Change" .............................................. 4.04 "GGD Stock" ....................................................... 11.01 "Global Security".................................................. App. 1 "Initial Purchasers"............................................... App. 1 "Legal Holiday" ................................................... 13.07 "New York Presenting Agent" ....................................... 2.03 "Paying Agent" .................................................... 2.03 "Purchase Agreement"............................................... App. 1 "Purchased Shares" ................................................ 11.10 11 -5- "QIB".............................................................. App. 1 "Registrar" ....................................................... 2.03 "Registration Default"............................................. 5.08 "Registration Rights Agreement".................................... App. 1 "Regulation S"..................................................... App. 1 "Representative" .................................................. 12.02 "Repurchase Date" ................................................. 4.03 "Repurchase Price" ................................................ 4.01 "Rule 144A"........................................................ App. 1 "Senior Indebtedness" ............................................. 12.02 "Shelf Registration Statement"..................................... 12.02 "Transfer Restricted Securities"................................... App. 1 "U.S. Government Obligations" ..................................... 9.01 "Voting Shares" ................................................... 4.04 provided, that whenever the definition contained in such section limits its application to the term as used in specific sections, the foregoing shall not be deemed to expand the application of such definition to the term as used in any section other than such specific sections. SECTION 1.03. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company or any other obligor on the Securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.04. Rules of Construction. Unless the context otherwise requires: 12 -6- (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles; (3) "or" is not exclusive; (4) words in the singular include the plural, and words in the plural include the singular; and (5) provisions apply to successive events and transactions. ARTICLE 2. THE SECURITIES SECTION 2.01. Form and Dating. Certain provisions relating to the Securities are set forth in Appendix 1, the Rule 144A/Regulation S Appendix, attached hereto (the "Appendix"), which is hereby incorporated in and expressly made part of this Indenture. The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A with respect to Securities in global form or Exhibit B with respect to Securities in definitive form which are hereby incorporated in and expressly made a part of this Indenture. In the limited circumstances described herein, the global Security may be exchanged for definitive certificated Securities substantially in the form of Exhibit B. The Securities shall be issued without coupons and only in denominations of $1,000 or any integral multiple thereof. Payment of principal of and premium, if any, and interest on any Security in either global or definitive form shall be made to the Holder thereof. SECTION 2.02. Execution and Authentication. Two Officers shall sign the Securities on behalf of the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Securities. 13 -7- If an Officer whose signature is on a Security no longer holds that office at the time the Security is authenticated, the Security shall nevertheless be valid. A Security shall not be valid until authenticated by the manual signature of the Trustee. The Trustee's signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate and make available for delivery Securities for original issue in an aggregate principal amount of $225,000,000 upon a Company order without any further action by the Company; provided, however, that in the event that the Company sells any Securities pursuant to the Over-Allotment Option, then the Trustee shall authenticate and deliver Securities for original issue in an aggregate principal amount of $225,000,000 plus up to an additional $25,000,000 aggregate principal amount of the Securities sold pursuant to the Over-Allotment Option upon a Company order without any further action by the Company. The aggregate principal amount of the Securities outstanding at any time may not exceed the amount set forth in the foregoing sentence, subject to the proviso set forth therein, except as provided in Section 2.07. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so, other than upon original issuance or pursuant to Section 2.07. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate. SECTION 2.03. Registrar, Paying Agent, Conversion Agent, New York Presenting Agent and Securities Custodian. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or exchange (the "Registrar"), an office or agency where Securities may be presented for payment (the "Paying Agent") and an office or agency where Securities may be presented for conversion (the "Conversion Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may appoint one or more Co-Registrars, one or more additional Paying Agents and one or more additional Conversion Agents. The Company may act as Registrar, Paying Agent, Conversion Agent or Co-Registrar. The term "Paying Agent" includes any additional paying agent; the term "Conversion Agent" includes any additional conversion agent. The Company shall notify the 14 -8- Trustee of the name and address of any Agent not a party to this Indenture and shall give the Trustee at least thirty days' notice prior to changing the Registrar, Paying Agent or Conversion Agent. If the Company fails to maintain a Registrar, Paying Agent or Conversion Agent, the Trustee shall act as such. The Company initially appoints the Trustee as Paying Agent, Registrar and Conversion Agent. If there is not at least one of each such Registrar or Co-Registrar, Paying Agent and Conversion Agent located in the Borough of Manhattan, the City of New York, the Company shall also maintain an office in the Borough of Manhattan, the City of New York where the securities may be presented for purposes of transfer and exchange, payment and conversion (the "New York Presenting Agent"). The Company initially appoints State Street Bank and Trust Company, having an office at 61 Broadway, New York, New York 10006, to serve as New York Presenting Agent. The Company initially appoints The Depository Trust Company ("DTC") to act as Depository with respect to the Securities in global form. The Company initially appoints State Street Bank and Trust Company to act as Securities Custodian with respect to the Securities in global form. SECTION 2.04. Payment on Securities; Paying Agent to Hold Money in Trust. (a) Subject to the following provisions, no later than 11:00 a.m. on the due date of principal of and premium, if any, and interest on the Securities, the Company will pay to the Paying Agent in immediately available funds the amounts, in money of the United States that at the time of payment is legal tender for payment of public or private debts, in the manner, at the times and for the purposes set forth herein and in the text of the Securities, and the Company hereby authorizes and directs the Paying Agent from funds so paid to it to make or cause to be made payment of the principal of and premium, if any, and interest on the Securities set forth herein and in the text of the Securities. The Paying Agent will make payment, from the funds furnished by the Company, of the principal of and premium, if any, and interest on the Securities by check drawn upon a bank in the city in which the Paying Agent's principal office is located, or make payment by wire transfer upon terms acceptable to the Paying Agent. 15 -9- (b) Interest on a Security (other than defaulted interest) shall be paid on each interest payment date to the Holder thereof at the close of business on the relevant record date specified in the Securities. Principal of and premium, if any, on Securities shall be payable only against presentation and surrender thereof at the principal office of the Paying Agent, unless the Company shall have otherwise instructed the Trustee in writing. (c) The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or premium, if any, or interest on the Securities, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. If the Company acts as Paying Agent, it shall segregate the money held by it for the payment of principal of and premium, if any, and interest on the Securities and hold it as a separate trust fund. The Company shall provide ten days prior written notice to the Trustee that it is to act as Paying Agent with respect to such payment and the Trustee may rely on such notice. The Company at any time may require a Paying Agent to pay all money held by the Paying Agent to the Trustee. Upon doing so the Paying Agent shall have no further liability for the money so paid. SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee not less than five days prior to each interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.06. Transfer and Exchange. (a) The transfer and exchange of Securities in global form shall be effected through the Depository, in accordance with this Indenture and the procedures of the Depository therefor. When definitive Securities are presented to the Registrar with a request to register the transfer of such definitive Securities or to exchange such definitive Securities for an equal principal amount of definitive Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such 16 -10- transaction are met; provided, however, that the definitive Securities surrendered for transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar, duly executed by the Holder thereof or his attorney, duly authorized in writing; provided, further, that, with respect to any Securities offered and sold in reliance on the provisions of Regulation S under the Securities Act, the Registrar shall not register the transfer nor make the exchange of any such Securities surrendered for transfer or exchange, respectively, other than in accordance with the provisions of Regulation S under the Securities Act, pursuant to registration under the Securities Act or pursuant to an available exemption from registration. To permit registrations of transfers and exchanges, the Company shall execute and the Trustee (or an authenticating agent appointed pursuant to Section 2.02) shall authenticate and deliver definitive Securities at the Registrar's request. No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or other governmental charge payable in connection with any registration of transfer or exchange (other than any such transfer taxes or similar governmental charge payable upon exchanges or transfers pursuant to Sections 2.10, 3.06, 4.03, 10.05 or 11.02). The Registrar shall not be required to register the transfer of or exchange any definitive Security selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. (b) Notwithstanding any other provisions of this Indenture (other than the provisions set forth in subsection (c) of this Section), a Security in global form may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (c) In the event that a Global Security is exchanged for Securities in definitive registered form pursuant to Sec- 17 -11- tion 2.4 of Appendix 1 or Section 2.10 of the Indenture, prior to the effectiveness of a Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.06 (including the certification requirements set forth on the reverse of the Securities intended to ensure that such transfers comply with Rule 144A or Regulation S, as the case may be) and such other procedures as may from time to time be adopted by the Company. (d) If at any time the Depository for the Securities notifies the Company that it is unwilling or unable to continue as Depository for the Securities, the Company may appoint a successor Depository with respect to the Securities. If a successor Depository for the Securities is not appointed by the Company within 90 days after the Company receives such notice, the Company will execute, and the Trustee, upon receipt of an Officers' Certificate for the authentication and delivery of definitive Securities, will authenticate and deliver, Securities in definitive form, in an aggregate principal amount equal to the principal amount of the Securities in global form, in exchange for such Securities in global form. The Company may at any time and in its sole discretion determine that the Securities issued in the form of global Securities shall no longer be represented by such global Securities. In such event the Company will execute, and the Trustee, upon receipt of an Officers' Certificate for the authentication and delivery of definitive Securities, will authenticate and deliver, Securities in definitive form in an aggregate principal amount equal to the principal amount of the Securities in global form, in exchange for such Securities in global form. If a definitive Security is issued in exchange for any portion of a global Security after the close of business at the office or agency where such exchange occurs on any record date and before the opening of business at such office or agency on the next succeeding interest payment date, interest will not be payable on such interest payment date in respect of such definitive Security, but will be payable on such interest payment date only to the person to whom interest in respect of such portion of such global Security is payable in accordance with the provisions of this Indenture. Definitive Securities issued in exchange for a Security in global form pursuant to this Section 2.06 shall be registered in such names and in such authorized denominations as 18 -12- the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. Upon execution and authentication, the Trustee shall deliver such definitive Securities to the Persons in whose names such Securities are so registered. (e) A definitive Security may not be exchanged by the Holder for a beneficial interest in Securities in global form except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a definitive Security, duly endorsed or accompanied by appropriate instruments of exchange or transfer, as the case may be, in form satisfactory to the Trustee, together with (i) certification in the form set forth on the reverse of the Security that such definitive Security is being transferred to a QIB in accordance with Rule 144A and (ii) written instructions directing the Trustee to make, or to direct the Securities Custodian to make, an adjustment on its books and records with respect to such global Security to reflect an increase in the aggregate principal amount of Securities represented thereby, such instructions to include information regarding the Depository account to be credited with such increase, unless the Company shall no longer maintain global securities, then the Trustee shall cancel such definitive Security and cause, or direct the Securities Custodian to cause, in accordance with the standing instructions and procedures existing between the Depository and the Securities Custodian, the aggregate principal amount of Securities represented by the Security in global form to be increased accordingly. (f) At such time as all interests in a Security in global form have either been exchanged for definitive Securities, redeemed, converted, repurchased or cancelled, such Security in global form shall be cancelled by the Trustee in accordance with the standing procedures and instructions existing between the Depository and the Securities Custodian. At any time prior to such cancellation, if any interest in a global Security is exchanged for definitive Securities, redeemed, converted, repurchased or cancelled, the principal amount of Securities represented by such Security in global form shall, in accordance with the standing procedures and instructions existing between the Depository and the Securities Custodian, be reduced and an endorsement shall be made on such Security in global form, by the Trustee or the Securities Custodian, at the direction of the Trustee, to reflect such reduction. Neither the Company nor the Registrar shall be required (i) to issue, register the transfer of or exchange Securities during a period beginning at the opening of business fifteen days before the day of any selection of Securities for redemption under Section 3.02 and ending at the close of business 19 -13- on the day of selection, or (ii) to register the transfer or exchange of any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. SECTION 2.07. Replacement Securities. If the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, or if a mutilated Security is surrendered to the Trustee, the Company shall issue and the Trustee shall authenticate a replacement Security if the Trustee's requirements are met. If an indemnity bond is required by the Trustee or the Company, such bond must be sufficient, in the judgment of both the Trustee and the Company, to protect the Company, the Trustee, any Agent or any authenticating agent from any loss which any of them may suffer if a Security is replaced. The Company may charge for its expenses incurred in replacing a Security. Every replacement Security shall be an additional obligation of the Company. SECTION 2.08. Outstanding Securities. The Securities outstanding at any time are all Securities authenticated by the Trustee (or an authenticating agent appointed pursuant to Section 2.02) except for those cancelled by the Trustee, those delivered to the Trustee for cancellation, those reductions in the interests in a global Security effected by the Trustee hereunder, and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. If Securities are considered paid under Section 5.01, they cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Treasury Securities. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or an Affiliate shall be 20 -14- disregarded, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. SECTION 2.10. Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and execute and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Every temporary Security shall be executed by the Company and authenticated by the Trustee, and registered by the Registrar, upon the conditions, and with like effect, as a definitive Security. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities in exchange for temporary Securities. SECTION 2.11. Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar, Paying Agent and Conversion Agent shall promptly forward to the Trustee any Securities surrendered to them for registration of transfer, exchange, payment or conversion. The Trustee shall cancel all Securities surrendered for registration of transfer, exchange, payment, conversion or cancellation and may destroy cancelled Securities and deliver a certificate of such destruction to the Company, unless the Company directs the Trustee to deliver cancelled Securities to the Company. The Company may not issue new Securities to replace Securities that it has paid or delivered to the Trustee for cancellation or that any Securityholder has converted pursuant to Article 11. SECTION 2.12. Defaulted Interest. If the Company defaults in a payment of interest on the Securities, it shall pay the defaulted interest in any lawful manner not inconsistent with the requirements of any securities exchange on which the Securities are listed. It may pay the defaulted interest, plus any interest payable on the defaulted interest, to the Persons who are Securityholders on a subsequent special record date. The Company shall fix the record date and payment date for the payment of any defaulted interest. At least 15 days before the record date, the Company shall mail to each Securityholder and the Trustee a notice that states the record date, payment date and amount of interest to be paid. SECTION 2.13. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in 21 -15- use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the CUSIP numbers. ARTICLE 3. REDEMPTION SECTION 3.01. Notices to Trustee. If the Company wishes to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee of the redemption date and the principal amount of Securities to be redeemed at least 45 days before the redemption date. SECTION 3.02. Selection of Securities to Be Redeemed. If less than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed by lot, or in its discretion, on a pro rata basis from Securities outstanding and not previously called for redemption (unless the Company specifically directs the Trustee otherwise), in such manner as the Trustee shall deem fair and appropriate. The Trustee shall make the selection (and provide the Company with written notice of such selection) at least 30 days but not more than 60 days before the redemption date. Securities and portions of them the Trustee selects for redemption shall be in amounts of $1,000 or integral multiples of $1,000. In the event that the Trustee is not the Registrar, the Registrar shall provide to the Trustee such information as the Trustee may reasonably request to implement the selection. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a redemption date, the Company shall mail a notice of redemption to the Trustee and each Holder whose Securities are to be redeemed. 22 -16- The notice shall identify the Securities (including CUSIP numbers, if any) to be redeemed and shall state: (1) the redemption date; (2) the redemption price; (3) the conversion price; (4) the name and address of the Paying Agent and Conversion Agent; (5) that Securities called for redemption may be converted at any time before the close of business on the business day immediately preceding the redemption date; (6) that Holders who want to convert Securities must satisfy the requirements set forth in paragraph 8 of the Securities; (7) that Securities called for redemption must be surrendered to the Paying Agent in order to collect the redemption price; (8) that interest on Securities called for redemption ceases to accrue on and after the redemption date (unless funds in the requisite amount are not paid or made available for payment on that date), and the amount of interest accrued on the Securities called for redemption up to but not including the redemption date; (9) if less than all of any Security is to be redeemed, the principal amount of such Security to be redeemed; (10) the CUSIP number, if any, printed on the Securities being redeemed; and (11) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities. Upon ten days prior notice to the Trustee, the Company may request that the Trustee mail the notice of redemption (prepared by the Company) in the Company's name and at its expense. 23 -17- SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption, unless theretofore converted into GGD Stock pursuant to the terms of this Indenture, shall become due and payable on the redemption date at the redemption price. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price, plus accrued interest to the redemption date; provided, however, that any regular semi-annual payment of interest becoming due on the redemption date shall be payable to the Holder of any such Security as provided in paragraph 2 of the Securities. SECTION 3.05. Deposit of Redemption Price. No later than 11:00 a.m. on the redemption date, the Company shall deposit in immediately available funds with the Paying Agent money sufficient to pay the redemption price of and interest accrued to the redemption date on all Securities to be redeemed on that date other than Securities or portions thereof called for redemption on that date which have been delivered by the Company to the Trustee for cancellation. The Paying Agent shall return to the Company any money not required for that purpose because of conversion of Securities. SECTION 3.06. Securities Redeemed in Part. Upon surrender to the Trustee of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder a new Security equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE 4. REPURCHASE OF SECURITIES AT THE OPTION OF THE HOLDERS UPON A FUNDAMENTAL CHANGE SECTION 4.01. Repurchase upon Fundamental Change. The Company covenants and agrees that, in the event that there occurs a Fundamental Change (as defined in Section 4.04(d) hereof), each Holder will have the right, at such Holder's option, to require the Company to repurchase all, or any portion that is an integral multiple of $1,000, of such Holder's Securities on the Repurchase Date (as defined in Section 4.03 below) selected as provided below at a repurchase price (the "Repurchase Price") which is equal to 100% of the principal amount of such Securities plus accrued interest to the Repurchase Date. 24 -18- SECTION 4.02. Notices, Etc. Unless the Company shall have theretofore called for redemption all the outstanding Securities, on or before the 30th day after the occurrence of a Fundamental Change, the Company shall deliver to the Trustee, and the Company shall, or, if so requested by the Company upon ten days' prior written notice, the Trustee shall, in the name of the Company and at its expense, mail to each Holder at such Holder's address appearing in the Securities Register a written notice (the "Company Notice") describing the occurrence of the Fundamental Change and of the repurchase right set forth herein arising as a result thereof, as well as stating the final date by which the Securities must be surrendered for repurchase, the conversion price then in effect, the Repurchase Date, the Repurchase Price and the procedure which the Holder must follow to elect repurchase. The Company shall also cause a copy of such notice of the repurchase right to be published in a newspaper of general circulation in the Borough of Manhattan, The City of New York. No failure of the Company to give the foregoing notices or defect therein shall limit any Holder's right to exercise a repurchase right or affect the validity of the proceedings for the repurchase of Securities. SECTION 4.03. Exercising Repurchase Right. (a) To elect repurchase of any Securities or portion thereof, the Holder will be required to surrender, on or before the Final Surrender Date (as defined below), (i) in the case of global Securities, to the Conversion Agent by book-entry delivery of the interest in the Security in global form to be repurchased, or (ii) in the case of definitive Securities, at any place where principal is payable, such Security duly endorsed or assigned to the Company or in blank, in any event together with written notice of the Holder's election to have the Company repurchase all or any $1,000 portion of such Security specified in such notice. Election of repurchase by a Holder shall be irrevocable (unless the Company defaults in payment of the repurchase price for the Securities on the repurchase date) and the right to convert the Securities as to which such Holder has made such election shall expire when such Securities are so surrendered (unless the Company defaults in payment of the repurchase price for the Securities on the repurchase date and such election is revoked). "Final Surrender Date" shall mean the date which is, subject to any contrary requirements of applicable law, 60 days after the date of mailing of the Company Notice. "Repurchase Date" shall mean the date selected by the Company for the repurchase of the Securities that is not 25 -19- less than 10 and not more than 30 days after the Final Surrender Date. (b) In the event a repurchase right shall be exercised in accordance with the terms hereof, the Company shall pay or cause to be paid the Repurchase Price in cash to the Holder on the Repurchase Date; provided, however, that installments of interest that mature on or prior to the Repurchase Date shall be payable in cash to the Holders of such Securities, registered as such at the close of business on the relevant record date specified in the Securities according to the terms and provisions of Article 2. (c) If any Security surrendered for repurchase shall not be so paid on the Repurchase Date, the principal amount which is payable at maturity shall, until the Repurchase Price (as calculated at the date of payment) is paid, continue to bear interest from the Repurchase Date at the rate borne by the Security and each such Security shall continue to remain convertible into Common Stock until said Repurchase Price shall have been paid to the Holder or duly provided for by deposit with the Paying Agent in immediately available funds without restriction. (d) Any Security which is to be repurchased only in part shall be surrendered to the Trustee (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal of the Security so surrendered. SECTION 4.04. Certain Definitions. For purposes of this Article: (a) The term "Capital Stock" shall mean capital stock of the Company that does not rank prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, to shares of capital stock of any other class of the Company; (b) The term "Fundamental Change" shall mean any of the following: 26 -20- (i) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), becoming the "beneficial owner" (as defined in Rule l3d-3 under the Exchange Act) of Voting Shares (as defined below) of the Company entitled to exercise more than 50% of the total voting power of all outstanding Voting Shares of the Company (including any right to acquire Voting Shares that are not then outstanding of which such person or group is deemed the beneficial owner); or (ii) a change in the Board of Directors in which the individuals who constituted the Board of Directors at the beginning of the two-year period immediately preceding such change (together with any other director whose election by the Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of at least two-thirds of the directors then in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors then in office; or (iii) any consolidation of the Company with, or merger of the Company into, any other Person, any merger of another Person into the Company, or any sale or transfer of all or substantially all of the assets of the Company to another Person (other than (x) a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of GGD Stock, (y) a merger which is effected solely to change the jurisdiction of incorporation of the Company or (z) any consolidation with or merger of the Company into a wholly-owned subsidiary of the Company, or any sale or transfer by the Company of all or substantially all of its assets to one or more of its wholly-owned subsidiaries, in any one transaction or a series of transactions, provided, in any such case, that the resulting corporation or each such subsidiary assumes or guarantees the Company's obligations under the Securities); provided, however, that a Fundamental Change shall not occur with respect to any such transaction if either (i) the last sale price of the GGD Stock for any five Trading Days during the ten Trading Days immediately preceding the public announcement by the Company of 27 -21- such transaction is at least equal to 105% of the conversion price in effect on such Trading Day or (ii) the consideration in such transaction to the holders of GGD Stock consists of cash, securities that are, or immediately upon issuance will be, listed on a national securities exchange or quoted on the Nasdaq National Market, or a combination of cash and such securities, and the aggregate fair market value of such consideration (which, in the case of such securities, shall be equal to the average of the last sale prices of such securities during the ten consecutive Trading Days commencing with the sixth Trading Day following consummation of the transaction) is at least 105% of the conversion price in effect on the date immediately preceding the closing date of such transaction; (c) The term "Person" shall include any syndicate or group which would be deemed to be a "person" under Section 13(d)(3) of the Exchange Act as in effect on the date of the original execution of this Indenture; and (d) The term "Voting Shares" shall mean all outstanding shares of any class or series (however designated) of Capital Stock entitled to vote generally in the election of members of the Board of Directors and includes, without limitation, the GGD Stock, the GTR Stock and the GMO Stock. ARTICLE 5. COVENANTS SECTION 5.01. Payment of Securities. The Company shall pay the principal of and premium, if any, and interest on, and Repurchase Price, if any, of the Securities on the dates and in the manner provided in the Securities and this Indenture. Principal, premium, if any, Repurchase Price, if any, and interest shall be considered paid on the date due if the Paying Agent (other than the Company) holds on that date money sufficient to pay all principal, premium, if any, and interest then due and that is immediately available on such date for payment to the Holders and that is not subject to restriction including, but not limited to, the restrictions set forth in Article 12 hereof. 28 -22- The Company shall pay interest on overdue principal and premium, if any, at the rate per annum borne by the Securities; it shall pay interest on overdue installments of interest at the same rate per annum to the extent lawful. SECTION 5.02. SEC Reports. The Company shall file with the Trustee within 15 days after the Company is required to file them with the SEC copies of the annual reports and the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act (as defined in Section 4.04). Notwithstanding that the Company may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC (unless the SEC will not accept such a filing) and provide the Trustee and Securityholders with the annual reports and the information, documents and other reports as are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to such Sections, such information, documents and other reports to be so filed and provided at the times specified for the filing of such information, documents and reports under such Sections. The Company also shall comply with the other provisions of TIA Section 314(a). SECTION 5.03. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture. For purposes of this Section 5.03, such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. The first certificate pursuant to this Section shall be for the year ending on December 31, 1998. SECTION 5.04. Corporate Existence. Subject to Article 6, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchise; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the 29 -23- Company and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 5.05. Notice of Defaults. In the event that the Company fails to make any payment in an amount in excess of $20,000,000 when due, after any applicable grace period, in respect of indebtedness for borrowed money of the Company or if indebtedness for borrowed money of the Company in an amount in excess of $20,000,000 is accelerated because of the occurrence of any default under such indebtedness, the Company will promptly give written notice to the Trustee of such failure or acceleration, as the case may be, or of the occurrence of an event which, with the giving of notice or the passage of time, or both, would entitle the holder or holders of such indebtedness to declare such indebtedness due and payable before its maturity. SECTION 5.06. Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture. SECTION 5.07. Resale of Certain Securities. During the period beginning on the last date of original issuance of the Securities and ending on the date that is two years from such date, the Company will not, and will use its best efforts not to permit any of its "affiliates" (as defined under Rule 144 under the Securities Act or any successor provision thereto) to, resell (x) any Securities which constitute "restricted securities" under Rule 144 or (y) any securities into which the Securities have been converted under this Indenture which constitute "restricted securities" under Rule 144, that in either case have been reacquired by any of them. The Trustee shall have no responsibility in respect of the Company's performance of its agreement in the preceding sentence. SECTION 5.08. Registration Rights. The Company agrees that the Holders (and any Person that has a beneficial interest in a Security) from time to time of Transfer Restricted Securities are entitled to the benefits of the Registration Rights Agreement executed by the Company. Pursuant to the Registration Rights Agreement the Company will, at its cost, (a) use its reasonable best efforts to file within 60 days after the first date of original issuance of the Securities a Registration Statement on Form S-3 (a "Shelf Registration Statement") covering resales of the Securities and 30 -24- the GGD Stock issuable upon the conversion pursuant to Rule 415 under the Securities Act, (b) use its reasonable best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act no later than 120 days after the first date of original issuance of the Securities and (c) use its reasonable best efforts to keep the Shelf Registration Statement effective after its effective date until the date which is the earliest of (i) the second anniversary of the effective date of the Shelf Registration Statement, (ii) such time as all the Securities or GGD Stock issuable upon conversion thereof (the "Registrable Securities") have been sold pursuant to the Shelf Registration Statement, transferred pursuant to Rule 144 under the Securities Act or otherwise transferred in a manner that results in such securities not being subject to transfer restrictions under the Securities Act and the absence of a need for a restrictive legend regarding registration under the Securities Act, and (iii) such time as all of the Registrable Securities held by non-affiliates of the Company are eligible for sale pursuant to Rule 144(k) under the Securities Act or any successor rule or regulation thereto. The Company will, in the event a Shelf Registration Statement is filed, among other things, provide to each Holder from whom such Shelf Registration Statement was filed copies of the prospectus which is a part of the Shelf Registration Statement, notify each such Holder when the Shelf Registration Statement has become effective, and take certain other actions as are required to permit unrestricted resales of the Securities and the GGD Stock issuable upon the conversion thereof by such Holders to third parties. If (i) on or prior to the 60th day after the first date of original issuance of the Securities, the Shelf Registration Statement has not been filed with the Commission; (ii) on or prior to the 120th day after the first date of original issuance of the Securities, the Shelf Registration Statement has not been declared effective by the Commission; or (iii) after the Shelf Registration Statement has been declared effective, such Shelf Registration Statement ceases to be effective or usable (subject to certain exceptions described in the Registration Rights Agreement) in connection with resales of Securities and the GGD Stock issuable upon the conversion thereof in accordance with and during the periods specified in the Registration Rights Agreement (each such event referred to in clauses (i) through (iii), a "Registration Default"), additional interest will accrue on the Securities over and above the rate set forth in the title of the Securities, from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration De- 31 -25- faults have been cured, at the rate of 0.25% per annum for a Registration Default pursuant to clause (i) above, and at a rate of 0.5% per annum for a Registration Default pursuant to clauses (ii) and (iii). The Company will have no other liabilities for monetary damages with respect to its registration obligations; provided, however, that in the event the Company breaches, fails to comply with or violates certain provisions of the Registration Rights Agreement, the Holders shall be entitled to, and the Company shall not oppose the granting of, equitable relief, including injunction and specific performance. ARTICLE 6. SUCCESSORS SECTION 6.01. When Company May Merge, Etc. The Company shall not consolidate or merge with or into, or sell, lease, convey or otherwise dispose of all or substantially all of its assets to, any Person unless: (1) the Company is the surviving person or that Person is a corporation organized under the laws of the United States, any state thereof or the District of Columbia or a corporation or comparable legal entity organized under the laws of a foreign jurisdiction and whose equity securities are listed on a national securities exchange in the United States or authorized for quotation on the Nasdaq National Market; (2) that Person assumes by supplemental indenture executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture, except that it need not assume the obligations of the Company as to conversion of Securities if pursuant to Section 11.15 the Company or another Person enters into a supplemental indenture obligating it to deliver securities, cash or other assets upon conversion of Securities; (3) immediately after giving effect to such transaction, no Default shall have occurred and be continuing; and (4) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stat- 32 -26- ing that such consolidation, merger, transfer or lease and such supplemental indenture comply with this Article and that all conditions precedent herein provided for related to such transaction have been complied with. The surviving, transferee or lessee corporation shall be the successor Company, but the predecessor Company in the case of a transfer or lease shall not be released from the obligation to pay the principal amount or Repurchase Price of and premium, if any, and interest on the Securities. ARTICLE 7. DEFAULTS AND REMEDIES SECTION 7.01. Events of Default. An "Event of Default" occurs if: (1) the Company defaults in the payment of interest (including additional interest as provided in Section 5.08) on any Security when the same becomes due and payable and the Default continues uncured for a period of 30 days, whether or not such payment is prohibited or restricted by the provisions of Article 12; (2) the Company defaults in the payment of (A) principal of or premium, if any, on any Security when the same becomes due and payable, whether at maturity, upon redemption or otherwise, or (B) the Repurchase Price in respect of any Security when due, in either case whether or not such payment is prohibited or restricted by the provisions of Article 12; (3) the Company fails to comply with any of its other covenants or agreements set forth in this Indenture and the Default continues for the period and after the notice specified below; (4) the Company fails to make any payment when due, including any applicable grace period, in respect of indebtedness for borrowed money of the Company, which payment is in an amount in excess of $20,000,000, or the Company defaults with respect to any indebtedness for borrowed money of the Company, which default results in acceleration of any such indebtedness which is in an amount of in excess of $20,000,000; 33 -27- (5) the Company pursuant to or within the meaning of any Bankruptcy Law (as defined below): (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian (as defined below) of it or for all or substantially all of its property; or (D) makes a general assignment for the benefit of its creditors; or (6) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company in an involuntary case; (B) appoints a Custodian of the Company or for all or substantially all of its property; or (C) orders the liquidation of the Company, and the order or decree remains unstayed and in effect for 90 consecutive days. The term "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. A Default under clause (3) above is not an Event of Default until the Trustee or, subject to Section 2.09, the Holders of at least 25% in principal amount of the Securities notify the Company in writing of the Default and the Company does not cure the Default within 60 days after receipt of the notice. The notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default". When a Default is cured, it ceases to exist. SECTION 7.02. Acceleration. If any Event of Default described in Section 7.01(1) through (4) occurs and is continuing, the Trustee, by written notice to the Company, or, subject to Section 2.09, the Holders of at least 25% in aggregate principal amount of the outstanding Securities, by 34 -28- written notice to the Company and the Trustee, may declare the principal of and accrued interest on all Securities to be due and payable. Upon such declaration such principal and interest shall be due and payable immediately. If any Event of Default described in Section 7.01(5) or (6) occurs the principal of and accrued interest on all Securities shall automatically become due and payable, without any action required of the Trustee or the Holders. The Holders of a majority in principal amount of the Securities by notice to the Trustee may rescind an acceleration and its consequences if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration, if the rescission would not conflict with any judgment or decree of a court of competent jurisdiction, and if all payments (including fees and expenses) due to the Trustee have been paid. SECTION 7.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal or the Repurchase Price of or premium, if any, or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if the Trustee does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. To the extent permitted by law. no remedy is exclusive of any other remedy and all remedies are cumulative. SECTION 7.04. Waiver of Past Defaults. Subject to Section 2.09, the Holders of a majority in aggregate principal amount of the Securities by written notice to the Trustee may waive an existing Default and its consequences except a Default in the payment of the principal of or premium, if any, or interest on any Security or a Default under Article 11. When a Default is waived, it is cured and ceases to exist. This Section 7.04 shall be in lieu of TIA Section 316(a)(1)(B), and TIA Section 316(a)(1)(B) is hereby expressly excluded from this Indenture and Section, as permitted by the TIA. SECTION 7.05. Control by Majority. Subject to Section 2.09, the Holders of a majority in aggregate principal amount of the Securities may direct the time, method and place of conducting any proceeding for any remedy available to the 35 -29- Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, is unduly prejudicial to the rights of another Securityholder, or would expose the Trustee to liability or expense for which it has not been offered reasonably satisfactory indemnity. This Section 7.05 shall be in lieu of TIA Section 316(a)(1)(A), and TIA Section 316(a)(1)(A) is hereby expressly excluded from this Indenture and Section, as permitted by the TIA. SECTION 7.06. Limitation on Suits. A Securityholder may pursue any remedy with respect to this Indenture or the Securities only if: (1) the Holder gives to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in principal amount of the Securities make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense to be, or which may be, incurred by the Trustee in pursuing the remedy; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (5) during such 60-day period the Holders of a majority in principal amount of the Securities do not give the Trustee a direction inconsistent with the request. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 7.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of the principal of and premium, if any, and interest on the Security on or after the respective due dates expressed in the Security, and to convert such Security in accordance with Article 11, or to bring suit for the enforcement of any such payment on or after such respective due dates and such right to convert, is absolute and unconditional and shall not be impaired or affected without the consent of the Holder. 36 -30- SECTION 7.08. Collection Suit by Trustee. If an Event of Default specified in Section 7.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as Trustee of an express trust against the Company for the whole amount of principal, premium, if any, Repurchase Price, if any, and interest remaining unpaid together with interest on overdue principal and premium, if any, and on the principal amount of any Security for which the Repurchase Price is overdue, and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate per annum set forth in the title of the Securities. SECTION 7.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceeding relative to the Company, its creditors or its property. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceedings. SECTION 7.10. Priorities. If the Trustee collects any money or property pursuant to this Article 7, it shall pay out the money or property in the following order: First: to the Trustee for amounts due under Section 8.07 or any other provision of this Indenture; Second: to holders of Senior Indebtedness to the extent required by Article 12; Third: to Securityholders for amounts due and unpaid on the Securities for principal, premium, if any, Repurchase Price, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal, premium, if any, Repurchase Price, if any, and interest, respectively; and Fourth: to the Company. 37 -31- The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section 7.10. SECTION 7.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 7.07, or a suit by a Holder or Holders of more than 10% in aggregate principal amount of the Securities then outstanding. ARTICLE 8. TRUSTEE SECTION 8.01. Duties of Trustee. (a) If to the knowledge of the Trustee an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture, but need not verify the accuracy of the contents thereof. 38 -32- (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 7.05; and (4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law and need not be invested except as agreed to by the Trustee. SECTION 8.02. Rights of Trustee. Subject to Section 8.01: (a) the Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document; (b) before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action 39 -33- it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel; (c) the Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care; (d) the Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; (e) the Trustee may consult with counsel reasonably acceptable to the Trustee, which may be counsel to the Company, and the advice of such counsel as to matters of law shall be full and complete authorization and protection in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel; (f) The Trustee shall not be bound to ascertain or inquire as to the performance or observance of any covenants, conditions or agreements on the part of the Company under this Indenture; but the Trustee may require of the Company full information and advice as to the performance of the covenants, conditions and agreements aforesaid; and (g) the Trustee shall not be required to give any bond or surety in respect of the execution of its trusts and powers or in respect of this Indenture. SECTION 8.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or an Affiliate with the same rights the Trustee would have if it were not Trustee. Any Agent may do the same with like rights. SECTION 8.04. Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, shall not be accountable for the Company's use of the proceeds from the sale of the Securities or the use or application of any money received by any Paying Agent other than the Trustee, and shall not be responsible for any statement in the Securities other than the Trustee's certificate of authentication. SECTION 8.05. Notice of Defaults. If a Default occurs and is continuing and if it is known to the Trustee, the 40 -34- Trustee shall mail to each Securityholder, at the name and address which appear in the Securities Register, a notice of the Default within 90 days after the Default occurs. Except in the case of a Default in payment of the principal of or premium, if any, or interest on any Security, the Trustee may withhold the notice if and so long as its board of directors, the executive committee, or a trust committee of its directors and/or responsible officers in good faith determines that withholding the notice is in the interests of Securityholders. The Trustee shall not be deemed to have notice of any Default or Event of Default other than as described in clauses (1) or (2) of Section 7.01 unless it shall have received written notice thereof from the Company or any Securityholder, or a Trust Officer has actual knowledge thereof. The foregoing sentence of this Section 8.05 shall be in lieu of the proviso to TIA Section 315(b), and such proviso to TIA Section 315(b) is hereby expressly excluded from this Indenture and Section, as permitted by the TIA. SECTION 8.06. Reports by Trustee to Holders. If required by TIA Section 313(a), within 60 days after each April 1 beginning with the April 1 following the date of this Indenture, the Trustee shall mail to each Securityholder a report dated as of such April 1 that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b), (c) and (d). A copy of each such report at the time of its mailing to Securityholders shall also be mailed to the Company and shall be filed with the SEC and each stock exchange, if any, on which the Securities are listed. The Company shall promptly notify the Trustee in writing if the Securities become listed on any stock exchange or of any delisting thereof. SECTION 8.07. Compensation and Indemnity. The Company shall from time to time pay to the Trustee reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee, within 45 days after receiving request therefor, for all reasonable out-of-pocket disbursements, fees and expenses incurred by the Trustee in connection with the performance of its duties under this Indenture, including without limitation those incurred in connection with the enforcement of any remedy hereunder or the interpretation of any provision hereunder. 41 -35- Such expenses may include the reasonable compensation and out-of-pocket expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee for, and hold it harmless against, any loss or liability incurred by it in connection with this Indenture. The Trustee shall promptly notify the Company of any claim for which the Trustee may seek indemnity, including costs and expenses of defending itself against any claim for liability arising from the exercise or performance of any of its powers or duties hereunder. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through its negligence or bad faith. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay principal of, premium, if any, and interest on particular Securities. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 7.01(5) or (6) occurs, the expenses and the compensation for such services are intended to constitute expenses of administration under any Bankruptcy Law. Notwithstanding any provision hereof to the contrary, the Trustee's lien shall not be subordinated to that of Senior Indebtedness. SECTION 8.08. Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign by so notifying the Company. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Trustee and the Company. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 8.10; (2) the Trustee is adjudged a bankrupt or an insolvent; 42 -36- (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 8.10, any Securityholder or Beneficial Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee (subject to the lien provided for in Section 8.07), the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. SECTION 8.09. Successor Trustee, Agents by Merger, Etc. If the Trustee or any Agent consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee or Agent, as the case may be. SECTION 8.10. Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirement of TIA Sections 310(a)(1) and 310(a)(5). The Trustee (or in the case of a corporation included in a bank holding company system, the related bank holding company) shall have a combined 43 -37- capital and surplus of at least $100,000,000 as set forth in its most recent published annual report of condition. In addition, if the Trustee is a corporation included in a bank holding company system, the Trustee, independently of such bank holding company, shall meet the capital requirements of TIA Section 310(a)(2). The Trustee shall comply with TIA Section 310(b). SECTION 8.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 9. DISCHARGE OF INDENTURE SECTION 9.01. Termination of Company's Obligations. The Company may terminate all of its obligations under this Indenture if: (a) (1) the Securities mature within one year or all of them are to be called for redemption (and the Securities are redeemable) within one year and arrangements satisfactory to the Trustee are made with respect to the giving of the notice of redemption; and (2) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations sufficient to pay, when due, the principal of and premium, if any, and interest on the Securities to maturity or redemption, as the case may be. The Company may make such deposit only during the one-year period referred to in paragraph (1) above and only if Article 12 permits it; or (b) all securities previously authenticated and delivered (other than destroyed, lost or stolen Securities which have been replaced or paid or Securities for whose payment money or securities have theretofore been held in trust and thereafter repaid to the Company, as provided in Section 9.03) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder. 44 -38- However, the obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 5.01, 8.07, 8.08, 9.03, 9.04 and 9.05 and in Article 11 shall survive until the Securities are no longer outstanding. Thereafter the obligations in Sections 8.07, 9.03 and 9.04 shall survive. After a termination of the Company's obligations in accordance with this Section, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under this Indenture except for those surviving obligations specified above. In order to have money available on a payment date to pay principal of and premium, if any, or interest on the Securities, the U.S. Government Obligations shall be payable as to principal or interest on or before such payment date in such amounts as will provide the necessary money. "U.S. Government Obligations" means direct obligations of the United States of America for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option. SECTION 9.02. Application of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 9.01. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and premium, if any, and interest on the Securities. Money and securities so held in trust are not subject to Article 12. SECTION 9.03. Repayment to Company. The Trustee and the Paying Agent shall promptly pay to the Company upon request any excess money or securities held by them at any time. Subject to the requirements of applicable law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or premium, if any, or interest that remains unclaimed for two years; provided, however, that, before being required to make any such repayment, the Trustee or such Paying Agent shall, if the Company so requests and at the expense of the Company, cause to be published once a week for two successive weeks, in each case on any day of the week, in an authorized newspaper in the Borough of Manhattan, The City of New York, or mail to each such Holder, a notice (in such form as may be deemed appropriate by such Trustee or Paying Agent) that said monies remain 45 -39- unclaimed and that, after a date named therein, which shall not be less than 30 days from the date of such publication or mailing, any unclaimed balance of said monies then remaining will be returned to the Company. After payment to the Company, Securityholders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person. SECTION 9.04. Indemnity for Government Obligations. The Company shall pay and shall indemnify the Trustee and each Securityholder against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such obligations. SECTION 9.05. Reinstatement. If the Trustee is unable to apply any money or United States Government Obligations in accordance with Section 9.01 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 9.01 until such time as the Trustee is permitted to apply all such money or United States Government Obligations in accordance with Section 9.01; provided, however, that if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or United States Government Obligations held by the Trustee. ARTICLE 10. AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 10.01. Without Consent of Holders. The Company and the Trustee may amend or supplement this Indenture or the Securities without the consent of any Securityholder: (1) to cure any ambiguity, defect or inconsistency herein or in the Securities; (2) to comply with Section 6.01; 46 -40- (3) to make any change that does not materially adversely affect the rights of any Securityholder; or (4) to make provision with respect to the conversion rights of Holders pursuant to the requirements of Section 11.17. SECTION 10.02. With Consent of Holders. The Company and the Trustee may amend or supplement this Indenture or the Securities with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities, and the Holders of a majority in aggregate principal amount of the Securities may waive compliance by the Company with any provision of this Indenture or the Securities. However, without the consent of each Securityholder affected, an amendment, supplement or waiver under this Section may not: (1) change the stated maturity date of the principal of, or interest on, any Security or adversely affect the right of a Holder to convert any Security; (2) reduce the principal amount or Repurchase Price of, or premium, if any, or interest on, any Security; (3) change the currency for payment of principal of, or interest on, any Security; (4) impair the right to institute suit for the enforcement of any payment on or with respect to any Security; (5) make any change in Article 12 that adversely affects the rights of any Securityholder; (6) reduce the principal amount of Securities whose Holders must consent to an amendment or supplement of this Indenture or the waiver of defaults or compliance hereunder; or (7) make any change in Section 7.04, 7.07 or this 10.02 (second sentence). An amendment under this Section may not make any change that adversely affects the rights under Article 12 of any holder of an issue of Senior Indebtedness unless the holders of the issue pursuant to its terms consent to the change. 47 -41- It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. The Company may establish, by delivery of an Officers' Certificate to the Trustee, a record date for determining Securityholders of record entitled to give any consent or waiver. After an amendment or supplement under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing the amendment or supplement. Any failure of the Company to mail any such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any supplemental indenture. SECTION 10.03. Compliance with Trust Indenture Act. Every amendment to or supplement of this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 10.04. Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Security is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to such Security or portion of a Security if a Trust Officer of the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Securityholder. Notwithstanding the foregoing, if a record date has been established for the purpose of determining Securityholders entitled to consent, such written notice of revocation must be signed by the Securityholder of record as of the record date or his duly appointed proxy. SECTION 10.05. Notation on or Exchange of Securities. The Trustee may place an appropriate notation relating to an amendment, supplement or waiver on any Security thereafter authenticated. The Company in exchange for all Securities may issue, and the Trustee shall authenticate, new Securities that reflect the amendment, supplement or waiver. SECTION 10.06. Trustee to Sign Amendments, Etc. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or Section 48 -42- 11.15 or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 8.01) shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee shall sign any amendment or supplement authorized pursuant to this Article if the amendment or supplement does not adversely affect the rights of the Trustee. If the amendment or supplement does adversely affect the Trustee's rights, the Trustee may, but need not, sign it. ARTICLE 11. CONVERSION SECTION 11.01. Conversion Privilege. A Holder of a Security may convert it into fully paid and non-assessable shares of GGD Stock at any time during the period and subject to the terms stated herein and in paragraph 8 of the Securities. The number of shares issuable upon conversion of a Security is determined by dividing the principal amount to be converted by the conversion price in effect on the conversion date, and rounding the result to the nearest 1/l00th of a share, with 500/1,000 of a share to be rounded up. The initial conversion price is stated in paragraph 8 of the Securities. The conversion price is subject to adjustment as provided in this Article 11. A Holder may convert a portion of a Security if the portion is $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of it. "GGD Stock" means shares of the series designated as Genzyme General Division Common Stock of the Company as it exists at the date of this Indenture or shares of any class or series resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which are not subject to any required redemption by the Company. 49 -43- SECTION 11.02. Conversion Procedure. To convert a Security a Holder must satisfy the requirements set forth in paragraph 8 of the Securities. The date on which the Holder satisfies all those requirements in respect of a Security is the conversion date of that Security. As soon as practical on or after the conversion date, the Company shall deliver through the Conversion Agent a certificate for the number of full shares of GGD Stock issuable upon the conversion of that Security and a check for any fractional share. The person in whose name the certificate is registered shall be treated as a shareholder of record on and after the conversion date. No payment or adjustment will be made for accrued interest on a converted Security (other than the payment of interest to the Holder of a Security at the close of business on a record date pursuant to Section 2.04(b) hereof), or for dividends or distributions on any GGD Stock issued upon conversion of any Security. If a Holder converts more than one Security at the same time, the number of full shares issuable upon the conversion shall be based on the total principal amount of the Securities converted. If GGD Stock is to be issued in the name of a Person other than the Holder thereof, and the restrictions on transfer of such Security set forth in the first paragraph of the face of the Security remain in effect, the Holder must provide certification regarding compliance with the restrictions on transfer, by executing an assignment in the form attached to the Security. If the restrictions on transfer of a Security set forth in the first paragraph on the face of the Security remain in effect, all shares of GGD Stock delivered upon conversion thereof shall be subject to such restrictions on transfer and shall bear a restrictive legend substantially in the form of such paragraph. Upon surrender of a Security that is converted in part, the Company shall execute and the Trustee shall authenticate for the Holder a new Security equal in principal amount to the unconverted portion of the Security surrendered. If the last day on which a Security may be converted is a Legal Holiday in a place where a Conversion Agent is located, the Security may be surrendered to that Conversion Agent on the next succeeding business day that is not a Legal Holiday 50 -44- with the same force and effect as if surrendered on such last day. Upon receiving notice of the conversion of an interest in a Security in global form, the Trustee or the Securities Custodian, at the direction of the Trustee, shall make a notation on such Security in global form as to the reduction in the principal amount represented thereby, subject to the terms of the standing agreements with and procedures of the Depository. SECTION 11.03. Fractional Shares. The Company will not issue a fractional share of GGD Stock upon conversion of a Security. Instead the Company will deliver to the converting Securityholder its check for the current market value of the fractional share. The current market value of a fraction of a share is determined by multiplying the current market price of a full share by the fraction, and rounding the result to the nearest cent, with .5 cents to be rounded up. For purposes of this Section, the current market price of a share of GGD Stock is the Quoted Price of the GGD Stock on the last Trading Day prior to the conversion date. SECTION 11.04. Taxes on Conversion. If a Holder of a Security converts it, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of GGD Stock upon the conversion. However, the Holder shall pay any such tax which is due because the shares are issued in a name other than such Holder's. SECTION 11.05. Company to Provide Stock. The Company shall reserve at all times and keep available, free from preemptive rights, out of its authorized but unissued GGD Stock, enough shares of GGD Stock to permit the conversion of the Securities. All shares of GGD Stock which may be issued upon conversion of the Securities shall be fully paid and nonassessable. The Company shall endeavor to comply with all applicable securities laws regulating the offer and delivery of shares of GGD Stock upon conversion of Securities and shall endeavor to list such shares on each national securities exchange on which the GGD Stock is listed, or to have such shares approved for quotation on the Nasdaq National Market or other over-the-counter market on which the GGD Stock is traded. 51 -45- SECTION 11.06. Adjustment for Change in Capital Stock. If the Company: (1) issues any shares of its capital stock as a dividend (or other distribution) on its GGD Stock; (2) subdivides its outstanding shares of GGD Stock into a greater number of shares; (3) combines its outstanding shares of GGD Stock into a smaller number of shares; or (4) issues by reclassification of its GGD Stock any shares of its capital stock, then the conversion privilege and the conversion price in effect immediately prior to such action shall be adjusted so that the Holder of a Security thereafter converted will receive the number of shares of capital stock of the Company that would have been received (and if there is more than one class or series of such capital stock, then shares of each class or series in the same proportions that would have been received) upon consummation of such action by a Holder of the number of shares of GGD Stock into which such Security might have been converted immediately prior to such action, with the aggregate conversion price to be divided evenly among the shares to be issued upon conversion thereof. The adjustment described in the preceding paragraph shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. If, after an adjustment, a Holder of a Security may receive shares of two or more classes or series of capital stock of the Company upon conversion of such Security, the Company shall determine the allocation of the adjusted conversion price between or among such classes or series of capital stock. After such allocation, the conversion privilege and the conversion price of each class of capital stock shall thereafter be subject to adjustment on terms comparable to those applicable to GGD Stock in this Article. SECTION 11.07. Adjustment for Rights Issue. If the Company distributes any rights or warrants to all holders of its GGD Stock entitling them to subscribe for or purchase shares of GGD Stock at a price per share less than the current 52 -46- market price per share (as defined in Section 11.11), then, on the Record Date (as defined in this Section 11.07), the conversion price shall be adjusted in accordance with the formula: O + (N x P) AC = CC x M ----------- O + N where: AC = the adjusted conversion price. CC = the current conversion price. O = the number of shares of GGD Stock outstanding on the Record Date. N = the number of additional shares of GGD Stock offered. P = the offering price per share of the additional shares. M = the current market price per share of GGD Stock on the Record Date (as defined in this Section 11.07). The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive such rights or warrants (for purposes of this Section 11.07 only, the "Record Date"). SECTION 11.08. Adjustment for Certain Distributions. Subject to the last paragraph of this Section 11.08, if the Company distributes to all holders of its GGD Stock any cash, debt securities (or other evidences of indebtedness) or other assets (excluding dividends or distributions for which adjustment is required to be made under Sections 11.06, 11.07 or 11.09), the conversion price shall be reduced in accordance with the following formula: AC = CC x M - P ----- M where: 53 -47- AC = the adjusted conversion price. CC = the current conversion price. M = the current market price per share of GGD Stock on the Record Date (as defined in this Section 11.08). P = the aggregate fair market value on the Record Date (as defined in this Section 11.08) (as determined in good faith by the Board of Directors and set forth in a certified resolution filed with the Trustee) of the cash, debt securities (or other evidences of indebtedness) or other assets distributed applicable to one share of GGD Stock. The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution (for purposes of this Section 11.08 only, the "Record Date"). No adjustment will be made with respect to this Section 11.08 if, in lieu of such adjustment, the holders of the Securities, upon conversion, will be entitled to receive, in addition to the shares of GGD Stock into which such Securities are convertible, the kind and amount of cash, debt securities (or other evidences of indebtedness) or other assets comprising the distribution that such holders would have received had they converted their Securities immediately prior to the Record Date (as defined in this Section 11.08). In addition, no adjustment will be made in the event that the then fair market value (as so determined) of the cash, debt securities (or other evidences of indebtedness) or other assets so distributed applicable to one share of GGD Stock is equal to or greater than the current market price per share of the GGD Stock, in which case, in lieu of such adjustment, adequate provision shall be made so that each holder of Securities shall have the right to receive upon conversion the amount of cash, debt securities (or other evidences of indebtedness) or other assets such holder would have received had such holder converted each Security on the Record Date (as defined in this Section 11.08). SECTION 11.09. Adjustment for All Cash Distribution. Subject to the last two paragraphs of this Section 11.09, if the Company shall pay or make a dividend or other distribution consisting exclusively of cash to all holders of its GGD Stock, 54 -48- the conversion price shall be reduced in accordance with the following formula: AC = CC x M - C ----- M where: AC = the adjusted conversion price. CC = the current conversion price. M = the current market price per share of GGD Stock on the date fixed for payment of such distribution. C = the amount of cash so distributed and not excluded (as provided below) applicable to one share of GGD Stock. The adjustment shall become effective immediately prior to the opening of business on the day following the date fixed for payment of such distribution. For the purposes of this Section 11.09, (A) the portion of regular cash dividends on the GGD Stock that does not exceed the per share amount of the immediately preceding regular cash dividend on the GGD Stock (as adjusted to reflect any of the events referred to in Sections 11.06, 11.07, 11.08, 11.09 and 11.10) shall be excluded and (B) the portion of such regular cash dividends on the GGD Stock, to the extent that the annualized per share amount thereof does not exceed 15% of the current market price per share of the GGD Stock as of the trading day immediately preceding the date of declaration of such dividend, shall be excluded. No adjustment will be made in the event that the amount of cash so distributed applicable to one share of GGD Stock is equal to or greater than the current market price per share of the GGD Stock, in which case, in lieu of such adjustment, adequate provision shall be made so that each Securityholder shall have the right to receive upon conversion the amount of cash such Holder would have received had such Holder converted each Security immediately prior to the record date for the distribution of the cash. SECTION 11.10. Adjustment for Tender or Exchange Offer. Subject to the last paragraph of this Section 11.10, in 55 -49- the event that a tender or exchange offer (other than an odd-lot offer) made by the Company or any subsidiary of the Company for all or a portion of the GGD Stock shall expire and such tender or exchange offer (including any amendment in effect immediately prior to the expiration thereof) shall require the payment to stockholders of consideration per share of GGD Stock having a fair market value (as determined in good faith by the Board of Directors and set forth in a certified resolution filed with the Trustee) that, as of the last time (the "Expiration Time") tenders or exchanges may be made pursuant to such tender or exchange offer, exceeds 110% of the current market price per share of GGD Stock at the Expiration Time, the conversion price shall be reduced in accordance with the following formula: AC = CC x O x M ----------- P + (T x M) where: AC = the adjusted conversion price. CC = the current conversion price. O = the number of shares of GGD Stock outstanding (including any tendered or exchanged shares) at the Expiration Time. P = the fair market value of the aggregate consideration payable to shareholders of GGD Stock based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares of GGD Stock validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares of GGD Stock so accepted, up to any such maximum, being referred to as the "Purchased Shares"). T = the number of shares of GGD Stock outstanding (less any Purchased Shares) on the Expiration Time. M = the current market price per share of GGD Stock at the Expiration Time. 56 -50- The adjustment shall become effective immediately prior to the opening of business on the day following the Expiration Time. In the event that the Company or its subsidiary, if applicable, is permanently prevented by applicable law from effecting any such purchases or all such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such tender or exchange offer had not been made. SECTION 11.11. Current Market Price. For purposes of Sections 11.07, 11.08, 11.09 and 11.10, the current market price per share of GGD Stock on any date is the average of the Quoted Prices of the GGD Stock for five consecutive Trading Days selected by the Company commencing not more than 20 Trading Days before, and ending not later than, the earlier of the date in question and the Trading Day before the "ex" date, if any, with respect to the issuance or distribution requiring such computation. The term "'ex' date," when used with respect to any issuance or distribution, means the first Trading Day on which the GGD Stock trades regular way in the market from which the Quoted Price is then to be determined without the right to receive such issuance or distribution. SECTION 11.12. When Adjustment May Be Deferred. No adjustment in the conversion price need be made unless the adjustment would require an increase or decrease of at least 1% in the conversion price then in effect. Any adjustments which are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be, with .005 cents and 500/1,000 of a share to be rounded up. SECTION 11.13. When No Adjustment Required. No adjustment need be made for rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest. No adjustment need be made for a change in the par value (including a change to no par value) of the Common Stock. To the extent the Securities become convertible into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. 57 -51- Notwithstanding any provision to the contrary in this Indenture, no adjustment shall be made in the conversion price which would have the effect of reducing the conversion price below the par value of the Common Stock. SECTION 11.14. Notice of Adjustment. Whenever the conversion price is adjusted, the Company shall promptly mail to Securityholders a notice of the adjustment and file with the Trustee a certificate from the Company's independent public accountant briefly stating the facts requiring the adjustment and the manner of computing it. In the absence of manifest error, such certificate shall be presumptive evidence that the adjustment is correct. SECTION 11.15. Voluntary Reduction. The Company from time to time may reduce the conversion price by any amount for any period of time if the period is at least 20 days and if the reduction is irrevocable during the period. Notwithstanding any provision to the contrary in this Indenture, the reduction of the conversion price pursuant to this Section 11.15 shall not require the consent of the Trustee or any Securityholder. Whenever the conversion price is reduced, the Company shall mail to Securityholders and the Trustee a notice of the reduction. The Company shall mail the notice at least 15 days before the date the reduced conversion price takes effect. The notice shall state the reduced conversion price and the period during which it will be in effect. A reduction of the conversion price is deemed not to be in effect for purposes of calculating adjustments pursuant to Sections 11.06 through 11.10. SECTION 11.16. Notice of Certain Transactions. If: (1) the Company takes any action which would require an adjustment in the conversion price pursuant to Section 11.08 but, in lieu of such adjustment, the Securityholders are entitled to participate therein (as described in the last paragraph of Section 11.08); (2) the Company takes any action that would require a supplemental indenture pursuant to Section 11.17; or (3) there is a dissolution or liquidation of the Company, 58 -52- the Company shall mail to Securityholders and the Trustee a notice stating the record date for any such distribution or the effective date of any such subdivision, combination, reclassification, consolidation, merger, transfer, lease, liquidation or dissolution. The Company shall mail the notice at least 15 days before such date. Failure to mail the notice or any defect in it shall not affect the validity of any transaction referred to in clause (1), (2) or (3) of this Section. SECTION 11.17. Provisions in Case of Consolidation, Merger of the Company or Transfer or Lease. If the Company is a party to a consolidation or merger or a transfer or lease of all or substantially all of its assets not prohibited by Section 6.01 or a merger which reclassifies or changes its outstanding GGD Stock, the Person formed by such consolidation or resulting from such merger or which assumes or leases such assets shall enter into a supplemental indenture. The supplemental indenture shall provide that the Holder of a Security may convert it into the kind and amount of securities, cash or other assets receivable upon the consolidation, merger, transfer or lease by a holder (other than any party to such transaction or any of its affiliates) of the number of shares of GGD Stock into which such Security might have been converted immediately before the effective date of such transaction, assuming such holder of GGD Stock failed to exercise his rights of election, if any, as to the kind or amount of securities, cash or other property receivable upon such consolidation, merger, transfer or lease (provided that, if the kind or amount of securities, cash or other property receivable upon such consolidation, merger, transfer or lease is not the same for each share of GGD Stock held immediately prior to such consolidation, merger, transfer or lease by others than the parties to such transaction or their affiliates and in respect of which such rights of election shall not have been exercised ("non-electing share"), then for the purposes of this Section the kind and amount of securities, cash and other property receivable upon such consolidation, merger, transfer or lease by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). The supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Article. If the issuer of securities deliverable upon conversion of Securities is an affiliate of the surviving, transferee or lessee corporation, that issuer shall join in the supplemental indenture. The successor Company shall mail to each Securityholder a notice briefly describing the supplemental indenture. 59 -53- If this Section applies to a particular event, Section 11.06 shall not apply to such event. SECTION 11.18. Company Determination Final. Subject to compliance with the terms of this Indenture (including without limitation Section 11.14) and of the Securities, any determination which the Company or its Board of Directors must make pursuant to Section 11.03, 11.06, 11.08, 11.10, 11.11 or 11.12 shall be conclusive. SECTION 11.19. Trustee's Disclaimer. The Trustee has no duty to determine when an adjustment under this Article should be made, how it should be made or what it should be. The Trustee has no duty to determine the market price or market value of any fractional or other share. The Trustee has no duty to determine whether any provisions of a supplemental indenture under Section 11.17 are correct. The Trustee makes no representation as to the validity or value of any securities or assets issued upon conversion of the Securities. The Trustee shall not be responsible for the Company's failure to comply with this Article. Each Conversion Agent other than the Company shall have the same protection under this Section as the Trustee. ARTICLE 12. SUBORDINATION SECTION 12.01. Agreement to Subordinate. The Company agrees, and each Securityholder by accepting a Security agrees, that the indebtedness evidenced by the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article, to the prior payment in full of all Senior Indebtedness, and that the subordination is for the benefit of the holders of Senior Indebtedness. SECTION 12.02. Certain Definitions. "Senior Indebtedness" means: (a) the principal of, interest (including, to the extent permitted by applicable law, interest on or after the commencement of a proceeding referred to in clauses (5) or (6) of Section 7.01 whether or not representing an allowed claim in such proceeding) on and any other amounts owing with respect to (i) any indebtedness of the Company, 60 -54- now or hereafter outstanding, in respect of borrowed money (other than the Securities), (ii) any indebtedness of the Company, now or hereafter outstanding, evidenced by a bond, note, debenture, capitalized lease, reimbursement obligation with respect to any letter of credit or other similar instrument, (iii) any other written obligation of the Company, now or hereafter outstanding, to pay money issued or assumed as all or part of the consideration for the acquisition of property, assets or securities and (iv) any guaranty or endorsement (other than for collection or deposit in the ordinary course of business) or discount with recourse of, or other agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire, to supply or advance funds or to become liable with respect to (directly or indirectly), any indebtedness or obligation of any person of the type referred to in the preceding subclauses (i), (ii) and (iii) now or hereafter outstanding; and (b) any refundings, renewals or extensions of any indebtedness or other obligation described in clause (a) of this Section 12.02. Notwithstanding the foregoing, if, by the terms of the instrument creating or evidencing any indebtedness or obligation referred to in clauses (a) and (b) above, it is expressly provided that such indebtedness or obligation is not senior in right of payment to the Securities, such indebtedness or obligation shall not be included as Senior Indebtedness. "Representative" means the indenture trustee or other trustee, agent or representative for an issue of Senior Indebtedness. SECTION 12.03. Liquidation; Dissolution; Bankruptcy. Upon any distribution to creditors of the Company in a liquidation, dissolution or winding up of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property: (1) holders of Senior Indebtedness shall be entitled to receive payment in full, in cash or in a manner satisfactory to the holders of such Senior Indebtedness, of all Senior Indebtedness before Securityholders shall be entitled to receive any payments of principal of or premium, if any, or interest on Securities; and 61 -55- (2) until the Senior Indebtedness is paid in full in cash or in a manner satisfactory to the holders of such Senior Indebtedness, any distribution to which Securityholders would be entitled but for this Article shall be made to holders of Senior Indebtedness as their interests may appear, except that Securityholders may receive securities that are subordinated to Senior Indebtedness to at least the same extent as the Securities. A distribution may consist of cash, securities or other property. SECTION 12.04. Company Not to Make Payments with Respect to Securities in Certain Circumstances. (a) Upon the maturity of any Senior Indebtedness by lapse of time, acceleration or otherwise, all principal thereof, premium, if any, and interest thereon and any other amounts owing in respect thereof shall first be paid in full, or such payment duly provided for in cash or in a manner satisfactory to the holders of such Senior Indebtedness, before any payment is made on account of the principal of or premium, if any, or interest on the Securities or to acquire any of the Securities. (b) Upon the happening of a default or event of default in the payment of the principal, premium, if any, or interest on the Senior Indebtedness, then, unless such default or event of default has been cured or waived or shall have ceased to exist, no payment shall be made by the Company with respect to the principal, premium, if any, or interest on (or otherwise in respect of) the Securities or to acquire any of the Securities. (c) Upon the happening of a default or event of default in respect of the Senior Indebtedness (other than a default or event of default in payment of the principal, premium, if any, or interest on the Senior Indebtedness) and if the Trustee and the Company receives a notice of such default or event of default from the holders of the Senior Indebtedness or their Representative (a "Payment Blockage Notice"), then no payment shall be made by the Company with respect to the principal, premium, if any, or interest on (or otherwise in respect of) the Securities until the earlier of (i) the date on which such default or event of default shall have been cured or waived or shall have ceased to exist or (ii) the 179th day after the date of such receipt of such Payment Blockage Notice. No more than one Payment Blockage Notice shall be effective for purposes of this section during any 365 consecutive day period. For purposes of this paragraph, no such default or event of de- 62 -56- fault that existed upon first delivery of any Payment Blockage Notice shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default or event of default shall have been cured or waived for a period of 180 consecutive days. SECTION 12.05. Acceleration of Securities. If payment of the Securities is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Indebtedness of the acceleration. SECTION 12.06. When Distribution Must Be Paid Over. If a distribution is made to Securityholders that, because of this Article, should not have been made to them, the Securityholders who receive the distribution shall hold it in trust for holders of Senior Indebtedness and pay it over to them as their interests may appear. SECTION 12.07. Notice by Company. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of principal of or premium, if any, or interest on the Securities to violate this Article. SECTION 12.08. Subrogation. After all Senior Indebtedness is paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness to the extent that distributions otherwise payable to the Securityholders have been applied to the payment of Senior Indebtedness. A distribution made under this Article to holders of Senior Indebtedness which otherwise would have been made to Securityholders is not, as between the Company and Securityholders, a payment by the Company on Senior Indebtedness. SECTION 12.09. Relative Rights. This Article defines the relative rights of Securityholders and holders of Senior Indebtedness. Nothing in this Indenture shall: (1) impair, as between the Company and Securityholders, the obligation of the Company, which is absolute and unconditional, to pay principal of and premium, if any, and interest on the Securities in accordance with their terms; 63 -57- (2) affect the relative rights of Securityholders and creditors of the Company, other than holders of Senior Indebtedness; or (3) prevent the Trustee or any Securityholder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness to receive distributions otherwise payable to Securityholders. If the Company fails because of this Article to pay principal of or premium, if any, or interest on a Security on the due date, such failure shall nevertheless be deemed a Default. SECTION 12.10. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness to enforce the subordination of the indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with the terms of this Indenture. SECTION 12.11. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their Representative. SECTION 12.12. Rights of Trustee and Paying Agent. Notwithstanding any provisions of this Indenture to the contrary, the Trustee and any Paying Agent may continue to make payments on the Securities and shall not at any time be charged with knowledge of the existence of any facts which would prohibit the making of such payments until it receives written notice (received by a Trust Officer, in the case of the Trustee) reasonably satisfactory to it that payments may not be made under this Article and, prior to the receipt of any such notice, the Trustee, subject to the provisions of Section 8.01, and any Agent shall be entitled to assume conclusively that no such facts exist. The Company, an Agent, a Representative or a holder of Senior Indebtedness may give the notice. If an issue of Senior Indebtedness has a Representative, only the Representative (or any Representative, if more than one) may give the notice with respect to such Senior Indebtedness. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a Representative) to establish that such notice has been given by a holder of Senior 64 -58- Indebtedness (or a Representative), and shall be entitled to rely on any written notice by a Person representing himself to be a holder of Senior Indebtedness to the effect that such issue of Senior Indebtedness has no Representative. Except as provided in Section 9.02, any deposit of monies by the Company with the Trustee or any Paying Agent (whether or not in trust) for the payment of the principal of or premium, if any, or interest on, or Repurchase Price, if any, of any Securities shall be subject to the provisions of this Article 12, except that if, at least three business days prior to the date on which by the terms of this Indenture any such monies may become payable for any purpose (including, without limitation, the payment of, principal of, or premium, if any, or interest on any Security), the Trustee shall not have received with respect to such monies the notice provided for in this Section 12.12, then the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary which may be received by it within three business days prior to or on or after such date. This Section shall be construed solely for the benefit of the Trustee and Paying Agent and shall not otherwise affect the rights of holders of Senior Indebtedness. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article 12, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of the Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article 12, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive payment. The Trustee shall not be deemed to owe any fiduciary duty to holders of Senior Indebtedness by virtue of the provisions of this Article 12. The Trustee's responsibilities to the holders of Senior Indebtedness are limited to those set forth in this Article and no implied covenants or obligations shall be read into this Indenture. The Trustee shall not become liable to the holders of Senior Indebtedness if it makes a payment prohibited by this Article in good faith. The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have 65 -59- if it were not Trustee. Any Agent may do the same with like rights. SECTION 12.13. Effectuation of Subordination by Trustee. Each Holder of Securities, by acceptance thereof, authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes. ARTICLE 13. MISCELLANEOUS SECTION 13.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 13.02. Notices. Any notice or communication to the Company or the Trustee by the other shall be duly given if in writing and delivered in person or by overnight courier or mailed by first class mail or transmitted by telephone facsimile transmission (and receipt confirmed) addressed as follows: If to the Company: Genzyme Corporation One Kendall Square Cambridge, Massachusetts 02139 Attention: Chief Financial Officer Facsimile: (617) 252-7852 If to the Trustee: State Street Bank and Trust Company Two International Place Boston, Massachusetts 02110 Attention: Corporate Trust Administration Facsimile: (617) 667-5372 With a copy to: Peabody & Arnold 50 Rowes Wharf Boston, Massachusetts 02110 66 -60- The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication to a Securityholder shall be mailed by first-class mail to his address as shown on the register kept by the Registrar. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If the Company mails a notice or communication to Securityholders, it shall mail a copy to the Trustee and each Agent at the same time. If a notice or communication is delivered, mailed or transmitted in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. SECTION 13.03. Communications by Holders with Other Holders. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and any other person shall have the protection of TIA Section 312(c). SECTION 13.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 13.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than pursuant to Section 5.03) shall include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition; 67 -61- (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with. SECTION 13.06. Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar, Paying Agent, New York Presenting Agent and Conversion Agent may each make reasonable rules and set reasonable requirements for its respective functions. SECTION 13.07. Legal Holidays. A "Legal Holiday" is a Saturday, Sunday or a day on which banking institutions in either New York, New York or in Boston, Massachusetts are not required to be open. If a payment date is a Legal Holiday at a place of payment, payment may be made at such place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 13.08. Governing Law. The laws of the State of New York shall govern this Indenture and the Securities without regard to principles of conflicts of law. SECTION 13.09. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. SECTION 13.10. Successors. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. 68 -62- SECTION 13.11. Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 13.12. Severability. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and a Holder shall have no claim therefor against any party hereto. 69 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above. GENZYME CORPORATION By: /s/ Henri A. Termeer ------------------------------------ Name: Henri A. Termeer Title: President and Chief Executive Officer STATE STREET BANK AND TRUST COMPANY By: /s/ Gerald R. Wheeler ------------------------------------ Name: Gerald R. Wheeler Title: Vice President 70 APPENDIX 1 RULE 144A/REGULATION S APPENDIX FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A AND TO CERTAIN PERSONS IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S CERTAIN PROVISIONS RELATING TO THE SECURITIES 1. Definitions. 1.1 Definitions. For the purposes of this Appendix the following terms shall have the meanings indicated below: "Depository" means The Depository Trust Company, its nominees and their respective successors. "Initial Purchasers" means Credit Suisse First Boston Corporation, Cowen & Company and Goldman, Sachs & Co. "Purchase Agreement" means the Purchase Agreement dated May 19, 1998, by and among the Company and the Initial Purchasers. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registration Rights Agreement" means the Registration Rights Agreement dated May 15, 1998, by and among the Company and the Initial Purchasers. "Securities" means the 5-1/4% Convertible Subordinated Notes Due 2005, issued under this Indenture on or about the date hereof. "Securities Act" means the Securities Act of 1933, as amended. "Securities Custodian" means the custodian with respect to a Global Security (as appointed by the Depository), or any successor person thereto and shall initially be the Trustee. "Shelf Registration Statement" means the registration statement issued by the Company, in connection with the offer and sale of Securities, pursuant to the Registration Rights Agreement. 71 -2- "Transfer Restricted Securities" means each Security until (i) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with the Resale Shelf Registration Statement or (ii) the date on which such Note is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. 1.2 Other Definitions.
Term Defined in Section: ---- ------------------ "Agent Members"........................... 2.1(b) "Global Security"......................... 2.1(a) "Regulation S"............................ 2.1(c) "Rule 144A"............................... 2.1(a)
2. The Securities. 2.1 Form and Dating. The Securities are being offered and sold by the Company pursuant to the Purchase Agreement. (a) Global Securities. Securities offered and sold to a QIB in reliance on Rule 144A under the Securities Act ("Rule 144A") as provided in the Purchase Agreement, shall be issued initially in the form of one or more permanent global Securities in definitive, fully registered form without interest coupons set forth in Exhibit A to the Indenture with the global securities legend on Exhibit A to the Indenture and restricted securities legend set forth in Section 2.2 (each, a "Global Security"), which shall be deposited on behalf of the purchasers of the Securities represented thereby with the Trustee, at its New York office, as custodian for the Depository (or with such other custodian as the Depository may direct), and registered in the name of the Depository or a nominee of the Depository, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided. (b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a Global Security deposited with or on behalf of the Depository. 72 -3- The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b), authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depository for such Global Security or Global Securities or the nominee of such Depository and (b) shall be delivered by the Trustee to such Depository or pursuant to such Depository's instructions or held by the Trustee as custodian for the Depository. Members of, or participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository or by the Trustee as the custodian of the Depository or under such Global Security, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Security. (c) Certificated Securities. Except as provided in this Section 2.1 or Section 2.2 or 2.4, owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of certificated Securities. Securities offered and sold in reliance on Regulation S under the Securities Act ("Regulation S") as provided in the Purchase Agreement shall be issued initially in the form of one or more certificated Securities in definitive, fully registered form without interest coupons, as set forth in Exhibit B to the Indenture, with the restricted securities legend set forth in Section 2.2(a), which shall be duly executed by the Company and authenticated by the Trustee as provided in the Indenture. Upon transfer of such definitive Securities to a QIB, such definitive Securities will, unless the restricted securities legend on such Global Security has previously been removed, be exchanged for an interest in the Global Security pursuant to the provisions of Section 2.06 of the Indenture. 2.2 Legend. (a) Except as permitted by the following paragraphs (b) and (c), each Security certificate evidencing a Transfer Restricted Security (and all Securities issued in exchange 73 -4- therefor or in substitution thereof) shall bear a legend in substantially the following form: "THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON CONVERSION THEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON CONVERSION THEREOF MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON CONVERSION THEREOF MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), OR (iv) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY AND THE COMMON STOCK, ISSUABLE UPON CONVERSION THEREOF FROM IT, OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE." (b) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Security) pursuant to Rule 144 under the Securities Act, or after the second anniversary of the original issuance date of the Security (or such earlier date after which the Security may be freely transferred without registration under the Securities Act or without being subject to transfer restrictions pursuant to the Securities Act, as may be 74 -5- provided in Rule 144(k) under the Securities Act (or any successor provision thereto) or otherwise) the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a certificated Security that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security, if the Holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Security). (c) After a transfer of any Securities during the period of the effectiveness of a Shelf Registration Statement with respect to such Securities, as the case may be, all requirements pertaining to legends on such Security will cease to apply, the requirements requiring any such Security issued to certain Holders be issued in global form will cease to apply, and a certificated Security without legends will be available to the transferee of the Holder of such Securities upon exchange of such transferring Holder's certificated Security or directions to transfer such Holder's interest in the Global Security, as applicable. 2.3 Assignment. Whenever any certification is required to be given to evidence compliance with certain restrictions relating to assignment of Transfer Restricted Securities, the Assignment Form set forth in Exhibit 1 hereto shall be used in lieu of the Assignment Form attached to the Form of Securities set forth in Exhibit A or Exhibit B. 2.4 Certificated Securities. (a) A Global Security deposited with the Depository or with the Trustee as custodian for the Depository pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of certificated Securities in an aggregate principal amount equal to the principal amount of such Global Security, in exchange for such Global Security, only if such transfer complies with Section 2.2 and (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for such Global Security or if at any time such Depository ceases to be a "clearing agency" registered under the Securities Exchange Act of 1934, as amended, and a successor depositary is not appointed by the Company within 90 days after such notice, or (ii) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of certificated Securities under this Indenture. 75 -6- (b) Any Global Security that is transferable to the beneficial owners thereof pursuant to this Section shall be surrendered by the Depository to the Trustee located in the Borough of Manhattan, The City of New York, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Security, an equal aggregate principal amount of certificated Securities of authorized denominations. Any portion of a Global Security transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 and any integral multiple thereof and registered in such names as the Depository shall direct. Any certificated Security delivered in exchange for an interest in the Global Security shall, except as otherwise provided by Section 2.2, bear the restricted securities legend set forth in Section 2.2(a). (c) Subject to the provisions of Section 2.4(b), the registered Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. (d) In the event of the occurrence of either of the events specified in Section 2.4(a), the Company will promptly make available to the Trustee a reasonable supply of certificated Securities in definitive, fully registered form without interest coupons. 76 EXHIBIT 1 TO RULE 144A/REGULATION S APPENDIX 1 [For use with Transfer Restricted Securities] ASSIGNMENT FORM To assign this Security or, in the event of conversion, shares of Genzyme General Division Common Stock, fill in the form below: I or we assign and transfer this Security or, shares of Genzyme General ---- Division Common Stock, to - -------------------------------------------------------------------------------- (Insert assignee's social security or tax identification number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint agent to ---------------------------------------------- transfer this Security on the books of the Company. The agent may substitute another to act for him. Date: Your signature: -------------------------- -------------------------------- (Sign exactly as your name appears on the face of this Security) Signature Guaranteed: ---------------------------------------------------------- In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities are owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being transferred in accordance with its terms: 77 PAGE 2 of EXHIBIT 1 TO RULE 144A/REGULATION S APPENDIX 1 [Check One] (1) / / to the Company or a Subsidiary thereof; or (2) / / to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (3) / / outside the United States to a "foreign person" in compliance with Rule 904 of Regulation S under the Securities Act of 1933, as amended; or (4) / / pursuant to an effective registration statement under the Securities Act of 1933, as amended; or (5) / / pursuant to another available exemption from the registration requirements of the Securities Act of 1933, as amended. and unless the box below is checked, the undersigned confirms that such Note is not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate"): / / The transferee is an Affiliate of the Company. Unless one of the items above is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered Holder thereof; provided, however, that if item (3) or (5) is checked, the Company or the Trustee may require, prior to registering any such transfer of the Notes, in their sole discretion, such written legal opinions, certifications (including an investment letter in the case of box (3) or (5)) and other information as the Trustee or the Company have reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended. If none of the foregoing items are checked, the Trustee or Registrar shall not be obligated to register this Note in the name of any person other than the Holder hereof unless 78 PAGE 3 of EXHIBIT 1 TO RULE 144A/REGULATION S APPENDIX 1 and until the conditions to any such transfer of registration set forth herein and in Section 2.06 of the Indenture shall have been satisfied. Dated: Signed: ----------------------- ---------------------------------- (Sign exactly as your name appears on the face of this Note) Signature Guarantee: ----------------------------------------------------------- TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the Company and the transferor are relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ----------------------- ---------------------------------- NOTICE: To be executed by an executive officer 79 EXHIBIT A FORM OF SECURITY IN GLOBAL FORM (Face of Security) UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. No. $__________ CUSIP No. GENZYME CORPORATION 5-1/4% Convertible Subordinated Note Due 2005 Genzyme Corporation, a Massachusetts corporation, promises to pay to or registered assigns, the principal sum of Dollars on June 1, 2005. The aggregate amount of outstanding Securities represented hereby may from time to time be reduced or increased to reflect exchanges by means of notations on the Schedule of Exchanges for Definitive Securities on the reverse hereof. Interest Payment Dates: June 1 and December 1. Record Dates: May 15 and November 15. A-1 80 Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Dated: GENZYME CORPORATION By: ---------------------------------- By: ---------------------------------- Authenticated: STATE STREET BANK AND TRUST COMPANY as Trustee By: -------------------------------- Authorized Signer A-2 81 (Reverse of Security) GENZYME CORPORATION 5-1/4% Convertible Subordinated Note Due 2005 1. INTEREST. GENZYME CORPORATION (the "Company"), a Massachusetts corporation, promises to pay interest on the principal amount of this Security at the rate of 5-1/4% per annum. The Company will pay interest semi-annually on June 1 and December 1 each year, commencing on December 1, 1998 to holders of Securities at the close of business on the relevant record dates specified above. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from May 22, 1998. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company will pay interest on the Securities (except defaulted interest) to the persons who are registered holders of Securities at the close of business on the May 15 or November 15 next preceding the interest payment date (including Securities that are cancelled after the record date and on or before the interest payment date). Holders must surrender Securities to a Paying Agent to collect principal and any premium payments. The Company will pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT, REGISTRAR, CONVERSION AGENT. Initially, State Street Bank and Trust Company (the "Trustee") will act as Paying Agent, Registrar and Conversion Agent. The Company may change any Paying Agent, Registrar, Conversion Agent or co-registrar by giving notice to the Trustee. The Company may act as Paying Agent, Registrar, Conversion Agent or co-registrar. 4. INDENTURE. The Company issued this Security as one of a duly authorized issue of Notes of the Company designated as its 5-1/4% Convertible Subordinated Notes Due 2005 (the "Securities") under an Indenture dated as of May 22, 1998 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture. The Securities are subject to A-3 82 all such terms, and Securityholders are referred to the Indenture for a statement of such terms. Terms used herein that are defined in the Indenture shall have the respective meanings assigned thereto in the Indenture. The Securities are general unsecured obligations of the Company limited to $225,000,000 in aggregate principal amount ($250,000,000 if the Over-Allotment Option is exercised in full). 5. OPTIONAL REDEMPTION. The Securities may not be redeemed prior to June 10, 2001, and are redeemable, subject to the subordination provisions described below, on such date and thereafter at the option of the Company, as a whole or from time to time in part, at the following prices (expressed as percentages of the principal amount) plus accrued interest to, but not including, the redemption date: 102.63% if redeemed on or before May 31, 2002 and thereafter if redeemed during the 12-month period beginning on the dates indicated below:
Year Percentage 2002 101.75% 2003 100.88% 2004 100.00%
No sinking fund is provided for the Securities. 6. REDEMPTION AT OPTION OF HOLDER UPON A FUNDAMENTAL CHANGE. If a Fundamental Change (as defined below) occurs, each holder of Securities shall have the right, at the holder's option, to require the Company to repurchase all of such holder's Securities, or any portion thereof that is an integral multiple of $1,000, on the date (the "Repurchase Date") selected by the Company that is not less than 10 nor more than 30 days after the Final Surrender Date (as defined below), at a price equal to 100% of the principal amount thereof, plus accrued interest to the Repurchase Date (the "Repurchase Price"). Unless the Company shall have theretofore called for redemption all the outstanding Securities, on or before the 30th day after the occurrence of a Fundamental Change, the Company is obligated to mail or cause the Trustee to mail to all holders of record of the Securities a notice (the "Company Notice") describing, among other things, the occurrence of such Fundamental Change and of the repurchase right arising as a result thereof. The Company must deliver a copy of the Company Notice to the Trustee and cause a copy of such notice to be published in a newspaper of general circulation in the Borough of Manhattan, The City of New York. To exercise the repurchase A-4 83 right, a holder of Securities must surrender, on or before the date which, subject to any contrary requirements of applicable law, is 60 days after the date of mailing of the Company Notice (the "Final Surrender Date") the Securities with respect to which the right is being exercised, which, in the case of definitive Securities, must be duly endorsed for transfer to the Company. The term "Fundamental Change" shall mean any of the following: (i) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) becoming the "beneficial owner" (as defined in Rule l3d-3 under such Act) of Voting Shares (as defined below) of the Company entitled to exercise more than 50% of the total voting power of all outstanding Voting Shares of the Company (including any right to acquire Voting Shares that are not then outstanding of which such person or group is deemed the beneficial owner); or (ii) a change in the Board of Directors in which the individuals who constituted the Board of Directors at the beginning of the two-year period immediately preceding such change (together with any other director whose election by the Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of at least two-thirds of the directors then in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors then in office; or (iii) any consolidation of the Company with, or merger of the Company into, any other Person, any merger of another Person into the Company, or any sale or transfer of all or substantially all of the assets of the Company to another Person (other than (x) a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Genzyme General Division Common Stock ("GGD Stock"), (y) a merger which is effected solely to change the jurisdiction of incorporation of the Company or (z) any consolidation with or merger of the Company into a wholly owned subsidiary of the Company, or any sale or transfer by the Company of all or substantially all of its assets to one or more of its wholly owned subsidiaries, in any one transaction or a series of transactions, provided, in any such case, that the resulting corporation or each such subsidiary assumes or guarantees the Company's obligations under the Securities); provided, however, that a Fundamental Change shall A-5 84 not occur with respect to any such transaction if either (i) the last sale price of the GGD Stock for any five Trading Days during the ten Trading Days immediately preceding the public announcement by the Company of such transaction is at least equal to 105% of the conversion price in effect on such Trading Day or (ii) the consideration in such transaction to the holders of GGD Stock consists of cash, securities that are, or immediately upon issuance will be, listed on a national securities exchange or quoted on the Nasdaq National Market, or a combination of cash and such securities, and the aggregate fair market value of such consideration (which, in the case of such securities, shall be equal to the average of the last sale prices of such securities during the ten consecutive Trading Days commencing with the sixth Trading Day following consummation of the transaction) is at least 105% of the conversion price in effect on the date immediately preceding the closing date of such transaction. "Voting Shares" is defined to mean all outstanding shares of any class or series (however designated) of Capital Stock entitled to vote generally in the election of members of the Board of Directors and includes, without limitation, the GGD Stock, the GTR Stock and the GMO Stock. 7. NOTICE OF REDEMPTION. Notice of redemption pursuant to paragraph 5 must be mailed at least 30 days, but not more than 60 days, before the redemption date to the Trustee and each holder of Securities to be redeemed at his address as shown on the register kept by the Registrar. Securities in denominations larger than $1,000 may be redeemed in part, but only in integral multiples of $1,000. On and after the redemption date, interest shall cease to accrue on Securities or any portion of them called for redemption; provided that funds in the requisite amount are paid or made available for payment on that date. 8. CONVERSION. Subject to the provisions of this paragraph 8, a holder of a Security may convert such Security into GGD Stock of the Company. If the Security is called for redemption, the holder may convert such Security at any time before the close of business on the business day immediately preceding the redemption date (unless the Company defaults in payment of the redemption price, in which case the conversion right will terminate on the date such default is cured). The holder may also convert such Security at any time before the close of business on its maturity date. The initial conversion price is $39.60 per share, subject to adjustment in certain events. The number A-6 85 of shares issuable upon conversion of a Security is determined by dividing the principal amount to be converted by the conversion price in effect on the conversion date, and rounding the result to the nearest 1/l00th of a share, with 500/1,000 of a share to be rounded up. Upon conversion, no payment or adjustment for accrued interest on a converted Security (other than the payment of interest to the Holder of a Security at the close of business on a record date pursuant to paragraph 2 hereof) or for dividends or distributions on the GGD Stock will be made. The Company will deliver a check for any fractional share issuable upon conversion. To convert a Security, a holder must (1) complete the appropriate instruction form for conversion pursuant to the Depository's book-entry conversion program, (2) deliver to the Conversion Agent by book-entry delivery the interest in the Security in global form to be converted, (3) furnish the appropriate endorsements and transfer documents if required by the Registrar or Conversion Agent, and (4) pay any tax or duty which may be payable in respect of any transfer involving the issue or delivery of GGD Stock in the name of a Person other than the Holder thereof. A holder may convert a portion of a Security if the portion is $1,000 or an integral multiple of $1,000. If GGD Stock is to be issued in the name of a Person other than the Holder thereof, and the restrictions on transfer of such Security set forth in the first paragraph of the face of the Security remain in effect, the Holder must provide certification through the Assignment Form attached hereto. If the restrictions on transfer of a Security set forth in the first paragraph of the face of the Security remain in effect, all shares of GGD Stock delivered upon conversion thereof shall bear a restrictive legend substantially in the form of such paragraph. The conversion price will be adjusted for the issuance of capital stock of the Company as a dividend or distribution on its GGD Stock; subdivisions, combinations or certain reclassifications of GGD Stock; distributions to all holders of GGD Stock of rights or warrants to purchase GGD Stock at less than the current market price at the time; distributions to such holders of GGD Stock of cash, debt securities (or other evidences of indebtedness) or other assets of the Company (excluding dividends or distributions for which adjustment is required to be made pursuant to another provision); certain dividends or other distributions consisting exclusively of cash to all holders of GGD Stock; or for payments to holders of GGD Stock pursuant to certain tender or exchange offers. No adjustment in the conversion price will be required unless such A-7 86 adjustment would require a change of at least 1% in the conversion price then in effect; provided that any adjustment that would otherwise be required to be made shall be carried forward and taken into account in any subsequent adjustment. However, no adjustment need be made if Securityholders are entitled to participate in certain of the above transactions or in certain other cases. The Company from time to time may voluntarily reduce the conversion price for a period of at least 20 days. If the Company is a party to a consolidation or merger, or a transfer or a lease of all or substantially all of its assets or a merger which reclassifies or changes its outstanding GGD Stock, the right to convert a Security into GGD Stock may be changed into a right to convert it into securities, cash or other assets of the Company or another person. 9. SUBORDINATION. The Securities are subordinated to Senior Indebtedness, which is defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give effect to such provisions, and each Securityholder appoints the Trustee his attorney-in-fact for any and all such purposes. 10. DENOMINATIONS, TRANSFER, EXCHANGE. This global security represents such of the outstanding Securities as shall be specified herein or endorsed hereon in accordance with the Indenture. The aggregate amount of outstanding Securities represented hereby may from time to time be reduced or increased to reflect exchanges. The definitive Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Registrar may require a holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Security or portion of a Security selected for redemption, except the unredeemed portion of any Security being redeemed in part. Also, it need not exchange or register the transfer of any Securities for a period of 15 days before a selection of Securities to be redeemed. 11. AMENDMENT, SUPPLEMENT, WAIVER. A-8 87 Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented, with the consent of the Company and the holders of a majority in aggregate principal amount of the Securities, and any existing default may be waived with the consent of the holders of a majority in aggregate principal amount of the Securities. Without the consent of any Securityholder, the Indenture or the Securities may be amended, inter alia, to cure any ambiguity, defect or inconsistency, to provide for assumption of Company obligations to Securityholders in the case of a merger or acquisition, or to make any change that does not materially adversely affect the rights of any Securityholder. 12. DEFAULTS AND REMEDIES. An Event of Default is default in the payment of interest on the Securities continued for 30 days, whether or not such payment is prohibited or restricted by the subordination provisions of the Indenture; default in payment of principal of or premium, if any, on the Securities when due and payable, whether or not such payment is prohibited or restricted by the subordination provisions of the Indenture; default in payment of the Repurchase Price to be paid upon a redemption at the option of the Holder pursuant to paragraph 6; failure by the Company for 60 days after certain notice to it to comply with any of its other agreements in the Indenture; default in the payment of other evidences of indebtedness of the Company if such payment exceeds $20,000,000 or acceleration of payments with respect to indebtedness of the Company in excess of $20,000,000; and certain events of bankruptcy or insolvency. If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in aggregate principal amount of the Securities may declare the principal of, and accrued interest on, all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing default (except a default in payment of principal or premium, if any, or interest) if it determines that withholding notice is in their interests. The Company must furnish an annual compliance certificate to the Trustee. 13. TRUSTEE DEALINGS WITH COMPANY. A-9 88 State Street Bank and Trust Company, the Trustee and any agent under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee or agent. 14. NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 15. AUTHENTICATION. This Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent on the face hereof. 16. ABBREVIATIONS. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 17. CUSIP NUMBERS Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption. 18. GOVERNING LAW. The laws of the State of New York shall govern the Indenture and the Securities. THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE. IT A-10 89 ALSO WILL FURNISH THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO: GENZYME CORPORATION, ONE KENDALL SQUARE, CAMBRIDGE, MASSACHUSETTS 02139, ATTENTION: INVESTOR RELATIONS DEPARTMENT. A-11 90 SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The following increases or decreases in this Global Security have been made: Date of Amount of Amount of increase Principal amount of this Signature of authorized Exchange decrease in in Principal Amount of Global Security officer of Trustee or Principal Amount this Global Security following such decrease Securities Custodian of this Global or increase Security
A-12 91 ASSIGNMENT FORM To assign this Security or, in the event of conversion, shares of Genzyme General Division Common Stock, fill in the form below: I or we assign and transfer this Security or, shares of Genzyme General ---- Division Common Stock, to - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert assignee's social security or tax identification number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint agent to transfer this Security on the - ------------------------------------ books of the Company. The agent may substitute another to act for him. Date: Your signature: -------------------- -------------------------------- (Sign exactly as your name appears on the face of this Security) Signature Guaranteed: -------------------------------------------------------- A-13 92 EXHIBIT B FORM OF DEFINITIVE SECURITY (Face of Security) No. $ CUSIP No. ----------- GENZYME CORPORATION 5-1/4% Convertible Subordinated Note Due 2005 Genzyme Corporation, a Massachusetts corporation, promises to pay to or registered assigns, the principal sum of ------------------ -------------- Dollars on June 1, 2005. Interest Payment Dates: June 1 and December 1. Record Dates: May 15 and November 15. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Dated: GENZYME CORPORATION By: --------------------------------- By: --------------------------------- Authenticated: STATE STREET BANK AND TRUST COMPANY as Trustee By: ------------------------------- Authorized Signer B-1 93 (Reverse of Security) GENZYME CORPORATION 5-1/4% Convertible Subordinated Note Due 2005 1. INTEREST. GENZYME CORPORATION (the "Company"), a Massachusetts corporation, promises to pay interest on the principal amount of this Security at the rate of 5-1/4% per annum. The Company will pay interest semi-annually on June 1 and December 1 each year, commencing on December 1, 1998 to holders of Securities at the close of business on the relevant record dates specified above. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from May 22, 1998. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company will pay interest on the Securities (except defaulted interest) to the persons who are registered holders of Securities at the close of business on the May 15 or November 15 next preceding the interest payment date (including Securities that are cancelled after the record date and on or before the interest payment date). Holders must surrender Securities to a Paying Agent to collect principal and any premium payments. The Company will pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT, REGISTRAR, CONVERSION AGENT. Initially, State Street Bank and Trust Company (the "Trustee") will act as Paying Agent, Registrar and Conversion Agent. The Company may change any Paying Agent, Registrar, Conversion Agent or co-registrar by giving notice to the Trustee. The Company may act as Paying Agent, Registrar, Conversion Agent or co-registrar. 4. INDENTURE. The Company issued this Security as one of a duly authorized issue of Notes of the Company designated as its 5-1/4% Convertible Subordinated Notes Due 2005 (the "Securities") under an Indenture dated as of May 22, 1998 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture. The Securities are subject to B-2 94 all such terms, and Securityholders are referred to the Indenture for a statement of such terms. Terms used herein that are defined in the Indenture shall have the respective meanings assigned thereto in the Indenture. The Securities are general unsecured obligations of the Company limited to $225,000,000 in aggregate principal amount ($250,000,000 if the Over-Allotment Option is exercised in full). 5. OPTIONAL REDEMPTION. The Securities may not be redeemed prior to June 10, 2001, and are redeemable, subject to the subordination provisions described below, on such date and thereafter at the option of the Company, as a whole or from time to time in part, at the following prices (expressed as percentages of the principal amount) plus accrued interest to, but not including, the redemption date: 102.63% if redeemed on or before May 31, 2002 and thereafter if redeemed during the 12-month period beginning on the dates indicated below:
YEAR PERCENTAGE 2002 101.75% 2003 100.88% 2004 100.00%
No sinking fund is provided for the Securities. 6. REDEMPTION AT OPTION OF HOLDER UPON A FUNDAMENTAL CHANGE. If a Fundamental Change (as defined below) occurs, each holder of Securities shall have the right, at the holder's option, to require the Company to repurchase all of such holder's Securities, or any portion thereof that is an integral multiple of $1,000, on the date (the "Repurchase Date") selected by the Company that is not less than 10 nor more than 30 days after the Final Surrender Date (as defined below), at a price equal to 100% of the principal amount thereof, plus accrued interest to the Repurchase Date (the "Repurchase Price"). Unless the Company shall have theretofore called for redemption all the outstanding Securities, on or before the 30th day after the occurrence of a Fundamental Change, the Company is obligated to mail or cause the Trustee to mail to all holders of record of the Securities a notice (the "Company Notice") describing, among other things, the occurrence of such Fundamental Change and of the repurchase right arising as a result thereof. The Company must deliver a copy of the Company Notice to the Trustee and cause a copy of such notice to be published in a newspaper of general circulation in the Borough of Manhattan, The City of New York. To exercise the repurchase B-3 95 right, a holder of Securities must surrender, on or before the date which, subject to any contrary requirements of applicable law, is 60 days after the date of mailing of the Company Notice (the "Final Surrender Date") the Securities with respect to which the right is being exercised, which, in the case of definitive Securities, must be duly endorsed for transfer to the Company. The term "Fundamental Change" shall mean any of the following: (i) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) becoming the "beneficial owner" (as defined in Rule l3d-3 under such Act) of Voting Shares (as defined below) of the Company entitled to exercise more than 50% of the total voting power of all outstanding Voting Shares of the Company (including any right to acquire Voting Shares that are not then outstanding of which such person or group is deemed the beneficial owner); or (ii) a change in the Board of Directors in which the individuals who constituted the Board of Directors at the beginning of the two-year period immediately preceding such change (together with any other director whose election by the Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of at least two-thirds of the directors then in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors then in office; or (iii) any consolidation of the Company with, or merger of the Company into, any other Person, any merger of another Person into the Company, or any sale or transfer of all or substantially all of the assets of the Company to another Person (other than (x) a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Genzyme General Division Common Stock ("GGD Stock"), (y) a merger which is effected solely to change the jurisdiction of incorporation of the Company or (z) any consolidation with or merger of the Company into a wholly owned subsidiary of the Company, or any sale or transfer by the Company of all or substantially all of its assets to one or more of its wholly owned subsidiaries, in any one transaction or a series of transactions; provided, in any such case, that the resulting corporation or each such subsidiary assumes or guarantees the Company's obligations under the Securities); provided, however, that a Fundamental Change shall B-4 96 not occur with respect to any such transaction if either (i) the last sale price of the GGD Stock for any five Trading Days during the ten Trading Days immediately preceding the public announcement by the Company of such transaction is at least equal to 105% of the conversion price in effect on such Trading Day or (ii) the consideration in such transaction to the holders of GGD Stock consists of cash, securities that are, or immediately upon issuance will be, listed on a national securities exchange or quoted on the Nasdaq National Market, or a combination of cash and such securities, and the aggregate fair market value of such consideration (which, in the case of such securities, shall be equal to the average of the last sale prices of such securities during the ten consecutive Trading Days commencing with the sixth Trading Day following consummation of the transaction) is at least 105% of the conversion price in effect on the date immediately preceding the closing date of such transaction. "Voting Shares" is defined to mean all outstanding shares of any class or series (however designated) of Capital Stock entitled to vote generally in the election of members of the Board of Directors and includes, without limitation, the GGD Stock, the GTR Stock and the GMO Stock. 7. NOTICE OF REDEMPTION. Notice of redemption pursuant to paragraph 5 must be mailed at least 30 days, but not more than 60 days, before the redemption date to the Trustee and each holder of Securities to be redeemed at his address as shown on the register kept by the Registrar. Securities in denominations larger than $1,000 may be redeemed in part, but only in integral multiples of $1,000. On and after the redemption date, interest shall cease to accrue on Securities or any portion of them called for redemption; provided that funds in the requisite amount are paid or made available for payment on that date. 8. CONVERSION. Subject to the provisions of this paragraph 8, a holder of a Security may convert such Security into GGD Stock of the Company. If the Security is called for redemption, the holder may convert such Security at any time before the close of business on the business day immediately preceding the redemption date (unless the Company defaults in payment of the redemption price, in which case the conversion right will terminate on the date such default is cured). The holder may also convert such Security at any time before the close of business on its maturity date. The initial conversion price is $39.60 per share, subject to adjustment in certain events. The number B-5 97 of shares issuable upon conversion of a Security is determined by dividing the principal amount to be converted by the conversion price in effect on the conversion date, and rounding the result to the nearest 1/l00th of a share, with 500/1,000 of a share to be rounded up. Upon conversion, no payment or adjustment for accrued interest on a converted Security (other than the payment of interest to the Holder of a Security at the close of business on a record date pursuant to paragraph 2 hereof) or for dividends or distributions on the GGD Stock will be made. The Company will deliver a check for any fractional share issuable upon conversion. To convert a Security, a holder must (1) complete and sign the conversion notice on the reverse of the Security, (2) surrender the Security to a Conversion Agent, (3) furnish the appropriate endorsements and transfer documents if required by the Registrar or Conversion Agent, and (4) pay any tax or duty which may be payable in respect of any transfer involving the issue or delivery of GGD Stock in the name of a Person other than the Holder thereof. A holder may convert a portion of a Security if the portion is $1,000 or an integral multiple of $1,000. If GGD Stock is to be issued in the name of a Person other than the Holder thereof, and the restrictions on transfer of such Security set forth in the first paragraph of the face of the Security remain in effect, the Holder must provide certification through the Assignment Form attached hereto. If the restrictions on transfer of a Security set forth in the first paragraph of the face of the Security remain in effect, all shares of GGD Stock delivered upon conversion thereof shall bear a restrictive legend substantially in the form of such paragraph. The conversion price will be adjusted for the issuance of capital stock of the Company as a dividend or distribution on its GGD Stock; subdivisions, combinations or certain reclassifications of GGD Stock; distributions to all holders of GGD Stock of rights or warrants to purchase GGD Stock at less than the current market price at the time; distributions to such holders of GGD Stock of cash, debt securities (or other evidences of indebtedness) or other assets of the Company (excluding dividends or distributions for which adjustment is required to be made pursuant to another provision); certain dividends or other distributions consisting exclusively of cash to all holders of GGD Stock; or for payments to holders of GGD Stock pursuant to certain tender or exchange offers. No adjustment in the conversion price will be required unless such adjustment would require a change of at least 1% in the conversion price then in effect; provided that any adjustment that B-6 98 would otherwise be required to be made shall be carried forward and taken into account in any subsequent adjustment. However, no adjustment need be made if Securityholders are entitled to participate in certain of the above transactions or in certain other cases. The Company from time to time may voluntarily reduce the conversion price for a period of at least 20 days. If the Company is a party to a consolidation or merger, or a transfer or a lease of all or substantially all of its assets or a merger which reclassifies or changes its outstanding GGD Stock, the right to convert a Security into GGD Stock may be changed into a right to convert it into securities, cash or other assets of the Company or another person. 9. SUBORDINATION. The Securities are subordinated to Senior Indebtedness, which is defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give effect to such provisions, and each Securityholder appoints the Trustee his attorney-in-fact for any and all such purposes. 10. DENOMINATIONS, TRANSFER, EXCHANGE. This global security represents such of the outstanding Securities as shall be specified herein or endorsed hereon in accordance with the Indenture. The aggregate amount of outstanding Securities represented hereby may from time to time be reduced or increased to reflect exchanges. The definitive Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Registrar may require a holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Security or portion of a Security selected for redemption, except the unredeemed portion of any Security being redeemed in part. Also, it need not exchange or register the transfer of any Securities for a period of 15 days before a selection of Securities to be redeemed. 11. AMENDMENT, SUPPLEMENT, WAIVER. Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented, with the consent of the Company and the holders of a majority in aggregate principal amount of the Securities, and any existing default may be waived with the consent of the holders of a majority in aggregate princi- B-7 99 pal amount of the Securities. Without the consent of any Securityholder, the Indenture or the Securities may be amended, inter alia, to cure any ambiguity, defect or inconsistency, to provide for assumption of Company obligations to Securityholders in the case of a merger or acquisition, or to make any change that does not materially adversely affect the rights of any Securityholder. 12. DEFAULTS AND REMEDIES. An Event of Default is default in the payment of interest on the Securities continued for 30 days, whether or not such payment is prohibited or restricted by the subordination provisions of the Indenture; default in payment of principal of or premium, if any, on the Securities when due and payable, whether or not such payment is prohibited or restricted by the subordination provisions of the Indenture; default in payment of the Repurchase Price to be paid upon a redemption at the option of the Holder pursuant to paragraph 6; failure by the Company for 60 days after certain notice to it to comply with any of its other agreements in the Indenture; default in the payment of other evidences of indebtedness of the Company if such payment exceeds $20,000,000 or acceleration of payments with respect to indebtedness of the Company in excess of $20,000,000; and certain events of bankruptcy or insolvency. If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in aggregate principal amount of the Securities may declare the principal of, and accrued interest on, all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing default (except a default in payment of principal or premium, if any, or interest) if it determines that withholding notice is in their interests. The Company must furnish an annual compliance certificate to the Trustee. 13. TRUSTEE DEALINGS WITH COMPANY. State Street Bank and Trust Company, the Trustee and any agent under the Indenture, in its individual or any other B-8 100 capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee or agent. 14. NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 15. AUTHENTICATION. This Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent on the face hereof. 16. ABBREVIATIONS. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 17. CUSIP NUMBERS Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption. 18. GOVERNING LAW. The laws of the State of New York shall govern the Indenture and the Securities. THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE. IT ALSO WILL FURNISH THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO: GENZYME CORPORATION, ONE KENDALL B-9 101 SQUARE, CAMBRIDGE, MASSACHUSETTS 02139, ATTENTION: INVESTOR RELATIONS DEPARTMENT. B-10 102 CONVERSION NOTICE To Genzyme Corporation: The undersigned owner of this Security hereby irrevocably exercises the option to convert this Security, or the portion hereof (which is $1,000 or an integral multiple thereof) below designated, into shares of Genzyme General Division Common Stock in accordance with the terms of the Indenture referred to in this Security, and directs that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares and any Securities representing any unconverted principal amount hereof, be issued and delivered to the registered holder hereof unless a different name has been indicated below. If shares are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. To convert this Security into Genzyme General Division Common Stock of the Company, check the box: / / To convert only part of this Security, state the amount (must be $1,000 or any whole multiple thereof): $-------- If you want the stock certificate made out in another Person's name, fill in the form below: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert other Person's social security or tax identification number) - -------------------------------------------------------------------------------- (Print or type other Person's name, address and zip code) Date: Your signature: -------------------- ---------------------------------- (Sign exactly as your name appears on the face of this Security) Signature Guaranteed: ---------------------------------------------------------- B-11 103 ASSIGNMENT FORM To assign this Security or, in the event of conversion, shares of Genzyme General Division Common Stock, fill in the form below: I or we assign and transfer this Security or, shares of Genzyme ------ General Division Common Stock, to - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert assignee's social security or tax identification number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint agent to transfer this Security on the - ---------------------------------------- books of the Company. The agent may substitute another to act for him. Date: Your signature: ---------------------- ---------------------------------- (Sign exactly as your name appears on the face of this Security) Signature Guaranteed: ---------------------------------------------------------- B-12 EX-4.4 3 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 4.4 $225,000,000 GENZYME CORPORATION 5 1/4% Convertible Subordinated Notes Due 2005 REGISTRATION RIGHTS AGREEMENT May 19, 1998 Credit Suisse First Boston Corporation Cowen & Company Goldman, Sachs & Co. c/o Credit Suisse First Boston Corporation Eleven Madison Avenue New York, New York 10010-3629 Dear Sirs: Genzyme Corporation, a Massachusetts corporation (the "Company"), proposes to issue and sell to Credit Suisse First Boston Corporation, Cowen & Company and Goldman, Sachs & Co. (the "Initial Purchasers"), upon the terms set forth in a purchase agreement of even date herewith (the "Purchase Agreement"), $225,000,000 aggregate principal amount of its 5 1/4% Convertible Subordinated Notes due 2005 (the "Notes"). The Notes will be issued pursuant to an Indenture, dated as of May 22, 1998 (the "Indenture") by and between the Company and State Street Bank and Trust Company (the "Trustee"). Under the terms of the Indenture, the Notes are convertible, in whole or in part, into shares of Genzyme General Division Common Stock, par value $.01 per share (the "Conversion Shares" and, together with the Notes, the "Securities"), at the option of the holders thereof at any time following the date of original issuance thereof at the conversion prices set forth in the Notes, as adjusted from time to time pursuant to the Indenture. As an inducement to the Initial Purchasers, the Company agrees with the Initial Purchasers, for the benefit of the holders of the Notes (including, without limitation, the Initial Purchasers) and Conversion Shares (collectively, the "Holders"), as follows: 1. Resale Shelf Registration. (a) The Company shall, at its cost, use its reasonable best efforts to file (within 60 days after the Closing Date (as defined in the Purchase Agreement)) with the Securities and Exchange Commission (the "Commission") and thereafter shall use its reasonable best efforts to cause to be declared effective a registration statement (the "Resale Shelf Registration Statement") on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act") relating to the offer and sale of the Transfer Restricted Securities (as defined in Section 5 hereof) by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Resale Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the "Resale Shelf Registration"); provided, however, that no Holder (other than the Initial Purchasers) shall be entitled to have the Securities held by it covered by such Resale Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder. 2 (b) The Company, subject to Section 2(h), shall use its reasonable best efforts to keep the Resale Shelf Registration Statement continuously effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Securities, for a period of two years from the date of its effectiveness or such shorter period that will terminate when all the Securities covered by the Resale Shelf Registration Statement (i) have been sold pursuant thereto or (ii) are no longer Transfer Restricted Securities as defined in Section 5(d) (in any such case, such period being called the "Shelf Registration Period"). The Company shall be deemed not to have used its best efforts to keep the Resale Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless such action is required by applicable law or otherwise permitted hereunder. (c) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Resale Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Resale Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 2. Registration Procedures. In connection with the Resale Shelf Registration contemplated by Section 1 hereof, the following provisions apply: (a) The Company shall (i) furnish to the Initial Purchasers, prior to the filing thereof with the Commission, a copy of the Resale Shelf Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that the Initial Purchasers (with respect to any portion of an unsold allotment from the original offering) is participating in the Resale Shelf Registration, the Company shall use its best efforts to reflect in each such document, when so filed with the Commission, such comments as the Initial Purchasers reasonably may propose; and (ii) subject to paragraph (l) of this Section 2, include the names of the Holders, who propose to sell Securities pursuant to the Resale Shelf Registration Statement, as selling securityholders. (b) The Company shall give written notice to the Initial Purchasers and Holders of the Securities (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) when the Resale Shelf Registration Statement or any amendment thereto has been filed with the Commission and when the Resale Shelf Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to the Resale Shelf Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Resale Shelf Registration Statement or the initiation of any proceedings for that purpose; 2 3 (iv) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the Company to make changes in the prospectus which forms a part of the Resale Registration Statement in order that the prospectus does not contain an untrue statement of a material fact nor omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (c) The Company shall make every reasonable effort to obtain the withdrawal at the earliest possible time, of any order suspending the effectiveness of the Resale Shelf Registration Statement. (d) The Company shall furnish to each Holder of Securities included within the coverage of the Resale Shelf Registration, without charge, at least one copy of the Resale Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (e) The Company shall, during the Resale Shelf Registration Period, deliver to each Holder of Securities included within the coverage of the Resale Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Resale Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by the prospectus, or any amendment or supplement thereto, included in the Resale Shelf Registration Statement in the manner described therein. (f) Prior to any public offering of the Securities, pursuant to any Resale Shelf Registration Statement, the Company shall register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or "blue sky" laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Resale Shelf Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject. (g) The Company shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to any Resale Shelf Registration Statement (to the extent such Securities are certificated) free of any restrictive legends and in such denominations and registered in such names as the Holders may reasonably request a reasonable period of time prior to sales of the Securities pursuant to such Resale Shelf Registration Statement and prior to settlement of such sales. 3 4 (h) Upon the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 2(b) above during the Shelf Registration Period, the Company shall promptly prepare and file a post-effective amendment to the Resale Shelf Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of the Securities or purchasers of Securities, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided however, that the Company may delay preparing, filing and distributing any such supplement or amendment if the Company determines in good faith that such supplement or amendment would, in the reasonable judgment of the Company, (i) interfere with or affect the negotiation or completion of a transaction that is being contemplated by the Company (whether or not a final decision has been made to undertake such transaction) or (ii) involve initial or continuing disclosure obligations that are not in the best interests of the Company's stockholders at such time; provided further, that such delay shall not extend for a period of more than 30 business days in any three month period or more than 60 business days in any twelve month period. If the Company notifies the Initial Purchasers and the Holders of the Securities in accordance with paragraphs (ii) through (v) of Section 2(b) above to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Initial Purchasers and the Holders of the Securities shall suspend use of such prospectus. The period of effectiveness of the Resale Shelf Registration Statement provided for in Section 1(b) above shall be extended by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchasers and the Holders of the Securities shall have received such amended or supplemented prospectus pursuant to this Section 2(h); provided, however, that such period of effectiveness including any such extension shall not exceed the holding period applicable to Rule 144(k) of the Securities Act or any substitution or modification thereof. (i) Not later than the effective date of the Resale Shelf Registration Statement, the Company will provide CUSIP numbers for the Notes and the Conversion Shares registered under the Resale Shelf Registration Statement and provide the Trustee with a certificate for the Notes, in a form eligible for deposit with The Depository Trust Company. (j) The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Resale Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Resale Shelf Registration Statement, which statement shall cover such 12-month period. (k) The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. (l) The Company may require each Holder of Securities to be sold pursuant to the Resale Shelf Registration Statement to furnish to the Company such information regarding the Holder and the 4 5 distribution of the Securities as the Company may from time to time reasonably require for inclusion in the Resale Shelf Registration Statement, and the Company may exclude from such registration the Securities of any Holder that fails to furnish such information within a reasonable time after receiving such request. (m) The Company shall enter into such customary agreements (including, if requested in accordance with Section 7 hereof, an underwriting agreement in customary form) and take all such other action, if any, as any Holder of the Securities shall reasonably request in order to facilitate the disposition of the Securities pursuant to any Resale Shelf Registration. (n) The Company shall (i) make reasonably available for inspection by the Holders, any underwriter participating in any disposition pursuant to the Resale Shelf Registration Statement in accordance with Section 7 hereof and any attorney, accountant or other agent retained by the Holders or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and (ii) cause the Company's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders or any such underwriter, attorney, accountant or agent in connection with the Resale Shelf Registration Statement, in each case, as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchasers and the other parties, by one firm of counsel, which firm shall be Cahill Gordon & Reindel until another firm shall be designated as described in Section 3 hereof. (o) The Company shall cause (i) its counsel to deliver (A) an opinion relating to the Securities in customary form addressed to such Holders and dated the effective date of such Resale Shelf Registration Statement (it being agreed that the matters to be covered by such opinion shall include, without limitation, the due incorporation and good standing of the Company and its subsidiaries; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the applicable Securities; the compliance as to form of such Resale Shelf Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act, respectively; and, as of the date of the opinion and as of the effective date of the Resale Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Resale Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, and from any documents incorporated by reference therein of an untrue statement of a material fact or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any such documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act); and (B) an opinion relating to the Securities in customary form addressed to any underwriters dated the closing date of any underwritten offering in accordance with Section 7 hereof and covering matters of the type customarily in opinions to underwriters in connection with underwritten offerings; (ii) its officers to execute and deliver all customary documents and certificates and updates thereof requested by any such underwriters of the applicable Securities and (iii) its independent public accountants and the independent public accountants, if any with respect to any other entity for which financial information is provided in the Resale Shelf Registration Statement to provide to the selling Holders of the applicable Securities and any such underwriter therefor a comfort letter in customary form; and covering matters of the type customarily 5 6 covered in comfort letters in connection with underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. (p) In the event that any broker-dealer registered under the Exchange Act shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "Rules") of the National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company will assist such broker-dealer in complying with the requirements of such Rules, including, without limitation, by (i) if such Rules, including Rule 2720, shall so require, engaging a "qualified independent underwriter" (as defined in Rule 2720) to participate in the preparation of the Resale Shelf Registration Statement relating to such Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Resale Shelf Registration Statement is an underwritten offering in accordance with Section 7 hereof or is made through a placement or sales agent, to recommend the yield of such Securities, (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 4 hereof and (iii) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules. (q) The Company shall use its reasonable best efforts to take all other steps necessary to effect the registration of the Securities covered by the Resale Shelf Registration Statement contemplated hereby. 3. Registration Expenses. The Company shall bear all fees and expenses incurred in connection with the performance of its obligations under Sections 1 and 2 hereof whether or not a Resale Shelf Registration is filed or becomes effective, shall bear or reimburse the Holders of the Securities covered thereby for the reasonable fees and disbursements of one firm of counsel, which firm shall be Cahill Gordon & Reindel until another firm shall be designated by the Holders of a majority in principal amount of the Notes covered thereby to act as counsel for the Holders in connection therewith. The Holders shall be responsible for all other fees and expenses, such as brokerage fees and commissions. 4. Indemnification. (a) To the extent permitted by law, the Company agrees to indemnify and hold harmless each Holder of the Securities and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (each Holder and such controlling persons are referred to collectively as the "Indemnified Parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any 6 7 untrue statement or alleged untrue statement of a material fact contained in the Resale Shelf Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to the Resale Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in the Resale Shelf Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to the Resale Shelf Registration in reliance upon and in conformity with written information pertaining to a Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein, (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to the Resale Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a prospectus relating to such Securities was required to be delivered by such Holder under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the final prospectus if the Company had previously furnished copies thereof to such Holder, (iii) the Company shall not be liable with respect to any statement in, or omission from, a prospectus used in a manner inconsistent with the last sentence of Section 2(h) and (iv) the Company shall not be liable with respect to any untrue statement in, or omission from, a prospectus when a subsequent version of the prospectus had been supplied and the Holders have been given reasonable notice of such subsequent version prior to the relevant sale or sales; provided, further, however, that this indemnity agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party. The Company shall also indemnify underwriters, their officers and directors and each person who controls such underwriters within the meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Holders of the Securities if requested by such Holders in connection with an underwriting in accordance with Section 7 hereof. (b) To the extent permitted by law, each Holder of the Securities, severally and not jointly, will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Resale Shelf Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to the Resale Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any of its controlling persons. (c) Promptly after receipt by an indemnified party under this Section 4 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 4, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnifi- 7 8 cation obligation provided in paragraph (a) or (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 4 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action. An indemnifying party will not be liable for any settlement of any action or claim effected without its written consent; provided, however, that such consent will not be reasonably withheld. (d) If the indemnification provided for in this Section 4 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the sale of the Securities, pursuant to the Resale Shelf Registration, or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 4(d), the Holders of the Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to a Resale Shelf Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company. 8 9 (e) The agreements contained in this Section 5 shall survive the sale of the Securities pursuant to the Resale Shelf Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party. 5. Additional Interest Under Certain Circumstances. (a) Additional interest (the "Additional Interest") with respect to the Notes shall be assessed as follows if any of the following events occur (each such event in clauses (i) through (iii) below a "Registration Default": (i) If on or prior to the 60th day after the first date of original issuance of the Notes, the Resale Shelf Registration Statement has not been filed with the Commission; (ii) If on or prior to the 120th day after the first date of original issuance of the Notes, the Resale Shelf Registration Statement has not been declared effective by the Commission; or (iii) If after the Resale Shelf Registration Statement is declared effective (A) such Resale Shelf Registration Statement thereafter ceases to be effective; or (B) such Resale Shelf Registration Statement or the related prospectus ceases to be usable (except as permitted in paragraph (b)) in connection with resales of Transfer Restricted Securities during the periods specified herein because either (1) any event occurs as a result of which the related prospectus forming part of such Resale Shelf Registration Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or (2) it shall be necessary to amend such Resale Shelf Registration Statement or supplement the related prospectus, to comply with the Securities Act or the Exchange Act or the respective rules thereunder. Additional Interest shall accrue on the Notes over and above the interest set forth in the title of the Securities from and including the date on which any such Registration Default shall occur to but excluding the date on which all such Registration Defaults have been cured, at a rate of 0.25% per annum in the case of (i) and 0.50% per annum in the case of (ii) or (iii). (b) A Registration Default referred to in Section 5(a)(iii)(B) hereof shall be deemed not to have occurred and be continuing in relation to the Resale Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to such Resale Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus or (y) other material events, with respect to the Company that would need to be described in such Resale Shelf Registration Statement or the related prospectus and (ii) in the case of clause (y), the Company is proceeding in good faith in accordance with Section 2(h); provided, however, that in any case if such Registration Default occurs for a continuous period in excess of 30 days, Additional Interest shall be payable in accordance with the above paragraph from the day such Registration Default occurs until such Registration Default is cured. (c) Any amounts of Additional Interest due pursuant to clause (i), (ii) or (iii) of Section 5(a) above will be payable in cash on the regular interest payment dates with respect to the Notes. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the principal amount of the Notes, multiplied by a fraction, the numerator of which is the number of days such Additional Interest 9 10 rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360. (d) "Transfer Restricted Securities" means each Security until (i) the date on which such Security has been effectively registered under the Securities Act and disposed of in accordance with the Resale Shelf Registration Statement or (ii) the date on which such Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. (e) Except as set forth in this Section 5, the Company will have no other liabilities for monetary damages with respect to its registration obligations hereunder; provided, however, that in the event the Company breaches, fails to comply with or violates the provisions of this Agreement, the Holders shall be entitled to, and the Company shall not oppose the granting of, equitable relief, including injunction and specific performance. 6. Rules 144 and 144A. The Company shall use its reasonable best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder of Notes, make publicly available such other information as is necessary to permit sales of their securities pursuant to Rules 144 and 144A for the Shelf Registration Period. The Company covenants that it will take such further action as any Holder of Notes may reasonably request, all to the extent required from time to time to enable such Holder to sell Notes without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Company will provide a copy of this Agreement to prospective purchasers of Notes identified to the Company by the Initial Purchasers upon request. Upon the request of any Holder of Notes, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 7. Underwritten Registrations. The Holders of Securities covered by the Resale Shelf Registration Statement who desire to do so may sell such securities in an underwritten offering in accordance with the conditions set forth below. In any such underwritten offering, the investment banker or bankers and manager or managers that will administer the offering will be selected by, and the underwriting arrangements with respect thereto will be approved by, the Holders of a majority of the Securities to be included in such offering; provided, however, that (i) with respect to the investment bankers and managers, such investment bankers and managers will be selected by such Holders subject to approval by the Company, which approval shall not be unreasonably withheld, and (ii) the Company shall not be obligated to arrange for more than one underwritten offering during the Shelf Registration Period. No Holder may participate in any underwritten offering contemplated hereby unless such Holder (a) agrees to sell such Holder's Securities in accordance with any approved underwriting arrangements, (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such approved underwriting arrangements, and (c) at least 25% of the outstanding Transfer Restricted Securities are included in such underwritten offering. The Holders participating in any underwritten offering shall be responsible for any expenses customarily borne by selling securityholders, including underwriting discounts and commissions and fees and expenses of counsel to the selling securityholders to the extent not required to be paid by the Company pursuant to Section 3 hereof. Notwithstanding the foregoing or the provisions of Section 2(l) hereof, upon receipt of a request from the managing underwriter or a representative of Holders of 10 11 a majority of the Transfer Restricted Securities outstanding to prepare and file an amendment or supplement to the Resale Shelf Registration Statement in connection with an underwritten offering, the Company may delay the filing of any such amendment or supplement as set forth in Section 2(h). 8. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Company and the written consent of the Holders of a majority in principal amount of the Securities affected by such amendment, modification, supplement, waiver or consents. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery: (1) if to a Holder of the Securities, at the most current address given by such Holder to the Company. (2) if to the Initial Purchasers: Credit Suisse First Boston Corporation Eleven Madison Avenue New York, NY 10010-3629 Fax No.: (212) 325-8278 Attention: Transactions Advisory Group with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Fax No.: (212) 269-5420 Attention: Geoffrey E. Liebmann (3) if to the Company, at its address as follows: Genzyme Corporation One Kendall Square Cambridge, MA 02139 Fax No.: (617) 252-7553 Attention: Chief Legal Officer 11 12 with a copy to: Palmer & Dodge LLP One Beacon Street Boston, MA 02108 Fax No.: (617) 227-4420 Attention: Maureen Manning All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient's facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery. (c) No Inconsistent Agreements. The Company has not, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. (d) Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns. (e) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. (h) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (i) Securities Held by the Company. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 12 13 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement on the Initial Purchasers and the Company in accordance with its terms. Very truly yours, GENZYME CORPORATION By: /s/ Henri A. Termeer --------------------------------------------- Name: Henri A. Termeer Title: President and Chief Executive Officer The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. CREDIT SUISSE FIRST BOSTON CORPORATION COWEN & COMPANY GOLDMAN, SACHS & CO. By: CREDIT SUISSE FIRST BOSTON CORPORATION By: /s/ W. Robert Dahl ----------------------------------- Name: W. Robert Dahl Title: Managing Director EX-4.5 4 PURCHASE AGREEMENT 1 EXHIBIT 4.5 $225,000,000 GENZYME CORPORATION 5 1/4% Convertible Subordinated Notes Due 2005 PURCHASE AGREEMENT May 19, 1998 CREDIT SUISSE FIRST BOSTON CORPORATION Cowen & Company Goldman, Sachs & Co. c/o Credit Suisse First Boston Corporation Eleven Madison Avenue New York, N.Y. 10010-3629 Dear Sirs: 1. Introductory. Genzyme Corporation, a Massachusetts corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the several initial purchasers named in Schedule C hereto (the "Purchasers") U.S.$225,000,000 principal amount of its 5 1/4% Convertible Subordinated Notes Due 2005 (the "Firm Securities") and also proposes to grant to the Purchasers an option, exercisable by Credit Suisse First Boston Corporation ("CSFBC") to purchase an aggregate of up to an additional U.S. $25,000,000 principal amount of its 5 1/4% Convertible Subordinated Notes Due 2005 ("Optional Securities"), each to be issued under an indenture, dated as of May 22, 1998 (the "Indenture"), between the Company and State Street Bank and Trust Company, as Trustee. The Firm Securities and the Optional Securities which the Purchasers may elect to purchase pursuant to Section 3 hereof are herein collectively called the "Offered Securities." The United States Securities Act of 1933, as amended, is herein referred to as the "Securities Act." The holders of the Offered Securities will be entitled to the benefits of a Registration Rights Agreement of even date herewith among the Company and the Purchasers (the "Registration Rights Agreement"), pursuant to which the Company agrees to file a registration statement (the "Registration Statement") with the Securities and Exchange Commission (the "Commission") registering the resale of the Offered Securities and the Underlying Shares (as defined below) issuable upon conversion thereof under the Securities Act. The Company hereby agrees with the several Purchasers as follows: 2. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, the several Purchasers that: (a) An offering circular (the "Offering Circular") relating to the Offered Securities to be offered by the Purchasers has been prepared by the Company. Such Offering Circular, together with the documents incorporated by reference therein, the documents listed in Schedule A hereto and any other document approved by the Company for use in connection with the contemplated resale of the Offered Securities are hereinafter collectively referred to as the "Offering Document". As of the date of this 2 Agreement, the Offering Document does not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Offering Document based upon written information furnished to the Company by any Purchaser through CSFBC specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 7(b). Except as disclosed in the Offering Document, on the date of this Agreement, the Company's Annual Report on Form 10-K most recently filed with the Commission and all subsequent reports (collectively, the "Exchange Act Reports") which have been filed by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended, (the "Exchange Act") do not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Such documents, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission thereunder. (b) The Company has been duly incorporated and is an existing corporation in good standing under the laws of the Commonwealth of Massachusetts, with power and authority (corporate and other) to own its properties and conduct its business as described in the Offering Document; and the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so licensed or qualified would not have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and the Subsidiaries (as defined below) taken as a whole or of the Company's General Division ("Genzyme General"). (c) The only "significant subsidiaries" of the Company, as defined in Rule 1-02(w) of the Commission's Regulation S-X, that are corporations are the subsidiaries of the Company listed on Schedule B hereto (the "Subsidiaries"). Each Subsidiary has been duly incorporated or organized and is existing in good standing under the laws of the jurisdiction of its incorporation or formation, with power and authority to own its properties and conduct its business as described in the Offering Document; and each Subsidiary is duly licensed or qualified to do business as a foreign corporation or other entity in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such license or qualification, except where the failure to be so licensed or qualified would not have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and the Subsidiaries taken as a whole or of Genzyme General; all of the issued and outstanding capital stock of each Subsidiary has been duly authorized and validly issued and, with respect to each Subsidiary, is fully paid and nonassessable; and the capital stock of each Subsidiary owned by the Company, directly or through subsidiaries, is owned free from liens, encumbrances and defects. Except as set forth on Schedule B attached hereto, the Company is the sole record owner, directly or indirectly, of all of the capital stock of each of its Subsidiaries. (d) All outstanding shares of capital stock of the Company have been duly authorized; all outstanding shares of capital stock of the Company are, and, when the Underlying Shares have been delivered and paid for upon conversion of the Offered Securities in accordance with the Indenture, such Underlying Shares will have been validly issued, fully paid and nonassessable and will conform to the description thereof contained in the Offering Document; and the stockholders of the Company have no preemptive or similar rights with respect to the Underlying Shares. Except as set forth in the 2 3 Offering Document, the Company does not have outstanding, and at the Closing Date the Company will not have outstanding, any options to purchase, or any rights or warrants to subscribe for, or any securities or obligations convertible into, or any contracts or commitments to issue or sell, (i) any Offered Securities, or (ii) any shares of capital stock held by it in any Subsidiary, or any such warrants, convertible securities or obligations (except shares issued or issuable pursuant to employee or director benefit plans after the date as of which information with respect thereto is given in the Offering Document). (e) No holder of securities of the Company has rights to the registration of any securities of the Company because of the filing of the Registration Statement. (f) Neither the Company nor any of its Subsidiaries is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "environmental laws"), owns or operates any real property contaminated with any substance that is subject to any environmental laws, is liable for any off-site disposal or contamination pursuant to any environmental laws, or is subject to any claim relating to any environmental laws, which violation, contamination, liability or claim would individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and the Subsidiaries taken as a whole or of Genzyme General; and the Company is not aware of any pending investigation which might lead to such a claim. (g) The financial statements included or incorporated in the Offering Document present fairly the financial position of the Company and its consolidated subsidiaries, Genzyme General, Genzyme Tissue Repair Division ("GTR") and Genzyme Molecular Oncology Division ("GMO") as of the dates shown and their results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with generally accepted accounting principles in the United States applied on a consistent basis. No other financial statements or schedules of the Company are required by the Act, the Exchange Act, the rules and regulations of the Commission under the Securities Act ("Rules and Regulations") or the rules and regulations of the Commission under the Exchange Act ("Exchange Act Rules and Regulations") to be included or incorporated in the Offering Document. Coopers & Lybrand L.L.P. and Arthur Andersen LLP, who have reported on certain of such financial statements, are independent accountants as required by the Securities Act, the Rules and Regulations, the Exchange Act and the Exchange Act Rules and Regulations, as applicable. (h) All contracts described in the Offering Document to which the Company or any Subsidiary is a party have been duly authorized, executed and delivered by the Company or such Subsidiary, constitute valid and binding agreements of the Company or such Subsidiary and are enforceable against the Company or such Subsidiary in accordance with the terms thereof. (i) The Indenture has been duly authorized; the Offered Securities have been duly authorized; and when the Offered Securities are delivered and paid for pursuant to this Agreement on the Closing Date (as defined below), the Indenture will have been duly executed and delivered, such Offered Securities will have been duly executed, authenticated, issued and delivered and will conform to the description thereof contained in the Offering Document and the Indenture and such Offered Securities will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium 3 4 and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. (j) When the Offered Securities are delivered and paid for pursuant to this Agreement on the Closing Date, such Offered Securities will be convertible into shares ("Underlying Shares") of Genzyme General Division Common Stock, par value $.01 per share ("GGD Stock"), in accordance with the terms of the Indenture; the Underlying Shares initially issuable upon conversion of such Offered Securities have been duly authorized and reserved for issuance upon such conversion and, when issued upon such conversion, will be validly issued, fully paid and nonassessable; the shares of GGD Stock outstanding as of the date hereof have been duly authorized and validly issued, are fully paid and nonassessable and conform in all material respects to the description thereof contained in the Offering Document; and the stockholders of the Company have no preemptive rights with respect to the Offered Securities or the Underlying Shares. (k) Except as disclosed in the Offering Document, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or any Purchaser for a brokerage commission, finder's fee or other like payment in connection with the sale of the Offered Securities. (l) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required for the consummation of the transactions contemplated by this Agreement in connection with the issuance and sale of the Offered Securities by the Company, except such as may be required under state securities laws. (m) The execution, delivery and performance of the Indenture and this Agreement and the issuance and sale of the Offered Securities and compliance with the terms and provisions thereof will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any Subsidiary of the Company or any of their properties, or any agreement or instrument to which the Company or any such Subsidiary is a party or by which the Company or any such Subsidiary is bound or to which any of the properties of the Company or any such Subsidiary is subject, or the charter or by-laws (or comparable instruments) of the Company or any such Subsidiary, and the Company has full power and authority to authorize, issue and sell the Offered Securities as contemplated by this Agreement. (n) This Agreement has been duly authorized, executed and delivered by the Company. (o) The Registration Rights Agreement has been duly authorized, executed and delivered by the Company, conforms in all material respects to the description thereof in the Offering Document and constitutes a valid and legally binding obligation of the Company, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and general equity principles. (p) Except as disclosed in the Offering Document, the Company and its subsidiaries have good and marketable title to all material real properties and all other material properties and assets owned by them, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or to be made thereof by them; and except 4 5 as disclosed in the Offering Document, the Company and its subsidiaries hold any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or to be made thereof by them. (q) The Company and its Subsidiaries possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole or of Genzyme General. (r) No labor dispute with the employees of the Company or any Subsidiary exists or, to the knowledge of the Company, is imminent that might have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole or of Genzyme General. (s) The Company and its Subsidiaries own, possess or can acquire on reasonable terms, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, "intellectual property rights") necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any intellectual property rights that, if determined adversely to the Company or any of its Subsidiaries, would individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole or of Genzyme General. All such intellectual property rights are valid and enforceable and, to the knowledge of the Company and its Subsidiaries, are not being infringed by any third parties which infringement would individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole or of Genzyme General. To the knowledge of the Company, the Company's and its Subsidiaries' present use of any of the intellectual property rights does not infringe on any rights of third parties or conflict with any asserted rights of others that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole or of Genzyme General. (t) The descriptions of the human clinical trials, animal studies and other preclinical tests being conducted by or on behalf of the Company and its Subsidiaries and of any license or similar applications relating to products and services in development contained in the Offering Document (the "Company Studies and Applications") are accurate and complete in all material respects, and the Company has no knowledge of any other trials, studies or tests, the results of which reasonably call into question the results thereof described or referred to in the Offering Document which have not previously been publicly disclosed by Genzyme in a press release. Neither the Company nor any Subsidiary has received any notices or correspondence from the U.S. Food and Drug Administration or any other governmental agency requiring the termination, suspension or a modification which would result in a materially adverse change in any Company Studies and Applications. 5 6 (u) Neither the Company nor any of the Subsidiaries is in violation of its certificate of incorporation, by-laws or in default (nor has an event occurred which with notice or lapse of time or both would constitute a default or acceleration) in the performance of any obligation, agreement or condition contained in any indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement or other evidence of indebtedness, lease, contract or other agreement or instrument to which the Company or any of the Subsidiaries is a party or by which any of them or their respective properties is bound or affected and neither the Company nor any of the Subsidiaries is in violation of any judgment, ruling, decree, order, franchise, license or permit known to such counsel or any statute, rule or regulation applicable to the business or properties of the Company or any of the Subsidiaries, where such violation or default would have a material adverse effect on the condition (financial or otherwise), business, properties or results of operations of the Company and its Subsidiaries taken as a whole or of Genzyme General. (v) Except as disclosed in the Offering Document, there are no pending actions, suits or proceedings against or affecting the Company, any of its Subsidiaries or any of their respective properties that, if determined adversely to the Company or any of its Subsidiaries, would individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole or of Genzyme General, or would materially and adversely affect the ability of the Company to perform its obligations under the Indenture or this Agreement, or which are otherwise material in the context of the sale of the Offered Securities or the issuance of the Underlying Shares upon conversion thereof; and no such actions, suits or proceedings are threatened or, to the Company's knowledge, contemplated. (w) Except as disclosed in the Offering Document, since the date of the latest audited financial statements included in the Offering Document there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole or of Genzyme General, and, except as disclosed in or contemplated by the Offering Document, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (x) The Company is not an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the United States Investment Company Act of 1940, as amended (the "Investment Company Act") ; and the Company is not and, after giving effect to the offering and sale of the Offered Securities and the application of the proceeds thereof as described in the Offering Document, will not be an "investment company" as defined in the Investment Company Act. (y) The Company and its affiliates have not taken and will not take, directly or indirectly, any action designed to cause, or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the GGD Stock to facilitate the sale or resale of the Offered Securities. (z) No securities of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as the Offered Securities are listed on any national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system. 6 7 (aa) Assuming the truth and accuracy of the Purchasers' representations contained in Section 4, the offer and sale of the Offered Securities by the Company to the several Purchasers will be exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereof, and the resale by the Purchasers pursuant to Section 4(b) hereof will be exempt from the registration requirements of the Securities Act by reason of Rule 144A thereunder and Regulation S thereunder ("Regulation S") and, in connection therewith, it is not necessary to qualify an indenture in respect of the Offered Securities under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act".) (bb) Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf (i) has, within the six-month period prior to the date hereof, offered or sold in the United States or to any U.S. person (as such terms are defined in Regulation S) the Offered Securities or any security of the same class or series as the Offered Securities or (ii) has offered or will offer or sell the Offered Securities (A) in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act or (B) with respect to any such securities sold in reliance on Rule 903 of Regulation S, by means of any directed selling efforts within the meaning of Rule 902(b) of Regulation S. The Company, its affiliates and any person acting on its or their behalf have complied and will comply with the offering restrictions requirement of Regulation S. The Company has not entered and will not enter into any contractual arrangement with respect to the distribution of the Offered Securities except for this Agreement. (cc) The Company is subject to Section 13 or 15(d) of the Exchange Act. 3. Purchase, Sale and Delivery of Offered Securities. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to sell to the Purchasers, and the Purchasers agree to purchase from the Company, at a purchase price of 97.5% of the principal amount thereof plus accrued interest, if any, from May 22, 1998 to the Closing Date (as hereinafter defined) the respective principal amounts of Firm Securities set forth opposite the names of the several Purchasers in Schedule C hereto. The Company will deliver against payment of the purchase price the Firm Securities to be offered and sold by the Purchasers (i) in reliance on Rule 144A under the Securities Act (the "Firm 144A Securities") issued in the form of one permanent global security in definitive form without interest coupons deposited with the Trustee as custodian for DTC and registered in the name of Cede & Co., as nominee for DTC, and bearing the legend regarding restrictions on transfer set forth under "Transfer Restrictions" in the Offering Document and (ii) in reliance on Regulation S (the "Firm Regulation S Securities") issued in definitive, fully registered form, in such denominations and registered in such names as CSFBC requests and bearing the legend relating thereto set forth under "Transfer Restrictions" in the Offering Document. Payment for the Firm Securities shall be made by the Purchasers in Federal (same day) funds by wire transfer to an account at a bank acceptable to CSFBC drawn to the order of Genzyme Corporation , on May 22, 1998, or at such other time not later than seven full business days thereafter, as CSFBC and the Company determine, such time being herein referred to as the "Closing Date," against (i) delivery to the Trustee as custodian for DTC of the permanent global security in definitive form representing all of the Firm 144A Securities and (ii) delivery to the Purchasers of definitive fully registered certificates representing all of the Firm Regulation S Securities at the office of Cahill Gordon & Reindel at 9:00 A.M. (New York time). The certificates representing the Firm 144A Securities and the Firm Regulation S Securities will be made available for checking at least 24 hours prior to the First Closing Date. 7 8 In addition, upon written notice from CSFBC given to the Company not more than 30 days subsequent to the date of this Agreement, the Purchasers may purchase all or less than all of the Optional Securities at the purchase price per principal amount of Offered Securities (including any accrued interest thereon to the related Optional Closing Date) to be paid for the Firm Securities. The Company agrees to sell to the Purchasers the principal amount of Optional Securities specified in such notice and the Purchasers agree to purchase such Optional Securities. Such Optional Securities shall be purchased from the Company for the account of each Purchaser in the same proportion as the number of Firm Securities set forth opposite such Purchaser's name in Schedule C hereto bears to the total number of Firm Securities (subject to adjustment by CSFBC to eliminate fractions) and may be purchased by the Purchasers only for the purpose of covering over-allotments made in connection with the sale of the Firm Securities. No Optional Securities shall be sold or delivered unless the Firm Securities previously have been, or simultaneously are, sold and delivered. The right to purchase the Optional Securities or any portion thereof may be exercised not more than twice and to the extent not previously exercised may be surrendered and terminated at any time upon notice by CSFBC to the Company. Each time for the delivery of a payment for the Optional Securities, being herein referred to as the "Optional Closing Date," which may be the First Closing Date (the First Closing Date and each Optional Closing Date, if any, being sometime referred to as a "Closing Date"), shall be determined by CSFBC but shall not be later than seven full business days, nor prior to two full business days except in the case of the First Closing Date for any such Optional Closing Date , after written notice of election to purchase Optional Securities is given. The certificates for the Securities evidencing the Optional Securities being purchased on each Optional Closing Date will be in such denominations and registered in such names as CSFBC requests and will be made available for checking and packaging at the above offices of Cahill Gordon & Reindel at a reasonable time in advance of such Optional Closing Date. Payment for the Optional Securities being purchased on each Optional Closing Date and to be offered and sold by the Purchasers in reliance on Rule 144A (the "Optional 144A Securities") and the Optional Securities being purchased on such Optional Closing Date and to be offered and sold by the Purchasers in reliance on Regulation S (the "Optional Regulation S Securities") shall be made by the Purchasers in Federal (same day) funds by wire transfer to an account at a bank acceptable to CSFBC drawn to the order of Genzyme Corporation at 9:00 A.M. (New York time) on such Optional Closing Date against (i) delivery to the Trustee as custodian for DTC of a permanent global security in definitive form without coupons representing all of the Optional 144A Securities and (ii) delivery to the Purchasers of definitive fully registered certificates representing all of the Optional Regulation S Securities being purchased on such Optional Closing Date at the office of Cahill Gordon & Reindel, or at such other place or places of CSFBC and the Company shall determine. 4. Representations by Purchasers; Resale by Purchasers. (a) Each Purchaser severally represents and warrants to the Company that it is an "accredited investor" within the meaning of Regulation D under the Securities Act. (b) Each Purchaser severally acknowledges that the Offered Securities have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S or pursuant to an exemption from the registration requirements of the Securities Act. Each Purchaser severally represents and agrees that it has offered and sold the Offered Securities, and will offer and sell the Offered Securities as part of its distribution at any time only in accordance with Rule 903 or Rule 144A under the Securities Act ("Rule 144A"). Accordingly, neither such Purchaser nor its affiliates, nor any persons acting on its or their behalf, have engaged or will 8 9 engage in any directed selling efforts with respect to the Offered Securities, and such Purchaser, its affiliates and all persons acting on its or their behalf have complied and will comply with the offering restrictions requirement of Regulation S. Each Purchaser severally agrees that, at or prior to confirmation of sale of the Offered Securities, other than a sale pursuant to Rule 144A, such Purchaser will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases the Offered Securities from it during the restricted period a confirmation or notice to substantially the following effect: "The securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time, or (ii) otherwise until one year after the earlier of the date of the commencement of the offering and the closing date, except in either case in accordance with Regulation S (or Rule 144A if available) under the Securities Act. Terms used above have the meanings given to them by Regulation S." Terms used in this subsection (b) have the meanings given to them by Regulation S. (c) Each Purchaser severally agrees that it and each of its affiliates has not entered and will not enter into any contractual arrangement with respect to the distribution of the Offered Securities except with the prior written consent of the Company. (d) Each Purchaser severally agrees that it and each of its affiliates will not offer or sell the Offered Securities in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act, including, but not limited to (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Each Purchaser severally agrees, with respect to resales made in reliance on Rule 144A of any of the Offered Securities, to deliver either with the confirmation of such resale or otherwise prior to settlement of such resale a notice to the effect that the resale of such Offered Securities has been made in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A. (e) Each of the Purchasers severally represents and agrees that (i) it has not offered or sold and prior to the date six months after the date of issue of the Offered Securities will not offer or sell any Offered Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Offered Securities in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Offered Securities to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such document may otherwise lawfully be issued or passed on. 9 10 5. Certain Agreements of the Company. The Company agrees with the several Purchasers that: (a) The Company will advise CSFBC promptly of any proposal to amend or supplement the Offering Document and will not effect such amendment or supplementation (other than a required filing of a report under the Exchange Act) without CSFBC's consent. If, at any time prior to the completion of the resale of the Offered Securities by the Purchasers, any event occurs as a result of which the Offering Document as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Company promptly will notify CSFBC of such event and promptly will prepare, at its own expense, an amendment or supplement which will correct such statement or omission. Neither CSFBC's consent to, nor the Purchasers' delivery to offerees or investors of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6. CSFBC will notify the Company when its distribution is complete. (b) The Company will furnish to the Purchasers copies of the Offering Document and all amendments and supplements to such documents, in each case as soon as available and in such quantities as CSFBC reasonably requests, and the Company will furnish to CSFBC on the date hereof three copies of the Offering Document signed by a duly authorized officer of the Company. At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, the Company will promptly furnish or cause to be furnished to CSFBC (and, upon request, to each of the other Purchasers) and, upon request of holders and prospective purchasers of the Offered Securities, to such holders and purchasers, copies of the information required to be delivered to holders and prospective purchasers of the Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto) in order to permit compliance with Rule 144A in connection with resales by such holders of the Offered Securities. The Company will pay the expenses of printing and distributing to the Purchasers all such documents. (c) The Company will cooperate with the Purchasers and their counsel in the qualification of the Offered Securities for sale and the determination of their eligibility for investment under the laws of such jurisdictions in the United States and Canada as CSFBC designates and will continue such qualifications in effect so long as required for the resale of the Offered Securities by the Purchasers, provided that the Company will not be required to qualify as a foreign corporation or to file a general consent to service of process in any such jurisdiction. (d) During the period of five years hereafter, the Company will furnish to CSFBC (and, upon request, to each of the other Purchasers) as soon as practicable after the end of each fiscal year, a copy of its annual report to shareholders for such year; and the Company will furnish to CSFBC (and, upon request, to each of the other Purchasers) (i) as soon as available, a copy of each report and any definitive proxy statement of the Company filed with the Commission under the Exchange Act or mailed to shareholders, and (ii) from time to time, such other information concerning the Company as CSFBC may reasonably request. (e) During the period of two years after the Closing Date, the Company will, upon request, furnish to CSFBC, each of the other Purchasers and any holder of Offered Securities a copy of the restrictions on transfer applicable to the Offered Securities. 10 11 (f) During the period of two years after the Closing Date the Company will not, and will not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Offered Securities that have been reacquired by any of them. (g) During the period of two years after the Closing Date, the Company will not be or become, an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act. (h) The Company will pay all expenses incidental to the performance of its obligations under this Agreement and the Indenture, including (i) the fees and expenses of the Trustee and its professional advisers; (ii) all expenses in connection with the execution, issue, authentication, packaging and initial delivery of the Offered Securities, the printing of this Agreement, the Offered Securities and the Indenture, and the preparation and printing of the Offering Document and amendments and supplements thereto, and any other document relating to the issuance, offer, sale and delivery of the Offered Securities ; (iii) the cost of qualifying the Offered Securities for trading in The Portal(SM) Market ("PORTAL") and any expenses incidental thereto; (iv) the cost of any advertising approved by the Company in connection with the issue of the Offered Securities; (v) any expenses (including fees and disbursements of counsel) incurred in connection with qualification of the Offered Securities for sale under the laws of such jurisdictions in the United States and Canada as CSFBC designates and the printing of memoranda relating thereto; (vi) any fees charged by investment rating agencies for the rating of the Offered Securities in the event such a rating is requested by the Company; provided, that the Company agrees that in no event will the Purchasers be obligated to pay any such rating agency fees; and (vii) expenses incurred in distributing the Offering Document (including any amendments and supplements thereto) to the Purchasers. (i) In connection with the Offering, until CSFBC shall have notified the Company of the completion of the resale of the Offered Securities, neither the Company nor any of its affiliates has or will, either alone or with one or more other persons, bid for or purchase for any account in which it or any of its affiliates has a beneficial interest any Offered Securities or attempt to induce any person to purchase any Offered Securities; and neither it nor any of its affiliates will make bids or purchases for the purpose of creating actual, or apparent, active trading in, or of raising the price of, the Offered Securities. (j) The Company will not offer, sell, contract to sell, announce its intention to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Commission a registration statement under the Securities Act relating to (other than pursuant to the Registration Rights Agreement), (i) any shares of its GGD Stock, or securities (other than GTR Stock, GMO Stock or GGD Debentures (as defined in the Offering Circular) into which outstanding GMO Notes (as defined in the Offering Circular) are exchanged in accordance with their terms) convertible into or exchangeable or exercisable for any shares of GGD Stock, other than pursuant to employee and director benefit plans or upon the exercise of outstanding warrants or conversion of the Notes or the GGD Debentures or (ii) any Notes or other United States dollar-denominated debt securities (other than GGD Debentures into which outstanding GMO Notes are exchanged in accordance with their terms), issued or guaranteed by the Company and having a maturity of more than one year from the date of issue without the prior written consent of CSFBC for a period of 90 days after the date of the Offering Document; provided that prior to the expiration of such 90-day period, the Company may engage in any of the foregoing activities in connection with an acquisition using GGD Stock or securities convertible into or exchangeable or exercisable for GGD Stock, provided that the terms of any such acquisition shall not provide 11 12 for the issuance of any such shares or securities prior to the expiration of such period without the prior written consent of CSFBC. (k) The Company will not at any time offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, pledge, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act or the safe harbor of Regulation S thereunder to cease to be applicable to the offer and sale of the Offered Securities. 6. Conditions of the Obligations of the Purchasers. The obligations of the several Purchasers to purchase and pay for the Firm Securities on the First Closing Date and the Optional Securities on each Optional Closing Date will be subject to the accuracy of the representations and warranties on the part of the Company herein, to the accuracy of the statements of officers of the Company made pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions precedent: (a) The Purchasers shall have received a letter, dated as of the Closing Date, of Coopers & Lybrand LLP confirming that they are independent public accountants within the meaning of the Securities Act and the applicable published Rules and Regulations and to the effect that: (i) in their opinion the financial statements examined by them and incorporated by reference in the Offering Circular and included in the Exchange Act Reports comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the related published Rules and Regulations; (ii) they have performed the procedures specified by the American Institute of Certified Public Accountants for a review of interim financial information as described in Statement of Auditing Standards No. 71, Interim Financial Information, on the unaudited financial statements, if any, incorporated by reference in the Offering Circular and included in the Exchange Act Reports; (iii) on the basis of the review referred to in clause (ii) above, a reading of the latest available interim financial statements, if any, of the Company, Genzyme General, GTR and GMO, inquiries of officials of the Company who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that: (A) the unaudited financial statements included in the Exchange Act Reports do not comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the related published Rules and Regulations or any material modifications should be made to such unaudited financial statements for them to be in conformity with generally accepted accounting principles; (B) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more than three business days prior to the date of such letter, there was any change in the capital stock, other than changes due to the issuance of common stock in connection with the exercise of stock options, stock warrants or the employee stock purchase plan, or any increase in long-term debt of the Company and its con- 12 13 solidated subsidiaries, Genzyme General, GTR or GMO or, at the date of the latest available balance sheet read by such accountants, there was any decrease in consolidated net current assets of the Company, Genzyme General, GTR or GMO, as compared with amounts shown on the latest balance sheet included in the Exchange Act Reports; or (C) for the period from the closing date of the latest statements of operations included in the Exchange Act Reports to the closing date of the latest available statements of operations read by such accountants there were any decreases, as compared with the corresponding period of the previous year in the total or per share amounts of consolidated net income or in the ratio of earnings to fixed charges, except in all cases set forth in clauses (iii)(B) and (iii)(C) above for changes, increases or decreases which the Exchange Act Reports disclose have occurred or may occur or which are described in such letter; and (iv) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information incorporated in the Offering Circular and included in the Exchange Act Reports (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its subsidiaries, Genzyme General, GTR or GMO subject to the internal controls of the Company's accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter. (b) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) except for changes relating to events described in clauses (ii) (C), (D) and (E) of this paragraph, a change in U.S. or international financial, political or economic conditions or currency exchange rates or exchange controls as would, in the judgment of CSFBC, be likely to prejudice materially the success of the proposed issue, sale or distribution of the Offered Securities, whether in the primary market or in respect of dealings in the secondary market, or (ii) (A) any change, or any development or event involving a prospective change, in the condition (financial or other), business, properties or results of operations of the Company or its subsidiaries which, in the judgment of a majority in interest of the Purchasers including CSFBC, is material and adverse and makes it impractical or inadvisable to proceed with completion of the offering or the sale of and payment for the Offered Securities; (B) any downgrading in the rating of any debt securities of the Company by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Securities Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of the Company (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (C) any suspension or limitation of trading in securities generally on the New York Stock Exchange, or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (D) any banking moratorium declared by U.S. Federal or New York authorities; or (E) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of a majority in interest of the Purchasers including CSFBC, the effect of any such outbreak, escalation, declaration, 13 14 calamity or emergency makes it impractical or inadvisable to proceed with completion of the offering or sale of and payment for the Offered Securities. (c) The Purchasers shall have received an opinion, dated such Closing Date, of Palmer & Dodge LLP, counsel for the Company, that: (i) Each of the Company and Genzyme Securities Corporation ("GSC") and Deknatel Snowden Pencer, Inc. ("DSP" and together with GSC, the "Domestic Subsidiaries") is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Each of the Company and the Domestic Subsidiaries is duly qualified to do business as a foreign corporation in good standing in all jurisdictions in which the nature of the activities conducted by it or the character of the assets owned or leased by it makes such qualification necessary, except where the failure to be so qualified would not have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and the Subsidiaries taken as a whole or of Genzyme General. Each of the Company and the Domestic Subsidiaries has full corporate power and authority to own or lease all the assets described as or known to such counsel to be owned or leased by it and to conduct its business as described in the Offering Document. (ii) The Indenture has been duly authorized, executed and delivered by the Company. The Offered Securities have been duly authorized and executed by the Company. The Offered Securities delivered on such Closing Date conform in all material respects to the description thereof contained in the Offering Document. The Indenture constitutes and, upon authentication, issuance and delivery of the Offered Securities against payment therefor, the Offered Securities delivered on such Closing Date will constitute valid and legally binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. (iii) The Offered Securities delivered on such Closing Date are convertible into the Underlying Shares of the Company in accordance with the terms of the Indenture; the Underlying Shares initially issuable upon conversion of such Offered Securities delivered on such Closing Date have been duly authorized and reserved for issuance upon such conversion and, when issued upon such conversion, will be validly issued, fully paid and nonassessable. The outstanding shares of the Company's capital stock have been duly authorized and validly issued, are fully paid and nonassessable, are not subject to any preemptive or similar right. (iv) The stockholders of the Company have no preemptive rights with respect to the Offered Securities or the Underlying Shares. (v) Except as disclosed in the Offering Document or pursuant to the agreements listed on Schedule C, there are no contracts, agreements or understandings known to such counsel between the Company and any person granting such person the right to require the Company to file a registration statement under the Act to include shares of GGD Stock in the securities registered pursuant to a registration statement filed by the Company under the Act. (vi) No consent, approval, authorization or order of, or any filing or declaration with, any court or governmental agency or body is required in connection with the authorization, issu- 14 15 ance, transfer, sale or delivery of the Offered Securities by the Company in the manner contemplated by this Agreement or the issuance of the Underlying Shares by the Company, in connection with the execution, delivery and performance of this Agreement by the Company or in connection with the taking by the Company of any action contemplated thereby, except such as may be required under state securities laws. (vii) The authorized capital stock of the Company is as set forth in the Offering Document. The description of the Company's capital stock and the Underlying Shares contained in the Offering Document conforms in all material respects to the terms thereof contained in the Company's articles of organization. (viii) No registration under the Act of the Offered Securities is required in connection with the sale of the Offered Securities to the several Purchasers as contemplated by this Agreement and the Offering Document or in connection with the initial resale of the Offered Securities by the Purchasers in accordance with Section 4 of this Agreement, and prior to the effectiveness of the Shelf Registration Statement (as defined in the Registration Rights Agreement), the Indenture is not required to be qualified under the TIA, in each case assuming (i) (A) that the purchasers who buy such Offered Securities in the initial resale thereof are qualified institutional buyers as defined in Rule 144A promulgated under the Act or (B) that the offer or sale of the Offered Securities is made in an offshore transaction as defined in Regulation S, (ii) the accuracy of the Company's representations contained in this Agreement regarding the absence of general advertising or general solicitation in connection with the sale of such Offered Securities to the Purchasers and the initial resale thereof, and (iii) the accuracy of the Purchasers' representations set forth in Section 4 of this Agreement and the due performance by the Purchasers of their agreements set forth in that section. (ix) Such counsel has participated in the preparation of the Offering Document. Except as explicitly provided in such opinion, such counsel has not undertaken to verify independently the facts disclosed in the Offering Document (including any documents incorporated by reference therein). However, in the course of such participation, nothing has come to such counsel's attention which has caused them to believe that, as of the date hereof and as of such Closing Date, the Offering Document, or any amendment or supplement thereto including any documents incorporated by reference into the Offering Document, contained or contains any untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading (except that such counsel need express no opinion as to financial statements, schedules and other financial or statistical data contained in the Offering Document or incorporated by reference therein). (x) Such counsel has reviewed all contracts or other agreements referred to in the Offering Document (including the contracts referred to in the documents incorporated by reference therein set forth in such opinion, as agreed upon between such counsel and counsel for the Purchasers and the descriptions thereof (insofar as such descriptions constitute a summary of the legal matters referred to therein) are accurate in all material respects (except that such counsel need express no opinion as to any descriptions thereof appearing in the financial statements, schedules and other financial or statistical data contained in the Offering Document or incorporated by reference therein). Such counsel does not know of any contracts or other documents required to be 15 16 filed as an exhibit to any document incorporated by reference in the Offering Circular which have not been so filed. (xi) The Company has full corporate power and authority to enter into this Agreement, and this Agreement has been duly authorized, executed and delivered by the Company. (xii) The execution, delivery and performance of the Indenture and this Agreement by the Company, the consummation by the Company of the transactions herein contemplated and the compliance by the Company with the terms of this Agreement do not and will not result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Company or GSC pursuant to the terms or provisions of, or result in a breach or violation of any of the terms or provisions of, or constitute a default or result in the acceleration of any obligation under, the charter or by-laws of the Company or any of the Domestic Subsidiaries, or, to the knowledge of such counsel, any indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement or other evidence of indebtedness, lease, contract or other agreement or instrument to which the Company or GSC is a party or by which either the Company's or GSC's respective properties is bound or affected, or any judgment, ruling, decree or order known to such counsel or any statute, rule, order or regulation applicable to the business or properties of the Company or GSC. The opinion regarding violations of contracts of the Company may be limited to violations that would materially and adversely affect the ability of the Company to perform its obligations under this Agreement or that would have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and the Subsidiaries taken as a whole or of Genzyme General. In addition, such counsel need not express any opinion as to the securities or Blue Sky laws of any jurisdiction other than the United States. (xiii) Delivery of the Offered Securities will pass valid and marketable title thereto free and clear of any liens, encumbrances or claims to the Purchasers if they have purchased such Offered Securities in good faith without knowledge or reason to know of any adverse claims thereto and such counsel is not aware of any adverse claim with respect thereto. (xiv) Such counsel is not aware of any legal or governmental proceeding pending or threatened against the Company or the Subsidiaries of a character required to be disclosed in the Offering Circular or any document incorporated therein by reference by the Securities Act, the Rules and Regulations, the Exchange Act and the Exchange Act Rules and Regulations, other than those that may be described therein, nor is such counsel aware of any such proceeding in which an unfavorable ruling, decision or finding might individually or in the aggregate materially and adversely affect the ability of the Company to perform its obligations under this Agreement. (xv) The Company is not and, after giving effect to the offering and sale of the Offered Securities, including the issuance of the Underlying Shares upon conversion of the Offered Securities, and the application of the proceeds thereof as described in the Offering Document, will not be an "investment company," as such term is defined in the Investment Company Act of 1940, as amended. In rendering the foregoing opinion, such counsel may rely, to the extent they deem such reliance proper, on the opinions (in form and substance reasonably satisfactory to Purchasers' counsel) of other counsel reasonably acceptable to Purchasers' counsel as to matters governed by the laws of ju- 16 17 risdictions other than the United States, the Commonwealth of Massachusetts or the General Corporation Law of the State of Delaware, and as to matters of fact, upon certificates of officers of the Company and of government officials; provided that such counsel shall state that the opinion of any other counsel is in form satisfactory to such counsel and, in such counsel's opinion, such counsel and the Purchasers are justified in relying on such opinions of other counsel. Copies of all such opinions and certificates shall be furnished to counsel to the Purchasers on the Closing Date. Such counsel may state that they are not passing upon any matters relating to patents, trademarks or state and federal laws relating to the provision of human health care products and services. For purposes of the opinion set forth in the last sentence of paragraph (iii), such counsel may assume that all of the shares issued under the Company's employee and director stock plans have been issued in compliance with the terms of such plans and all shares issued upon the exercise of warrants have been issued in compliance with the terms of such warrants. Such counsel may also state that their opinion on enforceability of the Indenture and the Notes is rendered as if Massachusetts law applied to such agreements. (d) The Purchasers shall have received from Cahill Gordon & Reindel, counsel for the Purchasers, such opinion or opinions, dated the Closing Date, with respect to the validity of the Offered Securities, the Offering Document, the exemption from registration for the offer and sale of the Offered Securities by the Company to the several Purchasers and the resales by the Purchasers as contemplated hereby and other related matters as CSFBC may require, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters. (e) The Purchasers shall have received a certificate, dated as of such Closing Date, of the President or the Executive Vice President and Chief Legal Officer and, a principal financial or accounting officer of the Company in which such officers, to the best of their knowledge after reasonable investigation, shall state that the representations and warranties of the Company in this Agreement are true and correct, that the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date, and that, subsequent to the date of the most recent financial statements in the Exchange Act Reports, there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole except as set forth in or contemplated by the Exchange Act Reports or as described in such certificate. (f) The Purchasers shall have received a certificate, dated the Closing Date, of the principal financial or accounting officer of DSP in which such officer shall state that, to the best of his knowledge after reasonable investigation, the execution and delivery of this Agreement by the Company, the consummation by the Company of the transactions therein contemplated and the compliance by the Company with the terms of this Agreement do not and will not result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of DSP pursuant to the terms or provisions of, or result in a breach or violation of any of the terms or provisions of, or constitute a default or result in the acceleration of any obligation under, the charter or by-laws of DSP or, to the knowledge of such officer, any indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement or other evidence of indebtedness, lease, contract or other agreement or instrument to which DSP is a party or by which its properties is bound or affected, or any judgment, ruling, decree or order known to such officer or any statute, rule or regulation applicable to the business or properties of DSP, other than the securities or blue sky laws of any jurisdiction other than the 17 18 United States or the varying states therein, except as set forth in or contemplated by the Offering Document or as described in such certificate. (g) The Purchasers shall have received a letter, dated the Closing Date, addressed to the Purchasers and signed by Peter Wirth, in his capacity as Executive Vice President and Chief Legal Officer of the Company, in form and substance acceptable to the Purchasers relating to the Company's annual report on Form 10-K. The Company will furnish the Purchasers with such conformed copies of such opinions, certificates, letters and documents as the Purchasers reasonably request. CSFBC may in its sole discretion waive compliance with any conditions to the obligations of the Purchasers hereunder, whether in respect of an Optional Closing Date or otherwise. 7. Indemnification and Contribution. (a) The Company will indemnify and hold harmless each Purchaser against any losses, claims, damages or liabilities, joint or several, to which such Purchaser may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Offering Document, or any amendment or supplement thereto, or the Exchange Act Reports, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and will reimburse each Purchaser for any legal or other expenses reasonably incurred by such Purchaser in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by any Purchasers through CSFBC specifically for use therein, it being understood and agreed that the only such information consists of the information described as such in subsection (b) below. (b) Each Purchaser will severally and not jointly indemnify and hold harmless the Company against any losses, claims, damages or liabilities to which the Company may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Offering Document, or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Purchaser through CSFBC specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, it being understood and agreed that the only such information furnished by any Purchasers consists of the following information in the Offering Document: the last paragraph at the bottom of the cover page concerning the terms of the offering by the Purchasers, the legend concerning over-allotments and stabilizing on the inside front cover page and information contained in the third sentence of the second paragraph, the sixth and eighth paragraphs, the third sentence of the ninth paragraph and the eleventh paragraph under the caption "Plan of Distribution." 18 19 (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action. An indemnifying party will not be liable for any settlement of any action or claims effected without its written consent; provided, however, that such consent will not be unreasonably withheld. (d) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Purchasers on the other from the offering of the Offered Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total discounts and commissions received by the Purchasers from the Company under this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), no Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Offered Securities purchased by it were resold exceeds the amount of any damages which such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The Purchasers' obligations in this subsection (d) to contribute are several in proportion to their respective purchase obligations and not joint. (e) The obligations of the Company under this Section 7 shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, 19 20 if any, who controls any Purchaser within the meaning of the Securities Act or the Exchange Act; and the obligations of the Purchasers under this Section shall be in addition to any liability which the respective Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act. 8. Default of Purchasers. If any Purchaser or Purchasers default in their obligations to purchase Offered Securities hereunder on either the First Closing Date or any Optional Closing Date and the aggregate principal amount of Offered Securities that such defaulting Purchaser or Purchasers agreed but failed to purchase does not exceed 10% of the total principal amount of Offered Securities that the Purchasers are obligated to purchase on such Closing Date, CSFBC may make arrangements satisfactory to the Company for the purchase of such Offered Securities by other persons, including any of the Purchasers, but if no such arrangements are made by such Closing Date, the non-defaulting Purchasers shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Offered Securities that such defaulting Purchasers agreed but failed to purchase on such Closing Date. If any Purchaser or Purchasers so default and the aggregate principal amount of Offered Securities with respect to which such default or defaults occur exceeds 10% of the total principal amount of Offered Securities that the Purchasers are obligated to purchase on such Closing Date and arrangements satisfactory to CSFBC and the Company for the purchase of such Offered Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Purchaser or the Company, except as provided in Section 9 (provided that if such default occurs with respect to Optional Securities after the First Closing Date, this Agreement shall not terminate as to the Firm Securities or any Optional Securities purchased prior to such termination). As used in this Agreement, the term "Purchaser" includes any person substituted for a Purchaser under this Section. Nothing herein will relieve a defaulting Purchaser from liability for its default. 9. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Company or its officers and of the several Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Purchaser, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If for any reason the purchase of the Offered Securities by the Purchasers is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 5 and the respective obligations of the Company and the Purchasers pursuant to Section 7 shall remain in effect. If the purchase of the Offered Securities by the Purchasers is not consummated for any reason other than solely because of the occurrence of any event specified in clause (C), (D) or (E) of Section 6(b)(ii), the Company will reimburse the Purchasers for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Offered Securities. 10. Notices. All communications hereunder will be in writing and, if sent to the Purchasers will be mailed, delivered or telegraphed and confirmed to the Purchasers c/o Credit Suisse First Boston Corporation, at Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking Department Transactions Advisory Group, or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at One Kendall Square, Cambridge, MA 02139, Attention: Chief Financial Officer. 11. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder, except that holders of Offered Securities shall be entitled to en- 20 21 force the agreements for their benefit contained in the second and third sentences of Section 5(b) hereof against the Company as if such holders were parties thereto. 12. Representations of Purchasers. CSFBC will act for the several Purchasers in connection with this purchase, and any action under this Agreement taken by CSFBC will be binding upon all the Purchasers. 13. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. The Company hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. 21 22 If the foregoing is in accordance with the Purchasers' understanding of our agreement, kindly sign and return to us one of the counterparts hereof, whereupon it will become a binding agreement between the Company and the Purchasers in accordance with its terms. Very truly yours, GENZYME CORPORATION By: /s/ Henri A. Termeer --------------------------------------------- Name: Henri A. Termeer Title: President and Chief Executive Officer The foregoing Purchase Agreement is hereby confirmed and accepted as of the date first above written. CREDIT SUISSE FIRST BOSTON CORPORATION COWEN & COMPANY GOLDMAN, SACHS & CO. By: CREDIT SUISSE FIRST BOSTON CORPORATION By: /s/ W. Robert Dahl -------------------------- Name: W. Robert Dahl Title: Managing Director 23 SCHEDULE A NONE. 24 SCHEDULE B
Subsidiary % Owned by Genzyme ---------- ------------------ Deknatel, Snowden, Pencer, Inc. 100% Genzyme BV 100% Genzyme Limited 100% Genzyme Securities Corporation 100%
25 SCHEDULE C
Purchasers Principal Amount of ---------- Firm Securities ------------------- Credit Suisse First Boston Corporation................. $180,000,000 Cowen & Company........................................ 22,500,000 Goldman, Sachs & Co.................................... 22,500,000 ------------ Total.............. $225,000,000 ============
EX-5.1 5 OPINION OF PALMER & DODGE LLP 1 EXHIBIT 5.1 Palmer & Dodge LLP One Beacon Street Boston, Massachusetts 02108 TELEPHONE: (617) 573-0100 FACSIMILE: (617) 227-4420 July 21, 1998 Genzyme Corporation One Kendall Square Cambridge, MA 02139 We are rendering this opinion in connection with the Registration Statement on Form S-3 (the "Registration Statement") filed by Genzyme Corporation (the "Company") with the Securities and Exchange Commission under the Securities Act of 1933, as amended, on or about the date hereof. The Registration Statement relates to the registration of up to $250,000,000 in aggregate principal amount of 5 1/4% Convertible Subordinated Notes due 2005 (the "Notes") and the shares of Genzyme General Division Common Stock, $0.01 par value per share, issuable upon conversion of the Notes (the "Conversion Shares"). The Notes were issued by the Company pursuant to an Indenture dated as of May 22, 1998 (the "Indenture") between the Company and State Street Bank and Trust Company, as trustee (the "Trustee"). We understand that the Notes and Conversion Shares are to be offered and sold from time to time by the holders named in the Prospectus forming part of the Registration Statement in the manner described in such Prospectus. We have acted as your counsel in connection with the preparation of the Registration Statement and are familiar with the proceedings taken by the Company in connection with the initial sale of the Notes. We have examined such documents as we consider necessary to render this opinion. This opinion is limited to the federal laws of the United States and the laws of the Commonwealth of Massachusetts. We are rendering this opinion as though the laws of Massachusetts govern the Indenture and the Notes notwithstanding the recitation in such documents that they are governed by the laws of the State of New York. Based upon the foregoing, we are of the opinion that: 1. The Indenture has been duly authorized, executed and delivered by the Company and the Trustee, and the Notes will be valid and legally binding obligations of the Company, subject to bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. 2 2. The 6,313,131 Conversion Shares being registered have been duly authorized and, when issued and delivered upon conversion of the Notes in accordance with the terms of the Indenture, will be validly issued, fully paid and non-assessable. In rendering the foregoing opinions, we express no opinion as to federal or state laws relating to fraudulent transfers. We hereby consent to the filing of this opinion as a part of the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the Prospectus filed as a part thereof. Very truly yours, /s/ Palmer & Dodge LLP ---------------------- Palmer & Dodge LLP EX-12.1 6 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12.1 GENZYME CORPORATION AND SUBSIDIARIES Computation of Ratio of Earnings to Fixed Charges (in thousands)
Three Months Ended March 31, Year Ended December 31, 1998 ------------------------------------------------------- -------- 1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- Income (loss) before income taxes.................... $(12,554) $30,784 $43,299 $(69,622) $25,729 $ 7,784 Add: Portion of rents representative of the interest factor........................................... 2,911 2,888 3,335 4,260 5,421 1,355 Amortization of debt conversion feature value..... - - - - 2,028 1,027 Amortization of debt discount..................... - - - - 196 91 Interest on indebtedness.......................... 2,500 1,354 1,109 7,170 10,599 4,031 --------- ------- ------- -------- ------- ------- As adjusted income (loss)......................... $ (7,143) $35,026 $47,743 $(58,192) $43,973 $14,288 ========= ======= ======= ========= ======= ======= Fixed charges: Portion of rents representative of the interest factor........................................... 2,911 2,888 3,335 4,260 5,421 1,355 Amortization of debt conversion feature value..... - - - - 2,028 1,027 Amortization of debt discount..................... - - - - 196 91 Interest on indebtedness.......................... 2,500 1,354 1,109 7,404 10,808 4,120 Capitalized interest.............................. 4,554 8,945 8,736 2,377 470 119 Capitalized amortization of debt discount......... 275 275 275 57 - - --------- ------- ------- -------- ------- ------- Total fixed charges.................................. $ 10,240 $13,462 $13,455 $ 14,098 $18,923 $ 6,712 ========= ======= ======= ======== ======= ======= Ratio of earnings to fixed charges (1)............... - 2.6x 3.5x - 2.3x 2.1x ========= ======= ======= ======== ======= =======
- ---------------------------- (1) The ratio of earnings to fixed charges is not presented for the years ended December 31, 1993 and 1996 because in such years fixed charges exceeded earnings (as set forth above) by $17.4 million and $72.3 million, respectively, due primarily to (i) in 1993, charges for in-process research and development of $49.0 million and charges for goodwill impairment and restructuring costs of $26.5 million and (ii) in 1996, charges for in-process research and development of $130.6 million. EX-23.1 7 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in this Registration Statement on Form S-3 of Genzyme Corporation of our reports dated February 27, 1998 on our audits of the consolidated financial statements and financial statement schedule of Genzyme Corporation, the combined financial statements and financial statement schedule of Genzyme General Division, the combined financial statements and financial statement schedule of Genzyme Tissue Repair Division and the combined financial statements of Genzyme Molecular Oncology Division as of December 31, 1996 and 1997 and for each of the three years in the period ended December 31, 1997, which reports are included in Genzyme Corporation's 1997 Annual Report on Form 10-K, as amended on Form 10-K/A filed on April 27, 1998. We also consent to the reference to our firm in the Registration Statement under the caption "Experts." /s/ PricewaterhouseCoopers LLP ------------------------------- PricewaterhouseCoopers LLP Boston, Massachusetts July 21, 1998 - ------- EX-25.1 8 FORM T-1 1 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM T-1 --------- STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE Check if an Application to Determine Eligibility of a Trustee Pursuant to Section 305(b)(2) ____ STATE STREET BANK AND TRUST COMPANY (Exact name of trustee as specified in its charter) Massachusetts 04-1867445 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification No.) 225 Franklin Street, Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code) Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel 225 Franklin Street, Boston, Massachusetts 02110 (617) 654-3253 (Name, address and telephone number of agent for service) GENZYME CORPORATION (Exact name of obligor as specified in its charter) MASSACHUSETTS 06-1047163 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ONE KENDALL SQUARE BUILDING 1400 CAMBRIDGE, MA 02109 (Address of principal executive offices) (Zip Code) CONVERTIBLE SUBORDINATED NOTES (Title of indenture securities) 2 GENERAL ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS SUBJECT. Department of Banking and Insurance of The Commonwealth of Massachusetts, 100 Cambridge Street, Boston, Massachusetts. Board of Governors of the Federal Reserve System, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C. (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. The obligor is not an affiliate of the trustee or of its parent, State Street Corporation. (See note on page 2.) ITEM 3. THROUGH ITEM 15. NOT APPLICABLE. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY. 1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT. A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION. A copy of a Statement from the Commissioner of Banks of Massachusetts that no certificate of authority for the trustee to commence business was necessary or issued is on file with the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE. A copy of the authorization of the trustee to exercise corporate trust powers is on file with the Securities and Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS CORRESPONDING THERETO. A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Eastern Edison Company (File No. 33-37823) and is incorporated herein by reference thereto. 1 3 5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN DEFAULT. Not applicable. 6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY SECTION 321(b) OF THE ACT. The consent of the trustee required by Section 321(b) of the Act is annexed hereto as Exhibit 6 and made a part hereof. 7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is annexed hereto as Exhibit 7 and made a part hereof. NOTES In answering any item of this Statement of Eligibility which relates to matters peculiarly within the knowledge of the obligor or any underwriter for the obligor, the trustee has relied upon information furnished to it by the obligor and the underwriters, and the trustee disclaims responsibility for the accuracy or completeness of such information. The answer furnished to Item 2. of this statement will be amended, if necessary, to reflect any facts which differ from those stated and which would have been required to be stated if known at the date hereof. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, State Street Bank and Trust Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Boston and The Commonwealth of Massachusetts, on the 16TH OF JULY,1998. STATE STREET BANK AND TRUST COMPANY By: /s/ Gerald R. Wheeler ------------------------- NAME: GERALD R. WHEELER TITLE: VICE PRESIDENT 2 4 EXHIBIT 6 CONSENT OF THE TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by GENZYME CORPORATION. of its CONVERTIBLE SUBORDINATED NOTES, we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. STATE STREET BANK AND TRUST COMPANY By: /s/ Gerald R. Wheeler ---------------------------- NAME: GERALD R. WHEELER TITLE: VICE PRESIDENT DATED: JULY 16, 1998 3 5 EXHIBIT 7 Consolidated Report of Condition of State Street Bank and Trust Company, Massachusetts and foreign and domestic subsidiaries, a state banking institution organized and operating under the banking laws of this commonwealth and a member of the Federal Reserve System, at the close of business March 31, 1998, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act and in accordance with a call made by the Commissioner of Banks under General Laws, Chapter 172, Section 22(a).
Thousands of ASSETS Dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ................. 1,144,309 Interest-bearing balances .......................................... 9,914,704 Securities ................................................................. 10,062,052 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge subsidiary ................................ 8,073,970 Loans and lease financing receivables: Loans and leases, net of unearned income ................................... 6,433,627 Allowance for loan and lease losses ................................ 88,820 Allocated transfer risk reserve .................................... 0 Loans and leases, net of unearned income and allowances ............ 6,344,807 Assets held in trading accounts ............................................ 1, 117,547 Premises and fixed assets .................................................. 453,576 Other real estate owned .................................................... 100 Investments in unconsolidated subsidiaries ................................. 44,985 Customers' liability to this bank on acceptances outstanding ............... 66,149 Intangible assets .......................................................... 263,249 Other assets ............................................................... 1,066,572 ----------- Total assets ............................................................... 38,552,020 =========== LIABILITIES Deposits: In domestic offices ................................................ 9,266,492 Noninterest-bearing .............................................. 6,824,432 Interest-bearing ................................................. 2,442,060 In foreign offices and Edge subsidiary ............................. 14,385,048 Noninterest-bearing .............................................. 75,909 Interest-bearing ................................................. 14,309,139 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge subsidiary ................................ 9,949,994 Demand notes issued to the U.S. Treasury and Trading Liabilities ........... 171,783 Trading liabilities ........................................................ 1,078,189 Other borrowed money ....................................................... 406,583 Subordinated notes and debentures .......................................... 0 Bank's liability on acceptances executed and outstanding ................... 66,149 Other liabilities .......................................................... 878,947 Total liabilities .......................................................... 36,203,185 ----------- EQUITY CAPITAL Perpetual preferred stock and related surplus .............................. 0 Common stock ............................................................... 29,931 Surplus .................................................................... 450,003 Undivided profits and capital reserves/Net unrealized holding gains (losses) 1,857,021 Net unrealized holding gains (losses) on available-for-sale securities ..... 18,136 Cumulative foreign currency translation adjustments ........................ (6,256) Total equity capital ....................................................... 2,348,835 ----------- Total liabilities and equity capital ....................................... 38,552,020 -----------
4 6 I, Rex S. Schuette, Senior Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Rex S. Schuette We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. David A. Spina Marshall N. Carter Truman S. Casner 5 -----END PRIVACY-ENHANCED MESSAGE-----