-----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, U+IpKv/kx0fzHcZeVV5HJTXDxLozF68yLRU4bkAlqdHr8gecxc+/4gHpGLEkSDiT w+r66xuZ8eAeS9gXDug49A== 0001047469-05-020919.txt : 20050808 0001047469-05-020919.hdr.sgml : 20050808 20050805211255 ACCESSION NUMBER: 0001047469-05-020919 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050808 DATE AS OF CHANGE: 20050805 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14680 FILM NUMBER: 051004231 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 10-Q 1 a2161257z10-q.htm 10-Q
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

ý   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005

or

o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                               to                              

Commission file number 0-14680

GENZYME CORPORATION
(Exact name of registrant as specified in its charter)

Massachusetts
(State or other jurisdiction
of incorporation or organization		   06-1047163
(I.R.S. Employer
Identification No.)

500 Kendall Street, Cambridge, Massachusetts
(Address of principal executive offices)
 
02142
(Zip Code)

(617) 252-7500
(Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark whether the Registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act). Yes ý    No o

        The number of shares of Genzyme Stock outstanding as of July 29, 2005: 256,673,349

NOTE REGARDING REFERENCES TO OUR SERIES OF STOCK

        Throughout this Form 10-Q, the words "we," "us," "our" and "Genzyme" refer to Genzyme Corporation as a whole, and "our board of directors" refers to the board of directors of Genzyme Corporation. Genzyme has one outstanding series of common stock, which we refer to as "Genzyme Stock."

NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This Form 10-Q contains forward-looking statements, including statements regarding our:

    •
    projected timetables for the preclinical and clinical development of, regulatory submissions and approvals for, and market introduction of, our products and services in various jurisdictions;

    •
    timing of, and availability of data from, clinical trials;

    •
    merger and acquisition activity, including our recent acquisitions of Bone Care International, Inc., or Bone Care, and Equal Diagnostics, Inc., or Equal Diagnostics, and finalization of the purchase accounting for our acquisitions of ILEX Oncology, Inc., or ILEX, and Verigen AG, or Verigen;

    •
    completion of a post-closing working capital assessment for our acquisition of substantially all of the pathology/oncology testing assets related to the Physician Services and Analytical Services business units of IMPATH Inc., or IMPATH;

    •
    estimates of the time and cost associated with completing the development of, obtaining approval for and commercializing the in-process research and development, or IPR&D, we acquired from Verigen, ILEX and Sangstat Medical Corporation, or SangStat;

    •
    plan to repay the outstanding balance on our credit facility within a year;

    •
    estimates of the future amortization expenses for our intangible assets;

    •
    entry into new collaborations and licensing agreements;

    •
    estimates of the potential markets for our products and services, including the anticipated drivers for future growth;

    •
    sales and marketing plans;

    •
    assessment of competitors and potential competitors and the anticipated impact of potentially competitive products on our revenues;

    •
    estimates of the capacity of, and the projected timetable of approvals for, manufacturing and other facilities to support our products and services;

    •
    expected future revenues, operations and expenditures;

    •
    allocation of expenditures related to our research and development programs;

    •
    projected future earnings and earnings per share;

    •
    assessment of the outcome and financial impact of litigation and other governmental proceedings and the potential impact of unasserted claims;

    •
    ability to fund operations and our projected cash needs;

    •
    expected continued adoption of Renagel by nephrologists;

    •
    U.S. and foreign income tax audits, including our provision for liabilities and assessment of the potential financial impact of favorable settlement of these audits or expiration of the applicable statute of limitations;

2

    •
    assessment of the impact of recent tax legislation, including the American Jobs Creation Act, and recent accounting pronouncements, including Statement of Financial Accounting Standards, or SFAS, No. 151 regarding inventory costs, and SFAS No. 123R regarding option expensing;

    •
    expected future payments related to employee benefits and leased facilities acquired from ILEX, IMPATH, and SangStat, and the expected timing of these payments;

    •
    expected future payments upon achievement of development and commercial milestones related to our acquisition of Verigen and the anticipated timing of our purchase of the remaining outstanding shares of Verigen; and

    •
    expected future payments we will pay Wyeth based on the volume of Synvisc sales and the expected effect of such payments on our amortization expenses.

        These statements are subject to risks and uncertainties, and our actual results may differ materially from those in the forward-looking statements included in this report. These risks and uncertainties include:

    •
    our ability to successfully complete preclinical and clinical development of our products and services;

    •
    our ability to manufacture sufficient amounts of our products for development and commercialization activities and to do so in a timely and cost-effective manner;

    •
    our ability to obtain and maintain adequate patent and other proprietary rights protection of our products and services and successfully enforce our proprietary rights;

    •
    the scope, validity and enforceability of patents and other proprietary rights held by third parties and their impact on our ability to commercialize our products and services;

    •
    the accuracy of our estimates of the size and characteristics of the markets to be addressed by our products and services, including growth projections;

    •
    market acceptance of our products and services;

    •
    the use of cash in business combinations or other strategic initiatives;

    •
    our ability to identify new patients for our products and services;

    •
    our ability to satisfy the post-marketing commitments made as a condition of the marketing approvals of Fabrazyme and Aldurazyme;

    •
    the accuracy of our information regarding the products and resources of our competitors and potential competitors;

    •
    the content and timing of submissions to and decisions made by the United States Food and Drug Administration, commonly referred to as the FDA, the European Agency for the Evaluation of Medicinal Products, or EMEA, and other regulatory agencies;

    •
    the availability of reimbursement for our products and services from third-party payors, and the extent of such coverage and the accuracy of our estimates of the payor mix for our products;

    •
    our ability to increase market penetration outside the United States for our products;

    •
    market acceptance of Thymoglobulin, Campath and Clolar in expanded areas of use and new markets;

    •
    our ability to optimize dosing and improve patient compliance with Renagel;

    •
    our ability to effectively manage wholesaler inventories of our products and the levels of compliance with our inventory management programs;

3

    •
    our ability to establish and maintain strategic license, collaboration and distribution arrangements and to manage our relationships with collaborators, distributors and partners;

    •
    our reliance on third parties to provide us with materials and services in connection with the manufacture of our products;

    •
    the continued funding and operation of our joint ventures by our partners;

    •
    decisions made by the United States District Court, arbitrators for the American Arbitrators Association, the United Kingdom Competition Appeal Tribunal, the Federal Trade Commission and other judicial bodies and regulatory and dispute resolution authorities;

    •
    our ability to successfully increase market penetration for our Synvisc product as a treatment for osteoarthritis of the knee and to expand its use in other joints;

    •
    the resolution of litigation related to the consolidation of our tracking stocks;

    •
    the initiation of governmental investigations into our business activities or legal proceedings by or against us;

    •
    the impact of changes in the exchange rate for the Euro and other currencies on our product and service revenues in future periods;

    •
    our ability to successfully integrate Bone Care and ILEX;

    •
    the number of diluted shares considered outstanding, which will depend on business combination activity, our stock price and potential changes in accounting rules;

    •
    the outcome of our IRS audit; and

    •
    the possible disruption of our operations due to terrorist activities and armed conflict, including as a result of the disruption of operations of regulatory authorities, our subsidiaries, our manufacturing facilities and our customers, suppliers, distributors, couriers, collaborative partners, licensees and clinical trial sites.

        We have included more detailed descriptions of these and other risks and uncertainties in Item 2 of this report under the heading "Factors Affecting Future Operating Results." We encourage you to read those descriptions carefully. We caution investors not to place substantial reliance on the forward-looking statements contained in this report. These statements, like all statements in this report, speak only as of the date of this report (unless another date is indicated), and we undertake no obligation to update or revise these statements.

NOTE REGARDING INCORPORATION BY REFERENCE

        The Securities and Exchange Commission allows us to disclose important information to you by referring you to other documents we have filed with the SEC. The information that we refer you to is "incorporated by reference" into this Form 10-Q. Please read that information.

NOTE REGARDING TRADEMARKS

        Genzyme®, Renagel®, Hectorol®, Cerezyme®, Ceredase®, Fabrazyme®, Thyrogen®, Synvisc®, Carticel®, Hylaform®, Seprafilm®, Epicel®, IMPATH®, Myozyme®, Aldurazyme®, Thymoglobulin®, Lymphoglobuline®, Campath® and MACI® are registered trademarks of Genzyme or its subsidiaries. Sepra™, VERIGEN™ and Clolar™ are trademarks of Genzyme or its subsidiaries. Naglazyme™, Phenoptin™ and Phenylase™ are trademarks of BioMarin Pharmaceutical, Inc. WelChol® is a registered trademark of Sankyo Pharma, Inc. Gengraf® is a registered trademark of Abbott Laboratories. All rights reserved.

4


GENZYME CORPORATION AND SUBSIDIARIES
FORM 10-Q, JUNE 30, 2005
TABLE OF CONTENTS

 
    
   PAGE NO.
PART I.   FINANCIAL INFORMATION   6

ITEM 1.
 
Financial Statements
 
6
    Unaudited, Consolidated Statements of Operations and Comprehensive Income for the Three and Six Months Ended June 30, 2005 and 2004   6
    Unaudited, Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004   7
    Unaudited, Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2004   8
    Notes to Unaudited, Consolidated Financial Statements   9

ITEM 2.
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
29

ITEM 3.
 
Quantitative and Qualitative Disclosures About Market Risk
 
62

ITEM 4.
 
Controls and Procedures
 
62

PART II.
 
OTHER INFORMATION
 
63

ITEM 1.
 
Legal Proceedings
 
63

ITEM 2.
 
Unregistered Sales of Equity Securities and Use of Proceeds
 
64

ITEM 4.
 
Submission of Matters to a Vote of Security Holders
 
64

ITEM 6.
 
Exhibits
 
65

Signatures
 
66

5


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


GENZYME CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Income

(Unaudited, amounts in thousands, except per share amounts)

 
   Three Months Ended
June 30,
   Six Months Ended June 30,
  
 
   2005
   2004
   2005
   2004
  
Revenues:                          
  Net product sales   $ 599,347   $ 491,264   $ 1,162,560   $ 945,629  
  Net service sales     64,035     54,777     124,649     89,558  
  Revenues from research and development contracts     4,757     3,547     10,879     5,652  
   
 
 
 
 
      Total revenues     668,139     549,588     1,298,088     1,040,839  
   
 
 
 
 
Operating costs and expenses:                          
  Cost of products sold     102,328     107,442     207,302     213,543  
  Cost of services sold     42,922     35,426     84,041     56,287  
  Selling, general and administrative     196,385     152,850     378,224     296,070  
  Research and development (including research and development related to contracts)     121,726     99,370     236,471     192,186  
  Amortization of intangibles     40,105     27,245     81,291     53,490  
  Purchase of in-process research and development     —     —     9,500     —  
   
 
 
 
 
      Total operating costs and expenses     503,466     422,333     996,829     811,576  
   
 
 
 
 
Operating income     164,673     127,255     301,259     229,263  
   
 
 
 
 
Other income (expenses):                          
  Equity in loss of equity method investments     (417 )   (4,274 )   (2,135 )   (8,105 )
  Minority interest     3,357     964     5,551     2,126  
  Gains on investments in equity securities     4,817     71     4,958     424  
  Other     253     (390 )   193     (714 )
  Investment income     7,544     5,603     14,162     13,279  
  Interest expense     (4,466 )   (17,495 )   (8,274 )   (27,821 )
   
 
 
 
 
      Total other income (expenses)     11,088     (15,521 )   14,455     (20,811 )
   
 
 
 
 
Income before income taxes     175,761     111,734     315,714     208,452  
Provision for income taxes     (52,130 )   (33,558 )   (96,525 )   (62,382 )
   
 
 
 
 
Net income   $ 123,631   $ 78,176   $ 219,189   $ 146,070  
   
 
 
 
 
Net income per share:                          
  Basic   $ 0.49   $ 0.35   $ 0.87   $ 0.65  
   
 
 
 
 
  Diluted   $ 0.46   $ 0.33   $ 0.83   $ 0.62  
   
 
 
 
 
Weighted average shares outstanding:                          
  Basic     253,086     226,578     252,003     226,145  
   
 
 
 
 
  Diluted     270,084     241,230     268,988     241,417  
   
 
 
 
 
Comprehensive income, net of tax:                          
  Net income   $ 123,631   $ 78,176   $ 219,189   $ 146,070  
   
 
 
 
 
  Other comprehensive income (loss), net of tax:                          
    Foreign currency translation adjustments     (52,195 )   (5,856 )   (98,848 )   (15,285 )
    Gain on affiliate sale of stock     996     —     996     —  
    Other     119     392     312     452  
    Unrealized gains (losses) on securities:                          
      Unrealized gains (losses) arising during the period     2,944     (4,565 )   (16,415 )   (2,139 )
      Reclassification adjustment for (gains) losses included in net income     (2,014 )   245     (1,732 )   90  
   
 
 
 
 
      Unrealized gains (losses) on securities, net     930     (4,320 )   (18,147 )   (2,049 )
   
 
 
 
 
  Other comprehensive loss     (50,150 )   (9,784 )   (115,687 )   (16,882 )
   
 
 
 
 
Comprehensive income   $ 73,481   $ 68,392   $ 103,502   $ 129,188  
   
 
 
 
 

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

6


GENZYME CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited, amounts in thousands, except par value amounts)

 
   June 30,
2005
   December 31,
2004
  
ASSETS              
Current assets:              
  Cash and cash equivalents   $ 1,018,179   $ 480,198  
  Short-term investments     106,676     70,994  
  Accounts receivable, net     555,883     546,613  
  Inventories     277,434     293,658  
  Prepaid expenses and other current assets     83,353     79,329  
  Notes receivable—related parties     2,412     2,399  
  Deferred tax assets     165,835     160,438  
   
 
 
    Total current assets     2,209,772     1,633,629  

Property, plant and equipment, net
 
 
1,275,087
 
 
1,310,256
 
Long-term investments     513,626     528,262  
Notes receivable—related parties     7,186     9,491  
Goodwill     1,297,482     1,290,916  
Other intangible assets, net     1,149,862     1,069,399  
Investments in equity securities     127,247     150,253  
Other noncurrent assets     72,997     77,215  
   
 
 
    Total assets   $ 6,653,259   $ 6,069,421  
   
 
 

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 

Current liabilities:
 
 
 
 
 
 
 
  Accounts payable   $ 63,035   $ 88,140  
  Accrued expenses     354,764     344,063  
  Income taxes payable     100,039     50,080  
  Deferred revenue     15,294     12,612  
  Current portion of long-term debt and capital lease obligations     379,967     129,503  
   
 
 
    Total current liabilities     913,099     624,398  

Long-term debt and capital lease obligations
 
 
119,371
 
 
120,991
 
Convertible notes     690,000     690,000  
Deferred revenue—noncurrent     12,809     7,716  
Deferred tax liabilities     198,151     225,850  
Other noncurrent liabilities     20,855     20,310  
   
 
 
    Total liabilities     1,954,285     1,689,265  
   
 
 

Commitments and contingencies (Notes 4,11)
 
 
 
 
 
 
 

Stockholders' equity:
 
 
 
 
 
 
 
  Preferred stock, $0.01 par value     —     —  
  Common stock, $0.01 par value     2,543     2,491  
  Additional paid-in capital     4,432,926     4,217,357  
  Notes receivable from stockholders     (14,170 )   (13,865 )
  Accumulated earnings (deficit)     107,156     (112,033 )
  Accumulated other comprehensive income     170,519     286,206  
   
 
 
    Total stockholders' equity     4,698,974     4,380,156  
   
 
 
    Total liabilities and stockholders' equity   $ 6,653,259   $ 6,069,421  
   
 
 

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

7


GENZYME CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited, amounts in thousands)

 
   Six Months Ended
June 30,
  
 
   2005
   2004
  
Cash Flows from Operating Activities:              
  Net income   $ 219,189   $ 146,070  
  Reconciliation of net income to cash from operating activities:              
    Depreciation and amortization     133,195     102,701  
    Provision for bad debts     4,449     4,928  
    Charge for in-process research and development     9,500     —  
    Minority interest     (5,551 )   (2,126 )
    Equity in loss of equity method investments     2,135     8,105  
    Gains on investments in equity securities     (4,958 )   (424 )
    Write off of unamortized debt fees     —     5,329  
    Deferred income tax benefit     (21,667 )   (17,284 )
    Tax benefit from employee stock options     46,101     15,067  
    Other     2,193     3,984  
    Increase (decrease) in cash from working capital changes (excluding impact of acquired assets and assumed liabilities):              
      Accounts receivable     (42,491 )   (72,609 )
      Inventories     (8,815 )   2,597  
      Prepaid expenses and other current assets     (7,085 )   20,416  
      Accounts payable, accrued expenses and deferred revenue     (28,086 )   (31,775 )
      Income taxes payable     51,406     39,328  
   
 
 
        Cash flows from operating activities     349,515     224,307  
   
 
 

Cash Flows from Investing Activities:
 
 
 
 
 
 
 
  Purchases of investments     (592,098 )   (222,985 )
  Sales and maturities of investments     573,667     777,830  
  Purchases of equity securities     (5,330 )   (3,028 )
  Proceeds from sale of investments in equity securities     5,397     550  
  Purchases of property, plant and equipment     (80,376 )   (84,037 )
  Investments in equity investees     —     (17,895 )
  Acquisitions, net of acquired cash     (10,679 )   (264,143 )
  Acquisition of sales and marketing rights     (141,435 )   —  
  Purchases of intangible assets     —     (4,800 )
  Other     1,056     271  
   
 
 
        Cash flows from investing activities     (249,798 )   181,763  
   
 
 

Cash Flows from Financing Activities:
 
 
 
 
 
 
 
  Proceeds from issuance of common stock     169,520     43,283  
  Proceeds from draws on credit facility     350,000     135,000  
  Payments of debt and capital lease obligations     (101,618 )   (588,171 )
  Bank overdraft     11,785     1,175  
  Minority interest payable     7,001     2,006  
  Other     821     217  
   
 
 
        Cash flows from financing activities     437,509     (406,490 )
   
 
 

Effect of exchange rate changes on cash
 
 
755
 
 
(2,497
)
   
 
 

Increase (decrease) in cash and cash equivalents
 
 
537,981
 
 
(2,917
)
Cash and cash equivalents at beginning of period     480,198     292,774  
   
 
 
Cash and cash equivalents at end of period   $ 1,018,179   $ 289,857  
   
 
 

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

8


GENZYME CORPORATION AND SUBSIDIARIES

Notes To Unaudited, Consolidated Financial Statements

1. Description of Business

        We are a global biotechnology company dedicated to making a major impact on the lives of people with serious diseases. Our broad product and service portfolio is focused on rare genetic disorders, renal disease, orthopaedics, organ transplant, and diagnostic and predictive testing. We are organized into five financial reporting units, which we also consider to be our reporting segments:

    •
    Renal, which develops, manufactures and distributes products that treat patients suffering from renal diseases, including chronic renal failure. The unit derives substantially all of its revenue from sales of Renagel (including sales of bulk sevelamer) and Hectorol;

    •
    Therapeutics, which develops, manufactures and distributes therapeutic products, with an expanding focus on products to treat patients suffering from genetic diseases and other chronic debilitating diseases, including a family of diseases known as lysosomal storage disorders, or LSDs, and other specialty therapeutics, such as Thyrogen. The unit derives substantially all of its revenue from sales of Cerezyme, Fabrazyme and Thyrogen;

    •
    Transplant, which develops, manufactures and distributes therapeutic products that address pre-transplantation, prevention and treatment of acute rejection in organ transplantation, as well as other auto-immune disorders. The unit derives its revenue primarily from sales of Thymoglobulin and Lymphoglobuline;

    •
    Biosurgery, which develops, manufactures and distributes biotherapeutics and biomaterial products, with an emphasis on products that meet medical needs in orthopaedics and broader surgical areas. The unit derives its revenue primarily from sales of Synvisc, the Sepra line of products, Matrix-induced Autologous Chondrocyte Implantation, or MACI, and Carticel; and

    •
    Diagnostics/Genetics, which develops, manufactures and distributes in vitro diagnostics products, and provides testing services for the oncology, and prenatal and reproductive markets.

        We report the activities of our oncology, bulk pharmaceuticals and cardiovascular business units under the caption "Other." We report our corporate, general and administrative operations and corporate science activities that we do not allocate to our financial reporting units, under the caption "Corporate." Effective January 1, 2005, as a result of changes in how we review our business, we re-allocated the programs of our former drug discovery and development business unit, formerly reported under the caption "Other," amongst several of our existing reporting segments and business units as follows:

    •
    our tolevamer research and development program, for the treatment of C. difficile associated diarrhea, is now included in our Renal reporting segment;

    •
    our deferitrin (iron chelator) research and development program is now included in our Therapeutics reporting segment;

    •
    WelChol, an adjunctive therapy for the reduction of elevated LDL cholesterol in patients with primary hypercholesterolemia, is now included in our bulk pharmaceuticals business unit and as a result, will continue to be reported under the caption "Other;" and

    •
    our other drug discovery research and development programs are now included in our corporate science activities under the caption "Corporate."

We have reclassified our 2004 segment disclosures to conform to our 2005 presentation.

9

2. Basis of Presentation and Significant Accounting Policies

    Basis of Presentation

        Our unaudited, consolidated financial statements for each period include the statements of operations and comprehensive income, balance sheets and statements of cash flows for our corporate operations taken as a whole. We have eliminated all significant intercompany items and transactions in consolidation. We prepare our unaudited, consolidated financial statements following the requirements of the SEC for interim reporting. As permitted under these rules, we condense or omit certain footnotes and other financial information that are normally required by accounting principles generally accepted in the United States. In addition to the revisions to our segment disclosures described above, we have reclassified certain other 2004 data to conform to our 2005 presentation.

        These financial statements include all normal and recurring adjustments that we consider necessary for the fair presentation of our financial position and operating results. Since these are interim financial statements, you should also read our audited, consolidated financial statements and notes included in our 2004 Form 10-K. Revenues, expenses, assets and liabilities can vary from quarter to quarter. Therefore, the results and trends in these interim financial statements may not be indicative of results for future periods.

    Accounting for Stock-Based Compensation

        In accounting for stock-based compensation, we do not recognize compensation expense for qualifying options granted to our employees and directors under the provisions of our stock-based compensation plans with fixed terms and an exercise price greater than or equal to the fair market value of the underlying Genzyme Stock on the date of grant. All stock-based awards to non-employees are accounted for at their fair value in accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," as amended, and Emerging Issues Task Force, or EITF, Issue No. 96-18, "Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services."

        The following table sets forth our net income data as if compensation expense for our stock-based compensation plans was determined in accordance with SFAS No. 123, as amended, based on the fair value at the grant dates of the awards (amounts in thousands):

 
   Three Months Ended June 30,
   Six Months Ended June 30,
  
 
   2005
   2004
   2005
   2004
  
Net income:                          
  As reported   $ 123,631   $ 78,176   $ 219,189   $ 146,070  
  Add: employee stock-based compensation included in as-reported, net of tax     —     3     —     7  
  Deduct: pro forma employee stock-based compensation expense, net of tax     (46,334 )   (35,754 )   (65,592 )   (53,068 )
   
 
 
 
 
  Pro forma   $ 77,297   $ 42,425   $ 153,597   $ 93,009  
   
 
 
 
 

10

        The following table sets forth the impact to our historical net income per share data as if compensation expense for our stock-based compensation plans was determined in accordance with SFAS No. 123, as amended.

 
   Three Months Ended June 30,
   Six Months Ended June 30,
 
   2005
   2004
   2005
   2004
Net income per share:                        
  Basic:                        
    As reported   $ 0.49   $ 0.35   $ 0.87   $ 0.65
   
 
 
 
    Pro forma   $ 0.31   $ 0.19   $ 0.61   $ 0.41
   
 
 
 
  Diluted:                        
    As reported   $ 0.46   $ 0.33   $ 0.83   $ 0.62
   
 
 
 
    Pro forma   $ 0.29   $ 0.18   $ 0.59   $ 0.40
   
 
 
 

        The effects of applying SFAS No. 123, as amended, are not necessarily representative of the effects on reported net income (loss) in future years. We anticipate making additional awards of stock-based compensation in future years.

Recent Accounting Pronouncements

        SFAS No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4."    In November 2004, the Financial Accounting Standards Board, or FASB, issued SFAS No. 151, "Inventory Costs, an amendment of Accounting Research Bulletin, or ARB, No. 43, Chapter 4." SFAS No. 151 clarifies that abnormal amounts of idle facility expense, freight, handling costs and wasted materials spoilage should be recognized as current period charges in all circumstances. SFAS No. 151 will be effective for us beginning January 1, 2006. We have not yet determined the impact, if any, SFAS No. 151 will have on our consolidated financial statements.

        SFAS No. 123R, "Share-Based Payment, an amendment of FASB Statement Nos. 123 and 95."    In December 2004, the FASB issued a revision to SFAS No. 123, also known as SFAS 123R, "Share-Based Payments," which replaces SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes Accounting Principles Board, or APB, Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS 123R will require all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of operations based on their fair values. SFAS 123R allows alternative methods for determining the fair value of share based payments to employees and alternative methods of implementation. In April 2005, the SEC issued a rule that allows companies to implement SFAS 123R at the beginning of the next fiscal year, instead of the next reporting period, that begins after June 15, 2005. As a result, we plan to implement SFAS 123R in the reporting period starting January 1, 2006. We expect that SFAS 123R will have a significant impact on our financial statements. We expect that the adoption of SFAS 123R will cause us to record, as expense each quarter, a non-cash accounting charge approximating the fair value of all stock-based compensation meeting the criteria outlined in the provisions of SFAS 123R. We have not yet determined which valuation method we will use or the method of implementation.

11


3. Net Income Per Share

        The following table sets forth our computation of basic and diluted net income per share (amounts in thousands, except per share amounts):

 
   Three Months Ended June 30,
   Six Months Ended June 30,
 
   2005
   2004
   2005
   2004
Net income—basic   $ 123,631   $ 78,176   $ 219,189   $ 146,070
Effect of dilutive securities:                        
  Interest expense and debt fees, net of tax, related to our 1.25% convertible senior notes(1)     1,874     1,839     3,748     3,739
   
 
 
 
Net income—diluted   $ 125,505   $ 80,015   $ 222,937   $ 149,809
   
 
 
 
  Shares used in computing net income per common share—basic     253,086     226,578     252,003     226,145
Effect of dilutive securities:                        
  Shares issuable for the assumed conversion of our 1.25% convertible senior notes(1)     9,686     9,686     9,686     9,686
  Stock options (2)     7,301     4,957     7,288     5,576
  Warrants and stock purchase rights     11     9     11     10
   
 
 
 
    Dilutive potential common shares     16,998     14,652     16,985     15,272
   
 
 
 
Shares used in computing net income per common share—diluted(1,2,3)     270,084     241,230     268,988     241,417
   
 
 
 
Net income per share:                        
  Basic   $0.49
   $0.35
   $0.87
   $0.65
  Diluted   $0.46
   $0.33
   $0.83
   $0.62
(1)
Reflects the retroactive application of the provisions of EITF 04-8. The assumed conversion of our $690.0 million in principal of 1.25% convertible senior notes was dilutive for all periods presented.

(2)
We did not include the securities described in the following table in the computation of diluted earnings per share for all periods presented because these securities had an exercise price greater than the average market price per share (amounts in thousands):

 
   Three Months Ended June 30,
   Six Months Ended June 30,
 
   2005
   2004
   2005
   2004
Shares issuable upon exercise of outstanding options   3,373   13,050   2,061   9,188
   
 
 
 
(3)
We did not retroactively include the potentially dilutive effect of the assumed conversion of our $575.0 million in principal of 3% convertible subordinated debentures in the computation of dilutive earnings per share for the three and six months ended June 30, 2004, because we redeemed these debentures for cash in June 2004. The debentures were contingently convertible into approximately 8.2 million shares at an initial conversion price of $70.30 per share.

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4. Mergers and Acquisitions

Acquisition of Equal Diagnostics

        On July 15, 2005, we acquired Equal Diagnostics, a privately-held diagnostics company in Exton, Pennsylvania, which formerly served as a distributor for our clinical chemistry reagents. We paid $5.0 million in initial cash payments and issued promissory notes to the three former shareholders of Equal Diagnostics totaling $10.0 million in principal, which bear interest at 3.86% and are payable over eight years in equal annual installments commencing on March 31, 2007. In addition to these guaranteed payments, we may be obligated to make additional cash payments of up to an aggregate of approximately $8 million during the period commencing March 31, 2007 and ending March 31, 2014 based upon the gross margin of the acquired business, as defined in the purchase agreement. We will account for the acquisition as a purchase and, accordingly, will include its results of operations in our consolidated statements of operations from July 15, 2005, the date of acquisition.

Acquisition of Bone Care

        On July 1, 2005, we acquired Bone Care, a publicly-held specialty pharmaceutical company based in Middleton, Wisconsin with a focus on nephrology. We paid gross consideration of approximately $712 million in cash, including $668.4 million for the shares of Bone Care's common stock, $39.9 million for Bone Care's stock options and restricted stock outstanding on the date of acquisition and approximately $4 million for acquisition costs. Net consideration was $604 million as we acquired Bone Care's cash and short-term investments totaling $108 million. As part of the transaction, we acquired Hectorol, a line of vitamin D2 pro-hormone products used to treat secondary hyperparathyroidism in patients on dialysis and those with earlier stage chronic kidney disease, or CKD, which we have added to our renal business. We will account for the acquisition as a purchase and, accordingly, will include its results of operations in our consolidated statements of operations from July 1, 2005, the date of acquisition.

        In October 2004, Bone Care was one of seven companies, all of which market treatments or therapies for kidney patients, that received a subpoena from the office of the United States Attorney for the Eastern District of New York. The subpoena required Bone Care to provide a wide range of documents related to numerous aspects of its business and operations. The subpoena included specific requests for documents related to testing for parathyroid hormone levels and vitamin D therapies. Since receiving the subpoena, Bone Care cooperated, and we continue to cooperate, with the government's investigation. To our knowledge, no civil or criminal proceedings have been initiated against Bone Care or Genzyme at this time, although we cannot predict whether or when any proceedings might be initiated. As a result, we have not recorded any contingent liabilities related to the government's investigation. Because the period under investigation was prior to the date we acquired Bone Care, any future liabilities that may arise out of the government's investigation will be considered contingent liabilities that existed as of the date of acquisition. Any such liabilities will be recorded in our financial statements, when they become probable and estimable, as an increase to both the goodwill resulting from, and the liabilities assumed in connection with, our acquisition of Bone Care.

Acquisition of Verigen

        In February 2005, we acquired Verigen, a private company based in Leverkusen, Germany with a proprietary cell therapy product for cartilage repair (referred to as MACI) currently sold in Europe

13


and Australia. We paid $10.6 million in initial cash payments and may be obligated to make additional cash payments of up to an aggregate of $38.3 million over the next six years, based upon the achievement of development and commercial milestones relating to regulatory approval and commercialization of MACI in the United States, as well as contingent payments on worldwide sales of that product. To date we have acquired approximately 96% of Verigen's outstanding shares and anticipate acquiring the remaining outstanding shares in the second half of 2005. We accounted for the acquisition as a purchase and accordingly, included its results of operations in our consolidated statements of operations from February 8, 2005, the date of acquisition.

        The purchase price was allocated to the estimated fair value of the acquired tangible and intangible assets and assumed liabilities as follows (amounts in thousands):

Initial cash payments   $ 10,571  
Contingent payments     120  
Contingent liabilities     9,680  
Acquisition costs     912  
   
 
  Total purchase price   $ 21,283  
   
 

Cash and cash equivalents
 
$
924
 
Other current assets     3,558  
Other noncurrent assets     1,023  
Property, plant and equipment     2,673  
Other intangible assets (to be amortized over 10 years)     11,945  
In-process research and development     9,500  
Assumed liabilities     (8,340 )
   
 
  Allocated purchase price   $ 21,283  
   
 

        The purchase price was allocated to the intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The estimated fair value of the assets acquired and liabilities assumed exceeded the initial payments by $9.8 million resulting in negative goodwill. Pursuant to SFAS No. 142, "Goodwill and Other Intangible Assets," we recorded as a liability, contingent consideration up to the amount of the negative goodwill. When and if contingent payments come due, we will apply the payments against the $9.8 million contingent liability. Contingent payments in excess of $9.8 million, if any, will be recorded as goodwill. During the second quarter, we paid $0.1 million of contingent payments. As of June 30, 2005, the remaining contingent payment is $9.7 million.

        The allocation of the purchase price remains subject to potential adjustments, including the purchase of Verigen's remaining outstanding shares in the second half of 2005, the valuation of acquired tax assets and restructuring liabilities. Pro forma results are not presented for the acquisition of Verigen because the acquisition did not have a significant effect on our results of operations.

Acquisition of Synvisc Sales and Marketing Rights from Wyeth

        In January 2005, we consummated an arrangement with Wyeth under which we reacquired the sales and marketing rights to Synvisc in the United States, as well as Germany, Poland, Portugal and

14


the Czech Republic. Upon closing this transaction, we began to record revenue from sales of Synvisc to end-users in these territories. We also began selling Synvisc directly to end-users in Greece effective July 1, 2005. In exchange for the sales and marketing rights, we paid a total of $121.0 million in cash to Wyeth and $0.1 million of acquisition costs in the first quarter of 2005. We also accrued contingent payments to Wyeth totaling $29.8 million in the first half of 2005, of which $20.3 million had been paid as of June 30, 2005. Distribution agreements (a component of other intangible assets, net) in our consolidated balance sheet as of June 30, 2005 includes a total of $150.9 million for the initial and contingent payments (made or accrued) during the first half of 2005. We will make a series of additional contingent payments to Wyeth based on the volume of Synvisc sales in the covered territories. These contingent payments could extend out to June 2012, or could total a maximum of $293.7 million, whichever comes first.

        We determined that the contingent payments to Wyeth represent contingent purchase price. Accordingly, as contingent payments are made in the future, the amounts will be recorded as additional purchase price for the underlying intangible asset. We calculate amortization expense for this intangible asset based on an economic use model, taking into account our forecasted future sales of Synvisc and the resulting estimated future contingent payments we will be required to make. We periodically update the estimates used in this amortization calculation based on changes in forecasted sales and resulting estimated contingent payments.

        We are now recording selling, general and administrative, or SG&A, expenses related to the additional Synvisc sales force we assumed from Wyeth, and we continue to record all of the research and development expenses related to Synvisc.

        The reacquired Synvisc distribution rights qualify as an asset versus an acquired business. As a result, we do not provide pro forma results for our reacquisition of the Synvisc distribution rights.

Acquisition of ILEX

        In December 2004, we completed our acquisition of ILEX, an oncology drug development company. The transaction had a total value of approximately $1.1 billion, based on the $55.88 per share value of the 18.5 million shares of our common stock exchanged in the acquisition. We accounted for the acquisition as a purchase and accordingly, included its results of operations in our consolidated statements of operations from December 20, 2004, the date of acquisition.

        The purchase price was allocated to the intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price over the estimated fair value of the assets acquired and liabilities assumed amounted to $485.3 million, which was allocated to goodwill. We expect that substantially all of the amount allocated to goodwill will not be deductible for tax purposes.

        The allocation of the purchase price remains subject to potential adjustments, including adjustments for liabilities associated with certain exit activities and for change in control provisions under certain contractual agreements.

        In connection with our acquisition of ILEX, we initiated an integration plan to consolidate and restructure certain functions and operations, including the relocation and termination of certain ILEX personnel and the closure of certain of ILEX's leased facilities. These costs have been recognized as liabilities assumed in connection with the acquisition of ILEX in accordance with EITF 95-3 and are

15


subject to potential adjustments as certain exit activities are confirmed or refined. The following table summarizes the liabilities established for exit activities related to the acquisition of ILEX (amounts in thousands):

 
   Employee
Related
Benefits
   Closure of
Leased
Facilities
   Other
Exit
Activities
   Total
Exit
Activities
  
Recorded at acquisition date   $ 4,900   $ 216   $ 214   $ 5,330  
Payments in 2004     —     (140 )   (5 )   (145 )
   
 
 
 
 
Balance at December 31, 2004     4,900     76     209     5,185  
Revision of estimate     828     —     9,808     10,636  
Payments in 2005     (2,995 )   (31 )   (147 )   (3,173 )
   
 
 
 
 
Balance at June 30, 2005   $ 2,733   $ 45   $ 9,870   $ 12,648  
   
 
 
 
 

        In June 2005, we accrued a $9.8 million liability related to the termination of a development contract we assumed in connection with the acquisition of ILEX. The payment was recorded as a $6.9 million increase to goodwill, net of tax, and a $9.8 million increase to accrued expenses.

        We expect to pay employee related benefits to the former employees of ILEX through the second quarter of 2006.

        We also recorded an estimated tax liability of $40.9 million related to the integration of ILEX.

Acquisition of Physician Services and Analytical Services Business Units of IMPATH

        In May 2004, we acquired substantially all of the pathology/oncology testing assets related to the Physician Services and Analytical Services business units of IMPATH, a national medical testing provider, for total cash consideration of $215.3 million, including acquisition costs. We accounted for the acquisition as a purchase and, accordingly, included the results of operations related to these business units in our consolidated statements of operations from May 1, 2004, the date of acquisition. The purchase price is subject to adjustment based upon the completion of a post-closing assessment of the working capital of the acquired business units as of April 30, 2004, which we expect to complete in 2005.

        The purchase price was allocated to the intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price over the estimated fair value of the assets acquired and liabilities assumed amounted to $157.5 million, which was allocated to goodwill. Pro forma results are not presented for our acquisition of the pathology/oncology testing assets of IMPATH because the acquisition did not have a significant effect on our results of operations.

        In connection with the acquisition of these assets, we initiated an integration plan to consolidate and restructure certain functions and operations, including the relocation and termination of certain personnel and the closure of certain of the facilities leased by these business units of IMPATH. These costs have been recognized as liabilities assumed in connection with the purchase of the IMPATH

16


assets in accordance with EITF 95-3. The following table summarizes the liabilities established for exit activities related to this acquisition (amounts in thousands):

 
   Employee
Related
Benefits
   Closure of
Leased
Facilities
   Total
Exit
Activities
  
Recorded at acquisition date   $ 1,434   $ 36   $ 1,470  
Payments in 2004     (447 )   (4 )   (451 )
   
 
 
 
Balance at December 31, 2004     987     32     1,019  
Payments in 2005     (441 )   (27 )   (468 )
   
 
 
 
Balance at June 30, 2005   $ 546   $ 5   $ 551  
   
 
 
 

        We expect to pay employee related benefits to former employees of the Physician Services and Analytical Services business units of IMPATH and make payments related to the closure of certain of the facilities leased by these business units through the end of 2005.

Acquisition of SangStat

        In September 2003, we completed an all cash tender offer for the outstanding common stock and associated preferred stock purchase rights of SangStat for $22.50 per outstanding SangStat share. The aggregate consideration paid was $636.6 million in cash. We accounted for the acquisition as a purchase. Accordingly, the results of operations of SangStat are included in our consolidated financial statements from September 11, 2003, the day after the expiration of the successful tender offer.

        In connection with the acquisition of SangStat, we initiated an integration plan to consolidate and restructure certain functions and operations of SangStat, including the relocation and termination of certain SangStat personnel and the closure of certain of SangStat's leased facilities. These costs have been recognized as liabilities assumed in connection with the purchase of SangStat in accordance with

17


EITF 95-3. The following table summarizes the liabilities established for exit activities related to the acquisition of SangStat (amounts in thousands):

 
   Employee
Related
Benefits
   Closure of
Leased
Facilities(1)
   Other
Exit
Activities
   Total
Exit
Activities
  
Recorded at acquisition date   $ 7,118   $ 2,561   $ 49   $ 9,728  
Revision of estimate     1,315     (233 )   257     1,339  
Payments in 2003     (831 )   —     —     (831 )
   
 
 
 
 
Balance at December 31, 2003     7,602     2,328     306     10,236  
Revision of estimate     (455 )   (320 )   (184 )   (959 )
Payments in 2004     (5,454 )   (1,408 )   (122 )   (6,984 )
   
 
 
 
 
Balance at December 31, 2004     1,693     600     —     2,293  
Payments in 2005     (476 )   (192 )   —     (668 )
   
 
 
 
 
Balance at June 30, 2005   $ 1,217   $ 408   $ —   $ 1,625  
   
 
 
 
 
(1)
Includes costs associated with the closure of leased facilities in California, Germany, Spain and Canada.

        We expect to pay employee related benefits and make payments related to leased facilities through the end of 2005.

    Pro Forma Financial Summary

        The following pro forma financial summary is presented as if the acquisition of ILEX was completed as of January 1, 2004. The pro forma combined results are not necessarily indicative of the actual results that would have occurred had the acquisition been consummated on that date, or of the future operations of the combined entities. Material nonrecurring charges related to this acquisition, such as an IPR&D charge of $254.5 million, are included in the following pro forma financial summary (amounts in thousands, except per share amounts):

 
   Three Months Ended June 30, 2004
   Six Months Ended June 30, 2004
  
Total revenues   $ 557,601   $ 1,058,951  
   
 
 
Net income (loss)   $ 66,409   $ (131,817 )
   
 
 
Net income (loss) per share:              
  Basic   $0.27
   $(0.54
 )
  Diluted   $0.26
   $(0.54
 )

Weighted average shares outstanding:
 
 
 
 
 
 
 
  Basic   245,036
   244,603
  
  Diluted   260,016
   244,603
  

18

5. Inventories

 
   June 30,
2005
   December 31,
2004
 
   (Amounts in thousands)
Raw materials   $ 65,601   $ 65,000
Work-in-process     79,794     79,747
Finished products     132,039     148,911
   
 
  Total   $ 277,434   $ 293,658
   
 

        We capitalize inventory produced for commercial sale, which may result in the capitalization of inventory prior to regulatory approval. If a product is not approved for sale, it would likely result in the write-off of the inventory and a charge to earnings. Our total inventories included $9.7 million at June 30, 2005 and $5.5 million at December 31, 2004, of inventory for Myozyme, primarily consisting of finished goods, which has not yet been approved for sale. We submitted marketing applications for Myozyme in the European Union in December 2004 and in the United States in July 2005.

6. Note Receivable from Dyax Corporation

        We have a collaboration with Dyax Corporation, or Dyax, for the development and commercialization of DX-88 for the treatment of hereditary angioedema and other chronic inflammatory diseases. When the collaboration was amended in May 2002, we also extended to Dyax a $7.0 million line of credit. Dyax issued a senior secured promissory note in the principal amount of $7.0 million to us under which it can request periodic advances of not less than $250,000 in principal, subject to certain conditions. Advances under this note bear interest at the prime rate plus 2%, which was 8.25% at June 30, 2005, and were initially due, together with any accrued but unpaid interest, on May 31, 2005, the initial maturity date. The terms of the note provided that Dyax could extend the maturity date of the note to May 31, 2007 if, as of the initial maturity date, no defaults or events of default existed, Dyax satisfied the financial covenants in the note and our collaboration remained in effect. As of May 31, 2005, Dyax had satisfied these criteria and exercised its option to extend the maturity date for the note to May 31, 2007. As of June 30, 2005, Dyax has drawn $7.0 million under the note, which we have recorded as a note receivable-related party in our consolidated balance sheet. We consider Dyax a related party because a member of our board of directors is the chairman, president and chief executive officer of Dyax.

19


7. Goodwill and Other Intangible Assets

    Goodwill

        The following table contains the changes in our goodwill during the six months ended June 30, 2005 (amounts in thousands):

 
   As of
December 31,
2004
   Adjustments
   As of
June 30,
2005
Renal   $ 76,753   $ —   $ 76,753
Therapeutics     354,709     —     354,709
Transplant     132,111     —     132,111
Biosurgery     7,585     —     7,585
Diagnostics/Genetics(1)     240,005     (7 )   239,998
Other(1,2)     479,753     6,573     486,326
   
 
 
Goodwill, net   $ 1,290,916   $ 6,566   $ 1,297,482
   
 
 
(1)
The adjustments to goodwill include foreign currency revaluation adjustments for goodwill denominated in foreign currencies.

(2)
Includes the goodwill resulting from the acquisition of ILEX in December 2004. We recorded $6.6 million of additional adjustments to ILEX goodwill in 2005 related to revisions of the estimated liabilities established for exit activities, which were primarily costs to terminate a development contract.

        We are required to perform impairment tests related to our goodwill under SFAS No. 142 annually, which we perform in the third quarter, and whenever events or changes in circumstances suggest that the carrying value of an asset may not be recoverable. There were no such events in the first half of 2005.

20


    Other Intangible Assets

        The following table contains information on our other intangible assets for the periods presented (amounts in thousands):

 
   As of June 30, 2005
   As of December 31, 2004
 
   Gross
Other
Intangible
Assets
   Accumulated
Amortization
   Net
Other
Intangible
Assets
   Gross
Other
Intangible
Assets
   Accumulated
Amortization
   Net
Other
Intangible
Assets
Technology(1)   $ 1,021,734   $ (249,445 ) $ 772,289   $ 1,011,068   $ (206,194 ) $ 804,874
Patents     183,360     (64,398 )   118,962     183,360     (57,403 )   125,957
Trademarks     60,227     (23,425 )   36,802     60,227     (20,754 )   39,473
License fees     44,704     (14,376 )   30,328     44,789     (12,592 )   32,197
Distribution agreements(2)     164,953     (25,711 )   139,242     14,075     (7,038 )   7,037
Customer lists     83,578     (32,888 )   50,690     83,578     (25,444 )   58,134
Other     11,502     (9,953 )   1,549     11,420     (9,693 )   1,727
   
 
 
 
 
 
  Total   $ 1,570,058   $ (420,196 ) $ 1,149,862   $ 1,408,517   $ (339,118 ) $ 1,069,399
   
 
 
 
 
 
(1)
Includes core technology valued at $11.9 million resulting from our acquisition of Verigen in February 2005. The value assigned to this technology will be amortized over its estimated useful life of 10 years.

(2)
Includes $150.9 million in intangible assets related to our requisition of the Synvisc sales and marketing rights from Wyeth in January 2005.

        All of our other intangible assets are amortized over their estimated useful lives. Total amortization expense for our other intangible assets was:

    •
    $40.1 million for the three months ended June 30, 2005;

    •
    $27.2 million for the three months ended June 30, 2004;

    •
    $81.3 million for the six months ended June 30, 2005; and

    •
    $53.5 million for the six months ended June 30, 2004.

21

        The estimated future amortization expense for other intangible assets as of June 30, 2005 for the remainder of fiscal year 2005 and the five succeeding fiscal years is as follows (amounts in thousands):

Year Ended December 31,
   Estimated
Amortization
Expense(1)
2005 (remaining six months)   $ 78,630
2006     158,400
2007     161,160
2008     169,284
2009     174,301
2010     182,934
(1)
Includes estimated future amortization expense for the Synvisc distribution rights based on our forecasted future sales of Synvisc and the resulting future contingent payments we will be required to make. These contingent payments will be recorded as intangible assets when the payments are made.

8. Investments in Equity Securities

        In April 2005, we sold our entire investment in the common stock of Theravance, Inc., or Theravance, for $4.5 million in cash. Our investment in Theravance had a zero cost basis and, as a result, we recorded a gain of $4.5 million in gains on investments in equity securities in our consolidated statement of operations in April 2005 related to this sale.

        We review the carrying value of each of our strategic investments in equity securities on a quarterly basis for potential impairment.

        At June 30, 2005, our stockholders' equity includes $25.8 million of unrealized gains and $2.3 million of unrealized losses related to our investments in strategic equity securities. All of the unrealized losses relate to our investment in the common stock of BioMarin Pharmaceutical Inc., or BioMarin. The market value of BioMarin common stock had remained below our cost for the eighteen months immediately prior to June 30, 2005; however, based on the following facts and circumstances, we believe that the decline in market value is considered temporary:

    •
    the market value of BioMarin common stock fully recovered in July 2005 to exceed our cost basis;

    •
    improved results of operations for the first six months of 2005 for BioMarin/Genzyme LLC, our joint venture with BioMarin for the development and commercialization of Aldurazyme, a recombinant form of the human enzyme alpha-L-iduronidase for the treatment of an LSD known as mucopolysaccharidosis I, or MPS I; and

    •
    BioMarin/Genzyme LLC is now profitable.

9. Joint Venture with BioMarin

        We formed BioMarin/Genzyme LLC to develop and market Aldurazyme for the treatment of MPS I. We record our portion of the income or losses of BioMarin/Genzyme LLC in equity in income (loss)

22


of equity method investments in our consolidated statements of operations. Our portion of BioMarin/Genzyme LLC's net income (losses) were:

    •
    $1.5 million of net income for the three months ended June 30, 2005, as compared to net losses of $3.6 million for the same period of 2004; and

    •
    $1.7 million of net income for the six months ended June 30, 2005, as compared to $6.7 million of net losses for the same period of 2004.

        Condensed financial information for BioMarin/Genzyme LLC is summarized below (amounts in thousands):

 
   Three Months Ended June 30,
   Six Months Ended June 30,
  
 
   2005
   2004
   2005
   2004
  
Revenue   $ 19,205   $ 9,241   $ 35,079   $ 16,636  
Gross profit     12,980     5,666     23,371     10,689  
Operating expenses     (10,002 )   (12,932 )   20,198     (24,124 )
  Net income (loss)     3,049     (7,247 )   3,304     (13,394 )

10. Long-Term Debt

Revolving Credit Facility

        In December 2003, we entered into a three year $350.0 million revolving credit facility, maturing in December 2006. As of December 31, 2004, $100.0 million in principal remained outstanding under this facility. In January 2005, we repaid the entire $100.0 million in principal. In June 2005, we drew down $350.0 million under this facility to finance a portion of the cash consideration for the acquisition of Bone Care. As of June 30, 2005, $350.0 million in principal remained outstanding. This amount is included in the current portion of long-term debt and capital lease obligations on our consolidated balance sheet because we plan to repay the outstanding principal balance within a year. Borrowings under this credit facility bear interest at LIBOR plus an applicable margin, which was 4.01% at June 30, 2005. In August 2005, we repaid $190.0 million in principal of the $350.0 million that was outstanding at June 30, 2005. The terms of our revolving credit facility include various covenants, including financial covenants that require us to meet minimum liquidity and interest coverage ratios and to meet maximum leverage ratios. We currently are in compliance with these covenants.

11. Other Commitments and Contingencies

Legal Proceedings

        We periodically become subject to legal proceedings and claims arising in connection with our business.

        Four lawsuits have been filed against us regarding the exchange of all of the outstanding shares of Biosurgery Stock for shares of Genzyme Stock in connection with the elimination of our tracking stocks in July 2003. Each of the lawsuits is a purported class action on behalf of holders of Biosurgery Stock. The first case, filed in Massachusetts Superior Court in May 2003, alleged a breach of the implied covenant of good faith and fair dealing in our charter and a breach of our board of directors' fiduciary

23


duties. The plaintiff in this case sought an injunction to adjust the exchange ratio for the tracking stock exchange. The Court dismissed the complaint in November 2003, but the plaintiff has appealed this dismissal. This appeal was argued before the Massachusetts Appeals Court in March 2005 and we are awaiting the Appeals Court's ruling. Two substantially similar cases were filed in Massachusetts Superior Court in August and October 2003. These cases were consolidated in January 2004, and in July 2004, the consolidated case was stayed pending disposition of a fourth case, which was filed in the U.S. District Court for the Southern District of New York in June 2003. This case alleges violations of federal securities laws, common law fraud, and a breach of the merger agreement with Biomatrix in addition to the state law claims contained in the other cases. The plaintiffs are seeking an adjustment to the exchange ratio, the rescission of the acquisition of Biomatrix, and unspecified compensatory damages. We believe each of these cases is without merit and continue to defend against them vigorously.

        On March 27, 2003, the Office of Fair Trading, or OFT, in the United Kingdom issued a decision against our wholly-owned subsidiary, Genzyme Limited, finding that Genzyme Limited held a dominant position and abused that dominant position with no objective justification by pricing Cerezyme in a way that excludes other delivery/homecare service providers from the market for the supply of home delivery and homecare services to Gaucher patients being treated with Cerezyme. In conjunction with this decision, the OFT imposed a fine on Genzyme Limited and required modification to its list price for Cerezyme in the United Kingdom. Genzyme Limited appealed this decision to the Competition Appeal Tribunal. On May 6, 2003, the Tribunal issued an order that stayed the OFT's decision, but required Genzyme Limited to provide a homecare distributor a discount of 3% per unit during the appeal process. The Tribunal issued its judgment on Genzyme Limited's appeal on March 11, 2004, rejecting portions of the OFT's decision and upholding others. The Tribunal found that the list price of Cerezyme should not be reduced, but that Genzyme Limited must negotiate a price for Cerezyme that will allow homecare distributors an appropriate margin. These negotiations are ongoing. The Tribunal also reduced the fine imposed by the OFT for violation of U.K. competition laws. In response to the Tribunal's decision, we recorded an initial liability of approximately $11 million in our 2003 financial statements and additional liabilities totaling approximately $3 million during 2004 and 2005, all of which remain in accrued expenses in our consolidated balance sheet as of June 30, 2005. On April 13, 2004, Genzyme Limited filed an application with the Tribunal for permission to appeal to the High Court. The application is still pending.

        In June 2003, we filed suit in U.S. District Court for the District of Massachusetts, as co-plaintiff with Biogen IDEC and Abbott Laboratories against Columbia University seeking a declaration that Columbia's U.S. Patent 6,455,275 is invalid. The patent relates to the manufacture of recombinant proteins in Chinese hamster ovary, or CHO, cells, which are the cells we use to manufacture Cerezyme, Fabrazyme and Thyrogen, and which our joint venture partner BioMarin uses to manufacture Aldurazyme. This new patent was issued by the United States Patent and Trademark Office, or USPTO, in September 2002 from a family of patents and patent applications originally filed in 1980. We are licensed under the patent family for a royalty of 1.5% of sales but, because we were confident that the new patent was mistakenly issued by the USPTO and is invalid, we did not pay the royalty pending the outcome of the litigation. We then received notice from Columbia that we were in breach of our license agreement. A hearing on motions for a summary judgment was scheduled for November 2004; however, Columbia rescinded the breach notification and filed with the Court a covenant not to enforce its patent 6,455,275 against any plaintiff in this litigation. In view of this

24


covenant, the Court granted Columbia's motion to dismiss the plaintiffs' main claim for lack of subject matter jurisdiction.

        We are not able to predict the outcome of these cases or estimate with certainty the amount or range of any possible loss we might incur if we do not prevail in the final, non-appealable determinations of these matters. Therefore, except for the liabilities recorded in connection with the Tribunal's decision regarding Cerezyme pricing in the United Kingdom, we have not accrued any amounts in connection with these potential contingencies. We cannot provide you with assurance that the matters listed above, or other legal proceedings, will not have a material adverse impact on our financial condition or results of operations.

12. Provision for Income Taxes

 
   Three Months Ended June 30,
    
   Six Months Ended June 30,
    
  
 
   Increase
(Decrease)
% Change
   Increase/
(Decrease)
% Change
  
 
   2005
   2004
   2005
   2004
  
 
   (Amounts in thousands, except percentage data)

  
Provision for income taxes   $ (52,130 ) $ (33,558 ) 55 % $ (96,525 ) $ (62,382 ) 55 %
Effective tax rate     30 %   30 %       31 %   30 %    

        Our effective tax rate for all periods presented varies from the U.S. statutory tax rate as a result of:

    •
    our provision for state income taxes;

    •
    the tax benefits from export sales and domestic production activities;

    •
    benefits related to tax credits; and

    •
    the foreign tax rate differential.

In addition, our effective tax rate for the three and six months ended June 30, 2005 varies from the U.S. statutory tax rate due to non-deductible charges for IPR&D recorded in the first quarter of 2005 in connection with our acquisition of Verigen.

        We are currently under IRS audit for tax years 1996 to 1999 and 2002 to 2003. We believe that we have provided sufficiently for all audit exposures. Favorable settlement of these audits or the expiration of the statute of limitations on the assessment of income taxes for any tax year may result in a reduction of future tax provisions. Any such benefit would be recorded upon final resolution of the audit or expiration of the applicable statute of limitations.

        In October 2004, the United States enacted the American Jobs Creation Act of 2004, or the Act, which repeals the FSC Repeal and Extraterritorial Income Exclusion Act of 2000, or ETI, export subsidy for transactions after 2004 with two years of transition relief (2005-2006). The Act also provides a 9% deduction for income from domestic production activities which will be phased in over the years 2005-2010. While we are still evaluating the net impact of this new legislation, we do not expect it to have a material effect on our ongoing effective tax rate.

25


13. Defined Benefits Pension Plans

        We have defined benefit pension plans for certain employees in foreign countries. These plans are funded in accordance with requirements of the appropriate regulatory bodies governing each plan.

        The components of net pension expense for the three and six months ended June 30, 2005 and 2004 are as follows (amounts in thousands):

 
   Three Months Ended
June 30,
   Six Months Ended June 30,
  
 
   2005
   2004
   2005
   2004
  
Service cost   $ 745   $ 618   $ 1,525   $ 1,228  
Interest cost     689     577     1,412     1,147  
Expected return on plan assets     (797 )   (684 )   (1,632 )   (1,360 )
Amortization and deferral of actuarial loss     209     151     428     301  
   
 
 
 
 
Net pension expense   $ 846   $ 662   $ 1,733   $ 1,316  
   
 
 
 
 

        At December 31, 2004, we recorded net prepaid benefit costs of $5.0 million related to our defined benefit pension plans. For the six months ended June 30, 2005, we contributed $1.4 million to our pension plan in the United Kingdom. We anticipate making approximately $1.5 million of additional contributions to this plan in 2005 to satisfy our annual funding obligation.

14. Segment Information

        In accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," we present segment information in a manner consistent with the method we use to report this information to our management. Applying SFAS No. 131, we have five reporting segments as described in Note 1, "Description of Business," to these financial statements. As described in Note 1. above, effective January 1, 2005, as a result of changes in how we review our business, we re-allocated the programs of our former drug discovery and development business unit, formerly reported under the caption "Other," amongst several of our existing reporting segments and business units as follows:

    •
    our tolevamer research and development program is now included in our Renal reporting segment;

    •
    our deferitrin (iron chelator) research and development program is now included in our Therapeutics reporting segment;

    •
    WelChol is now included in our bulk pharmaceuticals business unit and as a result, will continue to be reported under the caption "Other;" and

    •
    our other drug discovery research and development programs are now included in our corporate science activities under the caption "Corporate."

We have reclassified our 2004 segment disclosures to conform to our 2005 presentation.

26


        The following table provides information concerning the operations in our reporting segments (amounts in thousands):

 
   Three Months Ended June 30,
   Six Months Ended
June 30,
  
 
   2005
   2004
   2005
   2004
  
Revenues:                          
  Renal   $ 100,847   $ 87,617   $ 200,250   $ 171,140  
  Therapeutics     332,592     276,482     647,645     531,591  
  Transplant     35,041     36,495     66,196     72,729  
  Biosurgery(1)     92,281     59,579     167,333     107,282  
  Diagnostics/Genetics(1)     76,517     71,726     155,890     123,840  
  Other(1)     30,319     16,982     59,793     32,716  
  Corporate(1)     542     707     981     1,541  
   
 
 
 
 
    Total   $ 668,139   $ 549,588   $ 1,298,088   $ 1,040,839  
   
 
 
 
 
Income (loss) before income taxes:                          
  Renal   $ 25,957   $ 22,263   $ 53,136   $ 38,200  
  Therapeutics     182,287     142,478     357,868     271,335  
  Transplant     (2,843 )   (6,141 )   (8,261 )   (13,129 )
  Biosurgery(1)     11,332     3,923     (2,401 )   1,068  
  Diagnostics/Genetics(1)     (4,103 )   (2,272 )   (7,628 )   (1,111 )
  Other(1)     (21,879 )   (9,420 )   (40,461 )   (17,956 )
  Corporate(1,2)     (14,990 )   (39,097 )   (36,539 )   (69,955 )
   
 
 
 
 
    Total   $ 175,761   $ 111,734   $ 315,714   $ 208,452  
   
 
 
 
 
(1)
The results of operations of acquired companies and assets and the amortization expense related to acquired intangible assets are included in segment results beginning on the date of acquisition. Charges for IPR&D related to these acquisitions are included in segment results in the year of acquisition. Acquisitions completed from January 1, 2004 to June 30, 2005 are:

Acquisition
   Date Acquired
   Business Segment(s)
   IPR&D Charge
Verigen   February 8, 2005   Biosurgery/Corporate   $9.5 million
Synvisc sales and marketing rights from Wyeth   January 6, 2005   Biosurgery   None
ILEX   December 20, 2004   Other   $254.5 million
Pathology/oncology testing assets of IMPATH   May 1, 2004   Diagnostics/Genetics   None
Alfigen   February 21, 2004   Diagnostics/Genetics   None
(2)
Loss before income taxes for Corporate consists primarily of interest income, interest expense and other income and expense items that we do not specifically allocate to a particular segment.

27

    Segment Assets

        The following table provides information concerning the assets of our reporting segments (amounts in thousands):

 
   June 30,
2005
   December 31,
2004
Segment Assets(1):            
  Renal   $ 594,880   $ 616,979
  Therapeutics     938,344     949,168
  Transplant     381,103     408,090
  Biosurgery(2,3)     461,036     294,715
  Diagnostics/Genetics     452,161     464,870
  Other     783,876     797,352
  Corporate(4)     3,041,859     2,538,247
   
 
    Total   $ 6,653,259   $ 6,069,421
   
 
(1)
Assets for our five reporting segments and Other include primarily accounts receivable, inventory and certain fixed and intangible assets.

(2)
Includes $20.1 million of assets resulting from our acquisition of Verigen in February 2005.

(3)
In January 2005, we reacquired, from Wyeth, the sales and marketing rights to Synvisc in the United States, as well as Germany, Poland, Portugal and the Czech Republic. We began selling Synvisc directly to end-users in Greece effective July 1, 2005. In exchange for the sales and marketing rights, we paid a total of $121.0 million in cash to Wyeth and $0.1 million of acquisition costs in the first quarter of 2005. We also accrued contingent payments to Wyeth totaling $29.8 million in the first half of 2005, of which $20.3 million had been paid as of June 30, 2005. The $121.1 million purchase price, including acquisition costs, and the $29.8 million of contingent payments accrued in the first half of 2005 were recorded as intangible assets in our consolidated balance sheet as of June 30, 2005.

(4)
Includes the assets related to our corporate, general and administrative operations, and corporate science activities that we do not allocate to a particular segment, including cash, cash equivalents, short-and long-term investments, net property, plant and equipment and deferred tax assets.

28


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that characterize our business. In particular, we encourage you to review the risks and uncertainties described under "Factors Affecting Future Operating Results" below. These risks and uncertainties could cause actual results to differ materially from those forecasted in forward-looking statements or implied by past results and trends. Forward-looking statements are statements that attempt to project or anticipate future developments in our business; we encourage you to review the examples of forward-looking statements under "Note Regarding Forward-Looking Statements" at the beginning of this report. These statements, like all statements in this report, speak only as of the date of this report (unless another date is indicated), and we undertake no obligation to update or revise the statements in light of future developments.

INTRODUCTION

        We are a global biotechnology company dedicated to making a major impact on the lives of people with serious diseases. Our broad product and service portfolio is focused on rare genetic disorders, renal disease, orthopaedics, organ transplant, and diagnostic and predictive testing. We are organized into five financial reporting units, which we also consider to be our reporting segments:

    •
    Renal, which develops, manufactures and distributes products that treat patients suffering from renal diseases, including chronic renal failure. The unit derives substantially all of its revenue from sales of Renagel (including sales of bulk sevelamer) and Hectorol;

    •
    Therapeutics, which develops, manufactures and distributes therapeutic products, with an expanding focus on products to treat patients suffering from genetic diseases and other chronic debilitating diseases, including a family of diseases known as LSDs, and other specialty therapeutics, such as Thyrogen. The unit derives substantially all of its revenue from sales of Cerezyme, Fabrazyme and Thyrogen;

    •
    Transplant, which develops, manufactures and distributes therapeutic products that address the pre-transplantation, prevention and treatment of acute rejection in organ transplantation, as well as other auto-immune disorders. The unit derives its revenue primarily from sales of Thymoglobulin and Lymphoglobuline;

    •
    Biosurgery, which develops, manufactures and distributes biotherapeutics and biomaterial products, with an emphasis on products that meet medical needs in orthopaedics and broader surgical areas. The unit derives its revenue primarily from sales of Synvisc, the Sepra line of products, MACI and Carticel; and

    •
    Diagnostics/Genetics, which develops, manufactures and distributes in vitro diagnostic products and provides testing services for the oncology and prenatal and reproductive markets.

        We report the activities of our oncology, bulk pharmaceuticals and cardiovascular business units under the caption "Other." We report our corporate, general and administrative operations and corporate science activities that we do not allocate to our financial reporting units under the caption "Corporate." Effective January 1, 2005, as a result of changes in how we review our business, we re-allocated the programs of our former drug discovery and development business unit, formerly reported under the caption "Other," amongst several of our existing reporting segments and business units as follows:

    •
    our tolevamer research and development program, for the treatment of C. difficile associated diarrhea, is now included in our Renal reporting segment;

29

    •
    our deferitrin (iron chelator) research and development program is now included in our Therapeutics reporting segment;

    •
    WelChol, an adjunctive therapy for the reduction of elevated LDL cholesterol in patients with primary hypercholesterolemia, is now included in our bulk pharmaceuticals business unit and, as a result, will continue to be reported under the caption "Other;" and

    •
    our other drug discovery research and development programs are now included in our corporate science activities under the caption "Corporate."

We have reclassified our 2004 segment disclosures to conform to our 2005 presentation.

MERGERS AND ACQUISITIONS

Acquisition of Equal Diagnostics

        On July 15, 2005, we acquired Equal Diagnostics, a privately-held diagnostics company in Exton, Pennsylvania, which formerly served as a distributor for our clinical chemistry reagents. We paid $5.0 million in initial cash payments and issued promissory notes to the three former shareholders of Equal Diagnostics totaling $10.0 million in principal, which bear interest at 3.86% and are payable over eight years in equal annual installments commencing on March 31, 2007. In addition to these guaranteed payments, we may be obligated to make additional cash payments of up to an aggregate of approximately $8 million during the period commencing March 31, 2007 and ending March 31, 2014 based upon the gross margin of the acquired business, as defined in the purchase agreement. We will account for the acquisition as a purchase and, accordingly, will include its results of operations in our consolidated statements of operations from July 15, 2005, the date of acquisition.

Acquisition of Bone Care

        On July 1, 2005, we acquired Bone Care, a publicly-held specialty pharmaceutical company based in Middleton, Wisconsin with a focus on nephrology. We paid gross consideration of approximately $712 million in cash, including $668.4 million for the shares of Bone Care's common stock, $39.9 million for Bone Care's stock options and restricted stock outstanding on the date of acquisition, and approximately $4 million for acquisition costs. Net consideration was $604 million as we acquired Bone Care's cash and short-term investments totaling $108 million. As part of the transaction, we acquired Hectorol, a line of vitamin D2 pro-hormone products used to treat secondary hyperparathyroidism in patients on dialysis and those with earlier stage CKD, which we have added to our renal business. We will account for the acquisition as a purchase and, accordingly, will include its results of operations in our consolidated statements of operations from July 1, 2005, the date of acquisition.

        In October 2004, Bone Care was one of seven companies, all of which market treatments or therapies for kidney patients, that received a subpoena from the office of the United States Attorney for the Eastern District of New York. The subpoena required Bone Care to provide a wide range of documents related to numerous aspects of its business and operations. The subpoena included specific requests for documents related to testing for parathyroid hormone levels and vitamin D therapies. Since receiving the subpoena, Bone Care cooperated, and we continue to cooperate, with the government's investigation. To our knowledge, no civil or criminal proceedings have been initiated against Bone Care or Genzyme at this time, although we cannot predict whether or when any proceedings might be initiated. As a result, we have not recorded any contingent liabilities related to the government's investigation. Because the period under investigation was prior to the date we acquired Bone Care, any future liabilities that may arise out of the government's investigation will be considered contingent liabilities that existed as of the date of acquisition. Any such liabilities will be recorded in our financial statements, when they become probable and estimable, as an increase to both

30


the goodwill resulting from, and the liabilities assumed in connection with, our acquisition of Bone Care.

Acquisition of Verigen

        In February 2005, we acquired Verigen, a private company based in Leverkusen, Germany with a proprietary cell therapy product for cartilage repair (referred to as MACI) that is currently sold in Europe and Australia. We paid $10.6 million in initial cash payments and may be obligated to make additional cash payments of up to an aggregate of $38.3 million over the next six years, based upon the achievement of development and commercial milestones relating to regulatory approval and commercialization of MACI in the United States, as well as contingent payments on worldwide sales of that product. To date we have acquired approximately 96% of Verigen's outstanding shares and anticipate acquiring the remaining outstanding shares in the second half of 2005. We accounted for the acquisition as a purchase and accordingly, included its results of operations in our consolidated statements of operations from February 8, 2005, the date of acquisition.

        The purchase price was allocated to the intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The estimated fair value of the assets acquired and liabilities assumed exceeded the initial payments by $9.8 million resulting in negative goodwill. Pursuant to SFAS No. 142, we recorded as a liability, contingent consideration up to the amount of the negative goodwill. When and if contingent payments come due, we will apply the payments against the $9.8 million contingent liability. Contingent payments in excess of $9.8 million, if any, will be recorded as goodwill. During the second quarter, we paid $0.1 million of contingent payments. As of June 30, 2005, the remaining contingent payment is $9.7 million.

        The allocation of the purchase price remains subject to potential adjustments, including the purchase of Verigen's remaining outstanding shares in the second half of 2005, the valuation of acquired tax assets and restructuring liabilities.

Acquisition of Synvisc Sales and Marketing Rights from Wyeth

        In January 2005, we consummated an arrangement with Wyeth under which we reacquired the sales and marketing rights to Synvisc in the United States, as well as Germany, Poland, Portugal and the Czech Republic. Upon closing this transaction, we began to record revenue from sales of Synvisc to end-users in these territories. We also began selling Synvisc directly to end-users in Greece effective July 1, 2005. In exchange for the sales and marketing rights, we paid a total of $121.0 million in cash to Wyeth and $0.1 million of acquisition costs in the first quarter of 2005. We also accrued contingent payments to Wyeth totaling $29.8 million in the first half of 2005, of which $20.3 million had been paid as of June 30, 2005. Distribution agreements (a component of other intangible assets, net) in our consolidated balance sheet as of June 30, 2005 includes a total of $150.9 million for the initial and contingent payments (made or accrued) during the first half of 2005. We will make a series of additional contingent payments to Wyeth based on the volume of Synvisc sales in the covered territories. These contingent payments could extend out to June 2012, or could total a maximum of $293.7 million, whichever comes first.

        We determined that the contingent payments to Wyeth represent contingent purchase price. Accordingly, as contingent payments are made in the future, the amounts will be recorded as additional purchase price for the underlying intangible asset. We calculate amortization expense for this intangible asset based on an economic use model, taking into account our forecasted future sales of Synvisc and the resulting estimated future contingent payments we will be required to make. We periodically update the estimates used in this amortization calculation based on changes in forecasted sales and resulting estimated contingent payments.

31


        We are now recording SG&A expenses related to the additional Synvisc sales force we assumed from Wyeth, and we continue to record all of the research and development expenses related to Synvisc.

Acquisition of ILEX

        In December 2004, we completed our acquisition of ILEX, an oncology drug development company. The transaction had a total value of approximately $1.1 billion, based on the $55.88 per share value of the 18.5 million shares of our common stock exchanged in the acquisition. We accounted for the acquisition as a purchase and accordingly, included its results of operations in our consolidated statements of operations from December 20, 2004, the date of acquisition.

        The purchase price was allocated to the intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price over the estimated fair value of the assets acquired and liabilities assumed amounted to $485.3 million, which was allocated to goodwill. We expect that substantially all of the amount allocated to goodwill will not be deductible for tax purposes.

        The allocation of the purchase price remains subject to potential adjustments, including adjustments for liabilities associated with certain exit activities and for change in control provisions under certain contractual agreements.

Acquisition of Physician Services and Analytical Services Business Units of IMPATH

        In May 2004, we acquired substantially all of the pathology/oncology testing assets related to the Physician Services and Analytical Services business units of IMPATH, a national medical testing provider, for total cash consideration of $215.3 million, including acquisition costs. We accounted for the acquisition as a purchase and, accordingly, included the results of operations related to these business units in our consolidated statements of operations from May 1, 2004, the date of acquisition. The purchase price is subject to adjustment based upon the completion of a post-closing assessment of the working capital of the acquired business units as of April 30, 2004, which we expect to complete in 2005.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES

        Our critical accounting policies and significant estimates are set forth under the heading "Management's Discussion and Analysis of Genzyme Corporation and Subsidiaries' Financial Condition and Results of Operations—Critical Accounting Policies and Significant Estimates" in Exhibit 13.1 to our 2004 Form 10-K. There have been no changes to these policies and no significant changes to these estimates since December 31, 2004.

A. RESULTS OF OPERATIONS

        The following discussion summarizes the key factors our management believes are necessary for an understanding of our consolidated financial statements.

32


REVENUES

        The components of our total revenues are described in the following table:

 
   Three Months Ended
June 30,
    
   Six Months Ended
June 30,
    
  
 
   Increase/
(Decrease)
% Change
   Increase/
(Decrease)
% Change
  
 
   2005
   2004
   2005
   2004
  
 
   (Amounts in thousands, except percentage data)

  
Product revenue   $ 599,347   $ 491,264   22 % $ 1,162,560   $ 945,629   23 %
Service revenue     64,035     54,777   17 %   124,649     89,558   39 %
     
 
     
 
     
  Total product and service revenue     663,382     546,041   21 %   1,287,209     1,035,187   24 %
Research and development revenue     4,757     3,547   34 %   10,879     5,652   92 %
   
 
     
 
     
  Total revenues   $ 668,139   $ 549,588   22 % $ 1,298,088   $ 1,040,839   25 %
   
 
     
 
     

Product Revenue

        We derive product revenue from sales of:

    •
    Renagel, for the reduction of elevated serum phosphorus levels in end-stage renal disease patients on hemodialysis and bulk sevelamer;

    •
    Therapeutics products, including Cerezyme for the treatment of Gaucher disease, Fabrazyme for the treatment of Fabry disease and Thyrogen, which is an adjunctive diagnostic agent used in the follow-up treatment of patients with well-differentiated thyroid cancer;

    •
    Transplant's therapeutic products for the treatment of immune-mediated diseases, primarily Thymoglobulin and Lymphoglobuline, each of which induce immunosuppression of certain types of immune cells responsible for acute organ rejection in transplant patients;

    •
    Biosurgery products, including the Sepra line of products, such as Seprafilm, and orthopaedic products, such as Synvisc;

    •
    Diagnostic products, including infectious disease and cholesterol testing products; and

    •
    Other products, including:

    •
    oncology products, including Campath for the treatment of B-cell chronic lymphocytic leukemia in patients who have been treated with alkylating agents and who have failed fludarabine therapy, and Clolar for the treatment of children with refractory or relapsed acute lymphoblastic leukemia after prior regimens; and

    •
    bulk pharmaceuticals and Welchol, which is a mono and adjunctive therapy for the reduction of LDL cholesterol in patients with primary hypercholesterolemia.

33

        The following table sets forth our product revenue on a segment basis:

 
   Three Months Ended
June 30,
    
   Six Months Ended
June 30,
    
  
 
   Increase/
(Decrease)
% Change
   Increase/
(Decrease)
% Change
  
 
   2005
   2004
   2005
   2004
  
 
   (Amounts in thousands, except percentage data)

  
Renal:                                  
  Renagel (including sales of bulk sevelamer)   $ 100,847   $ 87,617   15 % $ 200,250   $ 171,140   17 %
   
 
     
 
     

Therapeutics:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Cerezyme     235,953     209,371   13 %   461,904     412,341   12 %
  Fabrazyme     74,424     49,620   50 %   144,450     87,723   65 %
  Thyrogen     20,699     16,298   27 %   38,414     30,295   27 %
  Other Therapeutics     1,281     1,193   7 %   2,088     1,232   69 %
   
 
     
 
     
    Total Therapeutics     332,357     276,482   20 %   646,856     531,591   22 %
   
 
     
 
     

Transplant:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Thymoglobulin/Lymphoglobuline     33,576     25,260   33 %   60,797     50,272   21 %
  Other Transplant     1,465     11,235   (87 )%   5,382     22,457   (76 )%
   
 
     
 
     
    Total Transplant     35,041     36,495   (4 )%   66,179     72,729   (9 )%
   
 
     
 
     

Biosurgery:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Synvisc     58,778     27,520   114 %   102,794     49,883   106 %
  Sepra products     17,099     15,579   10 %   33,751     29,791   13 %
  Other Biosurgery     6,913     8,030   (14 )%   13,213     12,699   4 %
   
 
     
 
     
    Total Biosurgery     82,790     51,129   62 %   149,758     92,373   62 %
   
 
     
 
     

Diagnostics/Genetics:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Diagnostic Products     22,121     22,917   (3 )%   48,987     46,287   6 %
  Other Diagnostics/Genetics     —     180   (100 )%   —     311   (100 )%
   
 
     
 
     
    Total Diagnostics/Genetics     22,121     23,097   (4 )%   48,987     46,598   5 %
   
 
     
 
     
Other product revenue     26,191     16,444   59 %   50,530     31,198   62 %
   
 
     
 
     
    Total product revenue   $ 599,347   $ 491,264   22 % $ 1,162,560   $ 945,629   23 %
   
 
     
 
     

Renal

        Sales of Renagel, including sales of bulk sevelamer, the raw material used to formulate Renagel, increased 15% to $100.8 million for the three months ended and 17% to $200.3 million for the six months ended June 30, 2005, as compared to the same periods of 2004, primarily due to:

    •
    an $8.8 million net increase in the three month period and a $20.4 million net increase in the six month period in net sales related to increased customer volume, driven primarily by increased end-user demand in the United States and Europe;

    •
    a $2.1 million increase for the three month period and $4.4 million increase for the six month period due to a 4.5% price increase; and

    •
    a 5% increase in the average exchange rate for the Euro against the U.S. dollar for the three and six months ended June 30, 2005, as compared to the same periods of 2004, which positively

34

      impacted Renagel revenue by $1.2 million for the three month period and $2.5 million for the six month period.

        Sales of Renagel, including sales of bulk sevelamer, were 17% of our total product revenue for both the three and six months ended June 30, 2005, as compared to 18% for both the three and six months ended June 30, 2004.

        Our acquisition of Bone Care on July 1, 2005 expanded our Renal product offerings with the addition of Hectorol, a complimentary product to Renagel used to treat secondary hyperparathyroidism in patients on dialysis and those with earlier stage CKD. Bone Care's operations are being integrated into our Renal business, and our sales representatives have begun selling Hectorol to nephrologists in the United States.

        In addition, we recently announced results from the Dialysis Clinical Outcomes Revisited, or DCOR, trial. The three-year trial compared the difference in mortality and morbidity outcomes for patients receiving Renagel with those using calcium-based phosphate binders. The study found that Renagel use resulted in clinical benefit to patients who were treated for two years or more and patients who were 65 years of age or older.

        We expect sales of Renagel and Hectorol to increase, driven primarily by growing patient access to our products and the continued adoption of the products by nephrologists worldwide. We expect adoption rates for Renagel to trend favorably as a result of the DCOR trial and the growing acceptance of the Kidney Disease Outcome Quality Initiative, or K/DOQI, guidelines. Renagel and Hectorol compete with several other products and our future sales may be impacted negatively by these products. We discuss these competitors under the heading "Factors Affecting Future Operating Results—Our future success will depend upon our ability to effectively develop and market our products against those of our competitors" in this report. In addition, our ability to continue to increase sales of Renagel and Hectorol will depend on many other factors, including our ability to optimize dosing and improve patient compliance with dosing of Renagel, the availability of reimbursement from third-party payors and the extent of coverage, including under the Medicare Prescription Drug Improvement and Modernization Act, and the accuracy of our estimates of the payor mix.

        In addition, our ability to effectively manage wholesaler inventories and the levels of compliance with the inventory management programs we implemented with our wholesalers in 2002, and which will expire this year, could impact the revenue from our Renal reporting segment that we record from period to period.

Therapeutics

        The 20% increase to $332.4 million for the three months ended and the 22% increase to $646.9 million for the six months ended June 30, 2005 in Therapeutics product revenue, as compared to the same periods of 2004, is primarily due to continued growth in sales of Cerezyme, Fabrazyme and Thyrogen.

        The 13% growth in sales of Cerezyme to $236.0 million for the three months ended and 12% to $461.9 million for the six months ended June 30, 2005, as compared to the same periods of 2004, is attributable to our continued identification of new Gaucher disease patients, particularly internationally. Our price for Cerezyme has remained consistent from period to period. Although we expect Cerezyme to continue to be a substantial contributor to revenue in the future, it is a mature product, and as a result, we cannot be certain that the current new patient growth trend will continue. In addition, a 5% increase in the average exchange rate for the Euro against the U.S. dollar for the three and six months ended June 30, 2005, as compared to the same periods of 2004, also positively impacted sales of Cerezyme by $3.4 million for the three month period and $7.2 million for the six month period.

35


        Our results of operations are highly dependent on sales of Cerezyme and a reduction in revenue from sales of this product would adversely affect our results of operations. Sales of Cerezyme were approximately 39% of our total product revenue for the three months ended June 30, 2005, as compared to 43% for the same period of 2004, and 40% of our total product revenue for the six months ended June 30, 2005 as compared to 44% for the same period of 2004. Revenue from Cerezyme would be impacted negatively if competitors developed alternative treatments for Gaucher disease, and the alternative products gained commercial acceptance, if our marketing activities are restricted, or if coverage, pricing or reimbursement is limited. Although orphan drug status for Cerezyme, which provided us with exclusive marketing rights for Cerezyme in the United States, expired in May 2001, we continue to have patents protecting our method of manufacturing Cerezyme until 2010 and the composition of Cerezyme as made by that process until 2013. The expiration of market exclusivity and orphan drug status will likely subject Cerezyme to increased competition, which may decrease the amount of revenue we receive from this product or the growth of that revenue. We are aware of companies that have initiated efforts to develop competitive products, and other companies may do so in the future. We discuss these competitors under the heading "Factors Affecting Future Operating Results—Our future success will depend upon our ability to effectively develop and market our products against those of our competitors" in this report.

        The 50% increase to $74.4 million for the three months ended and the 65% increase to $144.5 million for the six months ended June 30, 2005 in sales of Fabrazyme, as compared to the same periods of 2004, was primarily attributable to increased patient accruals worldwide.

        The 27% increase in sales of Thyrogen to $20.7 million for the three months ended and the 27% increase in sales of Thyrogen to $38.4 million for the six months ended June 30, 2005, as compared to the same periods of 2004, is primarily attributable to worldwide volume growth.

Transplant

        Transplant's product revenue decreased 4% to $35.0 million for the three months ended and 9% to $66.2 million for the six months ended June 30, 2005 as compared to the same periods of 2004. The decreases are primarily due to a $10.2 million decrease for the three month period and a $19.5 million decrease for the six month period in sales of Gengraf, which we co-promoted with Abbott Laboratories under an agreement that expired on December 31, 2004. The decrease is partially offset by a $6.2 million increase for the three month period and an $8.5 million increase for the six month period in sales of Thymoglobulin as a result of increased utilization of Thymoglobulin in transplant procedures.

Biosurgery

        Biosurgery's product revenue increased 62% to $82.8 million for the three months ended and increased 62% to $149.8 million for the six months ended June 30, 2005, as compared to the same periods of 2004. The increases were largely attributable to a $31.3 million increase for the three month period and a $52.9 million increase for the six month period in sales of Synvisc, primarily due to our reacquisition of the Synvisc sales and marketing rights from Wyeth in January 2005. Upon closing this transaction, we began to record revenue from sales of Synvisc to end-users in the United States, as well as Germany, Poland, Portugal and the Czech Republic. We began selling Synvisc directly to end-users in Greece effective July 1, 2005. We are aware of several products that compete with Synvisc, several companies that have intiated efforts to develop competitive products and several companies that market products designed to relieve the pain of osteoarthritis. These products could have an adverse effect on future sales of Synvisc. We discuss these competitors under the heading "Factors Affecting Future Operating Results—Our future success will depend on our ability to effectively develop and market our products against those of our competitors" included in this report.

36


Diagnostics/Genetics

        Diagnostics/Genetics product revenue decreased 4% to $22.1 million for the three months ended June 30, 2005, as compared to the same period of 2004. The decrease was attributable to a 4%, or $0.5 million, decrease in clinical chemistry revenue as a result of several large customers bringing inventory levels down following order increases in the first quarter of 2005.

        Diagnostics/Genetics product revenue increased 5% to $49.0 million for the six months ended June 30, 2005, as compared to the same period of 2004. The increase was attributable to a 7%, or $1.7 million, increase in clinical chemistry revenue as a result of higher order volume by several large customers. Revenue from sales of infectious disease testing products increased 19% to $10.1 million for the six month period primarily due to revenues received under a distribution agreement that went into effect during the first quarter of 2004.

Other Product Revenue

        Other product revenue increased 59% to $26.2 million for the three months ended and 62% to $50.5 million for the six months ended June 30, 2005, as compared to the same periods of 2004, primarily due to a 15% increase to $18.9 million for the three month period and a 13% increase to $35.4 million for the six month period in sales of bulk pharmaceuticals. These increases are primarily due to an increased demand for liquid crystals. Other product revenue includes a $7.3 million increase for the three month period and a $15.1 million increase for the six month period in oncology revenue due to the addition of sales from two oncology products, Campath and Clolar, that we acquired in the ILEX transaction at the end of 2004.

Service Revenue

        We derive service revenues primarily from the following principal sources:

    •
    sales of MACI, a proprietary cell therapy product for cartilage repair, Carticel for the treatment of cartilage damage and Epicel for the treatment of severe burns, all of which are included in our Biosurgery reporting segment; and

    •
    genetic and pathology/oncology testing services, which are included in our Diagnostics/Genetics reporting segment.

        The following table sets forth our service revenues on a reporting segment basis:

 
   Three Months Ended
June 30,
    
   Six Months Ended
June 30,
    
  
 
   Increase/
(Decrease)
% Change
   Increase/
(Decrease)
% Change
  
 
   2005
   2004
   2005
   2004
  
 
   (Amounts in thousands, except percentage data)

  
Biosurgery   $ 9,482   $ 6,148   54 % $ 17,432   $ 12,286   42 %
Diagnostics/Genetics     54,396     48,629   12 %   106,903     77,242   38 %
Other service revenue     157     —   N/A     314     30   947 %
   
 
     
 
     
  Total service revenue   $ 64,035   $ 54,777   17 % $ 124,649   $ 89,558   39 %
   
 
     
 
     

        Service revenue attributable to our Biosurgery reporting segment increased 54% to $9.5 million for the three months ended and 42% to $17.4 million for the six months ended June 30, 2005, as compared to the same periods of 2004. The increase for both periods is primarily due to the addition of sales from MACI, which we acquired in the Verigen transaction in February 2005.

37


        Service revenue attributable to our Diagnostics/Genetics reporting segment increased 12% to $54.4 million in the three months ended June 30, 2005, as compared to the same period of 2004. This increase is primarily attributable to:

    •
    additional service revenue resulting from our acquisition of substantially all of the pathology/oncology testing assets of IMPATH in May 2004;

    •
    continued growth in the prenatal screening and diagnosis market; and

    •
    increased sales of DNA testing services, primarily due to growth in the cystic fibrosis screening and diagnosis market.

        Service revenue attributable to our Diagnostics/Genetics reporting segment increased 38% to $106.9 million for the six months ended June 30, 2005, as compared to the same period of 2004. This increase is primarily attributable to:

    •
    additional service revenue resulting from our acquisition of substantially all of the pathology/oncology testing assets of IMPATH in May 2004 and our acquisition of substantially all of the assets of Alfigen in February 2004;

    •
    continued growth in the prenatal screening and diagnosis market; and

    •
    increased sales of DNA testing services, primarily due to growth in the cystic fibrosis screening and diagnosis market.

International Product and Service Revenue

        A substantial portion of our revenue was generated outside of the United States for the three and six months ended June 30, 2005 and 2004. The following table provides information regarding the change in international product and service revenue as a percentage of total product and service revenue during the periods presented:

 
   Three Months Ended
June 30,
    
   Six Months Ended
June 30,
    
  
 
   Increase/
(Decrease)
% Change
   Increase/
(Decrease)
% Change
  
 
   2005
   2004
   2005
   2004
  
 
   (Amounts in thousands, except percentage data)

  
International product and service revenue   $ 303,519   $ 242,160   25 % $ 593,811   $ 469,775   26 %
% of total product and service revenue     46 %   44 %       46 %   45 %    

        The 25% increase to $303.5 million for the three months ended and the 26% increase to $593.8 million for the six months ended June 30, 2005 in international product and service revenue, as compared to the same periods of 2004, is primarily due to:

    •
    a $50.0 million increase for the three month period and a $106.1 million increase for the six month period in the combined international sales of Renagel, Cerezyme, Fabrazyme and Thyrogen; and

    •
    a 5% increase in the average exchange rate for the Euro against the U.S. dollar for the three and six month periods, which positively impacted total product and service revenue by $6.8 million for the three month period and $14.3 million for the six month period.

38

Research and Development Revenue

        The following table sets forth our research and development revenue on a segment basis:

 
   Three Months Ended
June 30,
    
   Six Months Ended
June 30,
    
  
 
   Increase/
(Decrease)
% Change
   Increase/
(Decrease)
% Change
  
 
   2005
   2004
   2005
   2004
  
 
   (Amounts in thousands, except percentage data)

  
Therapeutics   $ 235   $ —   N/A   $ 789   $ —   N/A  
Transplant     —     —   N/A     17     —   N/A  
Biosurgery     9     2,302   (100 )%   143     2,623   (95 )%
Other     3,971     538   638 %   8,949     1,488   501 %
Corporate     542     707   (23 )%   981     1,541   (36 )%
   
 
     
 
     
  Total research and development revenue   $ 4,757   $ 3,547   34 % $ 10,879   $ 5,652   92 %
   
 
     
 
     

        Other research and development revenue increased $3.4 million for the three months ended and increased $7.5 million for the six months ended June 30, 2005, as compared to the same periods of 2004, primarily due to $2.0 million for the three month period and $4.9 million for the six month period in additional revenue resulting from research and development related to Campath that we performed on behalf of Schering AG under agreements we assumed in connection with our acquisition of ILEX in December 2004. These increases were partially offset by a decrease in Biosurgery research and development revenue primarily due to completion in 2004 of a development program for Hylaform and reimbursements received from Wyeth in 2004 for development projects associated with Synvisc, for which there are no comparable amounts in 2005, due to the reacquisition of the Synvisc sales and marketing rights from Wyeth in January 2005.

MARGINS

        The components of our total margins are described in the following table:

 
   Three Months Ended
June 30,
    
   Six Months Ended
June 30,
    
  
 
   Increase/
(Decrease)
% Change
   Increase/
(Decrease)
% Change
  
 
   2005
   2004
   2005
   2004
  
 
   (Amounts in thousands, except percentage data)

  
Product margin   $ 497,019   $ 383,822   29 % $ 955,258   $ 732,086   30 %
% of total product revenue     83 %   78 %       82 %   77 %    

Service margin
 
$
21,113
 
$
19,351
 
9
%
$
40,608
 
$
33,271
 
22
%
% of total service revenue     33 %   35 %       33 %   37 %    

Total product and service margin
 
$
518,132
 
$
403,173
 
29
%
$
995,866
 
$
765,357
 
30
%
% of total product and service revenue     78 %   74 %       77 %   74 %    

39

Product Margin

        Our overall product margin increased $113.2 million, or 29%, for the three months ended and $223.2 million, or 30%, for the six months ended June 30, 2005, as compared to the same periods in 2004. This is primarily due to:

    •
    a $31.3 million, or 114%, increase for the three month period and a $52.9 million, or 106%, increase for the six month period in sales of Synvisc resulting from our reacquisition of Synvisc sales and marketing rights from Wyeth in January 2005. Upon closing this transaction with Wyeth, we began to record revenue from sales of Synvisc to end-users in the United States, as well as in Germany, Poland, Portugal and the Czech Republic; and

    •
    improved margins for Renagel, Cerezyme and Fabrazyme due to increased sales and increased utilization of capacity at our global manufacturing facilities.

Service Margin

        Our overall service margin increased $1.8 million, or 9%, for the three months ended and $7.3 million, or 22%, for the six months ended June 30, 2005, as compared to the same periods in 2004. This is primarily due to a $3.3 million, or 54%, increase for the three month period and a $5.1 million, or 42%, increase for the six month period in the sales of Biosurgery services as well as a $5.8 million, or 12%, increase for the three month period and a $29.7 million, or 38%, increase for the six month period in sales of Diagnostics/Genetics services. Total service margin as a percent of total service revenue decreased for both the three and six months ended June 30, 2005, as compared to the same periods of 2004, primarily due to increased sales of lower margin testing services attributable to our acquisition of substantially all of the pathology/oncology testing assets related to the Physician Services and Analytical Services business units of IMPATH in May 2004.

OPERATING EXPENSES

Selling, General and Administrative Expenses

        The following table provides information regarding the change in SG&A during the periods presented:

 
   Three Months Ended
June 30,
    
   Six Months Ended
June 30,
    
  
 
   Increase/
(Decrease)
% Change
   Increase/
(Decrease)
% Change
  
 
   2005
   2004
   2005
   2004
  
 
   (Amounts in thousands, except percentage data)

  
Selling, general and administrative expenses   $ 196,385   $ 152,850   28 % $ 378,224   $ 296,070   28 %

        SG&A increased $43.5 million for the three months ended and $82.2 million for the six months ended June 30, 2005, as compared to the same periods of 2004, primarily due to:

    •
    an increase of $16.2 million for the three month period and $28.4 million for the six month period in SG&A for Therapeutics products, primarily due to increased spending for Cerezyme, Fabrazyme and Thyrogen.

    •
    an increase of $13.9 million for the three month period and $25.0 million for the six month period in SG&A for Biosurgery, primarily due to the additional expenses related to the Synvisc sales force we assumed from Wyeth, and because we now perform all marketing for Synvisc in the United States, as well as Germany, Poland, Portugal, and the Czech Republic;

40

    •
    an increase of $1.6 million for the three month period and $10.8 million for the six month period in SG&A for Diagnostics/Genetics, primarily due to our acquisition of substantially all of the pathology/oncology testing assets of IMPATH in May 2004; and

    •
    an increase of $4.8 million for the three month period and $9.6 million for the six month period in Other SG&A, primarily due to the increase in expenses for our oncology business as a result of our acquisition of ILEX in December 2004.

Research and Development Expenses

        The following table provides information regarding the change in research and development expenses during the periods presented:

 
   Three Months Ended
June 30,
    
   Six Months Ended
June 30,
    
  
 
   Increase/
(Decrease)
% Change
   Increase/
(Decrease)
% Change
  
 
   2005
   2004
   2005
   2004
  
 
   (Amounts in thousands, except percentage data)

  
Research and development expenses (including research and development related to contracts)   $ 121,726   $ 99,370   22 % $ 236,471   $ 192,186   23 %

        Research and development expenses increased $22.4 million for the three months ended and $44.3 million for the six months ended June 30, 2005, as compared to the same periods of 2004, primarily due to:

    •
    a $6.9 million increase for the three month period and a $13.5 million increase for the six month period in spending on Renal research and development programs;

    •
    a $5.3 million increase for the three month period and a $6.1 million increase for the six month period in spending on Therapeutics research and development programs; and

    •
    a $10.0 million increase for the three month period and a $21.0 million increase for the six month period in spending on Other research and development programs due to our acquisition of ILEX in December 2004. As a result of our increased focus on oncology research and development, costs related to our Other research and development programs are likely to represent an increased percentage of our overall research and development expenses in the future.

Amortization of Intangibles

        The following table provides information regarding the change in our amortization of intangibles expense during the periods presented:

 
   Three Months Ended
June 30,
    
   Six Months Ended
June 30,
    
  
 
   Increase/
(Decrease)
% Change
   Increase/
(Decrease)
% Change
  
 
   2005
   2004
   2005
   2004
  
 
   (Amounts in thousands, except percentage data)

  
Amortization of intangibles   $ 40,105   $ 27,245   47 % $ 81,291   $ 53,490   52 %

        Amortization of intangibles expense increased by $12.9 million for the three months ended and $27.8 million for the six months ended June 30, 2005, as compared to the same periods of 2004, primarily due to additional amortization expense attributable to the intangible assets acquired in connection with our acquisitions of Verigen in February 2005 and substantially all of the pathology/oncology testing assets of IMPATH in May 2004 as well as the reacquisition of the Synvisc sales and marketing rights from Wyeth in January 2005.

41


        As discussed in Note 4, "Mergers and Acquisitions," to our financial statements in this report, we calculate amortization expense for the Synvisc sales and marketing rights reacquired from Wyeth by taking into account forecasted future sales of Synvisc and the resulting future contingent payments which will be recorded as intangible assets when the payments are made. As a result, we expect amortization of intangibles to increase over the next five years based on these additional payments.

Purchase of In-Process Research and Development

        In connection with three of our acquisitions since 2003, we have acquired various IPR&D projects. Substantial additional research and development will be required prior to any of our acquired IPR&D programs and technology platforms reaching technological feasibility. In addition, once research is completed, each product candidate acquired from Verigen, ILEX and SangStat will need to complete a series of clinical trials, and receive FDA or other regulatory approvals prior to commercialization. Our current estimates of the time and investment required to develop these products and technologies may change depending on the different applications that we may choose to pursue. We cannot give assurances that these programs will ever reach feasibility or develop into products that can be marketed profitably. In addition, we cannot guarantee that we will be able to develop and commercialize products before our competitors develop and commercialize products for the same indications. If products based on our acquired IPR&D programs and technology platforms do not become commercially viable, our results of operations could be materially adversely affected.

Verigen

        In connection with our February 2005 acquisition of Verigen, we have acquired IPR&D related to MACI, Verigen's proprietary approach to cartilage repair.

        As of the date of our acquisition of Verigen, MACI had not reached technological feasibility in the United States due to lack of regulatory approval and did not have an alternative use. Accordingly, we allocated to IPR&D, and charged to expense in our consolidated statements of operations in March 2005, $9.5 million, representing the portion of the purchase price attributable to this project in the United States.

        Management assumes responsibility for determining the IPR&D valuation. The fair value assigned to purchased IPR&D was estimated by discounting, to present value, the cash flows expected to result from the project once it has reached technological feasibility in the United States. We used a discount rate of 24% and cash flows that have been probability-adjusted to reflect the risks of advancement through the product approval process. In estimating future cash flows, we also considered other tangible and intangible assets required for successful exploitation of the technology resulting from the purchased IPR&D project and adjusted future cash flows for a charge reflecting the contribution to value of these assets.

        As of June 30, 2005, we estimated that it will take approximately six years and an investment of approximately $33 million to complete the development of, obtain approval for and commercialize MACI in the United States.

ILEX

        In connection with our December 2004 acquisition of ILEX, we have acquired IPR&D related to three development projects, Campath (for indications other than B-cell chronic lymphocytic leukemia), Clolar (clofarabine) (for indications other than pediatric acute leukemia) and tasidotin hydrochloride.

        As of the date of our acquisition of ILEX, none of these projects had reached technological feasibility nor had an alternative future use. Accordingly, we allocated to IPR&D, and charged to expense in our consolidated statements of operations in December 2004, $254.5 million, representing

42


the portion of the purchase price attributable to these projects, of which $96.9 million is attributable to the Campath development projects, $113.4 million is attributable to the Clolar development projects and $44.2 million is related to the tasidotin development projects. In December 2004, after the date of our acquisition of ILEX, the FDA granted marketing approval for Clolar for the treatment of children with refractory or relapsed acute lymphoblastic leukemia.

        As of June 30, 2005, we estimated that it will take approximately three to six years and an investment of approximately $124 million to complete the development of, obtain approval for and commercialize Campath for non-Hodgkin's lymphoma and multiple sclerosis and other cancer and noncancer indications. We estimated that it will take approximately three to six years and an investment of approximately $68 million to complete the development of, obtain approval for and commercialize Clolar for hematologic cancer, solid tumor and additional pediatric acute leukemia indications. We estimated that it will take approximately five years and an investment of approximately $25 million to complete the development of, obtain approval for and commercialize tasidotin.

SangStat

        In connection with our acquisition of SangStat, we acquired IPR&D related to two projects, RDP58 and cyclosporine capsule. RDP58 is a novel inhibitor of several inflammatory cytokines. Cyclosporine capsule is a novel, smaller-size formulation of generic cyclosporine, an immunosuppressive agent. As of the acquisition date, neither project had reached technological feasibility nor had an alternative future use. Accordingly, we allocated to IPR&D, and charged to expense in our consolidated statements of operations in September 2003, $158.0 million, representing the portion of the purchase price attributable to these two projects, of which $138.0 million was attributable to RDP58 and $20.0 million was attributable to cyclosporine capsule.

        In March 2004, we entered into an agreement with Proctor & Gamble Pharmaceuticals, Inc., or PGP, a subsidiary of The Proctor & Gamble Company, under which we granted to PGP an exclusive, worldwide license to develop and market RDP58 for the treatment of gastrointestinal and other disorders. We retained development and commercialization rights to RDP58 in pulmonary and other disorders that were not specifically licensed to PGP and also retained co-promotion rights with PGP in oncology-related disorders, such as chemo-therapy-induced diarrhea. In exchange for the grant of the license, PGP paid us an upfront fee, and agreed to make milestone payments and pay royalties on product sales.

        In 2005, we cancelled our program for the development of RDP58 for pulmonary and other disorders not licensed to PGP. No further development is currently planned for this program.

        Although we received marketing authorization for both the 25mg and 100mg cyclosporine capsules in a European country in March 2004, we terminated our license for cyclosporine capsules effective April 2005.

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OTHER INCOME AND EXPENSES

 
   Three Months Ended
June 30,
    
   Six Months Ended
June 30,
    
  
 
   Increase/
(Decrease)
% Change
   Increase/
(Decrease)
% Change
  
 
   2005
   2004
   2005
   2004
  
 
   (Amounts in thousands, except percentage data)

  
Equity in loss of equity method investments   $ (417 ) $ (4,274 ) (90 )% $ (2,135 ) $ (8,105 ) (74 )%
Minority interest     3,357     964   248 %   5,551     2,126   161 %
Gains on investments in equity securities     4,817     71   6,685 %   4,958     424   1,069 %
Other     253     (390 ) (165 )%   193     (714 ) (127 )%
Investment income     7,544     5,603   35 %   14,162     13,279   7 %
Interest expense     (4,466 )   (17,495 ) (74 )%   (8,274 )   (27,821 ) (70 )%
   
 
     
 
     
  Total other income (expenses)   $ 11,088   $ (15,521 ) (171 )% $ 14,455   $ (20,811 ) (169 )%
   
 
     
 
     

Equity in Loss of Equity Method Investments

        Under this caption, we record our portion of the results of our joint ventures with BioMarin, Diacrin, Inc. and Medtronic, Inc., and our investments in Peptimmune, Inc. and Therapeutic Human Polyclonals, Inc.

        Our equity in loss of equity method investments decreased 90% to $0.4 million for the three months ended June 30, 2005, as compared to $4.3 million for the same period of 2004, and 74% to $2.1 million for the six months ended June 30, 2005, as compared to $8.1 million for the same period of 2004. Previously, the largest component of our equity in loss of equity method investments was net losses from our joint venture with BioMarin. However, this joint venture became profitable in the first quarter of 2005 due to increased sales of Aldurazyme. As a result, we recorded income of $1.5 million for the three months ended June 30, 2005 and $1.7 million for the six months ended June 30, 2005, representing our portion of the net income of the joint venture, as compared to charges of $3.5 million for the three months ended June 30, 2004 and $6.6 million for the six months ended June 30, 2004, representing our portion of the net losses of the joint venture for the same periods of 2004.

Minority Interest

        As a result of our adoption of FASB Interpretation No., or FIN, 46, "Consolidation of Variable Interest Entities," we have consolidated the results of Dyax-Genzyme LLC, and Excigen Inc. Our consolidated balance sheet as of June 30, 2005 includes assets of $0.7 million related to Dyax-Genzyme LLC, substantially all of which is lab equipment net of its associated accumulated depreciation. We have recorded Dyax's portion of this joint venture's losses as minority interest in our consolidated statements of operations. The results of Excigen were not significant.

Gains on Investments in Equity Securities

        Gains on investments in equity securities increased significantly for both the three and six months ended June 30, 2005, as compared to the same periods in 2004, primarily due to a $4.5 million gain on the sale of our investment in the common stock of Theravance, which we recorded in our consolidated statement of operations in April 2005 for which there was no comparable amount in 2004.

Investment Income

        Our investment income increased 35% for the three months ended June 30, 2005, as compared to the same period of 2004, primarily due to an increase in the average portfolio yield and higher average cash balances. These increases were offset, in part, by an increase in the realized losses on our U.S.

44


investment portfolio. Our investment income increased 7% for the six months ended June 30, 2005, as compared to the same period of 2004, primarily due to an increase in the average portfolio yield. This increase was offset, in part, by lower average cash balances and an increase in the realized losses on our U.S. investment portfolio.

Interest Expense

        Our interest expense decreased 74% for the three months ended June 30, 2005 and 70% for the six months ended June 30, 2005, as compared to the same periods of 2004, primarily due to a decrease in average debt balances outstanding in 2005 resulting from the redemption of our $575.0 million in principal of 3% convertible subordinated debentures for cash in June 2004.

Provision for Income Taxes

 
   Three Months Ended
June 30,
    
   Six Months Ended
June 30,
    
  
 
   Increase/
(Decrease)
% Change
   Increase/
(Decrease)
% Change
  
 
   2005
   2004
   2005
   2004
  
 
   (Amounts in thousands, except percentage data)

  
Provision for income taxes   $ (52,130 ) $ (33,558 ) 55 % $ (96,525 ) $ (62,382 ) 55 %
Effective tax rate     30 %   30 %       31 %   30 %    

        Our effective tax rate for all periods presented varies from the U.S. statutory tax rate as a result of:

    •
    our provision for state income taxes;

    •
    the tax benefits from export sales and domestic production activities;

    •
    benefits related to tax credits; and

    •
    the foreign tax rate differential.

In addition, our effective tax rate for the three and six months ended June 30, 2005 varies from the U.S. statutory tax rate due to non-deductible charges for IPR&D recorded in the first quarter of 2005 in connection with our acquisition of Verigen.

        We are currently under IRS audit for tax years 1996 to 1999 and 2002 to 2003. We believe that we have provided sufficiently for all audit exposures. Favorable settlement of these audits or the expiration of the statute of limitations on the assessment of income taxes for any tax year may result in a reduction of future tax provisions. Any such benefit would be recorded upon final resolution of the audit or expiration of the applicable statute of limitations.

        In October 2004, the United States enacted the American Jobs Creation Act of 2004, or the Act, which repeals the ETI export subsidy for transactions after 2004 with two years of transition relief (2005-2006). The Act also provides a 9% deduction for income from domestic production activities which will be phased in over the years 2005-2010. While we are still evaluating the net impact of this new legislation, we do not expect it to have a material effect on our ongoing effective tax rate.

B. LIQUIDITY AND CAPITAL RESOURCES

        We continue to generate cash from operations. At June 30, 2005, we had cash, cash equivalents and short- and long-term investments of $1.6 billion, as compared to cash, cash equivalents and short- and long-term investments of $1.1 billion at December 31, 2004. This increase is primarily due to the $350.0 million of cash we drew on our revolving credit facility at the end of the second quarter of 2005 in connection with our acquisition of Bone Care and cash generated from operations.

45


        The following is a summary of our statements of cash flows for the six months ended June 30, 2005 and 2004.

Cash Flows from Operating Activities

        Cash flows from operating activities are as follows (amounts in thousands):

 
   Six Months Ended
June 30,
  
 
   2005
   2004
  
Cash flows from operating activities:              
Net cash provided by operating activities before tax benefit from employee stock options and working capital changes   $ 338,485   $ 251,283  
Tax benefit from employee stock options     46,101     15,067  
Increase (decrease) in cash from working capital changes (excluding impact of acquired assets and assumed liabilities)     (35,071 )   (42,043 )
   
 
 
Cash flows from operating activities   $ 349,515   $ 224,307  
   
 
 

        Cash provided by operating activities increased $125.2 million, or 56%, for the six months ended June 30, 2005, as compared to the same period of 2004, primarily due to strong earnings, adjusted for non-cash items (including depreciation, amortization, charges for purchase of IPR&D, deferred income taxes and impairment charges), which increased $87.2 million, or 35%, to $338.5 million for the six months ended June 30, 2005, as compared to the same period of 2004. In addition, the tax benefit from employee stock options increased $31.0 million, or 206%, and cash from working capital changes increased $7.0 million, or 17%, for the first six months of 2005, as compared to the same period of 2004.

Cash Flows from Investing Activities

        Cash flows from investing activities are as follows (amounts in thousands):

 
   Six Months Ended
June 30,
  
 
   2005
   2004
  
Cash flows from investing activities:              
  Net (purchases) sales of investments, including investments in equity securities   $ (18,364 ) $ 552,367  
  Purchases of property, plant and equipment     (80,376 )   (84,037 )
  Investments in equity investees     —     (17,895 )
  Acquisitions, net of acquired cash     (10,679 )   (264,143 )
  Acquisition of sales and marketing rights     (141,435 )   —  
  Other investing activities     1,056     (4,529 )
   
 
 
    Cash flows from investing activities   $ (249,798 ) $ 181,763  
   
 
 

        For the six months ended June 30, 2005, we used:

    •
    $141.4 million in cash for our reacquisition of the Synvisc sales and marketing rights from Wyeth and $10.7 million in cash for our acquisition of Verigen, net of acquired cash;

    •
    $80.4 million in cash to fund the purchase of property, plant and equipment, primarily related to the ongoing expansion of our manufacturing capacity in the Republic of Ireland, the United Kingdom, Belgium and the United States; and

46

    •
    $18.4 million in cash to fund the net purchase of investments, including investments in equity securities.

        For the six months ended June 30, 2004, net sales of investments, including investments in equity securities, provided $552.4 million in cash. For the same period, acquisitions and capital expenditures accounted for significant cash outlays for investing activities. For the six months ended June 30, 2004, we used:

    •
    $264.1 million in cash for acquisitions, including $47.6 million to acquire the Alfigen assets in February 2004 and $215.3 million to acquire the IMPATH pathology/oncology assets in May 2004;

    •
    $84.0 million in cash to fund purchases of property, plant and equipment, primarily related to the ongoing expansion of our manufacturing capacity in the Republic of Ireland, the United Kingdom, Belgium and the United States, ongoing tenant improvements at our corporate headquarters facility in Cambridge, Massachusetts and expenditures related to other manufacturing expansions and relocations; and

    •
    $17.9 million to fund our equity method investments.

Cash Flows from Financing Activities

        Our cash flows from financing activities are as follows (amounts in thousands):

 
   Six Months Ended
June 30,
  
 
   2005
   2004
  
Cash flows from financing activities:              
  Proceeds from issuance of common stock   $ 169,520   $ 43,283  
  Proceeds from draw on credit facility     350,000     135,000  
  Payment of debt and capital lease obligations     (101,618 )   (588,171 )
  Bank overdraft     11,785     1,175  
  Minority interest     7,001     2,006  
  Other financing activities     821     217  
   
 
 
    Cash flows from financing activities   $ 437,509   $ (406,490 )
   
 
 

        For the six months ended June 30, 2005, financing activities generated $539.1 million of cash, primarily due to $350.0 million of proceeds drawn under our revolving credit facility and $169.5 million of proceeds from the issuance of common stock under our stock plans. This was offset by $101.6 million in cash utilized to repay debt and capital lease obligations.

        For the six months ended June 30, 2004, financing activities generated $181.7 million of cash primarily due to $43.3 million of proceeds from the issuance of common stock under our stock plans and $135.0 million drawn under our revolving credit facility. This was offset by $588.2 million in cash utilized to repay debt and capital lease obligations, including $575.0 million of cash used to redeem our 3% convertible subordinated debentures and $11.3 million to repay a 6.5% convertible note due March 29, 2004.

Revolving Credit Facility

        In December 2003, we entered into a $350.0 million revolving credit facility that matures in December 2006. As of December 31, 2004, $100.0 million in principal remained outstanding under this facility. In January 2005, we repaid the entire $100.0 million in principal outstanding. In June 2005, we drew down $350.0 million under this facility, to finance a portion of the cash consideration for the

47


acquisition of Bone Care, which was consummated on July 1, 2005. As of June 30, 2005, $350.0 million in principal remained outstanding. This amount is included in current portion of long-term debt and capital lease obligations in our consolidated balance sheet because we plan to repay the outstanding principal balance within a year. Borrowings under this credit facility bear interest at LIBOR plus an applicable margin, which was 4.01% at June 30, 2005. In August 2005, we repaid $190.0 million in principal of the $350.0 million that was outstanding at June 30, 2005. The terms of our revolving credit facility include various covenants, including financial covenants that require us to meet minimum liquidity and interest coverage ratios and to meet maximum leverage ratios. We currently are in compliance with these covenants.

Contractual Obligations

        The disclosure of payments we have committed to make under our contractual obligations is set forth under the heading "Management's Discussion and Analysis of Genzyme Corporation and Subsidiaries' Financial Condition and Results of Operations—Liquidity and Capital Resources" in Exhibit 13.1 to our 2004 Form 10-K. Excluding contingent payments to Wyeth for the reacquisition of the Synvisc sales and marketing rights, contingent payments to Verigen upon achievement of development and commercial milestones relating to MACI, contingent payments to the former shareholders of Equal Diagnostics and the $350.0 million of additional proceeds drawn and $290.0 million of proceeds repaid under our revolving credit facility, all described above, there have been no material changes to our contractual obligations since December 31, 2004.

Financial Position

        We believe that our available cash, investments and cash flows from operations will be sufficient to fund our planned operations and capital requirements for the foreseeable future. Although we currently have substantial cash resources and positive cash flow, we have used or intend to use substantial portions of our available cash and may make additional borrowings under our revolving credit facility for:

    •
    product development and marketing;

    •
    business combinations and other strategic business initiatives, including approximately $604 million, net of acquired cash, cash equivalents and short-term investments, for our merger with Bone Care, which was completed on July 1, 2005 and $5.0 million for the initial cash consideration paid for the acquisition of Equal Diagnostics, which was completed on July 15, 2005;

    •
    expanding existing and constructing new facilities;

    •
    expanding staff; and

    •
    working capital, including satisfaction of our obligations under capital and operating leases.

        Our cash reserves may be further reduced to pay principal and interest on the $690.0 million in principal under our 1.25% convertible senior notes due December 1, 2023. The notes are initially convertible into Genzyme Stock at a conversion price of approximately $71.24 per share. Holders of the notes may require us to repurchase all or any part of the notes for cash on December 1, 2008, 2013 or 2018, at a price equal to 100% of the principal amount of the notes plus accrued and unpaid interest through the day prior to the date of repurchase. Additionally, upon a change of control, each holder may require us to repurchase for cash, at 100% of the principal amount of the notes plus accrued interest, all or a portion of the holder's notes. On or after December 1, 2008, we may redeem for cash at 100% of the principal amount of the notes plus accrued interest, all or part of the notes that have not been previously converted or repurchased.

48


        In addition, we have several outstanding legal proceedings. Involvement in investigations and litigations can be expensive and a court or administrator may ultimately require that we pay expenses and damages. As a result of legal proceedings, we also may be required to pay fees to a holder of proprietary rights in order to continue certain operations. We have provided detail on pending legal proceedings in the notes to our financial statements and under the heading "Legal Proceedings" in Item 1. to Part II of this report.

        To satisfy these and other commitments, we may have to obtain additional financing. We cannot guarantee that we will be able to obtain any additional financing, extend any existing financing arrangement or obtain either on favorable terms.

Off-Balance Sheet Arrangements

        We do not use special purpose entities or other off-balance sheet financing arrangements. We enter into guarantees in the ordinary course of business related to the guarantee of our own performance and the performance of our subsidiaries. In addition, we have joint ventures and certain other arrangements that are focused on research, development and the commercialization of products. Entities falling within the scope of FIN 46 are included in our consolidated results if we qualify as the primary beneficiary. Entities not subject to consolidation under FIN 46 are accounted for under the equity method of accounting if our ownership percent exceeds 20% or if we exercise significant influence over the entity. We account for our portion of the losses of these entities in the line item "Equity in loss of equity method investments" in our statements of operations. We also acquire companies in which we agree to pay contingent consideration based on attaining certain thresholds.

Recent Accounting Pronouncements

        SFAS No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4."    In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4." SFAS No. 151 clarifies that abnormal amounts of idle facility expense, freight, handling costs and wasted materials spoilage should be recognized as current period charges in all circumstances. SFAS No. 151 will be effective for us beginning January 1, 2006. We have not yet determined the impact, if any, SFAS No. 151 will have on our consolidated financial statements.

        SFAS No. 123R, "Share-Based Payment, an amendment of FASB Statement Nos. 123 and 95."    In December 2004, the FASB issued SFAS 123R, "Share-Based Payments," which replaces SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees," SFAS 123R will require all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of operations based on their fair values. SFAS 123R allows alternative methods for determining the fair value of share based payments to employees and alternative methods of implementation. In April 2005, the SEC issued a rule that allows companies to implement SFAS 123R at the beginning of the next fiscal year, instead of the next reporting period, that begins after June 15, 2005. As a result, we plan to implement SFAS 123R in the reporting period starting January 1, 2006. We expect that SFAS 123R will have a significant impact on our financial statements. We expect that the adoption of SFAS 123R will cause us to record, as expense each quarter, a non-cash accounting charge approximating the fair value of such share based compensation meeting the criteria outlined in the provisions of SFAS 123R. We have not yet determined which valuation method we will use or the method of implementation.

49


FACTORS AFFECTING FUTURE OPERATING RESULTS

        Our future operating results could differ materially from the results described in this report due to the risks and uncertainties related to our business, including those discussed below.

Our financial results are highly dependent on sales of Cerezyme.

        We generate a significant portion of our revenue from sales of Cerezyme, our enzyme-replacement product for patients with Gaucher disease. Sales of Cerezyme totaled $461.9 million for the six months ended June 30, 2005, representing approximately 40% of our consolidated product revenue for the first six months of 2005. Because our business is highly dependent on Cerezyme, negative trends in revenue from this product could have a significant adverse effect on our operations and cause the value of our securities to decline substantially. We will lose revenue if alternative treatments gain commercial acceptance, if our marketing activities are restricted, or if reimbursement is limited. In addition, the patient population with Gaucher disease is not large. Because a significant percentage of that population already uses Cerezyme, opportunities for future sales growth are constrained. Furthermore, changes in the methods for treating patients with Gaucher disease, including treatment protocols that combine Cerezyme with other therapeutic products or reduce the amount of Cerezyme prescribed, could limit growth, or result in a decline, in Cerezyme sales.

If we fail to increase sales of several products and services, we will not meet our financial goals.

        Over the next few years, our success will depend substantially on our ability to increase revenue from many different products and services. The products and services include Cerezyme, Fabrazyme, Aldurazyme, Renagel, Hectorol, Synvisc, Thymoglobulin, Thyrogen, Clolar, Campath and diagnostic testing services. Our ability to increase sales will depend on a number of factors, including:

    •
    acceptance by the medical community of each product or service;

    •
    the availability of competing treatments that are deemed more efficacious, more convenient to use, or more cost effective;

    •
    our ability, and the ability of our collaborators, to efficiently manufacture sufficient quantities of each product to meet demand and to do so in a cost efficient manner;

    •
    regulation by the U.S. Food and Drug Administration, commonly referred to as the FDA, and the European Agency for the Evaluation of Medicinal Products, or EMEA, and other regulatory authorities;

    •
    the scope of the labeling approved by regulatory authorities for each product and competitive products;

    •
    the effectiveness of our sales force;

    •
    the extent of coverage, pricing and level of reimbursement from governmental agencies and third party payors; and

    •
    the size of the patient population for each product or service.

        Part of our growth strategy involves conducting additional clinical trials to support approval of expanded uses of some of our products and pursuing marketing approval for our products in new jurisdictions. With Synvisc, for example, we are pursuing marketing approval in Japan and are seeking to expand approval in the United States to cover use as a treatment of pain from osteoarthritis in the hip. The success of this component of our growth strategy will depend on the content and timing of our submissions to regulatory authorities and whether and when those authorities determine to grant approvals.

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        Because the healthcare industry is extremely competitive and regulatory requirements are rigorous, we spend substantial funds marketing our products and attempting to expand approved uses for them. These expenditures depress near-term profitability, with no assurance that the expenditures will generate future profits that justify the expenditures.

Our future success will depend on our ability to effectively develop and market our products against those of our competitors.

        The human healthcare products and services industry is extremely competitive. Other organizations, including pharmaceutical, biotechnology, device and diagnostic testing companies, have developed and are developing products and services to compete with our products, services, and product candidates. If doctors, patients or payors prefer these competitive products or these competitive products have superior safety, efficacy, pricing or reimbursement characteristics, we will have difficulty maintaining or increasing the sales of our products.

        Celltech Group plc and Actelion Ltd. have developed Zavesca®, a small molecule drug candidate for the treatment of Gaucher disease, the disease addressed by Cerezyme. Zavesca has been approved by both the FDA and the EMEA as an oral therapy for use in patients with mild to moderate Type 1 Gaucher disease for whom enzyme replacement is unsuitable. Teva Pharmaceuticals Industries Ltd., a licensee of Celltech, has received marketing approval of Zavesca in Israel. In addition, Shire Pharmaceuticals Group plc, or Shire, which recently acquired Transkaryotic Therapies Inc., is conducting a phase 1/2 clinical trial for its gene-activated glucocerebrosidase program, also to treat Gaucher disease.

        Nabi Biopharmaceuticals is currently marketing PhosLo®, a calcium-based phosphate binder. Like Renagel, PhosLo is approved for the control of elevated phosphate levels in patients with end-stage kidney failure. In addition, in October 2004, Shire received FDA approval for Fosrenol®, a non-calcium based phosphate binder for the reduction of high phosphorus levels in end-stage renal disease patients. Shire received marketing approval in Sweden in March 2004 and has filed for marketing approval of Fosrenol in the European Union and Canada. Renagel also competes with over-the-counter calcium carbonate products such as TUMS®.

        Zemplar®, a product of Abbott Laboratories, is a vitamin D receptor activator which is used to treat hyperparathyroidism associated with chronic kidney disease. Hectorol faces competition from Zemplar as well as from several other vitamin D hormone therapies used to treat hyperthyroidism and hyperproliferative diseases.

        Outside the United States, Shire is marketing Replagal™, a competitive enzyme replacement therapy for Fabry disease which is the disease addressed by Fabrazyme. In addition, while Fabrazyme has received Orphan Drug designation, which provides us with seven years of market exclusivity for the product in the United States, other companies may seek to overcome our market exclusivity and, if successful, compete with Fabrazyme in the United States.

        Several companies market products that, like Thymoglobulin and Lymphoglobuline, are used for the prevention and treatment of acute rejection in renal transplant. These products include Novartis' Simulect®, Pfizer Inc.'s ATGAM®, Ortho Biotech's Orthoclone OKT®3, Fresenius Biotech GmbH's ATG-Fresenius S® and the Roche Group's Zenapax®. Competition in the acute transplant rejection market largely is driven by product efficacy due to the potential loss of transplanted organs as the result of an acute organ rejection episode.

        Current competition for Synvisc includes Hyalgan®, produced by Fidia Farmaceutici S.p.A. and marketed in the United States by Sanofi-Synthelabo Inc.; Orthovisc®, produced and marketed outside of the United States by Anika Therapeutics, Inc. (in some cases through local distributors) and marketed in the United States by Ortho Biotech and DePuy Mitek, Inc. (both of which are wholly-

51


owned subsidiaries of Johnson & Johnson); Artz®, a product manufactured by Seikagaku Kogyo that is sold in Japan by Kaken Pharmaceutical Co. and in the United States by Smith & Nephew Orthopaedics under the name Supartz®; a product owned and manufactured by Savient Pharmaceuticals, Inc., which is marketed under the name Euflexxa™ in Europe and has been approved for marketing in the United States; and Durolane®, manufactured by Q-Med AB. We are also aware of other directly competitive products under development. Furthermore, several companies market products designed to relieve the pain associated with osteoarthritis. Synvisc will have difficulty competing with any of these products to the extent the competitive products are considered more efficacious, less burdensome to administer or more cost-effective.

        The examples above are illustrative. Almost all of our products face competition. Furthermore, the field of biotechnology is characterized by significant and rapid technological change. Discoveries by others may make our products or services obsolete. For example, competitors may develop approaches to treating lysosomal storage disorders (LSDs) that are more effective or less expensive than our products and product candidates. Because a significant portion of our revenue is derived from products that address this class of diseases and a substantial portion of our expenditures is devoted to developing new therapies for this class of diseases, such a development would have a material negative impact on our operations. Furthermore, our recent acquisition of ILEX Oncology, Inc., or ILEX, and certain of the pathology/oncology testing assets of IMPATH Inc., reflect our commitment to the oncology area. Many pharmaceutical and biotechnology companies are pursuing programs in this area, and these organizations may develop approaches that are superior to ours.

If we fail to obtain adequate levels of reimbursement for our products from third party payors, the commercial potential of our products will be significantly limited.

        A substantial portion of our domestic and international revenue comes from payments by third party payors, including government health administration authorities and private health insurers. Governments and other third party payors may not provide adequate insurance coverage or reimbursement for our products and services, which would impair our financial results.

        Third party payors are increasingly scrutinizing pharmaceutical budgets and healthcare expenses and are attempting to contain healthcare costs by:

    •
    challenging the prices charged for healthcare products and services;

    •
    limiting both the coverage and the amount of reimbursement for new therapeutic products;

    •
    limiting coverage for treatment of a particular patient to a maximum dollar amount or specified period of time;

    •
    denying or limiting coverage for products that are approved by the FDA or other governmental regulatory bodies but are considered experimental or investigational by third party payors; and

    •
    refusing in some cases to provide coverage when an approved product is used for disease indications in a way that has not received FDA or other applicable marketing approval.

        Attempts by third party payors to reduce costs in any of these ways could decrease demand for our products. In addition, in certain countries, including countries in the European Union and Canada, the coverage of prescription drugs, the pricing, and the level of reimbursement are subject to governmental control, and we may therefore be unable to negotiate coverage, pricing and/or reimbursement on terms that are favorable to us. Government health administration authorities may also rely on analyses of the cost-effectiveness of certain therapeutic products in determining whether to provide reimbursement for such products. Our ability to obtain satisfactory pricing and reimbursement may depend in part on whether our products, the cost of some of which are high in comparison to other therapeutic products, are viewed as cost-effective.

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        Furthermore, legislatures, including the U.S. Congress, occasionally discuss implementing broad-based measures to contain healthcare costs. If third party reimbursement is further constrained, or if legislation is passed to contain healthcare costs, our profitability and financial condition could suffer. For example, the Medicare Prescription Drug, Improvement and Modernization Act (or the Medicare Modernization Act (MMA)) was enacted into law in December 2003. Reimbursement changes resulting from the MMA may negatively affect product sales of some of our marketed products. Previously, the "average wholesale price" (AWP) mechanism was the basis of Medicare Part B payment for physician-administered drugs and biologics. Effective January 1, 2005, this changed to an "average sales price" (ASP) methodology under the MMA. Under the new ASP methodology, Thyrogen, Synvisc and our LSD products are being reimbursed under a new Medicare Part B system that reimburses each product at 106% of its ASP (sometimes referred to as "ASP + 6%"). As a result, reimbursement rates for these products may be lower than 2004 reimbursement rates, in particular, because the ASP methodology deducts sales incentives offered to healthcare providers from the sale prices used to calculate ASP, a deduction that was not made to AWP. For 2005, Hectorol for injection is reimbursed based on an "average acquisition price" determined by the Centers for Medicare and Medicaid Services (CMS). However, beginning in January 2006, Hectorol for injection may be reimbursed under an ASP-based methodology pursuant to the Part B reimbursement rule for 2006. Due to this possible change in reimbursement methodology for injectable Hectorol, reimbursement rates for this product are currently uncertain. Under the MMA, Medicare coverage for Renagel and Hectorol capsules will be available for the first time beginning in 2006. Medicare Part D, which applies to Renagel and Hectorol capsules, will be administered by private vendors under contract with the U.S. government. Each vendor will establish its own Part D formulary for prescription drug coverage and pricing for the first time during 2005, and we are therefore unable to predict how many vendors will cover Renagel and Hectorol capsules and on what terms.

The development of new biotechnology products involves a lengthy and complex process, and we may be unable to commercialize any of the products we are currently developing.

        We have multiple products under development and devote considerable resources to research and development, including clinical trials. For example, we are currently conducting three clinical trials for Myozyme, an enzyme replacement therapy intended to treat Pompe disease, and we are spending considerable resources attempting to develop new treatments for Gaucher disease.

        Before we can commercialize our development-stage product candidates, we will need to:

    •
    conduct substantial research and development;

    •
    undertake preclinical and clinical testing;

    •
    develop and scale-up manufacturing processes; and

    •
    pursue regulatory approvals and, in some jurisdictions, pricing approvals.

        This process involves a high degree of risk and takes many years. Our product development efforts with respect to a product candidate may fail for many reasons, including:

    •
    failure of the product candidate in preclinical studies;

    •
    difficulty enrolling patients in clinical trials, particularly for disease indications with small populations;

    •
    patients exhibiting adverse reactions to the product candidate or indications of other safety concerns;

    •
    insufficient clinical trial data to support the effectiveness of the product candidate;

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    •
    our inability to manufacture sufficient quantities of the product candidate for development or commercialization activities in a timely and cost-efficient manner; or

    •
    our failure to obtain the required regulatory approvals for the product candidate or the facilities in which it is manufactured.

        Few research and development projects result in commercial products, and success in preclinical studies or early clinical trials often is not replicated in later studies. We may decide to abandon development of a product or service candidate at any time or we may be required to expend considerable resources repeating clinical trials or conducting additional trials, either of which would increase costs of development and delay any revenue from those product candidates.

        Our efforts to expand the approved indications for our products and to gain marketing approval in new jurisdictions also may fail. These expansion efforts are subject to many of the risks associated with completely new products, and, accordingly, we may fail to recoup the investments we make pursuing these expansions.

Guidelines and recommendations published by various organizations can reduce the use of our products.

        Professional societies, practice management groups, private health/science foundations, and organizations involved in various diseases may publish guidelines or recommendations to the health care and patient communities from time to time. Recommendations of government agencies or these other groups/organizations may relate to such matters as usage, dosage, route of administration, and use of related therapies. Organizations like these have in the past made recommendations about our products and products of our competitors. Recommendations or guidelines that are followed by patients and health care providers could result in decreased use of our products. In addition, the perception by the investment community or shareholders that recommendations or guidelines will result in decreased use of our products could adversely affect prevailing market prices for our common stock. Our success also depends on our ability to educate patients and healthcare providers about our products and their uses. If these education efforts are not effective, then we may not be able to increase the sales of our existing products or successfully introduce new products to the market.

We may encounter substantial difficulties managing our growth.

        Several risks are inherent to our plans to grow our business. Achieving our goals will require substantial investments in research and development, sales and marketing, and facilities. For example, we have spent considerable resources building out and seeking regulatory approvals for our manufacturing plants. We cannot assure you that these facilities will prove sufficient to meet demand for our products or that we will not have excess capacity at these facilities. In addition, building our facilities is expensive, and our ability to recover these costs will depend on increased revenue from the products produced at the facilities.

        We produce relatively small amounts of material for research and development activities and pre-clinical trials. Even if a product candidate receives all necessary approvals for commercialization, we may not be able to successfully scale up production of the product material at a reasonable cost or at all.

        If we are able to grow sales of our products, we may have difficulty managing inventory levels. Marketing new therapies is a complicated process, and gauging future demand is difficult. With Renagel, for example, we have encountered problems in the past managing inventory levels at wholesalers. Comparable problems may arise with our other products, particularly during market introduction.

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        Growth in our business may also contribute to fluctuations in our operating results, which may cause the price of our securities to decline. Our revenue may fluctuate due to many factors, including changes in:

    •
    wholesaler buying patterns;

    •
    reimbursement rates;

    •
    physician prescribing habits;

    •
    the availability or pricing of competitive products; and

    •
    currency exchange rates.

        We may also experience fluctuations in our quarterly results due to price changes and sales incentives. For example, purchasers of our products, particularly wholesalers, may increase purchase orders in anticipation of a price increase and reduce order levels following the price increase. We occasionally offer sales incentives and promotional discounts on some of our products and services that could have a similar impact. In addition, some of our products are subject to seasonal fluctuation in demand.

        Our operating results and financial position also may be impacted when we attempt to grow through business combination transactions. We may encounter problems assimilating operations acquired in these transactions. Business combination transactions often entail the assumption of unknown liabilities, the loss of key employees, and the diversion of management attention. Furthermore, in any business combination, including our recent acquisitions of ILEX and Bone Care, there is a substantial risk that we will fail to realize the benefits we anticipate when we decide to undertake the transaction. We have in the past taken significant charges for impairment of goodwill and for impaired assets acquired in business combination transactions. We may be required to take similar charges in the future.

Manufacturing problems may cause product launch delays, inventory shortages, recalls and unanticipated costs.

        In order to generate revenue from our approved products, we must be able to produce sufficient quantities of the products. Many of our products are difficult to manufacture. Our products that are biologics, for example, require product characterization steps that are more onerous than those required for most chemical pharmaceuticals. Accordingly, we employ multiple steps to attempt to control the manufacturing processes. Minor deviations in these manufacturing processes could result in unacceptable changes in the products that result in lot failures, product recalls, or product liability.

        Certain of the raw materials required in the commercial manufacturing and the formulation of our products are derived from biological sources, including mammalian sources and human plasma. Such raw materials may be subject to contamination or recall. Also, some countries in which we market our products may restrict the use of certain biologically derived substances in the manufacture of drugs. A material shortage, contamination, recall, or restriction of the use of certain biologically derived substances in the manufacture of our products could adversely impact or disrupt our commercial manufacturing of our products or could result in a mandated withdrawal of our products from the market. This too, in turn, could adversely affect our ability to satisfy demand for our products, which could materially and adversely affect our operating results.

        In addition, we may only be able to produce certain of our products at a very limited number of facilities and, in some cases, we rely on third parties to formulate and manufacture our products. For example, we manufacture all of our Cerezyme and a portion of our Fabrazyme products at our facility in Allston, Massachusetts. A number of factors could cause production interruptions at our facilities or

55


the facilities of our third party providers, including equipment malfunctions, labor problems, natural disasters, power outages, terrorist activities, or disruptions in the operations of our suppliers.

        Manufacturing is also subject to extensive government regulation. Regulatory authorities must approve the facilities in which human healthcare products are produced. Any third party we use to manufacture, fill-finish or package our products to be sold must also be licensed by the applicable regulatory authorities. As a result, third party providers may not be readily available on a timely basis. In addition, facilities are subject to ongoing inspections and minor changes in manufacturing processes may require additional regulatory approvals, either of which could cause us to incur significant additional costs and lose revenue.

We rely on third parties to provide us with materials and services in connection with the manufacture of our products.

        Certain materials necessary for commercial production of our products, including specialty chemicals and components necessary for manufacture, fill-finish and packaging, are provided by unaffiliated third-party suppliers. In some cases, such materials are specifically cited in our drug application with regulatory authorities so that they must be obtained from that specific source and could not be obtained from another supplier unless and until the applicable authority approved that other supplier. In addition, there may only be one available source for a particular chemical or component. For example, we acquire polyalylamine (PAA), used in the manufacture of Renagel and Welchol, from Cambrex Charles City, Inc., the only source for this material currently qualified in our FDA drug applications for these products. Our suppliers may also be subject to FDA regulations regarding manufacturing practices. We may be unable to manufacture our products in a timely manner or at all if these third-party suppliers were to cease or interrupt production or otherwise fail to supply these materials or products to us for any reason, including due to regulatory requirements or actions, adverse financial developments at or affecting the supplier, or labor shortages or disputes.

        We also source some of our manufacturing, fill-finish, packaging and distribution operations to third-party contractors. The manufacture of products, fill-finish, packaging and distribution of our products requires successful coordination among these third-party providers and Genzyme. Our inability to coordinate these efforts, the lack of capacity available at the third-party contractor or any other problems with the operations of these third-party contractors could require us to delay shipment of saleable products, recall products previously shipped or could impair our ability to supply products at all. This could increase our costs, cause us to lose revenue or market share and damage our reputation.

If our strategic alliances are unsuccessful, our operating results will be negatively impacted.

        Several of our strategic initiatives involve alliances with other biotechnology and pharmaceutical companies, including a joint venture with BioMarin Pharmaceutical Inc. with respect to Aldurazyme. The success of this and similar arrangements is largely dependent on technology and other intellectual property contributed by our strategic partners or the resources, efforts, and skills of our partners. Disputes and difficulties in such relationships are common, often due to conflicting priorities or conflicts of interest. Merger and acquisition activity may exacerbate these conflicts. The benefits of these alliances are reduced or eliminated when strategic partners:

    •
    terminate the agreements or limit our access to the underlying intellectual property;

    •
    fail to devote financial or other resources to the alliances and thereby hinder or delay development, manufacturing or commercialization activities;

    •
    fail to successfully develop, manufacture or commercialize any products; or

    •
    fail to maintain the financial resources necessary to continue financing their portion of the development, manufacturing, or commercialization costs or their own operations.

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        Furthermore, payments we make under these arrangements may exacerbate fluctuations in our financial results. In addition, under some of our strategic alliances, we make milestone payments well in advance of commercialization of products with no assurance that we will ever recoup these payments. We also may make equity investments in our strategic partners, as we did with Cambridge Antibody Technology Group plc and MacroGenics, Inc. in 2003. Our strategic equity investments are subject to market fluctuations, access to capital and other business events, such as initial public offerings, the completion of clinical trials and regulatory approvals, which can impact the value of these investments. As a result, if any of our strategic equity investments decline in value and remain below cost for an extended duration, we will incur financial statement charges related to the decline in value of that investment.

Government regulation imposes significant costs and restrictions on the development and commercialization of our products and services.

        Our success will depend on our ability to satisfy regulatory requirements. We may not receive required regulatory approvals on a timely basis or at all. Government agencies heavily regulate the production and sale of healthcare products and the provision of healthcare services. In particular, the FDA and comparable agencies in foreign jurisdictions must approve human therapeutic and diagnostic products before they are marketed, as well as the facilities in which they are made. This approval process can involve lengthy and detailed laboratory and clinical testing, sampling activities and other costly and time-consuming procedures. Several biotechnology companies have failed to obtain regulatory approvals because regulatory agencies were not satisfied with the structure or conduct of clinical trials. Similar problems could delay or prevent us from obtaining approvals. Furthermore, regulatory authorities, including the FDA, may not agree with our interpretations of our clinical trial data, which could delay, limit or prevent regulatory approvals.

        Therapies that have received regulatory approval for commercial sale may continue to face regulatory difficulties. If we fail to comply with applicable regulatory requirements, regulatory authorities could take actions against us, including:

    •
    issuing warning letters;

    •
    issuing fines and other civil penalties;

    •
    suspending regulatory approvals;

    •
    refusing to approve pending applications or supplements to approved applications;

    •
    suspending product sales in the United States and/or exports from the United States;

    •
    mandating product recalls; and

    •
    seizing products.

        Furthermore, the FDA and comparable foreign regulatory agencies may require post-marketing clinical trials or patient outcome studies. We have agreed with the FDA, for example, to a number of post-marketing commitments as a condition to U.S. marketing approval for Fabrazyme and Aldurazyme. In addition, regulatory agencies subject a marketed therapy, its manufacturer and the manufacturer's facilities to continual review and periodic inspections. The discovery of previously unknown problems with a therapy or the facility used to produce the therapy could prompt a regulatory authority to impose restrictions on us, or could cause us to voluntarily adopt such restrictions, including withdrawal of one or more of our products or services from the market.

        We believe some of our products are prescribed by physicians for uses not approved by the FDA or comparable regulatory agencies outside the U.S. Although physicians may lawfully prescribe pharmaceutical products for such off-label uses, promotion of off-label uses is unlawful. Some of our

57


practices intended to make physicians aware of off-label uses of our products without engaging in off-label promotion could nonetheless be construed as off-label promotion. Although we have policies and procedures in place designed to help assure ongoing compliance with regulatory requirements regarding off-label promotion, some non-compliant actions may nonetheless occur. Regulatory authorities could take enforcement action against us if they believe we are promoting, or have promoted, our products for off-label use.

Legislative or regulatory changes may adversely impact our business.

        The FDA has designated some of our products and product candidates, including Fabrazyme and Myozyme, as orphan drugs under the Orphan Drug Act. The Orphan Drug Act provides incentives to manufacturers to develop and market drugs for rare diseases, generally by entitling 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. In the past Congress has considered legislation to change the Orphan Drug Act to shorten the period of automatic market exclusivity and to grant marketing rights to simultaneous developers of a drug. Legislation similar to the Orphan Drug Act has been enacted in countries other than the United States, including the European Union. The orphan legislation in the European Union is available for therapies addressing conditions that affect fewer than five out of 10,000 persons. The market exclusivity period is for ten years, although that period can be reduced to six years if, at the end of the fifth year, available evidence establishes that the product is sufficiently profitable not to justify maintenance of market exclusivity. If the Orphan Drug Act or other similar legislation is amended to reduce the protections afforded orphan drugs, any approved drugs for which we have been granted exclusive marketing rights may face increased competition, which may decrease the amount of revenue we receive from these products.

        In addition, the United States government and other governments have shown significant interest in pursuing healthcare reform. Any government-adopted reform measures could adversely impact:

    •
    the pricing of healthcare products in the United States or internationally; and

    •
    the amount of reimbursement available from governmental agencies or other third party payors.

        New laws, regulations and judicial decisions, or new interpretations of existing laws, regulations and decisions, that relate to healthcare availability, methods of delivery or payment for products and services, or sales, marketing or pricing may cause our revenue to decline, and we may need to revise our research and development programs.

Importation of products from Canada and other countries into the United States may lower the prices we receive for our products.

        In the United States and abroad, our products are subject to competition from lower-priced versions of our products and competing products from other countries where government price controls or other market dynamics result in lower prices for such products. Our products that require a prescription in the United States may be available to consumers in markets such as Canada and Mexico without a prescription, which may cause consumers to further seek out these products in these lower priced markets. The ability of patients and other customers to obtain these lower priced imports has grown significantly as a result of the Internet, an expansion of pharmacies in Canada and elsewhere that target American purchasers, the increase in U.S.-based businesses affiliated with Canadian pharmacies marketing to American purchasers, and other factors. Most of these foreign imports are illegal under current U.S. law. However, the volume of imports continues to rise due to the limited enforcement resources of the FDA and the U.S. Customs Service, and there is increased political pressure to permit such imports as a mechanism for expanding access to lower priced medicines.

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        The importation of lower-priced versions of our products into the United States and other markets adversely affects our profitability. This impact could become more significant in the future.

We may require significant additional financing, which may not be available to us on favorable terms, if at all.

        As of June 30, 2005, we had $1.6 billion in cash, cash equivalents and short- and long-term investments, excluding investments in equity securities.

        We have used or intend to use substantial portions of our available cash for:

    •
    product development and marketing;

    •
    business combinations and other strategic business initiatives, including our acquisition of Bone Care;

    •
    expanding existing and constructing additional facilities;

    •
    expanding staff; and

    •
    working capital, including satisfaction of our obligations under capital and operating leases.

        We may further reduce available cash reserves to pay principal and interest on outstanding debt, including our $690.0 million in principal of 1.25% convertible senior notes.

        To satisfy our cash requirements, we may have to obtain additional financing. We may be unable to obtain any additional financing or extend any existing financing arrangements at all or on terms that we or our investors consider favorable.

We may fail to adequately protect our proprietary technology, which would allow competitors or others to take advantage of our research and development efforts.

        Our long-term success largely depends on our ability to market technologically competitive products. If we fail to obtain or maintain adequate intellectual property protection in the United States or abroad, we may not be able to prevent third parties from using our proprietary technologies. Our currently pending or future patent applications may not result in issued patents. Patent applications are confidential for 18 months following their filing, and because third parties may have filed patent applications for technology covered by our pending patent applications without us being aware of those applications, our patent applications may not have priority over patent applications of others. In addition, our issued patents may not contain claims sufficiently broad to protect us against third parties with similar technologies or products, or provide us with any competitive advantage. If a third party initiates litigation regarding our patents, our collaborators' patents, or those patents for which we have license rights, and is successful, a court could declare our patents invalid or unenforceable or limit the scope of coverage of those patents.

        Governmental patent offices and courts have not consistently treated the breadth of claims allowed in biotechnology patents. If patent offices or the courts begin to allow or interpret claims more broadly, the incidence and cost of patent interference proceedings and the risk of infringement litigation will likely increase. On the other hand, if patent offices or the courts begin to allow or interpret claims more narrowly, the value of our proprietary rights may be reduced. Any changes in, or unexpected interpretations of, the patent laws may adversely affect our ability to enforce our patent position.

        We also rely upon trade secrets, proprietary know-how, and continuing technological innovation to remain competitive. We attempt to protect this information with security measures, including the use of confidentiality agreements with our employees, consultants, and corporate collaborators. These individuals may breach these agreements and any remedies available to us may be insufficient to

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compensate for our damages. Furthermore, our trade secrets, know-how and other technology may otherwise become known or be independently discovered by our competitors.

We may be required to license technology from competitors or others in order to develop and commercialize some of our products and services, and it is uncertain whether these licenses will be available.

        Third party patents may cover some of the products or services that we or our strategic partners are developing or producing. A patent is entitled to a presumption of validity, and, accordingly, we face significant hurdles in any challenge to a patent. In addition, even if we are successful in challenging the validity of a patent, the challenge itself may be expensive and require significant management attention.

        To the extent valid third party patent rights cover our products or services, we or our strategic collaborators would be required to seek licenses from the holders of these patents in order to manufacture, use, or sell these products and services, and payments under them would reduce our profits from these products. We may not be able to obtain these licenses on acceptable terms, or at all. If we fail to obtain a required license or are unable to alter the design of our technology to fall outside the scope of a third party patent, we may be unable to market some of our products and services, which would limit our profitability.

We may incur substantial costs as a result of litigation or other proceedings.

        A third party may sue us or one of our strategic collaborators for infringing the third party's patent or other intellectual property rights. Likewise, we or one of our strategic collaborators may sue to enforce intellectual property rights or to determine the scope and validity of third party proprietary rights. If we do not prevail in this type of litigation, we or our strategic collaborators may be required to:

    •
    pay monetary damages;

    •
    stop commercial activities relating to the affected products or services;

    •
    obtain a license in order to continue manufacturing or marketing the affected products or services; or

    •
    compete in the market with a substantially similar product.

        We are also currently involved in litigation matters and investigations that do not involve intellectual property claims and may be subject to additional actions in the future. For example, we are currently defending several lawsuits brought in connection with the elimination of our tracking stock in June 2003, some of which claim considerable damages. Also, the federal government, state governments and private payors are investigating and have begun to file actions against numerous pharmaceutical and biotechnology companies, including Genzyme, alleging that the companies have overstated prices in order to inflate reimbursement rates. Enforcement authorities also have instituted actions under health care "fraud and abuse" laws, including anti-kickback and false claims statutes. Moreover, individuals who use our products or services, including our diagnostic products and genetic testing services, sometimes bring product and professional liability claims against us or our subsidiaries.

        We may also become subject to investigations by government authorities in connection with our business activities. For example, we are currently cooperating with an investigation of Bone Care by the United States Attorney for the Eastern District of New York which was initiated in October 2004, when Bone Care received a subpoena requiring it to provide a wide range of documents related to numerous aspects of its business.

        We have only limited amounts of insurance, which may not provide coverage to offset a negative judgment or a settlement payment. We may be unable to obtain additional insurance in the future, or

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we may be unable to do so on acceptable terms. Any additional insurance we do obtain may not provide adequate coverage against any asserted claims.

        Regardless of merit or eventual outcome, investigations and litigations can result in:

    •
    diversion of management's time and attention;

    •
    expenditure of large amounts of cash on legal fees, expenses, and payment of damages;

    •
    limitations on our ability to continue some of our operations;

    •
    decreased demand for our products and services; and

    •
    injury to our reputation.

Our international sales and operations are subject to the economic, political, legal and business environments of the countries in which we do business, and our failure to operate successfully or adapt to changes in these environments could cause our international sales and operations to be limited or disrupted.

        Our international operations accounted for approximately 46% of our consolidated product and service revenues for the six months ended June 30, 2005. We expect that international product and service sales will continue to account for a significant percentage of our revenues for the foreseeable future. In addition, we have direct investments in a number of subsidiaries outside of the United States, primarily in the European Union, Latin America and Japan. Our international sales and operations could be limited or disrupted, and the value of our direct investments may be diminished, by any of the following:

    •
    economic problems that disrupt foreign healthcare payment systems;

    •
    fluctuations in currency exchange rates;

    •
    the imposition of governmental controls;

    •
    less favorable intellectual property or other applicable laws;

    •
    the inability to obtain any necessary foreign regulatory or pricing approvals of products in a timely manner;

    •
    import and export license requirements;

    •
    political instability;

    •
    terrorist activities and armed conflict;

    •
    restrictions on direct investments by foreign entities and trade restrictions;

    •
    changes in tax laws and tariffs;

    •
    difficulties in staffing and managing international operations; and

    •
    longer payment cycles.

        Our operations and marketing practices are also subject to regulation and scrutiny by the governments of the other countries in which we operate. In addition, the Foreign Corrupt Practices Act prohibits U.S. companies and their representatives from offering, promising, authorizing or making payments to foreign officials for the purpose of obtaining or retaining business abroad. Failure to comply with domestic or foreign laws could result in various adverse consequences, including possible delay in approval or refusal to approve a product, recalls, seizures, withdrawal of an approved product from the market, and/or the imposition of civil or criminal sanctions.

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        A significant portion of our business is conducted in currencies other than our reporting currency, the U.S. dollar. We recognize foreign currency gains or losses arising from our operations in the period in which we incur those gains or losses. As a result, currency fluctuations among the U.S. dollar and the currencies in which we do business have caused foreign currency transaction gains and losses in the past and will likely do so in the future. Because of the number of currencies involved, the variability of currency exposures and the potential volatility of currency exchange rates, we may suffer significant foreign currency transaction losses in the future due to the effect of exchange rate fluctuations.

Our level of indebtedness may harm our financial condition and results of operations.

        At June 30, 2005, we had $1.0 billion of outstanding indebtedness, excluding capital leases. We may incur additional indebtedness in the future. Our level of indebtedness will have several important effects on our future operations, including:

    •
    increasing our vulnerability to adverse changes in general economic and industry conditions; and

    •
    limiting our ability to obtain additional financing for capital expenditures, acquisitions and general corporate and other purposes.

        Our ability to make payments and interest on our indebtedness depends upon our future operating and financial performance.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        We are exposed to potential loss from financial market risks that may occur as a result of changes in interest rates, equity prices and foreign currency exchange rates. Disclosure related to market risk is set forth under the heading "Management's Discussion and Analysis of Genzyme Corporation and Subsidiaries' Financial Condition and Results of Operations—Market Risk," "—Interest Rate Risk," "—Foreign Exchange Risk" and "—Equity Price Risk" in Exhibit 13.1 to our 2004 Form 10-K. Our exposure to the risks associated with equity prices and interest rates has not materially changed since December 31, 2004. However, our foreign currency exchange rate risk has increased $12.2 million since December 31, 2004. The increase is primarily due to an increase in the notional amount of foreign exchange forward contracts outstanding. As a result of our worldwide operations, we may face exposure to adverse movements in foreign currency exchange rates, primarily to the Euro, British pound and Japanese yen. These exposures are reflected in market risk sensitive instruments, including foreign currency receivables and payables, foreign exchange forward contracts and foreign equity holdings.


ITEM 4. CONTROLS AND PROCEDURES

        At the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that (1) our disclosure controls and procedures were effective as of June 30, 2005, and (2) no change in internal control over financial reporting occurred during the quarter ended June 30, 2005 that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

        We periodically become subject to legal proceedings and claims arising in connection with our business.

        Four lawsuits have been filed against us regarding the exchange of all of the outstanding shares of Biosurgery Stock for shares of Genzyme Stock in connection with the elimination of our tracking stocks in July 2003. Each of the lawsuits is a purported class action on behalf of holders of Biosurgery Stock. The first case, filed in Massachusetts Superior Court in May 2003, alleged a breach of the implied covenant of good faith and fair dealing in our charter and a breach of our board of directors' fiduciary duties. The plaintiff in this case sought an injunction to adjust the exchange ratio for the tracking stock exchange. The Court dismissed the complaint in November 2003, but the plaintiff has appealed this dismissal. This appeal was argued before the Massachusetts Appeals Court in March 2005 and we are awaiting the Appeals Court's ruling. Two substantially similar cases were filed in Massachusetts Superior Court in August and October 2003. These cases were consolidated in January 2004, and in July 2004, the consolidated case was stayed pending disposition of a fourth case, which was filed in the U.S. District Court for the Southern District of New York in June 2003. This case alleges violations of federal securities laws, common law fraud, and a breach of the merger agreement with Biomatrix in addition to the state law claims contained in the other cases. The plaintiffs are seeking an adjustment to the exchange ratio, the rescission of the acquisition of Biomatrix, and unspecified compensatory damages. We believe each of these cases is without merit and continue to defend against them vigorously.

        On March 27, 2003, the OFT in the United Kingdom issued a decision against our wholly-owned subsidiary, Genzyme Limited, finding that Genzyme Limited held a dominant position and abused that dominant position with no objective justification by pricing Cerezyme in a way that excludes other delivery/homecare service providers from the market for the supply of home delivery and homecare services to Gaucher patients being treated with Cerezyme. In conjunction with this decision, the OFT imposed a fine on Genzyme Limited and required modification to its list price for Cerezyme in the United Kingdom. Genzyme Limited appealed this decision to the Competition Appeal Tribunal. On May 6, 2003, the Tribunal issued an order that stayed the OFT's decision, but required Genzyme Limited to provide a homecare distributor a discount of 3% per unit during the appeal process. The Tribunal issued its judgment on Genzyme Limited's appeal on March 11, 2004, rejecting portions of the OFT's decision and upholding others. The Tribunal found that the list price of Cerezyme should not be reduced, but that Genzyme Limited must negotiate a price for Cerezyme that will allow homecare distributors an appropriate margin. These negotiations are ongoing. The Tribunal also reduced the fine imposed by the OFT for violation of U.K. competition laws. In response to the Tribunal's decision, we recorded an initial liability of approximately $11 million in our 2003 financial statements and additional liabilities totaling approximately $3 million during 2004 and 2005, all of which remain in accrued expenses in our consolidated balance sheet as of June 30, 2005. On April 13, 2004, Genzyme Limited filed an application with the Tribunal for permission to appeal to the High Court. The application is still pending.

        In June 2003, we filed suit in U.S. District Court for the District of Massachusetts, as co-plaintiff with Biogen IDEC and Abbott Laboratories against Columbia University seeking a declaration that Columbia's U.S. Patent 6,455,275 is invalid. The patent relates to the manufacture of recombinant proteins in Chinese hamster ovary, or CHO, cells, which are the cells we use to manufacture Cerezyme, Fabrazyme and Thyrogen, and which our joint venture partner BioMarin uses to manufacture Aldurazyme. This new patent was issued by the USPTO in September 2002 from a family of patents and patent applications originally filed in 1980. We are licensed under the patent family for a royalty of 1.5% of sales but, because we were confident that the new patent was mistakenly issued by the USPTO

63


and is invalid, we did not pay the royalty pending the outcome of the litigation. We then received notice from Columbia that we were in breach of our license agreement. A hearing on motions for summary judgment was scheduled for November 2004; however, Columbia rescinded the breach notification and filed with the Court a covenant not to enforce its patent 6,455,275 against any plaintiff in this litigation. In view of this covenant, the Court granted Columbia's motion to dismiss the plaintiff's main claim for lack of subject matter jurisdiction.

        We are not able to predict the outcome of these cases or estimate with certainty the amount or range of any possible loss we might incur if we do not prevail in the final, non-appealable determinations of these matters. Therefore, except for the liabilities recorded in connection with the Tribunal's decision regarding Cerezyme pricing in the United Kingdom, we have not accrued any amounts in connection with these potential contingencies. We cannot provide you with assurance that the matters listed above, or other legal proceedings, will not have a material adverse impact on our financial condition or results of operations.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

        We did not purchase any shares of our common stock during the second quarter of our 2005 fiscal year.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        We held our annual meeting of shareholders on May 26, 2005. The following represents the results of the voting on proposals submitted to the shareholders for a vote at the annual meeting. Adoption of the proposals set forth below, except for the election of directors, required the affirmative vote of the majority of the shares of Genzyme Stock properly cast at the meeting. Each director was elected by a plurality of the votes properly cast at the meeting. Abstentions and broker non-votes were counted for determining a quorum, but were not treated as votes cast.

a.
Proposal to elect two directors for a term of office expiring in 2008:

 
   Number of Votes
Nominee
  For
   Withheld
Robert J. Carpenter   216,007,341   6,585,453
 
   Number of Votes
Nominee
  For
   Withheld
Charles L. Cooney   197,043,181   25,549,613

            Each nominee received a plurality of the votes cast, and therefore has been duly elected as a director of Genzyme. The terms of office for Douglas A. Berthiaume, Henry E. Blair, Gail K. Boudreaux, Victor J. Dzau, M.D., Connie Mack III and Henri A. Termeer as directors of Genzyme continued after the annual meeting.

    Dr. Constantine Anagnostopoulos retired from his position as a director of Genzyme when his term expired at this annual meeting. Dr. Anagnostopoulos served on our board of directors for 19 years.

b.
Proposal to amend our 1999 Employee Stock Purchase Plan to increase the number of shares of common stock covered by the plan by 1,000,000 shares.

Number of
Votes for
   Number of
Votes Against
   Number of
Votes Abstaining
   Number of
Broker Non-Votes
169,906,917   27,555,788   1,373,867   23,756,222

64

    The proposal received a majority of the votes cast, and was adopted.*

c.
Proposal to amend our 2004 Equity Incentive Plan to increase the number of shares of common stock covered by the plan by 10,000,000 shares.

Number of
Votes for
   Number of
Votes Against
   Number of
Votes Abstaining
   Number of
Broker Non-Votes
135,004,749   62,211,061   1,620,763   23,756,221

    The proposal received a majority of the votes cast, and was adopted.*

d.
Proposal to ratify our selection of independent auditors.

Number of
Votes for
   Number of
Votes Against
   Number of
Votes Abstaining
   Number of
Broker Non-Votes
215,464,436   5,573,772   1,554,586   —

    The proposal received a majority of the votes cast, and was adopted.*

e.
Shareholder proposal that the board of directors declassify the board so that all directors are elected annually.

Number of
Votes for
   Number of
Votes Against
   Number of
Votes Abstaining
   Number of
Broker Non-Votes
165,412,290   31,762,934   1,661,349   23,756,221

    The proposal received a majority of the votes cast but was not adopted.

*
For this purpose, abstentions and broker non-votes are not counted.


ITEM 6. EXHIBITS

(a)
Exhibits

        See the Exhibit Index following the signature page to this report on Form 10-Q.

65


GENZYME CORPORATION AND SUBSIDIARIES
FORM 10-Q, JUNE 30, 2005
SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 
 
GENZYME CORPORATION

 
 
By:
 
/s/  MICHAEL S. WYZGA      
Michael S. Wyzga
 Executive Vice President, Finance, Chief Financial Officer, and Chief Accounting Officer
(Duly Authorized Officer and Chief Accounting Officer)

DATE: August 5, 2005

66


GENZYME CORPORATION AND SUBSIDIARIES
FORM 10-Q, JUNE 30, 2005

EXHIBIT INDEX

Exhibit No.
   Description

*
3.1
 
Restated Articles of Organization of Genzyme, as amended. Filed as Exhibit 3.1 to Genzyme's Registration Statement on Form 8-A/A filed on May 28, 2004.

*
3.2
 
By-laws of Genzyme, as amended. Filed as Exhibit 3.1 to Genzyme's Form 8-K filed on July 7, 2004.

 
10.1
 
First Amendment to Lease, dated July 26, 1995, to Lease dated June 1, 1992, between Allston Landing Limited Partnership and Massachusetts Turnpike Authority. Filed herewith.

 
10.2
 
Second Amendment to Lease, dated December 22, 1997, to Lease dated June 1, 1992, between Allston Landing Limited Partnership and Massachusetts Turnpike Authority. Filed herewith.

 
10.3
 
Purchase and Supply Agreement, effective as of January 1, 2005, by and between Genzyme and Invitrogen Corporation. Filed herewith.†

 
10.4
 
1997 Equity Incentive Plan, as amended. Filed herewith.

 
10.5
 
Form of Nonstatutory Stock Option for grants under Genzyme's 1998 Director Stock Option Plan, as amended. Filed herewith.

 
10.6
 
Form of Incentive Stock Option for grants to executive officers under Genzyme's 2001 Equity Incentive Plan, as amended. Filed herewith.

 
10.7
 
Form of Nonstatutory Stock Option for grants to executive officers under Genzyme's 2001 Equity Incentive Plan, as amended. Filed herewith.

 
10.8
 
2004 Equity Incentive Plan, as amended. Filed herewith.

 
10.9
 
Form of Incentive Stock Option for grants to executive officers under Genzyme's 2004 Equity Incentive Plan, as amended. Filed herewith.

 
10.10
 
Form of Nonstatutory Stock Option for grants to executive officers under Genzyme's 2004 Equity Incentive Plan, as amended. Filed herewith.

 
10.11
 
1999 Employee Stock Purchase Plan, as amended. Filed herewith.

 
31.1
 
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

 
31.2
 
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

 
32.1
 
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.

 
32.2
 
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
*
Indicates exhibit previously filed with the Securities and Exchange Commission and incorporated herein by reference. Exhibits filed with Forms 10-K, 10-Q, 8-K, 8-A, 8-B or Schedule 14A of Genzyme Corporation were filed under Commission File No. 0-14680.

†
Confidential treatment has been requested for the deleted portions of Exhibit 10.3.



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GENZYME CORPORATION AND SUBSIDIARIES FORM 10-Q, JUNE 30, 2005 TABLE OF CONTENTS
GENZYME CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations and Comprehensive Income (Unaudited, amounts in thousands, except per share amounts)
GENZYME CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited, amounts in thousands, except par value amounts)
GENZYME CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited, amounts in thousands)
GENZYME CORPORATION AND SUBSIDIARIES Notes To Unaudited, Consolidated Financial Statements
FACTORS AFFECTING FUTURE OPERATING RESULTS
GENZYME CORPORATION AND SUBSIDIARIES FORM 10-Q, JUNE 30, 2005 SIGNATURES
GENZYME CORPORATION AND SUBSIDIARIES FORM 10-Q, JUNE 30, 2005 EXHIBIT INDEX
 EX-10.1 2 a2161257zex-10_1.txt EXHIBIT 10.1 EXHIBIT 10.1 FIRST AMENDMENT TO LEASE This First Amendment to Lease (the "Amendment") is entered into as of the 26th day of July, 1995, by and among ALLSTON LANDING LIMITED PARTNERSHIP, a Massachusetts limited partnership, with offices at One Kendall Square, Cambridge, Massachusetts 02139 ("Tenant"), and MASSACHUSETTS TURNPIKE AUTHORITY, a body politic and corporate organized pursuant to the laws of the Commonwealth of Massachusetts with offices at Ten Park Plaza, Suite 5170, Boston, Massachusetts 02116 ("Landlord"). Terms used in this Amendment, which are not defined herein, shall have the meanings set forth in the Lease (defined below). Reference is made to the following facts: A. Landlord and Tenant are parties to a certain lease, dated as of June 1, 1992 (the "Lease"), for certain premises containing 375,325 square feet of land, bounded by Soldiers Field Road, Western Avenue and other land of Landlord, as more particularly described in the Lease (the "Premises"). B. Pursuant to the Lease, Tenant has constructed a manufacturing facility and certain improvements (the "Improvements") on a portion of the Premises. C. Tenant had requested, and Landlord had agreed, that Tenant could construct the so-called "Tank Farm" for such manufacturing facility at a location outside of the boundaries of the portion of the Premises identified in the Lease as the initially established Development Parcel. Accordingly, Landlord and Tenant now wish to revise the boundaries of the Development Parcel to include such, "Tank Farm Area" (being approximately 5,154 square feet in area) and to confirm certain other matters in connection with the Improvements constructed by Tenant on the Premises. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, Landlord and Tenant hereby agree, effective as of the date of this Amendment, as follows: 1. The Appendix A originally attached to and made a part of the Lease is hereby deleted in its entirety, and the new Appendix A (Rev. 5/31/95) attached to this Amendment is substituted in place thereof. 2. With respect to the Improvements constructed by Tenant on the Development Parcel, Landlord and Tenant hereby agree, based upon the certifications of Tenant's architect, Architectural Resources Cambridge, Inc., and Certificate of Occupancy No. 30643 dated July 6, 1994, issued by the City of Boston's Inspectional Services Department, as follows: 1 (a) To the best of Tenant's knowledge, such Improvements have been completed in accordance with the plans therefor submitted to and approved by Landlord in accordance with Landlord's design approval rights under Section 3.2.2 of the Lease. For purposes of this Amendment, any statement made "to the best of a party's knowledge" shall mean that nothing has come to the actual attention of the individual officers or senior staff or representatives of such party participating directly in the management or supervision of the matter at issue that would lead such individuals to question the accuracy of such statement, but that such individuals have not made any special investigation with respect thereto. (b) As of July 6, 1994, such Improvements contain 130,490 square feet of FAR Floor Area and the initial Development Parcel Rent payable by Tenant with respect to such Improvements in accordance with Section 4.1.2 of the Lease shall be $234,882 per year. (c) As of June 1, 1995, the Holding Parcel Rent payable by Tenant with respect to the initially established Holding Parcel shall be $124,364 per year. (d) Landlord hereby acknowledges and agrees that as of April 8, 1992, Tenant "Commenced Material and Substantial Construction" of 130,490 square feet of FAR Floor Area on the Development Parcel. 3. Landlord hereby grants to Tenant the right to grant an easement for a term of years (not to extend beyond the expiration or earlier termination of the Lease) to Boston Edison Company for the construction, installation, operation, use, inspection, maintenance, modification, replacement, repair and removal of: (i) certain underground electrical ductbanks, manholes and a generator pad on the Holding Parcel in the locations shown on the plan entitled "Plan of the Genzyme Manufacturing Facility -- Existing Underground Utilities (Outside of the Development Parcel)" dated May 18, 1994, last revised May 31, 1995, a copy of which is attached as part of Appendix A hereto (the "Utilities Plan "); and (ii) certain underground electrical ductbanks and a manhole off the Premises on other property of Landlord in the location shown on the plan entitled "Boston Edison Company Electrical Engineering &Station Operations Department Plan of Soldiers Field Road, Brighton, Showing Proposed Conduit and Manhole Location," Plan #P-1786c, dated September 10, 1992 (the "Boston Edison Plan"), a reduced copy of which is attached as Appendix B hereto. The locations of the utility facilities identified in (i) and (ii) above may be relocated from time to time either (x) at the direction of Landlord pursuant to Landlord's relocation privileges under Section 2.1 of the Lease, or (y) as Tenant may request and Landlord may approve in writing, such approval to be in Landlord's sole discretion. The foregoing right and easement shall be subject to the following conditions: (a) Such construction, maintenance, modification, replacement, repair and removal shall be at Tenant's sole expense. Tenant shall at Tenant's sole expense cause the property crossed by such electrical facilities promptly to be restored to a condition acceptable to Landlord's Chief Engineer after each occasion on which Tenant performs any such work. 2 (b) Such right and easement shall be nonexclusive, and in common with similar rights and easements which Landlord may grant to others from time to time. (c) The exercise of such right and easement by Tenant and Boston Edison Company shall not interfere with Landlord's use of the property crossed by such electrical facilities including, without limitation, the use of such property for 24-hour access to the Massachusetts Turnpike, whether over existing ramps and access ways or ramps and ways hereafter constructed and/or relocated from time to time. (d) At Landlord's election after the expiration or earlier termination of the Lease, Tenant shall at Tenant's sole expense promptly relocate and/or remove such electrical facilities and restore the property to a condition acceptable to Landlord's Chief Engineer. (e) The foregoing right and easement granted to Tenant shall be subject to all of the terms and provisions imposed upon Tenant by the Lease. (f) Any easement granted to Boston Edison Company by Tenant pursuant to this Paragraph 3 shall be subject to the foregoing conditions and shall also be subject to Landlord's prior written approval as to form and substance. Attached hereto as Appendix C is a form of easement setting forth the minimum material provisions required by Landlord to be contained in any such easement. 4. Landlord hereby acknowledges that the electrical facilities described in Paragraph 3 above and a number of other utility lines serving the Development Parcel, as well as a generator pad and fencing, are located on the Holding Parcel (as such Parcels are currently configured). Such utility lines, generator pad and fencing are located as shown on the Utilities Plan. Such other utility lines include the lines for drain, sewer, fire protection water and domestic water services. Tenant acknowledges that Landlord retains the right to require, among other things, the relocation of such utility lines, generator pad and fencing from time to time pursuant to Section 2.1 of the Lease. Landlord agrees that to the extent Landlord exercises its right to terminate the Lease as to the Holding Parcel (or a portion thereof) pursuant to Article II of the Lease or pursuant to the last sentence of Section 2.1 of the Lease, the right and easement granted under Paragraph 3 of this Amendment, and any resulting easement granted by Tenant, shall be deemed to have been simultaneously terminated as to the Holding Parcel (or such portion thereof) PROVIDED, HOWEVER, that Tenant shall continue to have, as rights appurtenant to the lease of the remaining Premises, the right to use such electrical facilities and such other utility lines, generator pad and fencing as now located (or as relocated from time to time pursuant to Paragraph 3 of this Amendment, or pursuant to Section 2.1 of the Lease). 5. Landlord's and Tenant's liability under this Amendment shall be limited, respectively, as set forth in Sections 10.2 and 10.12 of the Lease. 3 6. Except as amended hereby, the Lease remains unchanged and in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Amendment to Lease as a sealed instrument as of the date and year first above written. TENANT: LANDLORD: ALLSTON LANDING LIMITED MASSACHUSETTS TURNPIKE PARTNERSHIP AUTHORITY By: Allston Landing Corporation, By: ------------------------------ its sole General Partner By: By: By: --------------------------------- ---------------------------------- Its Treasurer By: ---------------------------------- Approved: ---------------------------- James A. Aloisi, Jr. General Counsel By its signature below, the undersigned Guarantor of the Lease hereby acknowledges and consents to the foregoing First Amendment and ratifies and confirms its Guaranty dated as of June 1, 1992, with respect to the lease as amended through the First Amendment. GUARANTOR: GENZYME CORPORATION By: ---------------------------------- Its Senior Vice President 4 Appendix A (Rev. 5/31/95) Premises Description, Including Initially Established Development Parcel, Holding Parcel and Inaccessible Parcel Attached hereto are the following: Page A-2: This is a reduced copy of a "Plan of Land in Boston, MA." dated February 26, 1992, scale 1 inch = 100 feet, prepared for Allston Landing Limited Partnership (the "Premises Plan "). Pages A-3 and A-4: These pages contain a legal description of the Premises. Page A-5: This is a copy of a "Plan of the Genzyme Manufacturing Facility Existing Underground Utilities (Outside of the Development Parcel) in Boston, MA.", Scale 1" = 40', dated May 18, 1994, revised November 9, 1994, and last revised May 31, 1995 prepared by Vanasse Hangen Brustlin, Inc., prepared for Allston Landing Limited Partnership (the "Phase I Plan"). Pages A-6 and A-7: These pages contain a legal description of the Development Parcel. For purposes of this Lease: The "Premises" constitutes the area identified on the Premises Plan as the "Project Area (Area = 8.62 acres)" and described in the legal description on Pages A-3 and A-4. The initially established "Development Parcel" constitutes the area identified on the Phase I Plan as the "Phase I Lease Area (Area = 126,597 square feet or 2.906 acres)" and described in the legal description on Pages A-6 and A-7. The initially established "Holding Parcel" constitutes all of the Premises except for the initially established Development Parcel. As shown on the Phase I Plan, the area of the initially established "Holding Parcel" contains 248,728 square feet or 6.710 acres. The "Inaccessible Parcel" (Area = 63,130 square feet or 1.449 acres) constitutes that portion of the initially established Holding Parcel shown as shaded on the Phase I Plan. N 06 DEG. 30' 13 W a distance of two hundred ninety-three and seventy-three hundredths feet (293.73') to a point thence 5 [APPENDIX A-2] [GRAPHIC IMAGE OF PROJECT AREA] A-3 PREMISES LEGAL DESCRIPTION A certain parcel of land situated on the southerly side of Western Avenue in the City of Boston (Allston District), in the County of Suffolk, Commonwealth of Massachusetts, bounded and described as follows: Beginning at a point in the southerly line of Western Avenue at the northeasterly corner of the parcel and land hereinafter described, said point being the northwesterly corner of Lot 8 as shown on Land Court Plan No. 21781-E; thence S 06 DEG. 30' 13" E A distance of two hundred fifty and three hundredths feel (250.03') to a point; thence N 83 DEG. 17' 27" E A distance of one hundred thirteen and seventy-two hundredths feel (113.72') to a point; the previous two (2) lines bounding on said Lot 8; thence S 06 DEG. 42' 33' E A distance of five hundred sixty five and no hundredths feet (565.00') to a point; thence Southerly And curving to the right along the arc of a curve having a radius of one hundred ninety and no hundredths feet (190.00'), a length of one hundred seven and eighty seven hundredths feet (107.87') to a point; thence Westerly And curving to the right along the arc of a curve having a radius of eighty four and no hundredths feet (84.00'), a length of one hundred fifty eight and fourteen hundredths feet (158.14') to a point; thence N 46' 19' 00" W A distance of one hundred and no hundredths feet (100.00') to a point; thence Westerly And curving to the left along the arc of a curve having a radius of two hundred five and no hundredths feet (205.00'), a length of three hundred one and sixty hundredths feet (301.60') to a point; thence N 02 DEG. 30' 24" W A distance of seven hundred fifty three and forty seven hundredths feet (753.47') to a point; thence A-4 PREMISES LEGAL DESCRIPTION Northwesterly And curving to the left along the arc of a curve having a radius of fifty five and no hundredths feet (55.00'), a length of ninety and twenty three hundredths feet (90.23') to a point in the southerly line of said Western Avenue; the previous seven (7) courses bounding on land now or formerly of the Massachusetts Turnpike Authority; thence N 83 DEG. 29' 47" E A distance of three hundred eighty eight and no hundredths feet (388.00') along the southerly line of said Western Avenue to the point of beginning. The above described parcel of land contains an area of 8.62 areas more or less and is more particularly shown as 'Project Area' on a plan entitled: "Plan of Land in Boston, Massachusetts. Dated February 26, 1992, scale: 100 feet to an inch, prepared for Allston Landing Limited Partnership, prepared by Vanasse Hangan Brustlin, Inc., 101 Walnut Street, Watertown, MA. A-6 (VHB logo here) LEGAL DESCRIPTION PHASE ONE LEASE AREA GENZYME (REVISED MAY 31, 1995) A certain parcel of land situated on the southerly side of Western Avenue in the City of Boston (Allston District), county of Suffolk, Commonwealth of Massachusetts, bounded and described as follows: Beginning at a point in the southerly line of Western Avenue at the northwesterly corner of the parcel of land hereinafter described, said point being the northwesterly corner of Lot 8 as shown on Land Court Plan 21781E; thence S 06 DEG. 30' 13" E A distance of two hundred fifty and three hundredths feet (250.03') to a point; thence N 83 DEG. 17' 27" E A distance of one hundred thirteen and seventy-two hundredths feet (113.72') to a point; thence S 06 DEG. 42' 33" E A distance of three hundred eighty-six and eleven hundredths feet (386.11') to a point; thence S 83 DEG. 29' 47" W A distance of one hundred thirty-six and sixty hundredths feet (136.60') to a point; thence S 06 DEG. 30' 13" E A distance of seventy-three and no hundredths feet (73.00') to a point; thence S 83 DEG. 29' 47" W A distance of one hundred twenty and no hundredths feet (120.00') to a point; thence S 06 DEG. 30' 13" E A distance of thirty and no hundredths feet (30.00') to a point; thence S 83 DEG. 29' 47" W A distance of one hundred sixty-seven and no hundredths feet (167.00') to a point; thence N 06 DEG. 30' 13" W A distance of forty-seven and no hundredths feet (47.00') to a point; thence N 83 DEG. 29' 47" E A distance of one hundred two and no hundredths feet (102.00') to a point; thence N 06 DEG. 30' 13" W A distance of seventy-eight and no hundredths feet (78.00') to a point; thence N 83 DEG. 29' 47" E A distance of fifty-one and eleven hundredths feet (51.11') to a point; thence N 06 DEG. 30' 13" W A distance of three hundred twenty and no hundredths feet (320.00') to a point; thence N 83 DEG. 29' 47" E A distance of one hundred twenty-eight and thirty-nine hundredths feet (128.39') to a point; thence N 06 DEG. 30'13" W A distance of two hundred ninety-three and seventy-three hundredths feet (293.73') to a point; thence N 83 DEG. 29' 47" E A distance of twenty-seven and no hundredths feet (27.00') by the southerly line of Western Avenue to the point of beginning. The above described parcel of land contains 2.906 acres of land, more or less, and is shown on a plan entitled "Plan of the Genzyme Manufacturing Facility, Phase I Lease Area in Boston, Massachusetts, dated May 22, 1992 and most recently revised May 31, 1995, prepared by Vanasse Hangen Brustlin, Inc. [APPENDIX B] [GRAPHICS IMAGE OF SOLDIER'S FIELD AREA] APPENDIX C EASEMENT AGREEMENT THIS EASEMENT AGREEMENT (the "Agreement") made as of this ___ day of __________, 1993 by and between Allston Landing Limited Partnership, a Massachusetts limited partnership having an office address of ________________________________________ (herein referred to as "ALLP") and Boston Edison Company, a Massachusetts Corporation having its corporate office at 800 Boylston Street, Boston, MA 02199 (herein referred to as "Boston Edison"). RECITALS NOW THEREFORE, IN CONSIDERATION OF THE PROMISES AND OF THE MUTUAL AGREEMENTS HEREIN CONTAINED, AND OTHER GOOD AND VALUABLE CONSIDERATION, THE SUFFICEIENCY OF WHICH IS HEREBY ACKNOWLEDGED BY THE PARTIES, THE PARTIES HEREBY AGREE AS FOLLOWS: 1. AGREEMENTS AND GRANTS A. ALLP hereby grants to Boston Edison, upon the terms and conditions set forth in this Agreement, an easement to construct, install, operate, use, inspect, maintain, modify, replace, repair, and remove an electrical system and any and all fixtures, all of which shall be and remain the property of Boston Edison to be used only in connection with electrical service in accordance with detailed plans set forth in Exhibit A attached hereto and made a part hereof, (referred to herein as "the Plans"). The exact location of the electrical system and of the easement including its dimensions, has been substantially determined by ALLP and Boston Edison. ___________________ and Boston Edison agree to allow minor alterations to the location of the electrical system to accommodate circumstances that arise prior to and during construction. Upon completion of construction of the electrical system, Boston Edison shall submit to ALLP and to ALLP's landlord, the Massachusetts Turnpike Authority ("Authority") a set of as-built plans depicting the exact location of the easement. The area which is the subject of this easement is identified in the plans and shall be referred to herein as the "Easement Area." Prior to the installation by Boston Edison of any modifications, replacements, substitutes, additions, innovations or improvements to the electrical system, Boston Edison shall submit plans and specifications to ALLP and to the Authority's Chief Engineer for review and approval, which approval shall not be unreasonably withheld, and which approval shall be granted or denied within 60 days of receipt by ALLP and the Authority of a written proposal by Boston Edison. B. The rights herein granted to Boston Edison include the right of ingress and egress over the adjacent property of the Authority from time to time for the construction, C-1 installation, operation, use, inspection, maintenance, modification, replacement, repair, and removal of the electrical system by Boston Edison, its employees, agents and contractors, under the direction and supervision of the Authority in accordance with the Operation and Construction Requirements set forth in Exhibit B attached hereto and made part hereof. The Authority has reserved the right from time to time to make reasonable changes in such requirements. Boston Edison will conform to such changes within a reasonable time after it has received written notice thereof from the Authority. The Authority shall allow Boston Edison, its employees, agents and contractors reasonable access to the Easement Area and the electrical system throughout the term of the Agreement, subject to reasonable regulation regarding traffic flow, public health and safety and the Authority's own operations on the Turnpike. Vehicles of Boston Edison, its employees, agents and contractors may enter and leave the turnpike only at toll plazas. Operators of such vehicles shall pay all applicable tolls which shall be the same tolls applicable to similar vehicles driven by the general public. 2. TERM The term of this easement is coterminous with the term of that certain lease ("Lease") from the Authority to ALLP dated as of June 1, 1992, as amended through that First Amendment to Lease dated __________________, 1993. To the extent Authority exercises its right to terminate the Lease as to the Holding Parcel (or a portion thereof) pursuant to Article II of the Lease, the foregoing right granted to ALLP and any resulting easement granted by ALLP shall be deemed to have been simultaneously terminated by Landlord as to the Holding Parcel (or such portion thereof), and at Landlord's election thereafter ALLP shall at ALLP's sole expense promptly relocate and/or remove the electrical facilities and restore the property to a condition acceptable to Authority's Chief Engineer. 3. RESTORATION Boston Edison agrees to restore the Easement Area, at its own expense, immediately upon completion of construction, to a condition acceptable to the Chief Engineer, in accordance with Exhibit B. 4. AUTHORITY'S RESERVED RIGHTS ALLP and the Authority reserve the right to grant to others, including competitors of Boston Edison, rights to those granted hereunder. No easements or other rights granted by ALLP to Boston Edison are exclusive, except to the extent expressly stated in this Agreement. ALLP and the Authority each reserve the right for its employees, agents, grantees and assigns to enter upon any portion of property in which rights have been granted to Boston Edison hereunder for any purpose deemed necessary by the Authority's Chief Engineer in connection with the construction, reconstruction, or maintenance of the Turnpike or Authority-owned installations and appurtenants thereto. The Authority shall give Boston Edison reasonable advance notice of all proposed uses of the Easement Area and the opportunity to prevent any such use which may unreasonably interfere with the rights granted by this Agreement. The Authority shall exercise reasonable care in the C-2 performance of any work theron to avoid physical damage to the electrical system. If such damage does occur, the Authority shall reimburse Boston Edison for its reasonable costs in restoring such damaged portions to the electrical system to the same condition as existed prior to such damage. In no event shall the Authority be liable to Boston Edison or ALLP for any delay, consequential, special or incidental damages, including, but not limited to, lost profits and revenues, resulting from any such damage to the electrical system, fixtures or equipment or any other property of Boston Edison. Boston Edison will not interfere with the exercise by others of rights consistent with this Agreement granted or to be granted them. 5. INDEMNIFICATION Boston Edison, on behalf of itself, its agents, employees, contractors or subcontractors, assumes all risk of repair, maintenance, operation, removal or relocation of the electrical system, or any portion thereof, and shall be solely responsible and answerable in damages for any and all accidents and injuries to person or property, including death. Boston Edison hereby covenants and agrees to indemnify and hold harmless each of ALLP and the Authority from all claims, suits, actions, damages, and costs of every nature and description, arising out of or relating to the repair, maintenance, operation, removal or relocation of the electrical system or any portion thereof, by Boston Edison, its agents, employees, contractors or subcontractors or the violations of any law, ordinance, rule or regulation by them or any of them in connection therewith. Boston Edison shall, upon request, defend at its own cost and expense any action brought at any time against ALLP or the Authority in connection with any such claims or suits. Upon receipt by ALLP or the Authority of notice of any claim, suit, action, damage or cost covered by the hold harmless provisions of this paragraph, ALLP or the Authority shall notify Boston Edison thereof promptly and in writing. This indemnification obligation shall survive the expiration or earlier termination of this Easement Agreement. 6. NUISANCE Boston Edison, for itself and its successors, assigns and agents, covenants and agrees to place no signs, structures, buildings or parts thereof upon the Authority's property and to do nothing on such property to render such areas unsightly or offensive. 7. TAXES Boston Edison shall pay and discharge or cause to be paid and discharged any and all taxes, assessments and governmental charges or payments in lieu thereof (except any tax, assessment or other charge on the income of ALLP or the Authority) that shall or may be levied, assessed, or imposed during the term of this Agreement by any governmental or other lawful authority (except the Authority) upon or against ALLP or the Authority or Boston Edison arising out of the rights granted to Boston Edison hereunder. 8. AUTHORITY'S REMEDIES C-3 If Boston Edison shall fail materially to perform or observe any of the covenants, agreements, duties and conditions on its part to be performed or observed under this Agreement, and such failure shall continue unremedied after thirty (30) days' written notice to Boston Edison of the failure therof, either ALLP or the Authority shall have the right, at its election, to terminate this Agreement. Such right shall be in addition to all other rights or remedies available to it in law or in equity. All rights of ALLP and of the Authority against Boston Edison accruing or arising prior to termination shall survive such termination. In the even Boston Edison has commenced remedial action and is making good faith efforts diligently to complete such action, ALLP and the Authority will not have the right to terminate this Agreement. Upon failure, neglect or refusal of Boston Edison, upon notice in writing to Boston Edison from ALLP or the Authority, to perform or to commence to perform and diligently pursue in good faith to completion within a reasonable time any repair work hereunder, ALLP or the Authority may undertake and perform such repair work, and upon receipt of bills for such repair work from ALLP or the Authority may undertake and perform such repair work, and upon receipt of bills for such repair work from ALLP or the Authority, Boston Edison shall forthwith reimburse ALLP or the Authority, as the case may be, for such costs reasonably so incurred. 9. RELOCATION In the event it shall become necessary to rearrange or relocate the electrical system to accommodate changes or improvements on the Turnpike, and such rearrangements or relocations are reasonably required for such purposes, the relocation work will be made by Boston Edison at its sole expense upon receipt of written notice from the Authority or ALLP to do so. If Boston Edison shall fail (a) to perform such work, or (b) within forty (40) days of receipt of such written notice, to inform ALLP and the Authority of its intention to perform such work and to furnish ALLP and the Authority with a reasonable schedule for doing such work, each of ALLP and the Authority shall have the right, at its option, to perform such work, at the risk and expense of Boston Edison. The provisions of this paragraph are for the exclusive protection of ALLP and the Authority, and Boston Edison shall not be required to relocate any portion of the electrical system because of any conflict between Boston Edison's facilities and improvements contemplated or requested by other parties. ALLP and the Authority will fully cooperate with Boston Edison to the end that such changes and relocations of the electrical system may be held to the minimum necessary to accomplish the Authority's purposes. When an alternative method by which the Authority can accomplish its purpose is available and such alternative method would not necessitate relocation of the electrical system and, in the judgment of the Authority such alternative method is substantially equal in cost and feasibility, the Authority will adopt such alternative method and will permit the electrical system to remain in place or will disturb it as little as possible. 10. ASSIGNMENT C-4 Boston Edison may, upon forty-five (45) days' prior notice, assign or transfer its rights hereunder, in whole or in part, to any other entity with the prior written consent of the Authority, which consent shall not be unreasonably withheld, but no assignment shall act to expand the grant of easement allowing the Easement Area to be used for purposes not specifically provided for in Section 1, hereinabove. 11. NONDISCRIMINATION In all matters pertaining to its exercise of its rights hereunder, Boston Edison will comply with all applicable discrimination statutes, including Massachusetts General Laws c.151B, and with all applicable Authority rules and regulations for affirmative action. 12. INSURANCE Boston Edison will maintain in force at its expense, during the term of this Agreement, the following insurance: (i) Comprehensive bodily injury, personal injury and property damage liability insurance, including Blanket contractual Liability, Broad Form Comprehensive Liability insurance and products, Completed Operations and XCU (Explosion, Collapse, and Underground) hazards insurance, to a limit not less than ten million dollars ($10,000,000) combined single limit; (ii) Comprehensive Auto Liability insurance for vehicles owned, leased, rented, or otherwise used to a limited of not less than five million dollars ($5,000,000); (iii) Workers Compensation and Employer's Liability insurance, including All States and Longshoreman's and Harbor Worker's Act coverage for that amount as required by statute and limit of not less than five million dollars ($5,000,000) liability coverage; and (iv) Such additional insurance in such types, coverages and amounts as from time to time may be reasonably required by the Authority and such increases in the amounts provided for hereinabove in subparagraphs (i), (ii), and (iii) as from time to time may be reasonably required by ALLP or the Authority. Boston Edison shall make reasonable efforts to ensure that all such policies shall include a provision that acts or omissions of Boston Edison shall not preclude coverage for ALLP and for the Authority. All insurance required hereunder shall be effected with insurers acceptable to ALLP and the Authority and under valid and enforceable policies naming Boston Edison, ALLP and the Authority as their interests appear, as insureds thereunder. Any insurer rated A or higher in Best's Insurance Manual shall be deemed acceptable to ALLP and to the Authority. All insurance required hereunder: C-5 (i) Shall provide by endorsement for immediate written notice to ALLP and to the Authority of any material change in coverage or conditions and at least thirty (30) days' prior written notice to ALLP and to the Authority if coverage is to be cancelled or renewed; and (ii) Shall be evidenced by promptly furnishing ALLP and the Authority with certificates of insurance. 13. TURNPIKE LOSS OF REVENUE Any loss of toll, lease, easement or rental revenue by the Authority of any kind resulting from a leak or other incident cause directly or indirectly by the operation or installation of the electrical system or in any way attributed to the electrical system shall be reimbursed to the Authority by Boston Edison. Any such loss by the Authority shall be documented and forwarded by Registered Mail to Boston Edison within forty-five (45) days after such incident or occurrence. Any amount owed the Authority by Boston Edison shall be paid within thirty (30) days of such documentation. Amounts owed the Authority pursuant to this section remaining unpaid after the thirtieth (30th) day shall bear interest at the prime commercial rate of the First National Bank of Boston, as it may be adjusted from time to time. 14. NOTICE Every notice, demand and approval required or permitted to be given under this Agreement shall be in writing and deemed to have been duly given only when mailed by certified or registered mail, with return receipt requested, addressed in the case of notice or demand upon the Authority to it at: Director of Development and Planning Massachusetts Turnpike Authority State Transportation Building 10 Park Plaza, Suite 5170 Boston, MA 02116 And in the case of notice to or demand upon Boston Edison, to it at: W.B. Arcese, Jr. ROW Supervisor Boston Edison Pipeline Company 8 Anngina Drive Enfield, CT 06082 And in the case of notice to or demand upon ALLP, to it at: C-6 or in the case of either party to such other address as that party from time to time shall have designated by written notice given to the other party, as herein provided. 15. RECORDING In accordance with the provisions of M.G.L. c.183, Section 4, ALLP and Boston Edison shall record this Easement Agreement with the Suffolk County Registry of Deeds. 16. COMPLIANCE WITH LAWS Boston Edison shall comply with all applicable state and federal statutes relative to environmental protection in the construction, installation and operation of the electrical system, including, all local ordinances and conservation commission requirements of any city or town in which the electrical system in the Easement Area may be located. Boston Edison shall comply with the provision of M.G.L. c.7, Section 40J, by filing with the Commonwealth of Massachusetts Commissioner of Administration and Finance for Capital Planning and Operation, prior to the execution of the Agreement and also from time to time during the term of this Agreement, all disclosure statements required by said statute. Pursuant to M.G.L. c.62C, Section 49A, Boston Edison certifies under the pains and penalties of perjury that Boston Edison is in compliance with all laws of the Commonwealth of Massachusetts relating to taxes. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on their behalf by their duly authorized representatives as of the date first set forth above [SIGNATURE BLOCK] C-7 EXHIBIT B CONSTRUCTION AND OPERATIONAL REQUIREMENTS TO BE ATTACHED TO THE LEASE OF EASEMENT AGREEMENT BETWEEN THE AUTHORITY AND BOSTON EDISON PIPELINE 1. Boston Edison shall obtain a permit from the Authority for work performed within the Authority property. No work shall be done on property of the Authority until such time as Boston Edison shall have communicated with P. L. Matson, the Authority's Maintenance Engineer, whose office is at 668 South Avenue, Weston, Massachusetts, telephone: (617) 431-5120, and Al Abdella, Division Engineer, telephone: (617) 431-5149, and received from them permission to commence work and such further instructions as they may deem necessary in the performance of the work on the Turnpike property. 2. All operation within Turnpike property shall be subject to the directions of the Authority's Engineer and the State Police Captain. They shall have the right to stop all work due to traffic considerations, weather conditions, or for any other reason that, in their opinion, would affect the safe operation of the Turnpike. 3. Operations shall be conducted so as to cause minimum interference with Turnpike traffic and operations. The work area shall be kept open to traffic at all times except as may be authorized or directed by the Authority's Engineer. 4. All work shall be performed in accordance with all governing local, state and Federal rules, codes, laws, ordinance and regulations. 5. It shall be the responsibility of Boston Edison to notify the public service corporations and/or municipal departments 72 hours before digging. Further, a 72 hour advance call shall be made to the Dig Safe Center (Telephone: 1-800-322-4844). 6. If blasting is necessary, the approval of the Chief Engineer of the authority shall be secured. No fewer than two days in advance the Engineer will, for the protection of traffic, assign police details and other necessary personnel of the Authority, for which the Authority shall be reimbursed by Boston Edison at prevailing rates. The time during which explosives may be used is restricted to Monday through Thursday between the hours of 9:30 AM and 2:00 PM (Prevailing time). The use of explosives is not permitted on Friday, weekends (Saturday and Sunday), holidays. In order to minimize traffic disruptions, Boston Edison shall schedule blasting such that any two successive blasts detonated anywhere on the project are separated by at least two (2) hours. Boston Edison shall coordinate all blasting with the Authority's Engineer on site who shall determine in advance when the charges may be set. C-8 The maximum time for which traffic may be stopped at any single time shall be fifteen minutes, from the time traffic is stopped by police until all travel lanes are cleared of blast debris, to the satisfaction of the Engineer, and notice is given to the police that traffic may be resumed in both directions. If traffic is stopped for more than 15 minutes, Boston Edison shall pay to the Authority a penalty of $500 per minute for every minute traffic is stopped in excess of the 15 minute limit. 7. Any excavation of the outside shoulders of the Turnpike roadways authorized to be left open overnight shall be protected by barricades and traffic control devices satisfactory to the Authority's Engineer. 8. The Authority may assign representatives, generally referred to as Inspectors, as it reasonable deems necessary at the expense of Boston Edison and they shall be authorized to give directions with regard to the safety and convenience of the Turnpike traffic or of the public. 9. All ears disturbed by this operation, including, but not limited to, the right of way, fence, highway guard, drainage structures, waterways, stone bounds, loam and seeding, shall be restored to the original condition satisfactory to the Authority's Engineer. 10. All costs incurred by the Authority, including traffic protection and state police, if required, shall be reimbursed by Boston Edison at the prevailing rate. 11. Upon completion of construction of the electrical system, Boston Edison shall submit to the Authority an "As-Built" plan showing the exact location and profile of the crossing. C-9 EX-10.2 3 a2161257zex-10_2.txt EXHIBIT 10.2 EXHIBIT 10.2 EXECUTION COPY SECOND AMENDMENT TO LEASE This SECOND AMENDMENT TO LEASE (this "Second Amendment") is dated as of this 22nd day of December, 1997, to be effective as of the 1st day of June, 1997, by and among MASSACHUSETTS TURNPIKE AUTHORITY, a body politic and corporate organized pursuant to the laws of the Commonwealth of Massachusetts with offices at Ten Park Plaza, Suite 5170, Boston, Massachusetts 02116 (hereinafter referred to as "LANDLORD"), ALLSTON LANDING LIMITED PARTNERSHIP, a Massachusetts limited partnership with offices at One Kendall Square, Cambridge, Massachusetts 02139 (hereinafter referred to as "TENANT"), and GENZYME CORPORATION, with offices at One Kendall Square, Cambridge, Massachusetts 02139 (hereinafter referred to as "GUARANTOR"). W I T N E S S E T H: WHEREAS, Landlord and Tenant entered into that certain Lease dated as of June 1, 1992, as amended by that certain First Amendment to Lease dated as of July 26, 1995 by and between Landlord and Tenant (as amended, the "EXISTED LEASE") for the demise of the land and improvements defined in the Existing Lease as the "PREMISES", which Premises are comprised of therein described and defined Development Parcel and Holding Parcel (which Holding Parcel includes the Inaccessible Parcel) and which demise includes a right of first refusal to the therein described and defined Adjoining Parcels; WHEREAS, initial capitalized terms used herein and not otherwise defined shall have the meanings respectively ascribed to such terms in the Existing Lease; WHEREAS, Section 2.1.2 of the Existing Lease provides that Landlord may terminate the Existing Lease as to the Holding Parcel if Tenant has not Commenced Material and Substantial Construction of at least 200,000 square feet of FAR Floor Area of Improvements on the Holding Parcel by June 1, 1997; WHEREAS, Section 2.1.3 of the Existing Lease provides that, in addition to Landlord's remedies set forth in Section 2.1.2 of the Existing Lease, Tenant shall either provide access to Landlord over the Development Parcel in order to provide access to the Inaccessible Parcel or pay Rent with respect to the Inaccessible Parcel as if such Parcel was improved with 80,000 square feet of FAR Floor Area of Improvements if Tenant has not Commenced Material and Substantial Construction of at least 80,000 square feet of Improvements on the Inaccessible Parcel by June 1, 1997; WHEREAS, no such Construction had commenced on either the Holding Parcel or the Inaccessible Parcel as aforesaid as of June 1, 1997; WHEREAS, on account of no such Construction having commenced as aforesaid, the Existing Lease grants Landlord the right to terminate the Existing Lease as to the Holding Parcel; WHEREAS, if the Existing Lease is terminated as to the Holding Parcel, Tenant's rights to the Adjoining Parcels are terminated; WHEREAS, Tenant desires to continue to lease and develop the Holding Parcel (inclusive of the Inaccessible Parcel) upon the terms and conditions set forth herein; and WHEREAS, Landlord and Tenant desire to amend certain provisions of the Existing Lease as more specifically set forth herein. NOW, THEREFORE, in consideration of the premises and mutual promises and covenants contained herein and in the Existing Lease, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows: 1. Definitions. The definitions of Adjusted Rent, Development Parcel Rent, Holding Parcel Rent, Premises, Rent and Term as set forth in Section 1.1 of the Existing Lease are hereby deleted in their entirety, and the following definitions, in addition to the definition of Inaccessible Parcel Rent, are respectively substituted therefor: "ADJUSTED RENT: Commencing on the 30th, and redetermined on the 40th, 50th and 60th anniversaries of the Date of Lease Execution (June 1, 1992), to be in effect as so determined for the respective ten Lease Years following the 30th, 40th and 50th anniversaries and for the five Lease Years following the 60th anniversary, whichever is the lesser of (i) Fair Market Value Rent, assuming that the "MAXIMUM FAR FLOOR AREA OF IMPROVEMENTS" (defined as 130,490 square feet of initial Improvements plus the Maximum FAR Floor Area of Additional Improvements (as hereinafter defined)) have been constructed on the Premises, ascertained in accordance with $4.1.4 (but never less than Rent payable during the immediately preceding Lease Year) or (ii) the sum of (A) $1.80 multiplied by 130,490 (the total square feet of FAR Floor Area of initial Improvements constructed on the Development Parcel), increased by 5% per annum, cumulatively, from the Date of Lease Execution until the beginning of the Lease Year in question (calculated as [$1.80 (l+ (x) (. 05))x 130,490] (x being the Lease Year in question)), plus (B)(1)if either Landlord or Tenant terminate this Lease with respect to the Holding Parcel (exclusive of the Inaccessible Parcel) in accordance with Sections 4.2.1.1(e) and 4.2.1.1(f) of this Lease, respectively, the product of $1.80 multiplied by the greater of (v) 80,000 or (w) the total square feet of FAR Floor Area constructed on that portion of the Premises formerly referred to as the Inaccessible Parcel, increased by 5% per annum, cumulatively, from the Date of Lease Execution until the beginning of the Lease Year in question (calculated as [$1.80 (1+(x) (. 05)) x (y)] (x being the Lease Year in question and y being the greater of clause (v) and (w) above); or (2) if neither Landlord or Tenant terminate this Lease with respect to the Holding Parcel (exclusive of the Inaccessible Parcel) as provided herein, the product of $1.60 multiplied by 620,160 (the Maximum FAR Floor Area of Additional Improvements (as hereinafter defined)), increased by 5% per annum, cumulatively, from the Date of Lease Execution until the beginning of the Lease Year in question (calculated as [$1.60 (1+(x)(. 05))x 620,160] (x being the Lease Year in question). (For an example, see Section 4.1.6.) 2 DEVELOPMENT PARCEL RENT: The sum of (a) (i) from and after June 1, 1997, $272,724.10 per annum (100% of the product of $2.09 [$1.80 increased by 16.1%, the CPI Escalation for the initial five Lease Years] multiplied by 130,490 or the total square feet of FAR Floor Area of initial Improvements constructed on the Development Parcel) through the last day of the month in which the Development Plan Rent Commencement Date (as hereinafter defined) occurs, (ii) from and after the first day of the month following the Development Plan Rent Commencement Date, $245,451.69 per annum (90% of the product of $2.09 multiplied by 130,490) through the last day of the month in which the fifth anniversary of the Development Plan Rent Commencement Date occurs, and (iii) $272,724.10 per annum (100% of the product of $2.09 multiplied by 130,490) for any period thereafter, PLUS (b) from and after the Development Plan Rent Commencement Date: (i) if either Landlord or Tenant terminate this Lease with respect to the Holding Parcel (exclusive of the Inaccessible Parcel) in accordance with Sections 4.2.1.1(e) and 4.2.1.1(f) of this Lease, respectively, the product of $2.09 multiplied by the greater of (A) 80,000 or (B) the total square feet of FAR Floor Area constructed on that portion of the Premises formerly referred to as the Inaccessible Parcel; or (ii) if neither Landlord nor Tenant terminate this Lease with respect to the Holding Parcel (exclusive of the Inaccessible Parcel) as provided herein, $1,038,147.84 per annum (90% of the product of 620,160, being the maximum FAR Floor Area of additional Improvements which could potentially be constructed on the Premises ("MAXIMUM FAR FLOOR AREA OF ADDITIONAL IMPROVEMENTS"), multiplied by $1.86 through the last day of the month in which the fifth anniversary of the Development Plan Rent Commencement Date occurs, and $1,153,497.60 per annum (100% of the product of the Maximum FAR Floor Area of Additional Improvements, multiplied by $1.86) for any period thereafter; subject to increase on the tenth anniversary of the Date of Lease Execution (June 1, 1992) and every fifth anniversary thereafter by the a mount equal to the CPI Escalation multiplied by the sum of the amounts set forth in clause (a) and clause (b). Development Parcel Rent shall be due and payable from the Date of Lease Execution (June 1, 1992) until the commencement of Adjusted Rent. (For an example, see Section 4.1.6.) HOLDING PARCEL RENT: (a) $1.00 multiplied by the number of total square feet of land area included within that portion of the Holding Parcel exclusive of the Inaccessible Parcel which have been improved and upon which parking facilities have been constructed, as more fully provided in Section 4.1.l, PLUS (b) $250.00 annually for each parking space striped on that portion of the Holding Parcel exclusive of the Inaccessible Parcel, PLUS (c) $.50 multiplied by the number of total square feet of the remainder of the land area included within that portion of the Holding Parcel exclusive of the Inaccessible Parcel; subject to increase on the tenth anniversary of the Date of Lease Execution (June 1, 1992)and every five years thereafter by the amount equal to the CPI Escalation multiplied by the sum of the amounts set forth in clauses (a), (b) and (c). From and after the Development Plan Rent Commencement Date, no Holding Parcel Rent shall be payable. INACCESSIBLE PARCEL RENT: The product of $2.09 multiplied by the greater of (i) 80,000 or (ii) the total square feet of FAR Floor Area of Improvements constructed on the Inaccessible Parcel, subject to increase on the tenth anniversary of the Date of Lease Execution (June 1, 1992) and every five years thereafter by an amount equal to the CPI Escalation multiplied by the aforementioned product. From and after the Development 3 Plan Rent Commencement Date, no Inaccessible Parcel Rent shall be payable. PREMISES: The land and improvements located on the lot described in Appendix A attached to the Existing Lease, which lot consists of the Development Parcel and the Holding Parcel (which Holding Parcel includes the Inaccessible Parcel) as the same are initially established and described in said Appendix A. Effective as of the Development Plan Commencement Date, the Inaccessible Parcel shall be deemed to have been moved from the Holding Parcel to the Development Parcel. The Holding Parcel, exclusive of the Inaccessible Parcel, may be eliminated from the Premises by Landlord upon the terms and conditions set forth in this Lease. RENT: The sum of all Holding Parcel Rent, Inaccessible Parcel Rent, Development Parcel Rent and Adjusted Rent, per annum. TERM: From the Date of Lease Execution (June 1, 1992) until the sixty-fifth anniversary of such Date." 2. Section 2.1, Premises. The first sentence of Section 2.1 of the Existing Lease is hereby deleted in its entirety, and the following text is substituted therefor: "Landlord leases the Premises to Tenant and Tenant leases the Premises from Landlord for the Term (unless, with respect to all and/or certain portions of the Premises, earlier terminated in accordance with the provisions of the Lease), subject to the terms of this Lease and all matters of record existing as of the Date of Lease Execution and matters referred to herein, to all of which Tenant shall conform." 3. Section 2.1.1. Development Parcel. Holding Parcel and Inaccessible Parcel. The text of Section 2.1.1 of the Existing Lease is hereby revised as follows: a. The first paragraph of Section 2.1.1 is hereby deleted in its entirety, and the following text is substituted therefor: "The Premises consist of the Development Parcel, the Holding Parcel and the Inaccessible Parcel (the initial boundaries of which are described on Appendix A)." 4 b. The second sentence of the second paragraph of Section 2.1.l is hereby deleted in its entirety. c. The third and fourth paragraphs of Section 2.1.1 are hereby deleted in their entirety. d. The fifth paragraph of Section 2.1.1 shall be revised by adding to the last sentence thereof the clause: "(exclusive of the Inaccessible Parcel), but Tenant shall be permitted to use portions of the Holding Parcel for surface parking." 4. SECTION 2.1.2. Section 2.1.2 of the Existing Lease is hereby deleted in its entirety. 5. SECTION 2.1.3. Section 2.1.3 of the Existing Lease is hereby deleted in its entirety, and the following new Section 2.1.3 is substituted therefor: "2.1.3 Development of Inaccessible Parcel. Tenant shall be entitled to construct Improvements on the Inaccessible Parcel from time to time subject to and in accordance with Section 3.2 hereof. Until such time as Tenant constructs Improvements on the Inaccessible Parcel, Tenant shall pay Inaccessible Parcel Rent with respect to the Inaccessible Parcel calculated as if the Inaccessible Parcel were improved with 80,000 square feet of FAR Floor Area of Improvements. From and after the date that Tenant constructs Improvements on the Inaccessible Parcel that contain more than 80,000 square feet of FAR Floor Area, Tenant shall pay Inaccessible Parcel Rent with respect to the Inaccessible Parcel based upon the actual square footage of FAR Floor Area of such Improvements, as if such Improvements had been included in the initial Development Parcel. Such Rent shall be subject to such increases and adjustments as are then and thereafter applicable to the Improvements on the initial Development Parcel." 6. SECTION 4.1.1. HOLDING PARCEL RENT. Section 4.1.1 of the Existing Lease is hereby deleted in its entirety, and the following text is substituted therefor: "4.1.1 HOLDING PARCEL RENT. Holding Parcel Rent will be as set forth in Section 1.1, except that Holding Parcel Rent will continue to be paid with respect to any land area within public or private right of way hereafter established whether or not Landlord retains any fee interest therein. As of June 1, 1997, the Holding Parcel Rent computed in accordance with $1.1 is equal to $15,652.93 per month. The calculation of Holding Parcel Rent as of June 1, 1997 is detailed on Schedule 4.1.1 attached hereto." 7. SECTION 4.1.1.1, INACCESSIBLE PARCEL RENT. The following text is added as Section 4.1.1.1 of the Existing Lease following Section 4.1.1 of the Existing Lease: 5 "4.1.1.1 INACCESSIBLE PARCEL RENT. Inaccessible Parcel Rent will be as set forth in Section 1.1. As of June 1, 1997, the Inaccessible Parcel Rent computed in accordance with $1.1 is equal to $13,933.33 per month (or $2.09 x 80,000 =Section 167,200.00 per annum or $13,933.33 per month). " 8. SECTION 4.1.2. DEVELOPMENT PARCEL RENT. Section 4.1.2 of the Existing Lease shall be deleted in its entirety, and the following text shall be substituted therefor: "4.1.2 DEVELOPMENT PARCEL RENT. Development Parcel Rent during the Term shall be as set forth in Section 1.1, except that the amount set forth in clause (b) described under "Development Parcel Rent" shall not be due and payable to Landlord until the Development Plan Rent Commencement Date. The amount set forth in clause (b) of Development Parcel Rent shall not be reduced for any reason, including, without limitation, the fact that Tenant is permitted to develop more than 75% but less than 100% of the FAR Floor Area as set forth in the Development Plan (the "DEVELOPMENT PLAN FLOOR AREA") or if Tenant is prohibited from developing at least 75% of the Development Plan Floor Area and does not terminate the Lease as to the Holding Parcel in accordance with the provisions of Section 4.2.1.1(f) hereof." 9. SECTION 4.2.1.1, DEVELOPMENT OF THE HOLDING PARCEL. The following text is added as Section 4.2.1.1 of the Existing Lease following Section 4.2.1 of the Existing Lease: "4.2.1.1" DEVELOPMENT OF THE HOLDING PARCEL. (a) PRELIMINARY DEVELOPMENT PLAN. Notwithstanding any provisions of the Existing Lease to the contrary, within sixty (60) days after the date of this Second Amendment (the "PRELIMINARY DEVELOPMENT PLAN PERIOD"), Tenant shall present to Landlord for its review a preliminary development plan and development timetable for the Holding Parcel (the "PRELIMINARY DEVELOPMENT PLAN"). (b) DEVELOPMENT PLAN. During the three (3) months following the Preliminary Development Period (which three (3) months, together with the Preliminary Development Plan Period, shall be hereinafter referred to as the "Development Plan Period "), Landlord and Tenant shall negotiate in good faith the terms of a final development plan and development timetable for the Holding Parcel (the "DEVELOPMENT PLAN") which is consistent with the approved master plan set forth in Appendix F of the Existing Lease and mutually acceptable to Landlord and Tenant in each party's sole discretion. The Development Plan shall include, without limitation, (i) an agreement of Tenant to grant Landlord and its successors, assigns, lessees and/or licensees an exclusive access easement, in form and substance satisfactory to Landlord, along the westerly boundary of the Holding Parcel from Western Avenue to the southerly edge of the Holding Parcel and (ii) an identification of each Leasehold Mortgage Parcel (as hereinafter defined) and each Sale-Leaseback Parcel (as hereinafter defined). 6 To the extent the parties agree to the terms and conditions of the Development Plan, the parties agree to enter into an amendment to the Existing Lease, as amended hereby, as necessary and appropriate to reflect the terms of the Development Plan. Tenant acknowledges that Landlord's ability to enter into an amendment to the Lease as aforesaid as well as this Second Amendment is derived from M. G. L. Chapter 81A which provides that Landlord must submit to the Metropolitan Highway System Advisory Board ("ADVISORY BOARD") before the final execution thereof by Landlord all contracts, plans, agreements and memoranda of understanding relative to land use plans, air rights, zoning restrictions and environmental impacts associated with the development of the Holding Parcel (any such agreement is herein referred to as a "DEVELOPMENT CONTRACT") for review by the Advisory Board. (c) MEPA REVIEW. Upon completion of the Development Plan (but in any event no later than four (4) months after the expiration of the Development Plan Period), Tenant shall file a preliminary environmental impact report (the "PEIR") complying with all provisions of the Massachusetts Environmental Policy Act and the regulations enacted pursuant thereto (collectively, "MEPA") with the Commonwealth of Massachusetts Department of Environmental Affairs or any other successor agency ("DEP"). Tenant shall simultaneously provide Landlord with a copy of the PEIR. Upon Tenant's receipt of comments from DEP, Tenant shall submit a thorough response to such comments to DEP as soon as practicable (but in any event no later than two (2) months after receipt of such comments), and shall simultaneously provide Landlord with a copy of such response. Within twelve (12) months after the Development Plan Period, Tenant shall have complied with the provisions of the Massachusetts Environmental Policy Act and the regulations enacted pursuant thereto (collectively, "MEPA") and shall have received all permits and/or approvals required thereunder. Such twelve-month period shall be extended for up to an additional four (4) months if Tenant is diligently and continuously pursuing all applicable MEPA permits and/or approvals. 7 (d) DEVELOPMENT PLAN RENT COMMENCEMENT DATE. Tenant shall pay Rent in the amount set forth in clause (b) of Development Parcel Rent commencing on the earlier of (i) the date on which a permit (or other successor permission) entitling Tenant to have temporary or permanent occupancy of such Improvements, or portions thereof, is issued or Available To Be Issued (hereafter defined) by the City of Boston or when Tenant commences occupancy of such Improvements in connection with its business, if earlier (Tenant shall give prompt notice of said permit issuance to Landlord), or (ii) the date which is eighteen (18) months after all MEPA permits and/or approvals have been obtained (but in any event not longer than thirty-four (34) months after the expiration of the Development Plan Period) [which earlier date shall hereinafter be referred to as the "DEVELOPMENT PLAN RENT COMMENCEMENT DATE"]. "AVAILABLE TO BE ISSUED" shall mean that, but for delays neither caused by Tenant nor reasonably preventable by Tenant, could then have been substantially completed such that a permit entitling Tenant to have temporary or permanent occupancy would be issued. (e) LANDLORD'S TERMINATION OPTION. Notwithstanding any provisions of the Existing Lease to the contrary, if Tenant fails to comply with any of the provisions of subparagraphs (a), (b) and (c) above of this Section 4.2.1.1, upon four (4) months prior written notice to Tenant, Landlord may terminate the Lease as to the Holding Parcel (exclusive of the Inaccessible Parcel) and/or negotiate and conclude a lease transaction regarding all or a portion of the Holding Parcel (exclusive of the Inaccessible Parcel) with any other potential developers for any development on any terms and conditions acceptable to Landlord in its sole discretion. Landlord shall use reasonable efforts to require that the lease agreement embodying any such lease transaction contain covenants by the lessee to review the scope of the lessee's proposed construction with Tenant, to consider the coordination of such construction with Tenant, and to provide Tenant with the opportunity to comment on the lessee's proposed construction schedule. On or before the termination date specified in Landlord's notice to Tenant, Tenant shall surrender the Holding Parcel (exclusive of the Inaccessible Parcel) to Landlord in accordance with the provisions of the Lease, including, without limitation, Section 5.1.9 thereof. (f) TENANT'S TERMINATION OPTION. If for whatever reason prior to the commencement of the construction of the Improvements described in the Development Plan mutually agreed to by the parties Tenant is prohibited from developing at least 75% of the Development Plan Floor Area, upon at least four (4) months prior written notice to Landlord (which notice must be given within sixty (60) days of the date Tenant determines it is unable to develop at least 75% of the Development Plan Floor Area), Tenant may terminate the Lease as to the Holding Parcel (exclusive of the Inaccessible Parcel). On or before the 8 termination date specified in Tenant's notice to Landlord, Tenant shall surrender the Holding Parcel (exclusive of the Inaccessible Parcel) to Landlord in accordance with the provisions of the Lease, including, without limitation, Section 5.1.9 thereof." 10. SECTION 4.1.3, CPI ESCALATION. The first sentence of Section 4.1.3 of the Existing Lease is hereby deleted in its entirety, and the following text is substituted therefor: "The term "CPI Escalation" shall mean the sum from time to time of each five successive years' percentage increase in the CPI commencing in the case of the initial five Lease Years with CPI with a period which includes the Date of Lease Execution (June 1, 1992), and for each subsequent five Lease Years commencing with CPI for each subsequent five year anniversary of the Date of the Lease Execution (June 1, 1992), but no percentage increase shall be included to the extent that such increase in CPI exceeds 5% per annum for such period and if there is no percentage increase in CPI or a percentage increase in CPI of less than 3% per annum for such period, then for the purposes of calculating "CPI Escalation" 3% shall be included as the annual percentage increase for such period. Notwithstanding any provisions of the Existing Lease, as amended hereby, to the contrary, the parties hereby acknowledge and agree that the CPI Escalation for the initial five Lease Years is 16.1%." The last sentence of Section 4.1.3 of the Existing Lease is hereby deleted in its entirety, and the following text shall be substituted therefor: "Accordingly, the CPI escalation for Lease Years l-5 is 23.03% (4% + 4.16% + 4.87% + 5% (because 5.65% exceeds the 5% cap) + 5% (because 5.93% exceeds the 5% cap))." 11. SECTION 4.1.4. ADJUSTED RENT. Section 4.1.4 of the Existing Lease is hereby deleted in its entirety, and the following text is substituted therefor: "4.1.4 ADJUSTED RENT. Adjusted Rent during the Term shall be set forth in Section 1.1 and shall be determined respectively for the 30th, 40th, 50th and 60th anniversaries of the Date of the Lease Execution (June 1, 1992) respectively and, as so determined, remain in effect until the next such anniversary (or, finally, the end of the Term)." 12. SECTION 4.1.6. EXAMPLES. (a) Section 4.1.6(l) of the Existing Lease is hereby deleted in its entirety, and the following text is substituted therefor: 9 "(1) Assume it is the beginning of the seventh Lease Year. Tenant has built 130,490 sq. ft. of FAR Floor Area of initial Improvements on the Premises, the Development Plan Rent Commencement Date has occurred, and neither Landlord nor Tenant has terminated this Lease with respect to the Holding Parcel (exclusive of the Inaccessible Parcel) as provided herein. As of the date of the Development Plan Rent Commencement Date, Holding Parcel Rent and Inaccessible Parcel Rent will be $1,283,599.53 (90% of the sum of $272,724.10 ($2.09 x 130,490), plus $1,153,497.60 ($1.86 x 620,160))." (b) Section 4.1.6(2) of the Existing Lease is hereby deleted in its entirety, and the following text is substituted therefor: "(2) Assume it is the thirtieth anniversary of the Date of Lease Execution (June 1, 1992); neither Landlord nor Tenant terminated this Lease respect to the Holding Parcel (exclusive of the Inaccessible Parcel); the Premises are not fully developed as there are 630,490 square feet (as opposed to 750,650 square feet) of FAR Floor Area of Improvements on the Premises. The initial Improvements were 130,490 square feet of FAR Floor Area and 500,000 square feet of FAR Floor Area of Improvements were constructed. Adjusted Rent is to be determined in accordance with Section 1.l. Fair Market Value Rent (assuming Maximum FAR Floor Area of Improvements is constructed on the Premises), in accordance with the procedure set forth in 4. Section 1.5, has been determined to be $3,500,000 a sum which is greater than the amount of Rent paid by Tenant with respect to the previous Lease Therefore, in determining Adjusted Rent, Tenant shall pay the lesser of Fair market Value Rent or the product of clause (ii) of the Adjusted Rent Formula set forth in Section 1.1 which is the sum of the products obtained under clause (A) and clause (B) of the Adjusted Rent formula set forth in Section 1.1 each respectively increased by 5% per annum, cumulatively, from the Date of Lease Execution (June 1, 1992) until the beginning of the thirty-first Lease Year or the sum of $587,205.00 [$1.80 (1 + (30)(.05)) x 130,490], plus the sum of $2,480,640.00 [$1.60 (1 + (30)(.05)) x 620,160] resulting in a sum of $3,067,845.00 ($587,205.00 + $2,480,40.00)." 13. SECTION 12.1, TENANT'S RIGHT TO MORTGAGE. Section 12.1 of the Existing Lease is hereby deleted in its entirety, and the following text is substituted therefor: "12.1 RIGHT TO MORTGAGE. (a) Tenant shall have the right from time to time to grant one or more separate leasehold mortgages encumbering all or any functionally distinct portion of the Premises and the Improvements located thereon (each such portion of the Premises so mortgaged, a "LEASEHOLD MORTGAGE PARCEL"), assign and lease back all or a portion of the Premises and the Improvements located thereon incidental to a so-called sale-leaseback financing (each such portion of the Premises subject to a so-called sale-leaseback financing, a "SALE-LEASEBACK PARCEL") and grant a security interest under the Uniform Commercial Code in all or a portion of its interest in the Premises and all or a portion of the Improvements 10 (each a "LEASEHOLD MORTGAGE" and collectively, the "LEASEHOLD MORTGAGES"), to secure the payment of any loan or loans obtained by Tenant from one or more recognized institutional lenders or other recognized financing sources (collectively, "LEASEHOLD MORTGAGEE"); provided, however, that Tenant shall give prior written notice to Landlord of its intent to exercise such rights hereunder, including in such notice the name, address of each such proposed Leasehold Mortgagee, the amount of such loan or loans and a description of the Leasehold Mortgage Parcel or the Sale-Leaseback Parcel, as the case may be, and thereafter promptly furnish any other information regarding each such Leasehold Mortgagee which Landlord may reasonably request. The intent of this provision is to enable Tenant to separately finance those Improvements on the Premises used principally for manufacturing purposes, for office and administrative purposes, and for research and development purposes, and for parking facilities. The Leasehold Mortgage having the first priority from time to time with respect to each Leasehold Mortgage Parcel is the "FIRST LEASEHOLD MORTGAGE" with respect to that respective Leasehold Mortgage Parcel; and the holder thereof is the "FIRST LEASEHOLD MORTGAGE" with respect to that respective Leasehold Mortgage Parcel. All Leasehold Mortgages are sometimes referred to as "PERMITTED FINANCING." (b) Landlord agrees to consider amendments to this Lease which may be reasonably required to enable Tenant to obtain separate financing for each functionally distinct portion of the Premises. Tenant will submit such amendments to Landlord who will review the same and indicate those that are acceptable, and as to those which are not, specifying the reasons therefor and what changes would make the same acceptable to Landlord. To the extent such functionally distinct portion of the Premises is identified on the Development Plan, Landlord shall not deem such amendment unacceptable provided such amendment otherwise complies with this Section 12.1. At Tenant's request, Landlord will enter into separate (i.e., non-cross default) ground leases for each functionally distinct portion of the Premises, such separate ground leases to be on the same terms as contained in this Lease with only such changes as are necessary to accommodate separate leasing. In addition to the written notice from Tenant required in accordance with paragraph (a), Tenant shall deliver to Landlord a new lease upon the same terms and conditions of the Existing Lease as amended hereby, covering the Leasehold Mortgage Parcel or the Sale-Leaseback Parcel, as the case may be (except to the extent any such terms and conditions do not apply to the respective Leasehold Mortgage Parcel or the Sale-Leaseback Parcel), and a notice or memorandum thereof, in form and substance suitable for recording with the Suffolk County Registry of Deeds and the Suffolk Registry District of the Land Court (each a "PERMITTED FINANCING LEASE"). Landlord shall use reasonable efforts to obtain approval, execute and deliver the Permitted Financing Lease as soon as reasonably practicable thereafter. Landlord and Tenant agree to negotiate in good faith, execute and deliver all other documents, instruments, amendments, restatements, agreements and contracts reasonably necessary in connection with the execution and delivery of the Permitted Financing Lease, including, but not limited to any Landlord Consent, Waiver and Estoppel Agreement by and among Landlord, Tenant and Leasehold Mortgagee, reasonably requested by such Leasehold Mortgagee. (c) Notwithstanding any provisions of this Lease to the contrary: (i) the configuration of any and all Leasehold Mortgage Parcels and/or any and all Sale-Leaseback Parcels shall 11 be documented in the Development Plan; (ii) Landlord shall not be required to enter into any amendments to this Lease, any Permitted Financing Lease or any other documents in connection therewith (collectively, the "PERMITTED FINANCING LEASE DOCUMENTS") in order to assist Tenant in financing any portion of the Improvements if Landlord is required to pay any out-of-pocket expenses in connection therewith and/or if any provisions of any such Permitted Financing Lease Document in any way increase Landlord's obligations or decrease the economic benefits derived by Landlord hereunder; and (iii) Tenant shall promptly (but not later than ten (10) days after Landlord's delivery to Tenant of a statement of such costs) reimburse Landlord for all actual costs (out-of-pocket and otherwise) expended or incurred by Landlord in connection with assisting Tenant in arranging financing for any portion of the Improvements, including, without limitation, the negotiation and review of any Permitted Financing Lease Documents. 14. ADJOINING PARCELS. Tenant hereby relinquishes all of its rights in and to the Adjoining Parcels. In that regard, Article XIV and Appendix C of the Existing Lease are hereby deleted in their entirety. 15. ENTIRE AGREEMENT. This Second Amendment constitutes the entire agreement between Landlord and Tenant regarding the subject matter hereof and supersedes all oral statements and prior writings thereto, including, without limitation, that certain letter dated as of June 18, 1997 from Landlord to Tenant. Except for those set forth in this Second Amendment, no representations, warranties, or agreements have been made by Landlord or Tenant to the other with respect to this Second Amendment or the obligations of Landlord or Tenant in connection herewith. 16. NO OFFER. Submission of this Second Amendment to Tenant shall not be construed as an offer, and Tenant shall not have any rights under this Second Amendment unless Landlord executes a copy of this Second Amendment and delivers it to Tenant. 17. LANDLORD FEES. Within ten (10) days after Landlord's delivery to Tenant of a statement of such costs, Tenant shall reimburse Landlord for fifty percent (50%) of all costs (including, without limitation, reasonable attorneys' fees) expended or incurred by Landlord in connection with the drafting and negotiating of this Second Amendment. 18. MISCELLANEOUS. The parties hereto acknowledge and agree that, except as specifically amended by the terms of this Second Amendment, all of the terms, covenants and provisions of the Existing Lease are hereby ratified and confirmed and shall remain in full force and effect throughout the balance of the Term as defined in this Second Amendment. From and after the date hereof, all references in the Existing Lease to the terms "the Lease" or "this Lease" shall mean and be the Existing Lease as affected by this Second Amendment. 12 IN WITNESS WHEREOF, Landlord, Tenant and Guarantor have caused this Second Amendment to Lease to be executed by their duly authorized representatives as a Massachusetts instrument under seal on the date and year first above written. LANDLORD: APPROVED: MASSACHUSETTS TURNPIKE AUTHORITY MASSACHUSETTS TURNPIKE AUTHORITY /s/ Robert M. Ruzzo By: /s/ James E. Rooney - ----------------------------- --------------------------------- Name: Robert M. Ruzzo, Name: James E. Rooney, General Counsel Title: Chief Financial Officer TENANT: ALLSTON LANDING LIMITED PARTNERSHIP By: Allston Landing Corporation Its Sole General Partner By: /s/ David J. McLachlan - ----------------------------- ---------------------------------- Name: Name: David J. McLachlan, Title: Executive Vice President GUARANTOR: GENZYME CORPORATION By: /s/ David J. McLachlan --------------------------------- Name: David J. McLachlan Title: Executive Vice President 13 SCHEDULE 4.1.1 HOLDING PARCEL (PROPER) RENT CALCULATION (AS OF 6/1/97) The area of the Holding Parcel (excluding the area of the Inaccessible Parcel) is: 185,598 s.f. Of the total area, the Landlord has determined the following areas to be improved land used for access and parking: Main parking lot: 54,608 s.f. New parking: 2,560 s.f. Access road to parking: 16,640 s.f. TOTAL PARKING: 73,808 s.f.
The unimproved area of the Holding Parcel is: 185,598 - 73,808 = 111,790 s.f. Base rent has been computed at $0.50 (before escalation) for the unimproved area of the Holding Parcel, and base rent has been computed at $1.00 (before escalation) for the improved land. In addition, there is a parking fee of $1.00/day (before escalation) for every working day (261 weekdays, less 11 holidays = 250 days), on the 149 spaces which are on the improved land.
WITH EXCEPTION OF PARKING FEE, ESCALATED ORIGINAL BY 16.1% -------- ---------------------- Improved land rent = 73,808 s. f. x $1.00 =$73,808 $ 85,691.09 Unimproved land rent = 111,790 s. f. x $0.50 =$55,895 $ 64,894.10 Parking fee = 149 SPACES X 250 DAYS X $1/DAY = $37,250 $ 37.250.00 ---------------------------------------- ------------ Holding Parcel Proper Total = $ 166,953 $ 187,835.19 DIVIDED BY 12 = $ 15,652.93
* The CPI Escalation for Lease Years l-5 is 16.1%. 14 EX-10.3 4 a2161257zex-10_3.txt EXHIBIT 10.3 Exhibit 10.3 PURCHASE AND SUPPLY AGREEMENT BETWEEN GENZYME CORPORATION & INVITROGEN CORPORATION CONTRACT # SPM-254 JANUARY 1, 2005 TO DECEMBER 31, 2007 TABLE OF CONTENTS: 1. Definitions 2. Scope 3. Term 4. Payment Terms 5. Products and Pricing 6. Release of Orders 7. Forecasting, Purchase Orders and Supply Obligations 8. Biosurgery Products 9. Security of Supply 10. Acceptance; Rejection; Pre-shipment Samples 11. Certificate of Analysis; Other Documentation 12. Storage; Delivery 13. Manufacturing Obligations; Warranties 14. Other Obligations 15. Termination 16. SBA Socio-Economic Reporting 17. Confidentiality 18. Insurance 19. Work on Genzyme's Premises and Security 20. Research Product Warranties 21. Authorized use of Research Products 22. Regulatory 23. Export Control 24. Indemnification 25. Compliance Laws 26. Limitation of Liability 27. Assignment [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -2- 28. Jurisdiction 29. Severability; Remedies; Waiver; 30. Notices 31. Advertising 32. Statutes and Executive Orders 33. Survival 34. Additional or Inconsistent Terms 35. Entire Agreement 36. General Provisions The following Attachments are attached to this Purchase and Sale Agreement and made a part hereof: ATTACHMENT A: Global Buying Entities. ATTACHMENT B1: Listing and prices of Custom Manufactured Products. ATTACHMENT B2: Listings and prices of Biosurgery Products. ATTACHMENT B3: Listing and prices of Research Products. ATTACHMENT B4: Listing of Standard Custom Products ATTACHMENT C: Specifications, Certificates of Analysis, [**] and Herd Management ATTACHMENT D: List of Account Managers ATTACHMENT E: Genzyme Accounts Payable Contacts ATTACHMENT F: Supplemental Product Amendment for Biosurgery Products ATTACHMENT G: GENZYME Materials and Materials Specifications ATTACHMENT H: [**] Protocols ATTACHMENT I: Biosurgery Refrigeration & Transportation Requirements ATTACHMENT J: Supplemental Product Amendments ATTACHMENT K: Change Notification Process ATTACHMENT L: Certification of Suitability of Monographs of the European Pharmacopoeia [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -3- PURCHASE AND SUPPLY AGREEMENT This Purchase and Supply Agreement (the "AGREEMENT") effective January 1, 2005 ("EFFECTIVE DATE") is between Invitrogen Corporation ("SUPPLIER"), a Delaware corporation with a principal place of business at 1600 Faraday Avenue, Carlsbad, CA 92008 and Genzyme Corporation ("GENZYME"), a Massachusetts corporation with a principal place of business at One Kendall Square, Cambridge, MA 02139. RECITALS: A. GENZYME and Life Technologies, Inc. ("LIFE") were parties to a Supply Agreement effective January 1, 1999 ("ORIGINAL AGREEMENT"), whereby Life supplied certain products to GENZYME (GENZYME contract number C-194). The Original Agreement expired on December 31, 2001. B. SUPPLIER and GENZYME are parties to that certain Contract Manufacture Agreement effective March 17, 1996 for the supply of Biosurgery Products to GENZYME ("BIOSURGERY AGREEMENT"). C. On September 14, 2000, Life was acquired by and merged into SUPPLIER. GENZYME desires to have SUPPLIER continue supplying products similar to those supplied under the Original Agreement and the Biosurgery Agreement. SUPPLIER is willing to supply such products. D. By entering into this new Agreement, GENZYME and SUPPLIER desire to (i) renew and extend the supply relationship established by the Original Agreement; and (ii) terminate the Biosurgery Agreement as of the Effective Date, replacing such agreement with this Agreement; provided, however, that the Supplemental Product Amendments entered into under the Biosurgery Agreement shall not be terminated, and shall be incorporated herein as described in Section 8.2. NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties intending to be legally bound agree as follows: 1. Definitions: 1.1 "AFFILIATE" shall mean any entity or person that, directly or indirectly, controls, is controlled by, or is under common control with another person. A person shall be deemed to control another person if the controlling person possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled person, whether through ownership of stock, the power to elect or appoint the board of directors or trustees, by contract, or otherwise. 1.2 "BIOPRODUCTION" means any materials that are procured to a GENZYME part number and specification as contained in ATTACHMENT B1 and B2. 1.3 "FDA" means the U.S. Food and Drug Administration. 1.4 "PURCHASE ORDER" means any purchase order that GENZYME either itself or through a Buying Entity completes and delivers to SUPPLIER either directly or through one of its Affiliates listed in ATTACHMENT D in accordance with Section 6. 1.5 "QSR" means regulations set forth in FDA's Quality System Regulations at 21 C.F.R. Part 820. [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -4- 1.6 "SPECIFICATIONS" means the' procedures, test results, requirements, criteria, specifications, standards and other data relating to the manufacture and supply of Products, as more particularly set forth on ATTACHMENT C. 1.7 "STERILE" means that any Product described as Sterile has been manufactured in compliance with medical device QSR's through aseptic processing to a sterility assurance level of 10-3. 1.8 "THIRD PARTY" means any person or entity other than GENZYME, SUPPLIER, their respective Affiliates, and a Buying Entity. 2. SCOPE: 2.1 PRODUCTS. The products ("PRODUCTS"), individually or collectively, to be bought and sold by GENZYME from SUPPLIER are any of the following: 2.1.1 "CUSTOM MANUFACTURED PRODUCTS", as set forth more particularly on ATTACHMENT B 1, and which are: [**] 2.1.2 SUPPLIER's research products, as set forth in SUPPLIER's then-current U.S. Catalog, and its Affiliates' then-current written catalogs ("RESEARCH PRODUCTS"), including research products supplied under on-site stocking programs. 2.1.3 SUPPLIER's biosurgery products listed on ATTACHMENT B2 [**] (collectively, "BIOSURGERY PRODUCTS"). Products excludes services, custom products not listed above, and software products. 2.2 Buying Entities. Only GENZYME and an entity listed on ATTACHMENT A (each a "BUYING ENTITY") may place Purchase Orders for Products under this Agreement. 2.2.1 An entity not listed on ATTACHMENT A may not place Purchase Orders, either for itself or on behalf of any other party, and is not entitled to the benefits of this Agreement. 2.2.2 A GENZYME Affiliate or other entity may only become a Buying Entity by a written amendment of ATTACHMENT A signed by SUPPLIER and GENZYME. Removal of an entity from ATTACHMENT A requires only written notice from GENZYME to that Buying Entity and to SUPPLIER. 2.2.3 GENZYME warrants and represents to SUPPLIER that the Buying Entities listed on ATTACHMENT A, are Affiliates of GENZYME. If, at any time during this Agreement, any entity listed on ATTACHMENT A ceases to be a GENZYME Affiliate, then GENZYME shall so notify SUPPLIER, and such entity shall be removed from ATTACHMENT A and shall no longer be a Buying Entity. 2.2.4 Removal of a Buying Entity from ATTACHMENT A shall not, alone, release such Buying Entity from its obligations hereunder. 2.2.5 GENZYME and SUPPLIER each acknowledge and agree that the terms and conditions of this Agreement shall apply to all Purchase Orders submitted by GENZYME or any of the Buying Entities during the Term of this Agreement. Where the terms of this Agreement conflict with any such Purchase Order, this Agreement shall govern. 2.2.6 The placement of a Purchase Order by a Buying Entity constitutes such Buying Entity's acceptance that the terms and conditions of this Agreement govern such Purchase Order and agreement to abide by this Agreement. 2.2.7 SUPPLIER shall provide GENZYME with a list of all SUPPLIER Affiliates who are selling Products subject to this Agreement (together with SUPPLIER, "SELLING ENTITIES"). The acceptance of a Purchase Order by a Selling Entity constitutes [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -5- such Selling Entity's agreement (i) that the terms and conditions of this Agreement govern such Purchase Order; and (ii) to abide by the applicable terms and conditions of Agreement. SUPPLIER shall also provide GENZYME with written notice in due commercial course of any companies acquired by SUPPLIER during the term of this Agreement, any new product offerings, and new discounts or other promotional offerings. 2.2.8 The only role of the Buying Entities and Selling Entities under this Agreement is to facilitate the ordering, delivery and payment process on a multinational level. No Buying Entity or Selling Entity shall be liable under this Agreement except as expressly stated herein. GENZYME and SUPPLIER shall each be fully liable and responsible for all supply, delivery, quality, payment, warranty, security, insurance, use, indemnity, and other commitments under this Agreement, regardless of which Buying Entity or Selling Entity (respectively) placed or accepted a Purchase Order, or received or delivered Products. 3. TERM: This Agreement shall be effective on the Effective Date and continue until December 31, 2007 (the "INITIAL TERM"). Upon expiration of the Initial term, this Agreement shall automatically renew for successive one year terms unless it is terminated by either party pursuant to this Article 3 or as otherwise provided herein. Each party may terminate this Agreement after the Initial Term has expired by providing the other party with at least six (6) months written notice. 4. PAYMENT TERMS: 4.1 NON-U.S. PURCHASES. Non-U.S. Buying Entities shall receive invoices from, and payment on invoices shall be made to, the Selling Entity corresponding to the territory in which such Buying Entity is located. Such non-U.S. invoices shall be stated in the currency of the invoicing Selling Entity or the Buying Entity, as such parties may determine from time to time. 4.2 PAYMENT. Except as described in Section 4.3, invoices shall be paid within thirty (30) days of receipt, provided that all invoices shall include at least the following information: Buying Entity account number, Purchase Order number, Product description, quantity of Product desired, unit cost and extended cost of Product, invoice number, and applicable Product part number. 4.3 CONSOLIDATED INVOICES. SUPPLIER shall provide upon GENZYME's request consolidated monthly invoices for each U.S. Buying Entity. All such consolidated invoices shall be paid in full within the last date specified, provided that the parties agree on the amount invoiced. Consolidated invoices shall be submitted in Excel format and shall contain at least the following information: Buying Entity account number; Purchase Order number; Product description; quantity of Product; unit cost and extended cost of Product; invoice number; and applicable Product part number. 4.4 INVOICE DISPUTES. In the event GENZYME disputes an invoice amount, GENZYME shall notify SUPPLIER within fifteen (15) days of the date of receipt of such invoice, may withhold payment of the disputed amount, and shall pay the undisputed portion of such invoice by such fifteenth (15th) days. The parties shall negotiate in good faith how to address the disputed portion of the invoice. 5. PRODUCTS AND PRICING: 5.1 GENZYME BIOPRODUCTION PRODUCTS AND PRICING. [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -6- [**] 5.2 PROCESS DEVELOPMENT GENZYME & SUPPLIER SUPPORT. SUPPLIER understands that GENZYME needs the freedom to operate regarding the future development of mammalian cell base technologies. Therefore GENZYME may elect to work with Vendors whose skill set and know-how best suit GENZYME's timelines and or other requirements. GENZYME may use a reasonable effort to provide SUPPLIER an opportunity re: the above needs by using SUPPLIER's catalogue products, custom products, and or optimized IP platforms to address the cell culture needs of GENZYME during the course of this Agreement, so long as SUPPLIER can meet GENZYME's timelines, budgets and other requirements for the project. [**] 5.3 [**] [**] 5.4 PRICE AND PAYMENT TERMS FOR [**] BATCHES. The pricing for the [**] is set forth in ATTACHMENT B1. Delivery of the [**] will be consistent with terms outlined in Section 10.1 of the Supply Agreement. [**] 5.5 CURRENCY EXCHANGES. For the purposes of calculating rebates as described in Sections 5.3 and 5.7, SUPPLIER shall convert sales to Buying Entities from local currency to dollars using the methods it uses to convert all of its other foreign revenues, provided only that such methods comply with US generally accepted accounting principles. SUPPLIER currently uses the exchange rates posted at www.oanda.com; if that source changes SUPPLIER will report that source and the rate at the close of the respective quarter. 5.6 PRICE AND PAYMENT TERMS FOR [**] BATCHES. [**] USDA Website-//www.ams.usda.gov/LSMNpubs/pdfmonthly/pharm.pdf 5.7 PRICING FOR RESEARCH PRODUCTS. Current US prices for SUPPLIER Research Products are set forth in SUPPLIER's current catalog ( "List Price"). Each Selling Entity has a different catalog and the List Prices may vary by country. [**] [**] 5.8 GENZYME/ SUPPLLER- [**] PROGRAM - RESEARCH PRODUCTS. There are two levels of [**] status, with qualifications for each detailed below. In exchange for each level of [**] status, SUPPLIER will offer the stated price concessions. 5.8.1 [**] - LEVEL 1. Within 60 days of signing the contract, GENZYME and authorized Buying Entities will provide SUPPLIER and Selling Entities access to its end users for the purpose of promoting SUPPLIER's products and services [**] 5.8.2 [**] [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -7- 5.8.3 If SUPPLIER provides specific product, seminars and or special product pricing information during the year, GENZYME may list these in the Science and Research newsletter, as time and space allow. SUPPLIER will be given an annual expected schedule of newsletters. GENZYME Science and Research Procurement may sponsor product shows and technical meetings. Timing, content and location of these product shows to be mutually agreed to and SUPPLIER must provide at least a three (3) week advance notice request to GENZYME Science and Research Procurement. In exchange for its [**] status, Level 1, with respect to Research Products, addition discounts on Research Products are provided as listed in ATTACHMENT B3, Section A. 5.9 [**] - LEVEL II QUALIFICATION. 5.9.1 GENZYME will provide spend visibility on a quarterly basis for selected life science reagents by product category which SUPPLIER and GENZYME mutually agree too. GENZYME and SUPPLIER will agree as to the form and format of this data and the method of reporting. 5.9.2 [**] 5.10 GROWTH INCENTIVE ADJUSTMENTS. 5.10.1 If GENZYME purchases a company that has not done business with SUPPLIER historically, the growth incentive charts will not change and any new purchases from the acquired company can be applied to the growth incentive tiers. If GENZYME purchases a company that has done business with SUPPLIER historically, the growth incentive tiers will be adjusted by adding the acquired companies' historical volume to Tier 1. Each Tier will then be adjusted upward by the same percent as current tiers. 5.10.2 Adjustments to the growth incentives for GENZYME resulting from GENZYME's acquisition of a company that is presently procuring products from SUPPLIER will be reviewed and approved by both parties prior to any adjusts in the tiered rebates. 5.10.3 If SUPPLIER purchases any company that GENZYME has bought from historically the growth incentive rebates will be reviewed by both SUPPLIER and GENZYME and adjusted accordingly. 5.11 CONTINGENCY MANUFACTURING SITE AND DISASTER RECOVERY PLAN. Outlined below is the current long-term manufacturing capacities reflective both the US and Scotland Sites. 5.11.1 [**] 5.11.2 [**] 5.11.3 Contingency Manufacturing Site and Disaster Recovery Plan Scotland Facility [Inchinnan]: Plant capacity: currently staffed to run 5 days per week at two shifts per day; 24/7 provides ample expansion capabilities Based on above workweek, the current Inchinnan capacity approximates: [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -8- [**] 6. RELEASE OF ORDERS: 6.1 PURCHASE ORDER PLACEMENT. GENZYME shall have no obligation to order any Product by virtue of this Agreement alone. In the event that GENZYME orders Products hereunder, GENZYME shall issue a Purchase Order to SUPPLIER stating, at a minimum, the description and quantity of the Product(s) being ordered and the required date(s) for delivery of such Product(s). No Product shall be delivered prior to receipt of an applicable Purchase Order (whether electronically, by telephone, or fax). Purchase Orders for Custom Manufactured Products and Biosurgery Products shall be sent by hard copy or email only. In the event GENZYME does not receive a written notice of acceptance or rejection of a Purchase Order within five (5) business days of the Purchase Order date, acceptance of the Purchase Order by SUPPLIER shall be conclusively presumed. 6.2 ELECTRONIC ORDERS. Purchase Orders placed and acknowledgments sent under this Agreement may be sent in writing or by electronic means in a mutually agreed upon platform. The parties agree that: 6.2.1 The electronically transmitted Purchase Orders shall be deemed to satisfy any legal formalities requiring that agreements be in writing. 6.2.2 Neither party shall contest the validity or enforceability of any such electronic transmission under any applicable statute of frauds. 6.2.3 Computer maintained records when produced in hard copy form shall constitute business records and shall have the same validity as any other generally recognized business records. 6.3 21 CFR PART 11 COMPLIANCE. SUPPLIER and GENZYME each represent and warrant to the other that each is developing its electronic transmission and computer maintained records/security to bring such transmission, records, and security into compliance with the requirements of 21 CFR Part 11. 7. FORECASTING. PURCHASE ORDERS AND SUPPLY OBLIGATIONS: 7.1 FORECASTS. [**] 7.2 PURCHASE ORDER REQUIREMENTS: SUPPLY OBLIGATIONS. 7.2.1 GENZYME shall issue Purchase Orders for Products as follows: (i) for Custom Manufactured Products and [**] (after [**] has been approved by GENZYME for use in its bioproduction process) [**] months prior to the requested delivery date(s); (ii) for [**] and [**], [**] months prior to the requested delivery date(s); (iii) for Biosurgery Products (excluding [**]), [**] weeks prior to the requested delivery dates. 7.2.2 Each Purchase Order shall specify at a minimum the amount of each Product required, the delivery dates and location and any other ordering terms. Each Purchase Order shall constitute a binding obligation on GENZYME to take and pay for the Product specified therein subject to the terms of this Agreement. 7.2.3 [**] 7.2.4 DELAY OF DELIVERY: GENZYME may delay deliveries under an outstanding Purchase Order upon providing written notice to SUPPLIER no less than (i) [**] days before the scheduled delivery date for Custom Manufactured Products, and (ii) [**] days before the scheduled delivery date for Biosurgery Products. Such delays shall be at no additional charge to GENZYME. The maximum duration of any delay of [**] and Biosurgery Products shall be [**] months from the date of [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -9- GENZYME's notification of acceptance of the pre-shipment sample for the applicable Product (or, if no pre-shipment sample is sent, then from the original date of delivery of such Product); the maximum duration of any delay of [**] or [**] shall be [**] months from date of the Purchase Order. 8. BIOSURGERY PRODUCTS: 8.1 RAW MATERIALS FOR BIOSURGERY PRODUCTS. Prior to or on even date with its submission of a Purchase Order for Biosurgery Products, GENZYME shall deliver to SUPPLIER a sufficient amount of the materials set forth in ATTACHMENT G ("MATERIALS") to enable SUPPLIER to manufacture the amount of Biosurgery Products set forth in such Purchase Order. In the event that Materials are lost or destroyed due to SUPPLIER's negligence or misconduct, SUPPLIER will reimburse GENZYME for its direct out-of-pocket costs of the Materials and the associated shipping costs. 8.1.1 If GENZYME delays delivery of the necessary Materials, the affected Purchase Order delivery date(s) may be extended for the duration equal to such delay. 8.1.2 The parties acknowledge that SUPPLIER's manufacture of Biosurgery Products manufactured using Materials is conditional upon the Materials meeting certain specifications ("MATERIALS SPECIFICATIONS") as set forth on ATTACHMENT G. GENZYME shall accompany each delivery of Materials with Certificates of Analysis confirming that the delivered Materials meet the Materials Specifications, along with instructions for proper storage and handling of the Materials. 8.1.3 GENZYME acknowledges that if the Materials do not conform to the Materials Specifications upon their delivery to SUPPLIER, then SUPPLIER's manufacture of the Biosurgery Products may be adversely affected. [**] 8.1.4 Upon the parties' agreement with respect to the amount of Materials necessary to manufacture Biosurgery Products, GENZYME has the right to instruct SUPPLIER that excess Materials be disposed of by SUPPLIER, in which case GENZYME will reimburse SUPPLIER a disposal fee to cover SUPPLIER's expense in destroying such Material and other reasonable costs associated with the disposal of the materials. 8.1.5 SUPPLIER will provide reports to GENZYME prior to the close of each month with respect to delivered Material which will include: ending inventory, receipts, new reserves, and usage details. 8.2 OTHER BIOSURGERY PRODUCTS. The parties may enter into future agreements from time to time to add additional Biosurgery Products to ATTACHMENT B2. Biosurgery Products may only be added to this Agreement by execution of the Amendment form attached hereto as ATTACHMENT F ("SUPPLEMENTAL PRODUCT AMENDMENT" or SPA), to which a Certificate of Analysis and sample label for such product shall be attached. Supplemental Product Amendments that are currently effective between the parties as of the Effective Date are identified on ATTACHMENT J, are incorporated by reference herein, and the products described thereunder shall be Biosurgery Products hereunder, provided that where the terms of this Agreement conflict with the terms of any Supplemental Product Amendment, the terms of this Agreement shall govern. Each Supplemental Product Amendment entered into after the Effective Date shall be attached hereto as ATTACHMENTS F1, F2, and so on. 8.3 PURCHASE ORDERS. Following receipt of a Purchase Order for a biosurgery product that is not subject to a SPA, SUPPLIER and GENZYME shall review execute an SPA in the form attached hereto as ATTACHMENT F to incorporate such Biosurgery Product. SUPPLIER will not manufacture and deliver to GENZYME any Biosurgery Product that is not subject to an executed SPA. SUPPLIER shall use commercially reasonable and good faith efforts to meet GENZYME's Purchase Orders and delivery requirements for [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -10- Biosurgery Products. If SUPPLIER is unable for any reason to supply any portion of the total demand for Biosurgery Products specified in a Purchase Order that exceeds the then-applicable, accepted GENZYME Forecast, SUPPLIER may allocate its available supply among any or all customers on such basis as SUPPLIER may deem fair and practical, without liability for any failure of performance that may result therefrom. 8.4 TERMINATION OF SUPPLY OF BIOSURGERY PRODUCTS. 8.4.1 If GENZYME cannot offer its services as a result of action by the FDA, and the FDA's requirements cannot be satisfied within [**], GENZYME may terminate SUPPLIER's supply of Biosurgery Products hereunder by providing [**]. 8.4.2 Each party may terminate the supply of Biosurgery Products hereunder without cause [**] written notice to the other party. Such termination shall not affect the supply of Products other than Biosurgery Products. 9. SECURITY OF SUPPLY: 9.1 CUSTOM MANUFACTURED PRODUCTS. Upon GENZYME's request in a written or electronic Purchase Order, SUPPLIER shall commence manufacture of an inventory of Custom Manufactured Products (in the quantity (ies) set forth below) that are Pre-Approved Finished Goods (defined below), custom manufactured and stored in accordance with the applicable Specifications, and held on reserve inventory for the purpose of security of supply ("Security of Supply"). Submission of such initial Purchase Order obligates GENZYME to take delivery of the Security of Supply. Upon completion of the manufacture of the Security of Supply, SUPPLIER shall roll over such Security of Supply into its delivery of Custom Manufactured Products under the next-occurring Purchase Order on a first-in-first out-basis. At all times during the term of this Agreement, SUPPLIER shall maintain the inventory dedicated for Security of Supply in the following quantities and at the following locations: (i) [**] (ii) [**] 9.1.1 UNAPPROVED FINISHED GOODS. "UNAPPROVED FINISHED GOODS" means a Custom Manufactured Product which is tested, approved, packaged and labeled in accordance with the applicable Specifications for delivery to GENZYME by SUPPLIER, but which GENZYME has not tested to confirm conformity to the applicable Specifications. 9.1.2 PRE-APPROVED FINISHED GOODS. For GENZYME to approve a lot of [**] as Security of Supply, SUPPLIER shall send GENZYME a sample of such lot within [**] of receiving GENZYME's Purchase Order requesting such Security of Supply. Upon receipt of GENZYME's notification of acceptance of a pre-shipment sample of [**] as conforming to the applicable Specifications, the lot from which preshipment sample was taken shall be "Pre-Approved Finished Goods" for purposes of this Section 9.1. 9.1.3 FORM OF PACKAGING AND STORAGE CONDITIONS. The Security of Supply of [**] shall be maintained in [**] unless otherwise reasonably requested by GENZYME no less than [**] in advance. The Security of Supply of [**] shall be maintained in [**], unless otherwise reasonably requested by GENZYME no less than [**] in advance. 9.1.4 ORDERING SECURITY OF SUPPLY. GENZYME may, at any time, request delivery of all or part of the Security of Supply by placing a Purchase Order therefor ("SECURITY [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -11- SUPPLY ORDER"). SUPPLIER shall deliver such Security of Supply within[**] of receipt of such Security Supply Order. 9.1.5 REPLENISHMENT OF SECURITY OF SUPPLY. If GENZYME takes delivery of the entire inventory dedicated to Security of Supply pursuant to this Section 9.1, SUPPLIER shall use fully replenish the Security of Supply as follows: [**] 9.2 BACK-UP MANUFACTURING FACILITY: SUPPLIER has two manufacturing locations for [**]. In the event the primary manufacturing location becomes or would become incapable of manufacturing Custom Manufactured Products, SUPPLIER will use every available opportunity to manufacture in the alternate location; provided however, that manufacture in the Scotland facility must be approved by GENZYME in advance. 9.3 [**] 10. ACCEPTANCE: REJECTION: PRE-SHIPMENT SAMPLES: 10.1 [**]. SUPPLIER will test a sample of each lot of [**] in accordance with its Specifications prior to shipment of the full lot of [**]. SUPPLIER will provide GENZYME with a pre-shipment sample of [**] within [**] of the Purchase Order date. Such pre-shipment sample shall be [**] derived from one (1) lot of [**]. Upon receipt of such sample, GENZYME will have [**] to retest the sample in accordance with the [**] Specifications, and will notify SUPPLIER within such time whether the sample complies with the [**] Specifications. Within [**] of receipt of GENZYME's acceptance of such pre-shipment sample, SUPPLIER shall ship the full order of [**] from its New Zealand facility to its U.S. facility, and SUPPLIER'S U.S. facility will then deliver such [**] to the GENZYME location specified on the Purchase Order on or by the applicable delivery date. GENZYME's failure to provide timely notice of acceptance or rejection of the sample may result in a delay in delivery, and if so, will relieve SUPPLIER of breach with respect to a Purchase Order delivery late. 10.1.1 If GENZYME determines that the [**] sample does not comply with the [**] Specifications, GENZYME shall provide evidence to SUPPLIER supporting the claim. If SUPPLIER agrees that the [**] sample does not comply with the [**] Specifications, SUPPLIER shall provide a sample from a replacement batch of [**] within [**] after written notification of such rejection. 10.1.2 If SUPPLIER'S assays confirm that the [**] samples are in compliance with the Specifications, but GENZYME's assays determine that the samples are not in compliance with the Specifications, SUPPLIER and GENZYME will investigate the discrepancy and attempt to reach a reasonable settlement. 10.1.3 Prior to the next-scheduled shipment of [**], SUPPLIER will provide to GENZYME a Certificate of Analysis (COA) with respect to such shipment to allow GENZYME to determine the appropriate GENZYME location for the shipment to be shipped. 10.2 [**] AS A BIOSURGERY PRODUCT. 10.2.1 PRE-SHIPMENT SAMPLES. Prior to delivering [**] as a Biosurgery Product under a Purchase Order, SUPPLIER will use commercially reasonable efforts to provide GENZYME with a pre-qualification sample of [**] meeting the Specifications derived from at least one (1) lot of [**]. 10.2.2 INVENTORY. In response to GENZYME's Purchase Order for [**] as a Biosurgery Product, SUPPLIER will maintain an inventory [**] equal to the amount set forth in such Purchase Order, at no obligation to GENZYME, for [**] from the date of delivery of the preshipment sample in accordance with Section 10.2.1. [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -12- 10.2.3 ACCEPTANCE/REJECTION OF SAMPLE. If GENZYME rejects the sample of [**] in such [**] period, then SUPPLIER will provide a new sample of [**] from different lot; GENZYME acknowledges that such rejection may affect the delivery date of [**], notwithstanding any other provision herein. If GENZYME does not notify SUPPLIER of acceptance or rejection of the sample of [**] within such time period, then SUPPLIER shall have no obligation to fill the corresponding Purchase Order. If GENZYME notifies SUPPLIER of acceptance of the sample within the time period, then SUPPLIER shall ship the amount of [**] set forth in the Purchase Order, at GENZYME's instruction, either: (i) promptly in its entirety; or (ii) in installments over a period not to exceed [**]. If such installments are instructed by GENZYME to be delivered within [**] from notification of acceptance, then the price for such [**] shall be as the price existed on the date of the applicable Purchase Order; and if such installments are instructed by GENZYME to be delivered beyond [**] from notification of acceptance, then the price for [**] shall be subject to change as described in Section 5.6. 10.3 ALL BIOSURGERY PRODUCTS. 10.3.1 SHORTAGES: PATENT DEFECTS. Immediately upon receipt of a Biosurgery Product, GENZYME shall inspect same, and notify SUPPLIER of any claims for shortages, patent defects or damages, and shall hold any such Biosurgery Product pending receipt of SUPPLIER's written instructions regarding disposition. The failure of GENZYME to notify SUPPLIER within five (5) days after receipt shall constitute confirmation that the Biosurgery Product delivered was in the correct quantity, and that there were no patent defects or damages in the packaging containers. SUPPLIER will notify GENZYME if the delivery reflects an overage in excess of one hundred ten percent (110%) of the amount requested in the Purchase Order within thirty (30) days of the day of manufacture; and acceptance of such overage will be at the sole discretion of GENZYME at the original Purchase Order price. 10.3.2 COMPLIANCE WITH THE SPECIFICATIONS. GENZYME shall have thirty (30) days from the date of receipt of Biosurgery Products to confirm compliance of such Biosurgery Products with the Biosurgery Product Specifications (latent defects). The failure of GENZYME to notify SUPPLIER in writing that any Biosurgery Product was not in compliance with the Biosurgery Product Specifications shall constitute GENZYME's final acceptance of the Biosurgery Product. 10.3.3 CURE. If GENZYME rejects a Biosurgery Product as not complying with the Biosurgery Product Specifications subject to Section 8.1.3, then SUPPLIER will use commercially reasonable efforts to deliver to GENZYME a replacement lot of the Biosurgery Product. The replacement lot( s) size will be the same size as the rejected lot, unless otherwise agreed to by the parties, and will be priced at the same unit price as the failed lot. SUPPLIER will fully reimburse GENZYME for GENZYME's out of pocket cost of any raw materials consumed in the failed lot. 10.4 CUSTOM MANUFACTURED PRODUCT ACCEPTANCE 10.4.1 RECEIPT AND TESTING OF CUSTOM MANUFACTURED PRODUCT. All Custom Manufactured Product shipped shall be accompanied by quality control certificates of analysis (as set forth in Section 11) signed by a duly authorized official of SUPPLIER confirming that each batch of Custom Manufactured Product covered by such certificate meets the Specification's release requirements and shall be deemed accepted by GENZYME unless GENZYME, acting reasonably and in good faith, shall give written notice of rejection (hereafter referred to as a "REJECTION NOTICE") to SUPPLIER within sixty (60) days after receipt of the Custom Manufactured Product by, on behalf of, or for the account of GENZYME. [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -13- 10.4.2 REJECTION NOTICE. The Rejection Notice shall state in reasonable detail (sufficient to enable) SUPPLIER to identify the nature of the problem, the reason why the Custom Manufactured Product is not acceptable. Any Rejection Notice shall be accompanied by copies of all written reports relating to tests, studies or investigations performed to that date by or for GENZYME on the Custom Manufactured Product rejected. GENZYME shall have the right but not the obligation, to return the rejected Custom Manufactured Product to SUPPLIER at SUPPLIER's cost, and title to and risk of loss associated with the rejected Custom Manufactured Product shall transfer to SUPPLIER upon receipt by SUPPLIER of the rejected Custom Manufactured Product. 10.4.3 RETURN OF CUSTOM MANUFACTURED PRODUCT. Upon receipt of such Rejection Notice, SUPPLIER may require GENZYME to return the rejected Custom Manufactured Product or samples thereof (at SUPPLIER's cost) to SUPPLIER for further testing, in which event such Custom Manufactured Product or samples thereof as the case may be, shall be returned by GENZYME to SUPPLIER. Upon receipt of the rejected Custom Manufactured Product title to and risk of loss associated with the rejected Custom Manufactured Product shall transfer to SUPPLIER. If it is later determined that GENZYME was not justified in rejecting the Custom Manufactured Product, GENZYME shall reimburse SUPPLIER for the costs of the return, as well as any other costs or expenses incurred by SUPPLIER as a result of the rejection or return and retest and title to and risk of loss associated with such Custom Manufactured Product shall transfer to GENZYME upon placement of the Custom Manufactured Product on the designated carrier by SUPPLIER. 10.4.4 DISPUTE RESOLUTION. GENZYME's basis for rejection shall be conclusive unless SUPPLIER notifies GENZYME, within thirty-five (35) days of receipt of the Rejection Notice that it disagrees with such rejection. In the event of GENZYME's receipt of such a notice by SUPPLIER, representative samples of the Custom Manufactured Product in question shall be submitted to a mutually acceptable independent laboratory or consultant for analysis or review, the costs of which shall ultimately be paid by the party that is determined by the independent laboratory or consultant to have been incorrect in its determination of whether the Product should be rejected. Should the fees associated with the work conducted by the independent laboratory or consultant be due upfront, each of GENZYME and SUPPLIER shall each pay fifty percent (50%) of such upfront fees, and the party that is determined by the independent laboratory or consultant to have been incorrect in its determination shall then reimburse the other party. 10.4.5 PAYMENT OBLIGATIONS SUSPENDED FOR REJECTED CUSTOM MANUFACTURED PRODUCT. If any order of Custom Manufactured Products is rejected by GENZYME under Section 10.4, GENZYME's duty to pay all amounts payable to SUPPLIER in respect of the rejected Custom Manufactured Product shall be suspended until such time as it is determined by an independent laboratory or consultant that the Custom Manufactured Products in question should not have been rejected by GENZYME. If only a portion of an order is rejected, only the duty to pay the amount allocable to such portion shall be suspended. 11. CERTIFICATE OF ANALYSIS: OTHER DOCUMENTATION: A Certificate of Analysis will accompany Custom Manufactured Products and Biosurgery Products. SUPPLIER will accompany a Research Product with a Certificate of Analysis upon GENZYME's reasonable advanced written request. [**] and [**] shipments will also be accompanied with a certificate of country of origin, expiration date, and batch number. 12. STORAGE: DELIVERY: [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -14- 12.1 PACKAGING. All Products shall be packaged, marked and otherwise prepared for shipment by SUPPLIER in accordance with the Specifications, or if there are no such specifications for a particular Product, SUPPLIER will use reasonable commercial packaging practices. SUPPLIER shall mark on containers all necessary handling, loading and shipping instructions. An itemized packing list setting forth all Products shipped shall be included with each shipment. SUPPLIER shall store and transport Biosurgery Products in accordance with the specification set forth on ATTACHMENT I. 12.2 STORAGE. [**] 12.3 SHIPMENT. With respect to Custom Manufactured Products and Biosurgery Products, SUPPLIER shall arrange and prepay for shipping to GENZYME or the Buying Entity (as applicable), GENZYME or the Buying Entity shall reimburse SUPPLIER for such shipping charges, and title and risk of loss for such Custom Manufactured Products and Biosurgery Products shall pass to GENZYME or the Buying Entity (as applicable) upon delivery to GENZYME or Buying Entity (as applicable). With respect to Research Products, SUPPLIER shall ship such Research Products using the GENZYME Federal Express account number specified by GENZYME, and title and risk of loss for such Research Products shall pass to GENZYME or the Buying Entity (as applicable) upon delivery to Federal Express. 12.4 DELIVERY DATES. Delivery of Custom Manufactured Products and Biosurgery Products (subject to Section 8.3), shall be [**] late and no more than [**] early from agreed upon delivery date. If SUPPLIER is unable to deliver a Custom Manufactured Product or Biosurgery Product within this agreed upon time frame, SUPPLIER will, if requested by GENZYME or its Buying Entity, ship such product the fastest commercial manner available, at SUPPLIER'S expense. SUPPLIER will ship any Research Products not available at time of receipt of a Purchase Order by next-day delivery. 13. MANUFACTURING OBLIGATIONS: WARRANTIES: 13.1 CUSTOM MANUFACTURED PRODUCTS. SUPPLIER shall manufacture each Custom Manufactured Product in accordance with the Custom Manufactured Product Specifications, as set forth on ATTACHMENT C1. C2. C3 and ATTACHMENT C4. 13.2 SPECIFICATIONS: DISCONTINUATION. SUPPLIER shall not change any Specifications for, or discontinue the manufacture of, Custom Manufactured Products or Biosurgery Products without GENZYME's prior written agreement, which shall not be unreasonably withheld, except as may be required to comply with applicable laws and regulations and regulatory authority requirements, in which case SUPPLIER shall notify GENZYME and provide GENZYME with information regarding such change in accordance with the Change Notification Process set forth on attached ATTACHMENT K. Furthermore, SUPPLIER may make changes to or discontinue manufacture of Custom Manufactured Product and Biosurgery Product manufacturing process only in accordance with the Change Notification Process set forth on attached ATTACHMENT K. 13.3 BIOSURGERY PRODUCTS. Biosurgery Products supplied to GENZYME shall be under a GENZYME label, as incorporated in the Specifications and/or applicable Supplemental Product Amendment. GENZYME shall have no rights to use any trademark or logo of SUPPLIER in the promotion, sale or distribution of its products or services. SUPPLIER does not warrant that Biosurgery Product labeling designated by GENZYME meets any applicable regulatory requirement. 13.4 CUSTOM MANUFACTURED PRODUCTS WARRANTY. Each Custom Manufactured Product shipped hereunder shall, at the time it is made delivered to GENZYME or any Buying Entity: [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -15- 13.4.1 Meet such Custom Manufactured Product's Specifications; 13.4.2 Be manufactured in accordance with all applicable laws and regulations; 13.4.3 Be conveyed to GENZYME or the Buying Entity with good title; and 13.4.4 Not be adulterated or misbranded. EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT, INCLUDING IN SECTIONS 24 (INDEMNIFICATION) AND 26 (LIMITATION OF LIABILITY) HEREOF, GENZYME'S REMEDY FOR ANY BREACH OF THE FOREGOING WARRANTIES SHALL BE, AT GENZYME'S DISCRETION, EITHER REPLACEMENT OF THE NON-CONFORMING CUSTOM MANUFACTURED PRODUCT OR, IF SUPPLIER CANNOT REPLACE SUCH CUSTOM MANUFACTURED PRODUCT, REFUND OF THE CUSTOM MANUFACTURED PRODUCT PRICE. 13.5 SUPPLIER BIOSURGERY PRODUCT WARRANTY. SUPPLIER warrants to GENZYME that each Biosurgery Product shall at the time it is made available to GENZYME or a Buying Entity (as applicable): 13.5.1 Meet the relevant Biosurgery Specifications attached hereto as ATTACHMENT B2, F and G; 13.5.2 Be manufactured in substantial compliance with QSR or other similar requirements to the extent that such other applicable requirements have been incorporated into the Biosurgery Product Specifications at the time of manufacture of the Biosurgery Product; 13.5.3 Be packaged and shipped to GENZYME in a manner consistent with the Biosurgery Product Specifications attached hereto as ATTACHMENT B2, F and G; 13.5.4 Not be sold by SUPPLIER over a GENZYME label to Third Parties for any purpose. 13.6 STERILITY. The determination as to whether each batch of a Biosurgery Product is Sterile by the procedures defined in the Biosurgery Product Specifications provides a small, but non-zero probability that each and every container of a Biosurgery Product produced as part of a batch of a Biosurgery Product, which batch is in compliance with the Biosurgery Product Specifications, is not Sterile. Biosurgery Product packaging and aseptic filling process has not been qualified by the SUPPLIER to achieve or maintain a defined sterility assurance level. SUPPLIER DISCLAIMS ANY WARRANTY THAT EACH AND EVERY CONTAINER OF BIOSURGERY PRODUCT SHALL BE STERILE. 13.7 GENZYME ACKNOWLEDGEMENTS. 13.7.1 GENZYME acknowledges that SUPPLIER has not qualified Biosurgery Products for any human or animal diagnostic or therapeutic application. 13.7.2 GENZYME acknowledges that SUPPLIER has no responsibility with respect to whether components in the end product of any GENZYME therapeutic or diagnostic process are suitable for GENZYME's intended use, or for use in any other process using a Biosurgery Product which is practiced by GENZYME or any other party and which involves the health of a human. 13.7.3 EXCEPT AS OTHERWISE SET FORTH IN SECTION 24 (INDEMNIFICATION) HEREOF, GENZYME'S SOLE REMEDY FOR ANY BREACH OF THE FOREGOING WARRANTIES REGARDING BIOSURGERY PRODUCTS SHALL BE, AT GENZYME'S-DISCRETION, EITHER REPLACEMENT OF THE NON-CONFORMING BIOSURGERY PRODUCT OR, IF SUPPLIER CANNOT REPLACE SUCH BIOSURGERY PRODUCT, REFUND OF THE BIOSURGERY PRODUCT PRICE PAID. [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -16- 13.8 BIOSURGERY PRODUCT ISSUES. SUPPLIER shall notify GENZYME or the applicable Buying Entity in writing immediately upon learning: (i) that a Biosurgery Product delivered hereunder fails to meet the Biosurgery Product Specifications; or (ii) of a deviation of the Biosurgery Product batch records which could impact product quality; and in each case initiate an investigation and implement corrective action where commercially reasonably appropriate. 13.9 GENZYME BIOSURGERY PRODUCT WARRANTIES. GENZYME warrants that: 13.9.1 It has now and will maintain the technical and other requisite competencies to determine the suitability of the Biosurgery Products for the uses to which GENZYME or its customers will put such Biosurgery Products; 13.9.2 the Biosurgery Product Specifications have been determined by GENZYME to be adequate to confirm the suitability of the Biosurgery Product, its packaging and labeling supplied hereunder for the uses to which such Biosurgery Product will be put by GENZYME or its customers; 13.9.3 it shall ship Biosurgery Products in furtherance of its provision of service to its customers only under GENZYME's label; 13.9.4 GENZYME's processes are structured and will be operated only in a manner in which the use of any Biosurgery Product which is not Sterile shall be detected by GENZYME prior to any use of the Biosurgery Product; 13.9.5 It shall perform diligently sufficient incoming inspection to satisfy its obligations under this Agreement and under all applicable laws, rules and regulations. 13.10 LIMITATION OF WARRANTIES. SUPPLIER's warranties herein are personal to the purchaser of Biosurgery Products, and shall not be construed as running to the benefit of any Buying Entity's distributors or its or their customers. 13.11 WARRANTY DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, SUPPLIER MAKES NO WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PRODUCT, AND SUPPLIER DISCLAIMS ALL OTHER WARRANTIES, EXPRESS AND IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. SUPPLIER PROVIDES NO REPRESENTATIONS OR WARRANTIES THAT THE PRODUCTS ARE SUITABLE FOR USE IN ANY THERAPEUTIC OR DIAGNOSTIC PROCESS FOR HUMANS AND ANIMALS. 13.12 HERD MANAGEMENT. SUPPLIER agrees to conduct its Herd Management in conformance with the [**] Processing Protocols attached hereto as ATTACHMENT H to this Agreement. 13.13 TRACEABILITY. SUPPLIER will ensure traceability to the original manufacturer of each raw material used in the manufacture of Custom Manufactured Products and Biosurgery Products 13.14 SITE AUDIT. SUPPLIER will, within sixty (60) days of GENZYME's reasonable written request, allow GENZYME to inspect that portion of SUPPLIER's manufacturing facilities in which SUPPLIER manufactures Products, provided that GENZYME signs SUPPLIER'S standard site visit confidentiality agreement. SUPPLIER will work with GENZYME's audit team to secure a mutually agreeable date for such audit, respond to any reasonable questions, and take any compliance issues that may arise into consideration. 13.15 REGULATORY INSPECTION. SUPPLIER shall provide written notification of all inspections from any regulatory agencies that specifically apply to Custom Manufactured Products and Biosurgery Products within thirty (30) days of SUPPLIER's receipt of notice of such inspections. These inspections include: ISO, FDA, EC, HPB, and MCA. SUPPLIER shall [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -17- inform GENZYME within twenty-four (24) hours should any regulatory or ISO approval be withdrawn for Custom Manufactured Products and Biosurgery Products, if there are any recalls of items provided to GENZYME, or if any regulatory agency initiates any enforcement action against the SUPPLIER with respect to Custom Manufactured Products and Biosurgery Products. 14. OTHER OBLIGATIONS: 14.1 TECHNICAL SEMINARS. SUPPLIER and GENZYME's Science and Research Corporate Purchasing group will, from time to time, discuss the provision of technical seminars by SUPPLIER at a central GENZYME location. 14.2 QUARTERLY BUSINESS REVIEWS. SUPPLIER will conduct quarterly business reviews coordinated with designated GENZYME personnel, to monitor GENZYME's forecasts, business progress, on-time delivery (of product listed in ATTACHMENTS B1, B2 and B4) and cost savings. Such business reviews will review all areas of SUPPLIER'S business that is directly related to GENZYME. SUPPLIER will supply such business reviews to GENZYME no later than forty-five (45) days after the close of the previous business quarter for international, and thirty (30) days after the close of the previous business quarter for domestic, and the parties will meet to discuss such business reviews at a GENZYME location no later than sixty (60) days after the close of each calendar quarter. 14.3 ACCOUNT ADMINISTRATION: GENZYME and SUPPLIER will assign a primary individual to manage such party's account established by this Agreement. Each party may request a change of the other party's account manager upon written notice of at least ninety (90) days to the other party, at which point the parties shall attempt to resolve the issue. 14.4 GOVERNMENT APPLICATIONS. 14.4.1 SUPPLIER will cooperate with GENZYME by supporting any FDA applications with appropriate technical information available at that time to SUPPLIER. 14.4.2 GENZYME shall have the sole responsibility to obtain any government authorizations necessary to test, distribute or sell materials that use or incorporate the Biosurgery Products. 14.4.3 To the extent that GENZYME determines that applications to and approval from the FDA or other governmental authority are necessary for a Biosurgery Product, SUPPLIER will cooperate fully with GENZYME by providing available technical information about the Biosurgery Product to GENZYME for incorporation in GENZYME's application 14.4.4 Should GENZYME request SUPPLIER to provide proof of manufacture of a Biosurgery Product to a regulatory authority, SUPPLIER shall cooperate and supply information in response to such request. GENZYME shall reimburse any reasonable out of pocket expenses incurred by SUPPLIER in complying with GENZYME's request. 14.4.5 With respect to supply of Biosurgery Products for use in a European or other non-U.S. country, all of the provisions of this Section 14.4 and of Section 13.5 shall be construed to encompass the various equivalent (or most nearly equivalent) regulatory agencies and regulations applicable, to the extent that any requirements of such other authorities which are different than those of the U.S. government have been incorporated by mutual written agreement in amended Biosurgery Product Specifications. The parties shall negotiate in good faith using reasonable efforts any modifications to the provisions hereof occasioned by virtue of the supply of Biosurgery Products to a European country. The parties acknowledge and agree that because Biosurgery Products to be supplied to European countries pursuant to this Agreement is to be under a GENZYME label, the primary responsibility lies with GENZYME to identify the requirements [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -18- of the laws and regulations of each such country, and to communicate such requirements to SUPPLIER in order to amend the Biosurgery Product Specifications appropriately. 15. TERMINATION: 15.1 TERM. The term of this Agreement is set forth in Section 3. 15.2 TERMINATION FOR BREACH. If one party defaults in the performance, or fails to perform any of its material obligations under this Agreement, and such default is not remedied, or significant progress is not made towards resolving such default, within sixty (60) days written notice from the non-defaulting party, then the nondefaulting party shall have the right to terminate this Agreement and avail itself of any and all rights and remedies to which it may be entitled by law or in equity. 15.3 TERMINATION FOR BANKRUPTCY. Each party may terminate this Agreement effective immediately without liability upon written notice to the other if anyone of the following events occurs: 15.3.1 the other files a voluntary petition in bankruptcy or an involuntary petition is filed against it; 15.3.2 the other is adjudged bankrupt; 15.3.3 a court assumes jurisdiction of the assets of the other under federal reorganization act; 15.3.4 a trustee or receiver is appointed by a court for all or a substantial portion of the assets of the other; 15.3.5 the other becomes insolvent or suspends business; or 15.3.6 the other makes an assignment of its assets for the benefit of its creditors. 15.4 TERMINATION FOR INFRINGEMENT OR VIOLATION OF LAW. Each party may terminate this Agreement, or may terminate supply of a particular Product under this Agreement, upon sixty (60) days written notice to the other party if it would constitute a violation of law for the terminating party or its relevant Affiliate (i.e., a Buying Entity or Selling Entity, as applicable) to fulfill its obligations hereunder without (i) infringing the intellectual property of a Third Party, breaching federal or other governmental regulations, including but not limited to FDA requirements; or (ii) violating any law. 15.5 EFFECT OF TERMINATION OR EXPIRATION. 15.5.1 PURCHASE ORDERS. Upon termination or expiration of this Agreement, GENZYME either itself or through its Buying Entities shall (i) take delivery of and pay for all Products under any Purchase Order outstanding as of the date of termination; (ii) take delivery of and pay for all Biosurgery Products manufactured in reliance upon the binding portion of the relevant forecast; (iii) each Buying Entity shall not be relieved of the obligation to purchase all Products for which it has placed Purchase Orders; (iv) purchase all Products held in inventory as of the date of termination by or for SUPPLIER pursuant to the security of supply provision in Sections 9.1 or 10.2; and (v) SUPPLIER either itself or through its Selling Entity will fulfill all Purchase Orders submitted to SUPPLIER either itself or through its Selling Entity prior to the effective date of termination. In the event of any termination of this Agreement, GENZYME shall be responsible for taking delivery of Custom Manufactured Products and Biosurgery Products under any outstanding Purchase Order only if such Custom Manufactured Product or [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -19- Biosurgery Product has entered the manufacturing process at the time of termination. 15.5.2 SUPPLY STOCK AND RAW MATERIALS. If this Agreement is terminated by GENZYME for any reason, or if the Agreement is terminated by SUPPLIER on account of breach by GENZYME, GENZYME will purchase (i) all Custom Manufactured Products and Biosurgery Products that may reside in SUPPLIER inventory under outstanding Purchase Orders and as set forth in Sections 9.1 or 10.2; and (ii) any raw material (including [**]) purchased by or for SUPPLIER specifically for manufacture of any Custom Manufactured Product or Biosurgery Product in accordance with an outstanding Purchase Order and/or, in the case of Biosurgery Products, in accordance with the the-binding portion of GENZYME's forecast. GENZYME may request that SUPPLIER provide cost justification to support such reimbursement. No termination shall relieve GENZYME of its obligation to purchase all Products for which it has placed Purchase Orders. 15.5.3 BIOSURGERY PRODUCTS. In the event of GENZYME's termination of this Agreement for reason other than SUPPLIER's breach or bankruptcy, and unless otherwise agreed to by the parties, GENZYME shall accept delivery and pay for all Biosurgery Products for which SUPPLIER has commenced manufacture under the then-current GENZYME Forecast, and GENZYMES shall reimburse SUPPLIER for its direct, out-of-pocket costs of raw materials purchased to manufacture such Biosurgery Products to the extent such costs were authorized in writing by GENZYME and SUPPLIER cannot reasonably use raw materials. 16. SBA SOCIO-ECONOMIC REPORTING: GENZYME encourages SUPPLIER to use the following subcontractors and suppliers among its sources of supply, as defined by the Fair Labor Standards Act: Small Business, Small Disadvantaged, Service Disabled Veteran Owned, Woman Owned, HubZoned Small Business, and Veteran Owned. SUPPLIER shall supply GENZYME with SUPPLIER's Vendor Diversification Plan upon GENZYME's written request. 17. CONFIDENTIALITY: 17.1 NONUSE AND NONDISCLOSURE OBLIGATIONS. Each party shall maintain as confidential and shall not disclose, copy nor use for purposes other than the performance of this Agreement, any information which relates to the other party's business affairs, trade secrets, technology, research and development, pricing, or the terms of this Agreement ("CONFIDENTIAL INFORMATION") and each agrees to protect that Confidential Information of the other with the same degree of care it exercises to protect its own confidential information. 17.2 Exceptions. "Confidential Information" shall not include any information that: 17.2.1 is within the public domain prior to the time of the disclosure hereunder or thereafter becomes within the public domain other than as a result of disclosure by the receiving party in violation of this Agreement; 17.2.2 was in the possession of the receiving party on or before the date of disclosure hereunder, as evidenced by records, however maintained; 17.2.3 is acquired by a party hereto from a Third Party not under an obligation of confidentiality; 17.2.4 the receiving Party must disclose by law, order, subpoena, or regulation of a governmental agency or a court of competent jurisdiction, provided the other party receives prior written notice of such disclosure; or 17.2.5 is hereafter independently developed by a party without reference to or reliance upon the other party's Confidential Information, as evidenced by records, however maintained. [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -20- 17.3 INJUNCTIVE RELIEF. Breach of this Section 17 by one party may cause irreparable damage to the other party and, therefore, the injured party shall have the right to seek equitable and injunctive relief, and to recover the amount of damages (including reasonable attorney's fees and expense) incurred in connection with such disclosure and/or unauthorized use. 17.4 EFFECT UPON TERMINATION OR EXPIRATION. Upon expiration or termination of this Agreement, each party agrees to return to the other or destroy all Confidential Information of the other, as the other party may request. The obligations of confidentiality and nonuse set forth in this Section 17 shall survive expiration or termination of this Agreement. 18. INSURANCE: 18.1 INSURANCE COVERAGE. SUPPLIER, as its own expense, shall procure and maintain during the Initial Term, insurance policies with the following minimum coverages ("INSURANCE"). (a) [**] (b) [**] (c) [**] 18.2 PREMIUMS: PRIMARY COVERAGE. GENZYME shall not be liable for the payment of any premium or assessments with respect to any of the Insurance. GENZYME and each Buying Entity and their successors and assigns (and their officers, directors, employees, agents, and designees) shall be named as additional insured relative to SUPPLIER'S performance of services and other activities on or about the premises of each GENZYME or its Buying Entity. The Insurance shall be primary for all purposes to other insurance coverage, whether such other insurance is stated to be primary, contributory, excess, contingent or otherwise, as respects any and all liability, loss, claims, damages or expense arising out of the negligence or alleged negligence of SUPPLIER or a Selling Entity. 19. WORK ON GENZYME'S PREMISES AND SECURITY: 19.1 PREMISES RULES. SUPPLIER'S employees shall, when on GENZYME'S premises, conduct themselves in such a manner that the work does not interfere with the operation of GENZYME'S business, and strictly comply with all of GENZYME'S written rules for on-premises work. 19.2 VEHICLE SEARCH. For security purposes, all vehicles, persons and materials of or from SUPPLIER and its subcontractors, employees, agents, representatives or invitees entering or exiting the premises of GENZYME are subject to search upon request of any representative of the Corporate Security Department of GENZYME. 19.3 LOSS OR THEFT. Any instances of theft or loss under this Agreement involving SUPPLIER or any of its personnel, employees, agents, representatives, subcontractors or invitees of which SUPPLIER becomes aware shall be immediately reported to GENZYME. 20. RESEARCH PRODUCT WARRANTIES: [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -21- The SUPPLIER warrants to GENZYME that each Research Product shall conform substantially to the description of such Research Product as provided in the applicable catalog as referenced in Section 2.1.2 above and literature accompanying the Research Products until their respective expiration dates or, if no expiration date is provided, for six (6) months from the date of the Buying Entity's receipt of the Research Products. SUPPLIER warrants that all Research Products delivered hereunder will be new, of the grade and quality specified by SUPPLIER, free from material defects in design, material and workmanship, will conform to delivered samples and written descriptions, and will be free of liens and encumbrances. The warranties shall survive any delivery, inspection, payment or acceptance of the Products. At its expense, SUPPLIER shall replace Research Products not conforming to the foregoing warranties. GENZYME'S SOLE REMEDY FOR ANY BREACH OF THE FOREGOING WARRANTIES SHALL BE REPLACEMENT OF THE NON-CONFORMING RESEARCH PRODUCT OR, IF SUPPLIER CANNOT REPLACE SUCH RESEARCH PRODUCT, REFUND OF THE RESEARCH PRODUCT PRICE PAID. 21. AUTHORIZED USES OF RESEARCH PRODUCTS: Except as otherwise agreed in writing by an authorized representative of SUPPLIER, the purchase and sale of Research Products hereunder only conveys to GENZYME the non-transferable right for only GENZYME to use the purchased quantity of Research Products in compliance with the applicable intended use statement, limited use statement or limited label license, if any, in SUPPLIER's written catalogs or more recent Research Product literature or on the label or other documentation accompanying the Research Products (all such statements or licenses being incorporated herein by reference as if set forth herein in their entirety). Unless otherwise expressly indicated in SUPPLIER's written catalogs or more recent Research Product literature, or on the label or other documentation accompanying the Research Products, GENZYME may use the Research Products for research use only and not for any other purpose including, but not limited to, commercial purposes, in vitro diagnostic purposes, ex vivo or in vivo therapeutic purposes, investigational use, in foods, drugs, devices or cosmetics of any kind, or for consumption by or use in connection with or administration or application to humans or animals. GENZYME acknowledges that the Research Products have not been tested by or for SUPPLIER for safety or efficacy except as expressly stated in SUPPLIER'S written catalogs or more recent product literature, or on the label or other documentation accompanying the Research Products. Without limiting the foregoing restrictions, GENZYME warrants to SUPPLIER that should GENZYME use the goods for any use other than research, GENZYME shall conduct all necessary tests, comply with all applicable regulatory requirements, issue all appropriate warnings and information to subsequent purchasers and/or users and be responsible for obtaining any required intellectual property rights. GENZYME agrees to comply with instructions for use of the Research Products, if any, and not to misuse the Research Products. GENZYME also agrees to inform its employees of the risks, if any, involved in using or handling the Research Products and to train and equip them to handle the Research Products safely. SUPPLIER will label all hazardous shipments in accordance with HAZMA T standards. GENZYME realizes that because SUPPLIER'S goods are intended primarily for research purposes, they may not be on the Toxic Substances Control Act (TSCA) inventory. GENZYME assumes responsibility to ensure that purchased Research Products are approved for use under TSCA, if applicable. GENZYME has the responsibility to conduct any research necessary to learn the hazards involved for any of GENZYME'S uses of Research Products and to warn GENZYME'S customers, employees and any auxiliary personnel (such as freight handlers, etc.) of any risks [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -22- involved in GENZYME's use or handling of the Research Products. GENZYME agrees to comply with instructions for use of the Research Products, if any, and not to misuse the Research Products. If GENZYME is to repackage, re-label or use a Research Product as a starting material or component of other products, GENZYME will make commercially reasonable efforts to qualify the Research Products for such applications, and comply with all applicable laws and regulations relating to labeling or providing other communications to customers. GENZYME also agrees to make commercially reasonable efforts to inform its employees of the risks, if any, involved in using or handling the Research Products and to train and equip them to handle the Research Products safely. SUPPLIER will label all hazardous shipments in accordance with HAZMAT standards. 22. [**] TRANSMISSIBLE SPONGIFORM ENCEPHALOPATHY COMPLIANCE. SUPPLIER warrants that in the event that any Product that contains or is defined as being a ruminant derived material(s) and/or material(s) derived from animals which are susceptible to infection with transmissible spongiform encephalopathy through the oral route, it shall provide GENZYME with a current Certificate of Suitability (as defined in European Pharmacopoeia Monograph 2001: 1483, Products With Risk of Transmitting Agents of Animal Spongiform Encephalopathies - a sample of which is contained in ATTACHMENT L). SUPPLIER shall be responsible for advising GENZYME of any changes to the Certificate of Suitability in writing, and shall also provide an updated copy of the Certificate of Suitability as soon as it becomes available. SUPPLIER shall be responsible for identifying the Certificate of Suitability 10 number and its expiration date on any Certificate of Analysis for materials of Animal Origin (defined below). Within a commercially reasonable time after receipt of GENZYME's written request, SUPPLIER shall provide GENZYME with a Letter of Origin stating whether raw materials used in the manufacture of a Product are synthetic or plant derived, or if Animal Origin, whether the raw materials meet the Certificate of Suitability requirements. Material shall be deemed of "Animal Origin" if it is derived from animal tissues, cells, or body fluids; an "animal" is defined as a higher eukaryotic organism, including mammals (to include humans), fish, birds, reptiles, amphibians, insects, mollusks, etc. Animal Origin does not include lower eukaryotic organisms (including without limitation higher plants, fungi, protozoa and algae); nor does it include prokaryotic organisms (including without limitation bacteria or blue-green algae). 23. EXPORT CONTROL: Neither SUPPLIER nor GENZYME shall export or re-export, either directly or indirectly, any technical data relating to Products, incorporating the other party's Confidential Information or any Product in contravention of any laws or regulations of the United States, including but not limited to the United States Export Administration Act of 1979 as amended, the Trading With the Enemy Act, and the regulations of the U.S. Departments of Commerce, Defense, State, Energy and Treasury, pursuant thereto. 24. INDEMNIFICATION: 24.1 [**] 24.2 [**] 24.3 [**] 24.4 [**] 25. COMPLIANCE WITH LAWS: Each party represents and warrants that in the performance of this Agreement, it and its relevant Affiliates (i.e., Selling Entities and Buying Entities) shall comply with all applicable federal, state and local laws, ordinances, rules, and regulations (including without limitation, and if applicable, [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -23- 40 CFR 720.3(ee)). Each party agrees to indemnify and hold harmless the other from any and all liabilities, claims, demands, losses, costs, damages or expenses regardless of the nature of same to the extent they arise from any Third Party claim against such party for its or its relevant Affiliate's failure to comply with such laws, ordinances, rules or regulations. 26. LIMITATION OF LIABILITY: Except for claims arising under Sections 17 (Confidentiality), neither party shall be liable to the other for any indirect, incidental, special or consequential damages (including, without limitation, any damages arising from loss of use or lost business revenue, profits or goodwill) arising in connection with this Agreement, whether in an action in contract, tort, strict liability, warranty, or negligence even if advised of the possibility of such damages. [**] 27. ASSIGNMENT: The terms and provisions of this Agreement shall inure to the benefit of, and be binding upon, GENZYME, SUPPLIER, and their respective successor and assigns, including pursuant to a merger or consolidation; further, each party may, without the consent of the other, assign its rights and interests, and delegate its obligations hereunder, effective upon written notice thereof to the other party: (a) to an Affiliate if such Affiliate assumes all of the obligations of the assigning party hereunder and this Agreement remains binding upon the assignor, or (b) to any entity that acquires all or substantially all of the assets of a party to which this Agreement pertains, or which is the surviving entity in a merger or consolidation, if such entity assumes in writing all of the obligations of a party hereunder. Any attempt to assign or delegate any portion of this Agreement in violation of this Section 27 shall be null and void. Subject to the foregoing, any reference to GENZYME or SUPPLIER hereunder shall be deemed to include the successors thereto and assigns thereof. 28. JURISDICTION: This Agreement is deemed to be made under and shall be interpreted in accordance with the laws of the Commonwealth of Massachusetts. 29. SEVERABILITY: REMEDIES: WAIVER: In the event that anyone or more provisions contained in this Agreement shall be held by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The remedies contained herein are cumulative and in addition to, any other remedies at law or equity. A failure to enforce, or waiver of a breach of, any provision of this Agreement shall not constitute a waiver of any other breach or of such provisions. 30. NOTICES: All notices under this Agreement shall be in writing, properly addressed and shall be deemed to have been duly given or received upon the earlier of (i) if by personal service, when actually received, (ii) five business days after sending by registered or certified mail, return receipt requested, (iii) one business day after sending via a next business day commercial delivery service, and such service obtains the signature of a representative of the recipient; or (iv) one (1) day after transmission by facsimile. Any notices not addressed as follows shall be deemed not to have been give or received. [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -24- For notices to SUPPLIER regarding forecasts or operation of this Agreement: TO SUPPLIER (CUSTOM MANUFACTURED PRODUCTS): TO SUPPLIER (BIOSURGERY PRODUCTS): Invitrogen Corporation Invitrogen Corporation 3175 Staley Road 3175 Staley Road Grand Island, NY 14072 Grand Island, NY 14072 Attention: Arun Singhal Attention: Rick McAvoy Tel: 716-774-6769 Tel: 716-774-6959 Fax: 716-774-6811 Fax: 716-774-6811 TO GENZYME: WITH A COPY TO: Patti Nardi Douglas Hunt Director, Supply Management Associate Director, CQS Genzyme Corporation Genzyme Corporation PO Box 9322 PO Box 9322 Framingham, MA 01701-9322 Framingham, MA 01701-9322 WITH A COPY TO: Legal Department of Genzyme One Kendall Square Cambridge, MA 02139 For notices to SUPPLIER regarding interpretation, terms, termination, or breach of this Agreement, all notices shall be sent via mail or commercial delivery service: TO INVITROGEN: WITH A COPY TO: Invitrogen Corporation Invitrogen Corporation 1600 Faraday Avenue 1600 Faraday Avenue Carlsbad, CA 92008 Carlsbad, CA 92008 Attention: Contracts Department Attention: General Counsel Tel: 760-603-7200 Tel: 760-603-7200 Fax: 760-476-6326 Fax: 760-476-6326 TO GENZYME: WITH A COPY TO: Patti Nardi Douglas Hunt Director, Supply Management Associate Director Genzyme Corporation Genzyme Corporation PO Box 9322. PO Box 9322 Framingham, MA 01701-9322 Framingham, MA 01701-9322 WITH A COPY TO: Legal Department of Genzyme 15 Pleasant Street Connector Framingham, MA 10701 Notices to Buying Entities under this Agreement shall be delivered to those entities at the locations and addresses identified on ATTACHMENT A. 31. ADVERTISING: Without the prior written consent of each party's representative as designated in Section 30, and except as permitted under Section 17, neither GENZYME nor SUPPLIER shall in any manner advertise, publish, or disclose to any Third Party the terms of this Agreement. [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -25- 32. STATUTES AND EXECUTIVE ORDERS: The following statutes and Executive Orders ("EO's") together with Regulations issued hereunder are made a part of this Agreement: - Equal Opportunity (41 C.R.R. 60-14, EO 11246), - Employment of Disabled Veterans, and Veterans of Vietnam ERA (Sec. 60-250.4 of Title 41 C.F.R.) - Employment of the handicapped (sec. 60-741.4 of title 41 C.F.R., EO 11758) 33. SURVIVAL: All rights and obligations of the parties set forth herein that expressly or by their nature survive the expiration or termination of this Agreement (including, without limitation, rights and obligations under outstanding Purchase Orders) shall continue in full force and effect subsequent to and notwithstanding the expiration or termination of this Agreement until they are satisfied or by their nature expire and shall bind the parties and their legal representatives, successors, and permitted assigns. Without limiting the foregoing, any of the provisions of this Agreement and/or its Attachments dealing with Delivery, Payment, Warranty, Authorized Use, Confidential Information and Advertising, Intellectual Property Indemnity, Compliance with Laws, and Sections 2.2.8, 26, 28, 30, 34, 35, 36.4, 36.5 and 36.6=shall survive termination of this Agreement. 34. ADDITIONAL OR INCONSISTENT TERMS: Any terms or conditions set forth in any invoice provided to GENZYME by SUPPLIER or in any order provided to SUPPLIER by GENZYME (including, without limitation, Purchase Orders) which is in any way different from, inconsistent with or in addition to the terms and conditions set forth herein will not become a part of this Agreement or be binding upon GENZYME or SUPPLIER. 35. ENTIRE AGREEMENT: This Agreement and its Attachments constitute the entire agreement between the parties relating to the subject matter hereof, and supersedes and replaces all prior agreements, written or oral; between the parties regarding Products (including, without limitation, the Biosurgery Agreement). Any modification or waiver of any provision must be made in writing and signed by authorized representatives of each party. 36. GENERAL PROVISIONS. 36.1 NON-EXCLUSIVITY. SUPPLIER is not, and nothing in this Agreement shall imply that SUPPLIER or Selling Entities are GENZYME's or Buying Entities' exclusive manufacturer or supplier of Products. GENZYME and Buying Entities are not, and nothing in this Agreement shall imply that GENZYME or Buying Entities are, SUPPLIER's exclusive purchaser of Products. 36.2 FORCE MAJEURE. Notwithstanding anything contained in this Agreement to the contrary, and except for the obligation to make payment in any event other than war or civil disturbance, neither GENZYME nor SUPPLIER shall be liable for or considered to be in breach of this Agreement as a result of failure or delay in fulfilling its obligations under this Agreement where such failure or delay is due either in whole or in part to any act of God, war, civil disturbance, strike, labor dispute, fire, storm, earthquake, shortage of power, labor, materials, or transport or act of any government or other competent authority or any other circumstance beyond the reasonable control of GENZYME or SUPPLIER (as the case may be). This Agreement shall be deemed suspended as long as and to the extent that any such cause prevents or delays its performance. After sixty (60) cumulative days of such suspension on the part of one party, the other party may, at [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -26- its sole discretion, terminate its obligations under this Agreement with respect to the particular Product delayed by such force majeure, without further liability. 36.3 INDEPENDENT CONTRACTOR. SUPPLIER shall furnish Products to GENZYME as an independent contractor and not as an employee or agent of GENZYME. Except as expressly stated herein, SUPPLIER may not act for, bind, or represent GENZYME in any manner. 36.4 HEADINGS. Headings used herein are for descriptive purposes only and shall not control or alter the meaning of this Agreement as set forth in the text. 36.5 SEVERABILITY. Should one or more of the provisions contained in this Agreement be held invalid, illegal or unenforceable by a court or tribunal with jurisdiction to do so, then the validity, legality and enforceability of the remaining provisions contained herein shall not be affected or impaired thereby, unless the absence of the invalidated provision(s) adversely affect the parties' substantive rights. In such instance, the parties shall use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, implement the purposes of this Agreement. 36.6 NO AMENDMENT: WAIVER. This Agreement shall not be amended except by an instrument in writing executed by both parties. Failure of either party at any time to enforce any of the provisions of this Agreement shall not be deemed to be a waiver of such or any other provision hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives. Invitrogen Corporation (SUPPLIER) GENZYME CORPORATION (GENZYME) By: By: ----------------------------------- ------------------------------ Name: Mark Bamforth Date --------------------------------- Title: Title: SVP, Corporate Operations -------------------------------- [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. -27- ATTACHMENT A GENZYME AUTHORIZED BUYING ENTITIES GENZYME Genzyme Genzyme Genzyme CORPORATION * Corporation Corporation Corporation (Headquarters) 31 New York 51 New York 76 New York 500 Kendall Street Avenue Avenue Avenue Cambridge, MA Framingham, MA Framingham, MA Framingham, MA 02142 01701-9322 01701-9322 01701-9322 Telephone: 617- Telephone: 508- Telephone: 508- Telephone: 508- 252-7500 424-4300 424-4300 424-4300 Fax: 617-252-7600 Fax: 508-872-4091 Fax: 508-872-4091 Fax: 508-424-4066 Genzyme Genzyme Genzyme Genzyme Corporation Corporation Corporation Corporation 80 New York 11 Pleasant Street One Mountain Road 45 New York Avenue Connector Framingham, MA Avenue Framingham, MA PO Box 9322 01701-9322 Framingham, MA 01701-9322 Framingham, MA Telephone: 508- 01701-9322 Telephone: 508- 01701-9322 872-8400 Telephone: 508- 424-4300 Telephone: 508- Fax: 508-872-9080 424-4300 Fax: 508-424-4066 872-8400 Fax: 508-872-4091 Fax: 508-872-9080 Genzyme Genzyme Genzyme Genzyme Corporation Corporation Corporation Corporation 74 New York 78 New York 15 Pleasant Street 5 Mountain Road Avenue Avenue Connector Framingham, MA Framingham, MA Framingham, MA PO Box 9322 01701-9322 01701-9322 01701-9322 Framingham, MA Telephone: 508- Telephone: 508- Telephone: 508- 01701-9322 872-8400 424-4300 424-4300 Telephone: 508- Fax: 508-872-9080 Fax: 508-424-4066 Fax: 508-872-4091 872-8400 Fax: 508-872-9080 GENZYME Genzyme CORPORATION Corporation (Diagnostics (Diagnostics Business Unit Business Unit Headquarters) Location) One Kendall Square 6659 Top Gun Cambridge, MA San Diego, CA 02139 92121 Telephone: 617- Telephone: 858- 252-7500 452-3198 Fax: 617-252-7600 Fax: 858-452-3258
GENZYME GENZYME CORPORATION PHARMACEUTICALS (Pharmaceuticals Sygena Facility Business Unit Eichenweg 1 Headquarters) CH 4410 Liestal 500 Kendall Street SWITZERLAND Cambridge, MA Telephone: 011-41- 02142 061-906-5959 Telephone: 617- Fax: 011-41-061- 252-7500 906-5958 Fax: 617-252-7600 GENZYME Genzyme Genzyme CORPORATION Corporation Corporation (Biosurgery Division (Biosurgery Division (Biosurgery Division Headquarters) Location) Location) 500 Kendall Street 64 Sidney Street 65 Railroad Avenue Cambridge, MA Cambridge, MA Ridgefield, NJ 02142 02139 07657 Telephone: 617- Telephone: 617- 252-7500 494-8484 Fax: 617-252-7600 Fax: 617-494-6561 GENZYME Genzyme Genzyme Genzyme CORPORATION Corporation Corporation Corporation (Genetics Business (Genetics Business (Genetics Business (Genetics Business Unit Headquarters) Unit Location) Unit Location) Unit Location) Metro West Place 2000 Vivigen Way One Corporate 6991 E. Camelback 15 Pleasant Street Santa Fe, NM Drive Road Connector 87505 Yonkers, NY Suite B295 PO Box 9322 Telephone: 505- 10701-6807 Scottsdale, AZ Framingham, MA 438-1111 Telephone: 914- 85251 01701-9322 Fax: 505.A38-1120 969-3399 Telephone: 602- Telephone: 508- Fax: 914-969-2019 675-0250 872-8400 Fax: 602-675-0210 Fax: 508-872-5663 Genzyme Genzyme Genzyme Corporation Corporation Corporation (Genetics Business (Genetics Business (Genetics- Unit Location) Unit Location) Pasadena) 10421 University 1054 Town & 11 West Del Mar Center Drive #100 Country Road Pasadena, CA Tampa, FL 33612- Orange, CA 92868 91105 6422 Telephone: 714- Telephone: 800- Telephone: 813- 245-9259 255-1616 979-9442 Fax: 714-245-9259 Fax: 813-972-4632
Genzyme Genetics Genzyme Genetics Genzyme Genetics Genzyme Genetics I m path Impath Impath Impath 521 West 5ih St. Receiving Location Receiving Location Receiving Location New York NY 10019 5340 Alia Rd. 5300 McConnell 625 West 55th St. Los Angeles CA Ave. 5th Floor 90066 Los Angeles, CA New York, NY 90066 10019 Genzyme Genetics Genzyme Genetics I m path I m path Receiving Location Receiving Location 518 West 58th St. 810 East Hammond 5th Floor In. New York, NY Phoenix, AZ 85034 10019 GENZYME DRUG GENZYME DISCOVERY AND GLYCOBIOLOGY DEVELOPMENT RESEARCH INSTITUTE 153 Second Avenue 800 Research Waltham, MA Parkway, Suite 200 01254 Oklahoma City, OK Telephone: 781- 73104 290-5890 Telephone: 405- Fax: 781-290-5890 271-8144 Fax: 405-271-1030 GBL WEST MAILING GENZYME LTD GENZYME GENZYME FLANDERS 50 Gibson Drive 37 Hollands Road WATERFORD NV Kings Hill, West Haverhill IDA Business Park Cipalstraat 8 Mailing Suffolk CB9 8PU Kilmeadan Road B-2440 Geel Kent ME194AF UNITED KINGDOM Waterford BELGIUM UNITED KINGDOM Telephone: 011-44- IRELAND Telephone: 011-32- Telephone: 011-44- 1440-703-522 Telephone: 011- 1456-4911 1732-22-0022 Fax: 011-44-1440- 353-51-594-100 Fax: 011-32-1456- Fax: 011-44-1732- 707-783 Fax: 011-353-51- 4916 22-0024 594-105 GENZYME (FORMERLY GENZYME (FORMERLY SANGSTAT) SANGSTAT) 58,Avenue 1541, Avenue Debourg Marcel Merieux B.P. 7055 69280 Marcy F-69348 Lyon L'Etoile Cedex 07 FRANCE FRANCE Telephone: +33 (0)4 Telephone: +33 (0)4 37 22 58 1 0 37 28 16 88 Fax +33 (0)4 37 22 Fax: +33 (0)4 37 28 5898 1695
ATTACHMENT B1 CUSTOM MANUFACTURED PRODUCTS ATTACHED TO THE AGREEMENT [ ** ] [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. ATTACHMENT B2 BIOSURGERY PRODUCTS ATTACHED TO THE AGREEMENT [ ** ] [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. ATTACHMENT B3 RESEARCH PRODUCTS ATTACHED TO THE AGREEMENT [ ** ] [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. ATTACHMENT D LIST OF ACCOUNT MANAGERS FOR INVITROGEN UNITED STATES BELGIUM Invitrogen Corporation 1600 Pieters, Stefan Telephone vert commandes: Faraday Avenue Sr Account Manager 0800 23 20 79 PO Box 6482 Hoogwegel71 B-8470 Fax vert commandes: Carlsbad, California 92008 Gistel Gistel, Belgium 0800 13 58 13 Phone: (760) 603-7200 FAX: +32 59 27 39 76 Order Enquiries: (760) 602-6500 Email: serviceclients@invitroqen.com Rich Allred Gielen, Kurt Euro Tech-LinesM - 0800 91 83 92 (800) 955-6288 x61423 Technical Sales Representative Graaf Email: eurotech@invitroqen.com de Theuxlaan 25 Heusden-Zolder Andrews, Rick Belgium 3550 General Web Enquiries: BioProduction Specialist +3247531 0397 Email: eurowebinfo@invitroqen.com 972-396-5396 GERMANY .V. Invitrogen SA Customer Service Darlene Hundelgemsesteenweg 284 9820 Miebach, Anton Adams Merelbeke Senior Account Manager Westfeldgasse 19 716) 774-6642 Phone: 09 272 5599 Koeln 0-5 1143 Grand Island, New York FAX: 09 272 5598 Germany Email: euroinfo@)invitroqen.com +49 2203 982245 U.S. Electronic (Web) Orders Hours of FREE PHONE ORDERS: Invitrogen GmbH operation: 8:00 AM - 8:00 PM EST 0800 14894 Technologiepark Karlsruhe Emmy- Phone: (800) 955- 6288, Option 3, ORDERING ENQUIRIES: Noether Strasse 10 x46029 Email: ordersbel@invitroqen.com 76131 Karlsruhe FAX: (800) 331-2286 Email: euroinfo@invitrogen.com Email: catalog@invitrogen.com Technical Information: Euro Tech-LinesM - 0800 16369 Email: Gebi.ihrenfreie Bestellungen: U.S. Supply Center Orders Hours of eurotech@)invitroqen.com Tel: 0800 083 09 02 operation: 8:00 AM - 8:00 PM EST General Web Enquiries: Fax: 0800 083 34 35 Phone: (800) 955-6288, Option 3, x45430 Email: eurowebinfo@invitroqen.co ill Order Enquiries: FAX: (800) 331-2286 Email: orders germanv@invitrogen.co ill Email: suppycenters@invitrogen. com Technical Enquiries: Euro Tech-LinesM - 0800 181 54 50 U.S. Custom Primer Orders Hours of CANADA Email: eurotech@invitrogen.com operation: 8:00 AM - 8:00 PM EST Phone: (800) 955-6288, Option 3, Invitrogen Canada Inc. 2270 General Web Enquiries: x46636 Industrial St Burlington, Ontario Email: eurowebinfo@invitrogen.com FAX: (800) 331-2286 L7P 1A1 Email: primers@invitrogen.com Phone: 1-800-263-6236 FAX: UNITED KINGDOM 1-00-387-1007 Invitrogen Ltd 3 Fountain Drive Inchinnan Business Park Paisley UK PA4 9RF Phone: 0141 8146100 FAX: 0141 814 6260 Email: euroinfo@invitrogen.com
U.S. TECHNICAL SERVICES FRANCE Hours of operation: 9:00 AM - 8:00 Invitrogen SARL Free Phone Orders: PM EST BP 96 0800 269 210 FAO/ASK US 95613 Cergy Pontoise Cedex Free Fax Orders: Phone: (800) 955-6288 Phone: 01 34 32 31 00 FAX: (800) 352-1468 FAX: 01 30 37 50 07 Email: tech service@invitrogen.com Email: euroinfo@invitrogen.com
ATTACHMENT E GENZYME ACCOUNTS PAYABLE CONTACTS US Invoices. Unless otherwise specified, all US invoices (with the exception of EDI invoices as referenced below) shall be sent by mail to the following address: GENZYME Corporation P.O. Box 9322 Framingham, MA 01701-9322 USA International Invoices. Unless otherwise specified, all non-US (International) Invoices shall be sent to applicable GENZYME locations at the appropriate address specified in Attachment A. ATTACHMENT F SUPPLEMENTAL PRODUCT AMENDMENT FOR BIOSURGERY PRODUCTS Pursuant to Section 8.2 of that certain PURCHASE AND SUPPLY AGREEMENT entered into by and between Genzyme Corporation ("GENZYME") and Invitrogen Corporation ("Invitrogen") dated December -' 2003. SUPPLIER agrees to manufacture for the Biosurgery Division of GENZYME the following Biosurgery product (referred to herein as the "Biosurgery Product," , subject to the warranties and limitations set forth herein. The Biosurgery Product formulation and packaging components are attached. SUPPLIER will manufacture the Biosurgery Product in accordance with specifications attached here (the "Specifications"). SUPPLIER's warranty's for the Biosurgery Products are as set forth in the Purchase and Supply Agreement. A copy of the Certificate of Analysis that defines the Specifications is attached. In witness whereof each of the parties has caused its authorized representative to execute this Supplemental Product Amendment on the date specified below. Invitrogen Corporation Genzyme Corporation Name: Name: -------------------------------- ----------------------------------- Signature: Signature: --------------------------- ----------------------------- Title: Title: ------------------------------- --------------------------------- Date: Date: -------------------------------- ---------------------------------- ATTACHMENT G GENZYME MATERIALS AND MATERIALS SPECIFICATIONS ATTACHED TO THE AGREEMENT [ ** ] [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. ATTACHMENT J SUPPLEMENTAL PRODUCT AMENDMENTS ATTACHED TO THE AGREEMENT [ ** ] [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. ATTACHMENT L CERTIFICATION OF SUITABILITY OF MONOGRAPHS OF THE EUROPEAN PHARMACOPOEIA ATTACHED TO THE AGREEMENT [ ** ] [**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission. COUNCIL OF EUROPE EUROPEAN DIRECTORATE FOR THE QUALITY OF MEDICINES CERTIFICATION OF SUITABILITY OF MONOGRAPHS OF THE EUROPEAN PHARMACOPOEIA CERTIFICATION NO. RO-CEP 2000-171-REV. 03 Name of the substance: DONOR BOVINE SERUM (New Zealand Origin) Name of Holder: INVITROGEN CORPORATION 3175 Staley Road USA - 14072 Grand Island, New York Sites of production: Main Site: INVITROGEN NEW ZEALAND LIMITED 18-24 Botha Road NZ-Penrose, Auckland Backup or overflow sites: INVITROGEN CORPORATION INVITROGEN LIMITED 3175 Staley Road 3 Fountain Drive, Inchinnan Business Park USA - 14072 Grand Island, New York GB - Paisley PA4 9RF Scotland THIS CERTIFICATE SUPERSEDES THE PREVIOUS CERTIFICATE R0-CEP 2000-171-REV 02 After examination of the information provided on the origin of raw material(s) and type of tissue(s) used an d on the manufacturing process for this substance on the sites of production mentioned above, NZ - Penrose, Auckland, USA - 14072 Grand Island, New York and GB-Paisley PA4 9RF Scotland, we certify that the substance DONOR BOVINE SERUM meets the criteria described in the monograph Products with risk of transmitting agents of animal spongiform encephalopathies (no. 1483, Ph. Eur. 4th Ed. And any subsequently revised version). - - country of origin of source materials: New Zealand - - nature of animal tissues used in manufacture: Bovine blood The submitted dossier must be updated every five years or after any significant modification of the manufacturing method, the country(ies) or origin or the nature of the tissues used that may alter the risk of transmitting animal spongiform encephalopathy agents or require changing the specifications of the monograph. Manufacture of the substance shall take place in accordance with a suitable quality assurance system such as GMP and ISO 9001, and in accordance with the dossier submitted. Failure to comply with these provisions will render this certificate void. The certificate is valid provided that there has been no deterioration in the TSE status of the country(ies) of origin of the source material. This certificate is granted within the framework of the procedure established by the European Pharmacopoeia Commission [Resolution AP-CSP (93) 5 as amended] for a period of five years starting from 15 December 2000. Moreover, it is granted according to the provisions of Directive 2001/83/EC and Directive 2001/82/EC and any subsequent amendment, and the related guidelines. THIS CERTIFICATE HAS 41 LINES ONLY. /s/ Dr. A. Artiges ----------------------------------- Dr. A. Artiges Director of Quality of Medicines Strasbourg, 26 February 2003 Declaration of access (TO BE FILLED IN MY THE CERTIFICATE HOLDER UNDER THEIR OWN RESPONSIBILITY) INVITROGEN CORPORATION, as holder of the certificate of suitability RO-CEP 2000-171-Rev 03 for DONOR BOVINE SERUM Hereby authorizes -------------------------------------------------------------- (name of the pharmaceutical company) to use the above-mentioned certificate of suitability in support of their application(s) for the following Marketing Authorisation(s): (name of product(s) and marketing number(s), if known) Date and signature (of the CEP holder): EX-10.4 5 a2161257zex-10_4.txt EXHIBIT 10.4 EXHIBIT 10.4 GENZYME CORPORATION 1997 EQUITY INCENTIVE PLAN 1. PURPOSE The purpose of the Genzyme Corporation 1997 Equity Incentive Plan (the "Plan") is to attract and retain key employees and consultants of the Company and its Affiliates, to provide an incentive for them to achieve long-range performance goals, and to enable them to participate in the long-term growth of the Company by granting them Awards with respect to the Company's Common Stock. Certain capitalized terms used herein are defined in section 9 below. 2. ADMINISTRATION The Plan shall be administered by the Committee. The Committee shall determine the terms and conditions of the Awards. The Committee shall have authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the Plan as it shall from time to time consider advisable, and to interpret the provisions of the Plan. The Committee's decisions shall be final and binding. To the extent permitted by applicable law, the Committee may delegate to one or more executive officers of the Company the power to make Awards to Participants and all determinations under the Plan with respect thereto, provided that the Committee shall fix the maximum amount of such Awards for all such Participants and a maximum for any one Participant. 3. ELIGIBILITY All employees and consultants of the Company or any Affiliate capable of contributing significantly to the successful performance of the Company are eligible to be Participants in the Plan, other than persons deemed to be officers or directors of the Company within the meaning of the corporate governance rules for Nasdaq National Market companies. The Committee, in its sole discretion, shall determine from the group of eligible persons whether an individual shall be a Participant under the Plan." 4. STOCK AVAILABLE FOR AWARDS (a) AMOUNT. Subject to adjustment under subsection (b), Awards may be made under the Plan for up to 27,664,300 shares of Genzyme General Stock. If any Award expires or is terminated unexercised or is forfeited or settled in a manner that results in fewer shares outstanding than were awarded, the shares subject to such Award, to the extent of such expiration, termination, forfeiture or decrease, shall again be available for award under the Plan. Common Stock issued through the assumption or substitution of outstanding grants from an acquired company shall not reduce the shares available for Awards under the Plan. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. (b) ADJUSTMENT. In the event that the Committee determines that any stock dividend, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares or other transaction affects the Common Stock such that an adjustment is required in order to preserve the benefits intended to be provided by the Plan, then the Committee shall equitably adjust any or all of (i) the number and kind of shares in respect of which Awards may be made under the Plan, (ii) the number and kind of shares subject to outstanding Awards and (iii) the exercise price with respect to any of the foregoing, provided that the number of shares subject to any Award shall always be a whole number, and if considered appropriate, the Committee may make provision for a cash payment with respect to an outstanding Award. Notwithstanding the foregoing, unless otherwise determined by the Committee, no 1 adjustment will be made for dividends of one series of Common Stock paid on another series of Common Stock. 5. STOCK OPTIONS (a) GRANT OF OPTIONS. Subject to the provisions of the Plan, the Committee may grant Options to purchase shares of Common Stock. The Committee shall determine the number of shares subject to each Option and the exercise price therefor, which shall not be less than 100% of the Fair Market Value of the Common Stock as of the Pricing Date. The Plan does not provide for the granting of incentive stock options meeting the requirements of Section 422 of the Code. (b) TERMS AND CONDITIONS. Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may specify in the applicable grant or thereafter. The Committee may impose such conditions with respect to the exercise of Options, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. (c) PAYMENT. No shares shall be delivered pursuant to any exercise of an Option until payment in full of the exercise price therefor is received by the Company. Such payment may be made in whole or in part in cash or, to the extent permitted by the Committee at or after the grant of the Option, by delivery of a note or other commitment satisfactory to the Committee or shares of Common Stock owned by the optionee, including Restricted Stock, or by retaining shares otherwise issuable pursuant to the Option, in each case valued at their Fair Market Value on the date of delivery or retention, or such other lawful consideration, including a payment commitment of a financial or brokerage institution, as the Committee may determine. 6. GENERAL PROVISIONS APPLICABLE TO AWARDS (a) DOCUMENTATION. Each Award under the Plan shall be evidenced by a writing delivered to the Participant specifying the terms and conditions thereof and containing such other terms and conditions not inconsistent with the provisions of the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or to comply with applicable tax and regulatory laws and accounting principles. (b) COMMITTEE DISCRETION. The terms of each Award need not be identical, and the Committee need not treat Participants uniformly. Except as otherwise provided by the Plan or a particular Award, any determination with respect to an Award may be made by the Committee at the time of grant or at any time thereafter. (c) DIVIDENDS AND CASH AWARDS. In the discretion of the Committee, any Award under the Plan may provide the Participant with (i) dividends or dividend equivalents payable (in cash or in the form of Awards under the Plan) currently or deferred with or without interest and (ii) cash payments in lieu of or in addition to an Award. (d) TERMINATION OF EMPLOYMENT. The Committee shall determine the effect on an Award of the disability, death, retirement or other termination of employment of a Participant and the extent to which, and the period during which, the Participant's legal representative, guardian or Designated Beneficiary may receive payment of an Award or exercise rights thereunder. (e) CHANGE IN CONTROL. In order to preserve a Participant's rights under an Award in the event of a change in control of the Company (as defined by the Committee), the Committee in its discretion may, at the time an Award is made or at any time thereafter, take one or more of the following actions: (i) provide for the acceleration of any time period relating to the exercise or payment of the Award, (ii) provide for payment to the Participant of cash or other property with a Fair Market Value equal to the amount that would have been received upon the exercise or payment of the Award had the Award been exercised or paid upon the change in control, (iii) adjust the terms of the Award in a manner determined by the Committee to reflect the change in control, (iv) cause the Award to be assumed, or new rights substituted therefor, by 2 another entity, or (v) make such other provision as the Committee may consider equitable to Participants and in the best interests of the Company. (f) TRANSFERABILITY. In the discretion of the Committee, any Award may be made transferable upon such terms and conditions and to such extent as the Committee determines. The Committee may in its discretion waive any restriction on transferability. (g) LOANS. The Committee may authorize the making of loans or cash payments to Participants in connection with the grant or exercise of any Award under the Plan, which loans may be secured by any security, including Common Stock, underlying or related to such Award (provided that the loan shall not exceed the Fair Market Value of the security subject to such Award), and which may be forgiven upon such terms and conditions as the Committee may establish at the time of such loan or at any time thereafter. (h) WITHHOLDING TAXES. The Participant shall pay to the Company, or make provision satisfactory to the Committee for payment of, any taxes required by law to be withheld in respect of Awards under the Plan no later than the date of the event creating the tax liability. The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Participant. In the Committee's discretion, such tax obligations may be paid in whole or in part in shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value on the date of delivery. (i) FOREIGN NATIONALS. Awards may be made to Participants who are foreign nationals or employed outside the United States on such terms and conditions different from those specified in the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or to comply with applicable laws. (j) AMENDMENT OF AWARD. The Committee may amend, modify or terminate any outstanding Award, including substituting therefor another Award of the same or a different type, changing the date of exercise or realization, provided that the Participant's consent to such action shall be required unless the Committee determines that the action, taking into account any related action, would not materially and adversely affect the Participant. 7. CERTAIN DEFINITIONS "Affiliate" means any business entity in which the Company owns directly or indirectly 50% or more of the total voting power or has a significant financial interest as determined by the Committee. "Award" means any Stock Option granted under the Plan. "Board" means the Board of Directors of the Company. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor law. "Committee" means one or more committees each comprised of not less than two members of the Board appointed by the Board to administer the Plan or a specified portion thereof. "Common Stock" or "Stock" means the common stock, $.01 par value, of the Company. "Company" means Genzyme Corporation. "Designated Beneficiary" means the beneficiary designated by a Participant, in a manner determined by the Committee, to receive amounts due or exercise rights of the Participant in the event of the Participant's death. In the absence of an effective designation by a Participant, "Designated Beneficiary" means the Participant's estate. 3 "Fair Market Value" means, with respect to Common Stock or any other property, the fair market value of such property as determined by the Committee in good faith or in the manner established by the Committee from time to time. "Participant" means a person selected by the Committee to receive an Award under the Plan. "Pricing Date" means the date on which the Award is granted, except that the Committee may provide that the Pricing Date for an Award granted to a new employee or consultant shall be the date on which the recipient is hired or engaged if the grant of the Award occurs within 90 days of the date such employment or engagement commences. "Stock Option" or "Option" means an option to purchase shares of Common Stock awarded to a Participant under Section 5. 8. MISCELLANEOUS (a) RIGHTS LIMITED. Any Award made under the Plan shall be made in the sole discretion of the Committee, or its delegate as appointed in accordance with the Plan, and no prior Award shall entitle a person to any future Award. In no event shall the Plan, or any Award made under the Plan, form a part of an employee's or consultant's contract of employment or service, if any. Neither the Plan, nor any Award made under the Plan, shall confer upon any employee or consultant of the Company or its Affiliate any right with respect to the continuance of his or her employment by, or other service with, the Company or its Affiliate, nor shall they limit the right of the Company or its Affiliate to terminate the employee or consultant or otherwise change the terms of service. The loss of existing or potential profit in an Award shall not constitute an element of damages in the event of termination of employment or service for any reason, even if the termination is in violation of an obligation of the Company or its Affiliate to the Participant. (b) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed under the Plan until he or she becomes the holder thereof. A Participant to whom Common Stock is awarded shall be considered the holder of the Stock at the time of the Award except as otherwise provided in the applicable Award. (c) EFFECTIVE DATE. The Plan shall be effective on October 16, 1997. (d) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the Plan or any portion thereof at any time. (e) GOVERNING LAW. The provisions of the Plan shall be governed by and interpreted in accordance with the laws of Massachusetts. 4 EX-10.5 6 a2161257zex-10_5.txt EXHIBIT 10.5 EXHIBIT 10.5 GENZYME CORPORATION NOTICE OF GRANT OF STOCK OPTIONS ID: 06-1047163 AND OPTION AGREEMENT 500 Kendall Street Cambridge, MA 02142 OPTIONEE NAME OPTION NUMBER: OPTIONEE ADDRESS PLAN: ID: Effective _________, you have been granted a(n) Non-Qualified Stock Option to buy _____ shares of GENZYME CORPORATION (the Company) stock at $_______ per share. The total option price of the shares granted is $_________. Shares in each period will become fully vested on the date shown.
Shares Vest Type Full Vest Expiration
MAINTAIN THIS COPY FOR YOUR RECORDS. These options are granted under and governed by the terms and conditions of the Company's Stock Option plan as amended and the Option Agreement, all of which are attached and made a part of this document. Date: Time: Genzyme Corporation 1998 Director Stock Option Plan Terms and Conditions 1. PLAN INCORPORATED BY REFERENCE. THIS OPTION IS ISSUED PURSUANT TO THE TERMS OF THE PLAN AND MAY BE AMENDED AS PROVIDED IN THE PLAN. CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED IN THIS CERTIFICATE HAVE THE MEANINGS GIVEN TO THEM IN THE PLAN. THIS CERTIFICATE DOES NOT SET FORTH ALL THE TERMS AND CONDITIONS OF THE PLAN, WHICH ARE INCORPORATED HEREIN BY REFERENCE. GRANTS OF OPTIONS UNDER THE PLAN ARE AUTOMATIC AND ANY INTERPRETATION WITH RESPECT TO THE PLAN AND OPTIONS GRANTED UNDER IT SHALL BE DETERMINED BY A COMMITTEE CONSISTING OF ALL DIRECTORS OF THE COMPANY WHO ARE NOT ELIGIBLE TO PARTICIPATE IN THE PLAN AND SUCH DETERMINATIONS ARE FINAL AND BINDING. COPIES OF THE PLAN MAY BE OBTAINED UPON WRITTEN REQUEST WITHOUT CHARGE FROM THE SHAREHOLDER RELATIONS DEPARTMENT OF THE COMPANY. 2. OPTION PRICE. THE PRICE TO BE PAID FOR EACH SHARE OF STOCK ISSUED UPON EXERCISE OF THE WHOLE OR ANY PART OF THIS OPTION IS THE OPTION PRICE SET FORTH ON THE FACE OF THIS CERTIFICATE AS DETERMINED IN ACCORDANCE WITH THE PLAN (THE "OPTION PRICE"). 3. PERIOD OF EXERCISE. THIS OPTION MAY BE EXERCISED FROM TIME TO TIME UP TO THE NUMBER OF SHARES AND IN ACCORDANCE WITH THE EXERCISABILITY SCHEDULE SET FORTH ON THE FACE OF THIS CERTIFICATE, BUT ONLY FOR THE PURCHASE OF WHOLE SHARES. A DIRECTOR WHO CEASES TO SERVE AS A MEMBER OF THE BOARD MAY, DURING HIS OR HER LIFETIME, EXERCISE THE RIGHTS HE OR SHE HAD UNDER THIS OPTION AT THE TIME HE OR SHE CEASED BEING A DIRECTOR FOR THE FULL UNEXPIRED TERM OF SUCH OPTION. UPON THE DEATH OF THE DIRECTOR, THOSE ENTITLED TO DO SO UNDER THE DIRECTOR'S WILL OR THE LAWS OF DESCENT AND DISTRIBUTION SHALL HAVE THE RIGHT, AT ANY TIME WITHIN TWELVE (12) MONTHS AFTER THE DEATH, TO EXERCISE IN WHOLE OR IN PART ANY RIGHTS WHICH WERE AVAILABLE TO THE DIRECTOR AT THE TIME OF HIS OR HER DEATH. THIS OPTION MAY NOT BE EXERCISED AS TO ANY SHARES AFTER THE EXPIRATION DATE, WHICH SHALL BE TEN YEARS FROM THE DATE OF GRANT. 4. METHOD OF EXERCISE AND PAYMENT. THIS OPTION MAY BE EXERCISED ONLY BY WRITTEN NOTICE TO THE COMPANY AT ITS HEAD OFFICE ACCOMPANIED BY PAYMENT OF THE FULL OPTION PRICE FOR THE SHARES OF STOCK AS TO WHICH THEY ARE EXERCISED. THE OPTION PRICE SHALL BE PAID IN CASH OR BY CHECK. PROMPTLY FOLLOWING NOTICE AND PAYMENT, THE COMPANY WILL DELIVER TO THE DIRECTOR (OR OTHER PERSON ENTITLED TO EXERCISE THE OPTION) A CERTIFICATE REPRESENTING THE NUMBER OF SHARES WITH RESPECT TO WHICH THE OPTION IS BEING EXERCISED. 5. TRANSFERABILITY. THIS OPTION MAY BE TRANSFERRED WITHOUT CONSIDERATION (OR FOR SUCH CONSIDERATION AS THE COMMITTEE MAY FROM TIME TO TIME DEEM APPROPRIATE) BY THE HOLDER THEREOF TO ANY FAMILY MEMBER OF SUCH DIRECTOR; PROVIDED, HOWEVER, THAT NO SUBSEQUENT TRANSFER OF THIS OPTION SHALL BE PERMITTED EXCEPT FOR TRANSFERS: (i) TO A FAMILY MEMBER OF SUCH DIRECTOR; (ii) BACK TO THE DIRECTOR; OR (iii) PURSUANT TO THE APPLICABLE LAWS OF DESCENT AND DISTRIBUTION. FOR THIS PURPOSE, "FAMILY MEMBER" SHALL MEAN (i) ANY CHILD, STEPCHILD, GRANDCHILD, PARENT, STEPPARENT, GRANDPARENT, SPOUSE, FORMER SPOUSE, SIBLING, NIECE, NEPHEW, MOTHER-IN-LAW, FATHER-IN-LAW, SON-IN-LAW, DAUGHTER-IN-LAW, BROTHER-IN-LAW, OR SISTER-IN-LAW, INCLUDING ANY ADOPTIVE RELATIONSHIPS, AND ANY OTHER PERSON SHARING THE TRANSFEROR DIRECTOR'S HOUSEHOLD (OTHER THAN AS A TENANT OR EMPLOYEE); (ii) ANY TRUST IN WHICH ANY OF THE PERSONS DESCRIBED IN CLAUSE (i) HOLDS A GREATER THAN 50% BENEFICIAL INTEREST; (iii) ANY FOUNDATION IN WHICH ANY OF THE PERSONS DESCRIBED IN CLAUSE (i) OR THE TRANSFEROR DIRECTOR CONTROLS THE MANAGEMENT OF ASSETS; OR (iv) ANY OTHER ENTITY IN WHICH ANY OF THE PERSONS DESCRIBED IN CLAUSE (i) OR THE DIRECTOR HOLDS MORE THAN 50% OF THE VOTING INTERESTS. 6. RECAPITALIZATIONS, MERGERS, ETC. IN THE EVENT OF A CONSOLIDATION OR MERGER OF THE COMPANY WITH ANOTHER CORPORATION WHERE THE COMPANY'S STOCKHOLDERS DO NOT OWN A MAJORITY IN INTEREST OF THE SURVIVING OR RESULTING CORPORATION, OR THE SALE OR EXCHANGE OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY, OR A REORGANIZATION OR LIQUIDATION OF THE COMPANY, ANY DEFERRED EXERCISE PERIOD SHALL BE AUTOMATICALLY ACCELERATED AND THE DIRECTOR SHALL BE ENTITLED TO RECEIVE UPON EXERCISE AND PAYMENT IN ACCORDANCE WITH THE TERMS OF THE OPTION THE SAME SHARES, SECURITIES OR PROPERTY AS HE OR SHE WOULD HAVE BEEN ENTITLED TO RECEIVE UPON THE OCCURRENCE OF SUCH EVENT IF HE OR SHE HAD BEEN, IMMEDIATELY PRIOR TO SUCH EVENT, THE HOLDER OF THE NUMBER OF SHARES OF STOCK PURCHASABLE UNDER THIS OPTION OR, IF ANOTHER CORPORATION SHALL BE THE SURVIVOR, SUCH CORPORATION SHALL SUBSTITUTE THEREFOR SUBSTANTIALLY EQUIVALENT SHARES, SECURITIES OR PROPERTY OF SUCH OTHER CORPORATION; PROVIDED, HOWEVER, THAT IN LIEU OF THE FOREGOING THE BOARD MAY MAKE SUCH OTHER PROVISION AS IT MAY CONSIDER EQUITABLE TO THE DIRECTOR AND IN THE BEST INTERESTS OF THE COMPANY. NOTWITHSTANDING THE FOREGOING, IN THE EVENT OF A CHANGE IN CONTROL OF THE COMPANY (AS DEFINED IN A VOTE OF THE COMPENSATION COMMITTEE ADOPTED MAY 29, 2002), THIS OPTION SHALL BECOME EXERCISABLE AS TO ALL SHARES WITHOUT REGARD TO ANY DEFERRED EXERCISABILITY SCHEDULE OR DEFERRED EXERCISE PERIOD. 7. LIMITATION OF RIGHTS. NEITHER THE PLAN, NOR THE GRANTING OF THIS OPTION OR ANY OTHER ACTION TAKEN PURSUANT TO THE PLAN, SHALL CONSTITUTE AN AGREEMENT OR UNDERSTANDING, EXPRESS OR IMPLIED, THAT THE COMPANY WILL RETAIN AN OPTIONEE AS A DIRECTOR FOR ANY PERIOD OF TIME OR AT ANY PARTICULAR RATE OF COMPENSATION. A DIRECTOR SHALL HAVE NO RIGHTS AS A STOCKHOLDER WITH RESPECT TO THE SHARES COVERED BY THIS OPTION UNTIL THE DATE HE OR SHE EXERCISES SUCH OPTION AND PAYS THE OPTION PRICE TO THE COMPANY. 8. COMPLIANCE WITH SECURITIES LAWS. IT SHALL BE A CONDITION TO THE DIRECTOR'S RIGHT TO PURCHASE SHARES OF STOCK HEREUNDER THAT THE COMPANY MAY, IN ITS DISCRETION, REQUIRE (a) THAT THE SHARES OF STOCK RESERVED FOR ISSUE UPON THE EXERCISE OF THIS OPTION SHALL HAVE BEEN DULY LISTED, UPON OFFICIAL NOTICE OF ISSUANCE, UPON ANY NATIONAL SECURITIES EXCHANGE OR AUTOMATED QUOTATION SYSTEM ON WHICH THE COMPANY'S STOCK MAY THEN BE LISTED OR QUOTED, (b) THAT EITHER (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 WITH RESPECT TO THE SHARES SHALL BE IN EFFECT, OR (ii) IN THE OPINION OF COUNSEL FOR THE COMPANY, THE PROPOSED PURCHASE SHALL BE EXEMPT FROM REGISTRATION UNDER THAT ACT AND THE DIRECTOR SHALL HAVE MADE SUCH UNDERTAKINGS AND AGREEMENTS WITH THE COMPANY AS THE COMPANY MAY REASONABLE REQUIRE, AND (c) THAT SUCH OTHER STEPS, IF ANY, AS COUNSEL FOR THE COMPANY SHALL CONSIDER NECESSARY TO COMPLY WITH ANY LAW APPLICABLE TO THE ISSUE OF SUCH SHARES BY THE COMPANY SHALL HAVE BEEN TAKEN BY THE COMPANY OR THE DIRECTOR, OR BOTH. THE CERTIFICATES REPRESENTING THE SHARES PURCHASED UNDER THIS OPTION MAY CONTAIN SUCH LEGENDS AS COUNSEL FOR THE COMPANY SHALL CONSIDER NECESSARY TO COMPLY WITH ANY APPLICABLE LAW. 9. ACCEPTANCE. FAILURE OF THE PARTICIPANT TO ACCEPT THE TERMS AND CONDITIONS OF THIS OPTION CAN RESULT IN ADVERSE CONSEQUENCES TO THE PARTICIPANT INCLUDING CANCELLATION OF THE STOCK OPTION. Genzyme Corporation 1998 Director Stock Option Plan Terms and Conditions ACKNOWLEDGED AND AGREED: - ------------------------------------ SIGNATURE - ------------------------------------ NAME (PRINT) - ------------------------------------ DATE EX-10.6 7 a2161257zex-10_6.txt EXHIBIT 10.6 EXHIBIT 10.6 GENZYME CORPORATION NOTICE OF GRANT OF STOCK OPTIONS ID: 06-1047163 AND OPTION AGREEMENT 500 Kendall Street Cambridge, MA 02142 OPTIONEE NAME OPTION NUMBER: OPTIONEE ADDRESS PLAN: ID: Effective _________, you have been granted a(n) Incentive Stock Option to buy _____ shares of GENZYME CORPORATION (the Company) stock at $_______ per share. The total option price of the shares granted is $_________. Shares in each period will become fully vested on the date shown.
Shares Vest Type Full Vest Expiration
MAINTAIN THIS COPY FOR YOUR RECORDS. These options are granted under and governed by the terms and conditions of the Company's Stock Option plan as amended and the Option Agreement, all of which are attached and made a part of this document. Date: Time: GENZYME CORPORATION 2001 EQUITY INCENTIVE PLAN OFFICER (TIER I/II) INCENTIVE STOCK OPTION TERMS AND CONDITIONS 1. PLAN INCORPORATED BY REFERENCE. THIS OPTION IS ISSUED PURSUANT TO THE TERMS OF THE PLAN AND MAY BE AMENDED AS PROVIDED IN THE PLAN. CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED IN THIS CERTIFICATE HAVE THE MEANINGS GIVEN TO THEM IN THE PLAN. THIS CERTIFICATE DOES NOT SET FORTH ALL OF THE TERMS AND CONDITIONS OF THE PLAN, WHICH ARE INCORPORATED HEREIN BY REFERENCE. THE COMMITTEE ADMINISTERS THE PLAN AND ITS DETERMINATIONS REGARDING THE OPERATION OF THE PLAN ARE FINAL AND BINDING. COPIES OF THE PLAN MAY BE OBTAINED UPON WRITTEN REQUEST WITHOUT CHARGE FROM THE SHAREHOLDER RELATIONS DEPARTMENT OF THE COMPANY. 2. OPTION PRICE. THE PRICE TO BE PAID FOR EACH SHARE OF COMMON STOCK ISSUED UPON EXERCISE OF THE WHOLE OR ANY PART OF THIS OPTION IS THE OPTION PRICE SET FORTH ON THE FACE OF THIS CERTIFICATE (THE "OPTION PRICE"). 3. EXERCISABILITY SCHEDULE. THIS OPTION MAY BE EXERCISED AT ANY TIME AND FROM TIME TO TIME UP TO THE NUMBER OF SHARES AND IN ACCORDANCE WITH THE EXERCISABILITY SCHEDULE SET FORTH ON THE FACE OF THIS CERTIFICATE, BUT ONLY FOR THE PURCHASE OF WHOLE SHARES. THIS OPTION MAY NOT BE EXERCISED AS TO ANY SHARES AFTER THE DATE OF EXPIRATION SET FORTH ON THE FACE OF THIS CERTIFICATE (THE "EXPIRATION DATE"). 4. METHOD OF EXERCISE. TO EXERCISE THIS OPTION, THE PARTICIPANT SHALL DELIVER WRITTEN NOTICE OF EXERCISE TO THE COMPANY SPECIFYING THE NUMBER OF SHARES WITH RESPECT TO WHICH THE OPTION IS BEING EXERCISED ACCOMPANIED BY PAYMENT OF THE OPTION PRICE FOR SUCH SHARES IN CASH, BY CERTIFIED CHECK OR IN SUCH OTHER FORM, INCLUDING SHARES OF COMMON STOCK OF THE COMPANY VALUED AT THEIR FAIR MARKET VALUE ON THE DATE OF DELIVERY, AS THE COMMITTEE MAY APPROVE. PROMPTLY FOLLOWING SUCH NOTICE, THE COMPANY WILL DELIVER TO THE PARTICIPANT A CERTIFICATE REPRESENTING THE NUMBER OF SHARES WITH RESPECT TO WHICH THE OPTION IS BEING EXERCISED. 5. RECAPITALIZATION, MERGERS, ETC. IN THE EVENT OF A CONSOLIDATION OR MERGER OF THE COMPANY WITH ANOTHER ENTITY, THE SALE OR EXCHANGE OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY OR A REORGANIZATION OR LIQUIDATION OF THE COMPANY, THE COMMITTEE MAY UPON WRITTEN NOTICE TO THE PARTICIPANT PROVIDE THAT THIS OPTION SHALL TERMINATE ON A DATE NOT LESS THAN 20 DAYS AFTER THE DATE OF SUCH NOTICE UNLESS THERETOFORE EXERCISED. IN CONNECTION WITH SUCH NOTICE, THE COMMITTEE MAY IN ITS DISCRETION ACCELERATE OR WAIVE ANY DEFERRED EXERCISE PERIOD. [ NOTWITHSTANDING THE FOREGOING, IN THE EVENT OF A CHANGE IN CONTROL OF THE COMPANY (AS DEFINED IN A VOTE OF THE COMPENSATION COMMITTEE ADOPTED MAY 29, 2002), THIS OPTION SHALL BECOME EXERCISABLE AS TO ALL SHARES WITHOUT REGARD TO ANY DEFERRED EXERCISABILITY SCHEDULE OR DEFERRED EXERCISE PERIOD.](1) 6. OPTION NOT TRANSFERABLE. THIS OPTION IS NOT TRANSFERABLE BY THE PARTICIPANT OTHERWISE THAN BY WILL OR THE LAWS OF DESCENT AND DISTRIBUTION, AND IS EXERCISABLE, DURING THE PARTICIPANT'S LIFETIME, ONLY BY THE PARTICIPANT. THE NAMING OF A DESIGNATED BENEFICIARY DOES NOT CONSTITUTE A TRANSFER. 7. EXERCISE OF OPTION AFTER TERMINATION OF EMPLOYMENT. IF THE PARTICIPANT'S EMPLOYMENT WITH (a) THE COMPANY, (b) AN AFFILIATE, OR (c) A CORPORATION (OR PARENT OR SUBSIDIARY CORPORATION OF SUCH CORPORATION) ISSUING OR ASSUMING A STOCK OPTION IN A TRANSACTION TO WHICH SECTION 424(a) OF THE CODE APPLIES, IS TERMINATED FOR ANY REASON OTHER THAN BY DISABILITY (WITHIN THE MEANING OF SECTION 22(e)(3) OF THE CODE), DEATH OR RETIREMENT, THE PARTICIPANT MAY EXERCISE THE RIGHTS WHICH WERE AVAILABLE TO THE PARTICIPANT AT THE TIME OF SUCH TERMINATION ONLY WITHIN THREE MONTHS FROM THE DATE OF TERMINATION. IF PARTICIPANT'S EMPLOYMENT IS TERMINATED AS A RESULT OF DISABILITY, THIS OPTION SHALL BECOME EXERCISABLE AS TO ALL SHARES WITHOUT REGARD TO ANY DEFERRED EXERCISE PERIOD, AND SUCH RIGHTS MAY BE EXERCISED WITHIN TWELVE MONTHS FROM THE DATE OF TERMINATION. IF PARTICIPANT'S EMPLOYMENT IS TERMINATED AS A RESULT OF RETIREMENT (WHICH IS DEFINED AS A MINIMUM OF AGE 60 PLUS A MINIMUM OF FIVE YEARS OF SERVICE), THIS OPTION SHALL BECOME EXERCISABLE AS TO ALL SHARES WITHOUT REGARD TO ANY DEFERRED EXERCISE PERIOD, AND SUCH RIGHTS MAY BE EXERCISED WITHIN THREE YEARS FROM THE DATE OF TERMINATION. UPON THE DEATH OF THE PARTICIPANT, THIS OPTION SHALL BECOME EXERCISABLE AS TO ALL SHARES WITHOUT REGARD TO ANY DEFERRED EXERCISE PERIOD, AND HIS OR HER DESIGNATED BENEFICIARY SHALL HAVE THE RIGHT, AT ANY TIME WITHIN TWELVE MONTHS AFTER THE DATE OF DEATH, TO EXERCISE IN WHOLE OR IN PART ANY RIGHTS THAT WERE AVAILABLE TO THE PARTICIPANT AT THE TIME OF DEATH. NOTWITHSTANDING THE FOREGOING, NO RIGHTS UNDER THIS OPTION MAY BE EXERCISED AFTER THE EXPIRATION DATE. 8. COMPLIANCE WITH SECURITIES LAWS. IT SHALL BE A CONDITION TO THE PARTICIPANT'S RIGHT TO PURCHASE SHARES OF COMMON STOCK HEREUNDER THAT THE COMPANY MAY, IN ITS DISCRETION, REQUIRE (a) THAT THE SHARES OF COMMON STOCK RESERVED FOR ISSUE UPON THE EXERCISE OF THIS OPTION SHALL HAVE BEEN DULY LISTED, UPON OFFICIAL NOTICE OF ISSUANCE, UPON ANY NATIONAL SECURITIES EXCHANGE OR AUTOMATED QUOTATION SYSTEM ON WHICH THE COMPANY'S COMMON STOCK MAY THEN BE LISTED OR QUOTED, (b) THAT EITHER (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 WITH RESPECT TO THE SHARES SHALL BE IN EFFECT, OR (ii) IN THE OPINION OF COUNSEL FOR THE COMPANY, THE PROPOSED PURCHASE SHALL BE EXEMPT FROM REGISTRATION UNDER THAT ACT AND THE PARTICIPANT SHALL HAVE MADE SUCH UNDERTAKINGS AND AGREEMENTS WITH THE COMPANY AS THE COMPANY MAY REASONABLY REQUIRE, AND (c) THAT SUCH OTHER STEPS, IF ANY, AS COUNSEL FOR THE COMPANY SHALL CONSIDER NECESSARY TO COMPLY WITH ANY LAW APPLICABLE TO THE ISSUE OF SUCH SHARES BY THE COMPANY SHALL HAVE BEEN TAKEN BY THE COMPANY OR THE PARTICIPANT, OR BOTH. THE CERTIFICATES REPRESENTING THE SHARES PURCHASED UNDER THIS OPTION MAY CONTAIN SUCH LEGENDS AS COUNSEL FOR THE COMPANY SHALL CONSIDER NECESSARY TO COMPLY WITH ANY APPLICABLE LAW. 9. PAYMENT OF TAXES. THE PARTICIPANT SHALL PAY TO THE COMPANY, OR MAKE PROVISION SATISFACTORY TO THE COMPANY FOR PAYMENT OF ANY TAXES REQUIRED BY LAW TO BE WITHHELD WITH RESPECT TO THE EXERCISE OF THIS OPTION. THE COMMITTEE MAY, IN ITS DISCRETION, REQUIRE ANY OTHER FEDERAL OR STATE TAXES IMPOSED ON THE SALE OF THE SHARES TO BE PAID BY THE PARTICIPANT. IN THE COMMITTEE'S DISCRETION, SUCH TAX OBLIGATIONS MAY BE PAID IN WHOLE OR IN PART IN SHARES OF COMMON STOCK, INCLUDING SHARES RETAINED FROM THE EXERCISE OF THIS OPTION, VALUED AT THEIR FAIR MARKET VALUE ON THE DATE OF DELIVERY. THE COMPANY AND ITS AFFILIATES MAY, TO THE EXTENT PERMITTED BY LAW, DEDUCT ANY SUCH TAX OBLIGATIONS FROM ANY PAYMENT OF ANY KIND OTHERWISE DUE TO THE PARTICIPANT. 10. NOTICE OF SALE OF SHARES REQUIRED. THE PARTICIPANT AGREES TO NOTIFY THE COMPANY IN WRITING WITHIN 30 DAYS OF THE DISPOSITION OF ANY SHARES PURCHASED UPON EXERCISE OF THIS OPTION IF SUCH DISPOSITION OCCURS WITHIN TWO YEARS OF THE DATE OF THE GRANT OF THIS OPTION OR WITHIN ONE YEAR AFTER SUCH PURCHASE. 11. RIGHTS LIMITED. THE COMMITTEE, IN ITS SOLE DISCRETION, SHALL DETERMINE FROM THE GROUP OF ELIGIBLE PERSONS WHETHER AN INDIVIDUAL SHALL BE A PARTICIPANT UNDER THE PLAN. ANY OPTION GRANT MADE UNDER THE PLAN SHALL BE MADE IN THE SOLE DISCRETION OF THE COMMITTEE, OR ITS DELEGATE AS APPOINTED IN ACCORDANCE WITH THE PLAN, AND NO PRIOR OPTION GRANT SHALL ENTITLE A PERSON TO ANY FUTURE AWARD. IN NO EVENT SHALL THE PLAN, OR ANY OPTION GRANT MADE UNDER THE PLAN, FORM A PART OF AN EMPLOYEE'S OR CONSULTANT'S CONTRACT OF EMPLOYMENT OR SERVICE, IF ANY. NEITHER THE PLAN, NOR ANY OPTION GRANT MADE UNDER THE PLAN, SHALL CONFER UPON ANY EMPLOYEE OR CONSULTANT OF THE COMPANY OR ITS AFFILIATE ANY RIGHT WITH RESPECT TO THE CONTINUANCE OF HIS OR HER EMPLOYMENT BY, OR OTHER SERVICE WITH, THE COMPANY OR ITS AFFILIATE, NOR SHALL THEY LIMIT THE RIGHTS OF THE COMPANY OR ITS AFFILIATE TO TERMINATE THE EMPLOYEE OR CONSULTANT OR OTHERWISE CHANGE THE TERMS OF SERVICE. NO PARTICIPANT OR DESIGNATED BENEFICIARY SHALL HAVE ANY RIGHTS AS A SHAREHOLDER WITH RESPECT TO ANY SHARES OF COMMON STOCK TO BE ISSUED UNDER THE PLAN OR ANY OPTION UNTIL HE OR SHE BECOMES THE HOLDER THEREOF. THE LOSS OF EXISTING OR POTENTIAL PROFIT IN AN OPTION GRANT SHALL NOT CONSTITUTE AN ELEMENT OF DAMAGES IN THE EVENT OF TERMINATION OF EMPLOYMENT OR SERVICE FOR ANY REASON, EVEN IF THE TERMINATION IS IN VIOLATION OF AN OBLIGATION OF THE COMPANY OR ITS AFFILIATE TO THE PARTICIPANT. 12. ACCEPTANCE. FAILURE OF THE PARTICIPANT TO ACCEPT THE TERMS AND CONDITIONS OF THIS OPTION IN ACCORDANCE WITH THE REQUIREMENTS OF THE COMMITTEE OR ITS DELEGATE, AS APPLICABLE, CAN RESULT IN ADVERSE CONSEQUENCES TO THE PARTICIPANT, INCLUDING CANCELLATION OF THE OPTION. - ---------- (1) The exercisability of options held by Henri A. Termeer and Peter Wirth upon a change in control of the Company is governed by the terms of their respective Employment Agreements. This sentence therefore is not included in the form of Terms and Conditions for stock option grants to Mr. Termeer and Mr. Wirth. ACKNOWLEDGED AND AGREED: - ------------------------------------ Participant Signature - ------------------------------------ Participant Name (Print) - ------------------------------------ Date EX-10.7 8 a2161257zex-10_7.txt EXHIBIT 10.7 EXHIBIT 10.7 GENZYME CORPORATION NOTICE OF GRANT OF STOCK OPTIONS ID: 06-1047163 AND OPTION AGREEMENT 500 Kendall Street Cambridge, MA 02142 OPTIONEE NAME OPTION NUMBER: OPTIONEE ADDRESS PLAN: ID: Effective _________, you have been granted a(n) Non-Qualified Stock Option to buy _____ shares of GENZYME CORPORATION (the Company) stock at $_______ per share. The total option price of the shares granted is $_________. Shares in each period will become fully vested on the date shown.
Shares Vest Type Full Vest Expiration
MAINTAIN THIS COPY FOR YOUR RECORDS. These options are granted under and governed by the terms and conditions of the Company's Stock Option plan as amended and the Option Agreement, all of which are attached and made a part of this document. Date: Time: GENZYME CORPORATION 2001 EQUITY INCENTIVE PLAN OFFICER (TIER I/II) NONSTATUTORY STOCK OPTION TERMS AND CONDITIONS 1. PLAN INCORPORATED BY REFERENCE. THIS OPTION IS ISSUED PURSUANT TO THE TERMS OF THE PLAN AND MAY BE AMENDED AS PROVIDED IN THE PLAN. CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED IN THIS CERTIFICATE HAVE THE MEANINGS GIVEN TO THEM IN THE PLAN. THIS CERTIFICATE DOES NOT SET FORTH ALL OF THE TERMS AND CONDITIONS OF THE PLAN, WHICH ARE INCORPORATED HEREIN BY REFERENCE. THE COMMITTEE ADMINISTERS THE PLAN AND ITS DETERMINATIONS REGARDING THE OPERATION OF THE PLAN ARE FINAL AND BINDING. COPIES OF THE PLAN MAY BE OBTAINED UPON WRITTEN REQUEST WITHOUT CHARGE FROM THE SHAREHOLDER RELATIONS DEPARTMENT OF THE COMPANY. 2. OPTION PRICE. THE PRICE TO BE PAID FOR EACH SHARE OF COMMON STOCK ISSUED UPON EXERCISE OF THE WHOLE OR ANY PART OF THIS OPTION IS THE OPTION PRICE SET FORTH ON THE FACE OF THIS CERTIFICATE (THE "OPTION PRICE"). 3. EXERCISABILITY SCHEDULE. THIS OPTION MAY BE EXERCISED AT ANY TIME AND FROM TIME TO TIME UP TO THE NUMBER OF SHARES AND IN ACCORDANCE WITH THE EXERCISABILITY SCHEDULE SET FORTH ON THE FACE OF THIS CERTIFICATE, BUT ONLY FOR THE PURCHASE OF WHOLE SHARES. THIS OPTION MAY NOT BE EXERCISED AS TO ANY SHARES AFTER THE DATE OF EXPIRATION SET FORTH ON THE FACE OF THIS CERTIFICATE (THE "EXPIRATION DATE"). 4. METHOD OF EXERCISE. TO EXERCISE THIS OPTION, THE PARTICIPANT SHALL DELIVER WRITTEN NOTICE OF EXERCISE TO THE COMPANY SPECIFYING THE NUMBER OF SHARES WITH RESPECT TO WHICH THE OPTION IS BEING EXERCISED ACCOMPANIED BY PAYMENT OF THE OPTION PRICE FOR SUCH SHARES IN CASH, BY CERTIFIED CHECK OR IN SUCH OTHER FORM, INCLUDING SHARES OF COMMON STOCK OF THE COMPANY VALUED AT THEIR FAIR MARKET VALUE ON THE DATE OF DELIVERY, AS THE COMMITTEE MAY APPROVE. PROMPTLY FOLLOWING SUCH NOTICE, THE COMPANY WILL DELIVER TO THE PARTICIPANT A CERTIFICATE REPRESENTING THE NUMBER OF SHARES WITH RESPECT TO WHICH THE OPTION IS BEING EXERCISED. 5. RECAPITALIZATION, MERGERS, ETC. IN THE EVENT OF A CONSOLIDATION OR MERGER OF THE COMPANY WITH ANOTHER ENTITY, THE SALE OR EXCHANGE OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY OR A REORGANIZATION OR LIQUIDATION OF THE COMPANY, THE COMMITTEE MAY UPON WRITTEN NOTICE TO THE PARTICIPANT PROVIDE THAT THIS OPTION SHALL TERMINATE ON A DATE NOT LESS THAN 20 DAYS AFTER THE DATE OF SUCH NOTICE UNLESS THERETOFORE EXERCISED. IN CONNECTION WITH SUCH NOTICE, THE COMMITTEE MAY IN ITS DISCRETION ACCELERATE OR WAIVE ANY DEFERRED EXERCISE PERIOD. [NOTWITHSTANDING THE FOREGOING, IN THE EVENT OF A CHANGE IN CONTROL OF THE COMPANY (AS DEFINED IN A VOTE OF THE COMPENSATION COMMITTEE ADOPTED MAY 29, 2002), THIS OPTION SHALL BECOME EXERCISABLE AS TO ALL SHARES WITHOUT REGARD TO ANY DEFERRED EXERCISABILITY SCHEDULE OR DEFERRED EXERCISE PERIOD.](1) 6. TRANSFERABILITY. THIS OPTION MAY BE TRANSFERRED WITHOUT CONSIDERATION (OR FOR SUCH CONSIDERATION AS THE COMMITTEE MAY FROM TIME TO TIME DEEM APPROPRIATE) BY THE HOLDER THEREOF TO ANY FAMILY MEMBER; PROVIDED, HOWEVER, THAT NO SUBSEQUENT TRANSFER OF SUCH OPTION SHALL BE PERMITTED EXCEPT FOR TRANSFERS: (i) TO A FAMILY MEMBER; (ii) BACK TO THE PARTICIPANT; OR (iii) PURSUANT TO THE APPLICABLE LAWS OF DESCENT AND DISTRIBUTION. FOR THIS PURPOSE, "FAMILY MEMBER" SHALL MEAN (i) ANY CHILD, STEPCHILD, GRANDCHILD, PARENT, STEPPARENT, GRANDPARENT, SPOUSE, FORMER SPOUSE, SIBLING, NIECE, NEPHEW, MOTHER-IN-LAW, FATHER-IN-LAW, SON-IN-LAW, DAUGHTER-IN-LAW, BROTHER-IN-LAW OR SISTER-IN-LAW, INCLUDING ANY ADOPTIVE RELATIONSHIPS, AND ANY OTHER PERSON SHARING THE PARTICIPANT'S HOUSEHOLD (OTHER THAN AS A TENANT OR EMPLOYEE); (ii) ANY TRUST IN WHICH ANY OF THE PERSONS DESCRIBED IN CLAUSE (i) HOLDS A GREATER THAN 50% BENEFICIAL INTEREST; (iii) ANY FOUNDATION IN WHICH ANY OF THE PERSONS DESCRIBED IN CLAUSE (i) OR THE PARTICIPANT CONTROLS THE MANAGEMENT OF ASSETS; OR (iv) ANY OTHER ENTITY IN WHICH ANY OF THE PERSONS DESCRIBED IN CLAUSE (i) OR THE PARTICIPANT HOLDS MORE THAN 50% OF THE VOTING INTERESTS. 7. EXERCISE OF OPTION AFTER TERMINATION OF EMPLOYMENT. IF THE PARTICIPANT'S STATUS AS AN EMPLOYEE OR CONSULTANT OF (a) THE COMPANY, (b) AN AFFILIATE, OR (c) A CORPORATION (OR PARENT OR SUBSIDIARY CORPORATION OF SUCH CORPORATION) ISSUING OR ASSUMING A STOCK OPTION IN A TRANSACTION TO WHICH SECTION 424(a) OF THE CODE APPLIES, IS TERMINATED FOR ANY REASON OTHER THAN BY DISABILITY (WITHIN THE MEANING OF SECTION 22(e)(3) OF THE CODE), DEATH OR RETIREMENT, THE PARTICIPANT MAY EXERCISE THE RIGHTS WHICH WERE AVAILABLE TO THE PARTICIPANT AT THE TIME OF SUCH TERMINATION ONLY WITHIN THREE MONTHS FROM THE DATE OF TERMINATION. IF SUCH STATUS IS TERMINATED AS A RESULT OF DISABILITY, THIS OPTION SHALL BECOME EXERCISABLE AS TO ALL SHARES WITHOUT REGARD TO ANY DEFERRED EXERCISE PERIOD, AND SUCH RIGHTS MAY BE EXERCISED WITHIN TWELVE MONTHS FROM THE DATE OF TERMINATION. IF SUCH STATUS IS TERMINATED AS A RESULT OF RETIREMENT (WHICH IS DEFINED AS A MINIMUM OF AGE 60 PLUS A MINIMUM OF FIVE YEARS OF SERVICE), THIS OPTION SHALL BECOME EXERCISABLE AS TO ALL SHARES WITHOUT REGARD TO ANY DEFERRED EXERCISE PERIOD, AND SUCH RIGHTS MAY BE EXERCISED WITHIN THREE YEARS FROM THE DATE OF TERMINATION. UPON THE DEATH OF THE PARTICIPANT, THIS OPTION SHALL BECOME EXERCISABLE AS TO ALL SHARES WITHOUT REGARD TO ANY DEFERRED EXERCISE PERIOD, AND HIS OR HER DESIGNATED BENEFICIARY SHALL HAVE THE RIGHT, AT ANY TIME WITHIN TWELVE MONTHS AFTER THE DATE OF DEATH, TO EXERCISE IN WHOLE OR IN PART ANY RIGHTS THAT WERE AVAILABLE TO THE PARTICIPANT AT THE TIME OF DEATH. NOTWITHSTANDING THE FOREGOING, NO RIGHTS UNDER THIS OPTION MAY BE EXERCISED AFTER THE EXPIRATION DATE. 8. COMPLIANCE WITH SECURITIES LAWS. IT SHALL BE A CONDITION TO THE PARTICIPANT'S RIGHT TO PURCHASE SHARES OF COMMON STOCK HEREUNDER THAT THE COMPANY MAY, IN ITS DISCRETION, REQUIRE (a) THAT THE SHARES OF COMMON STOCK RESERVED FOR ISSUE UPON THE EXERCISE OF THIS OPTION SHALL HAVE BEEN DULY LISTED, UPON OFFICIAL NOTICE OF ISSUANCE, UPON ANY NATIONAL SECURITIES EXCHANGE OR AUTOMATED QUOTATION SYSTEM ON WHICH THE COMPANY'S COMMON STOCK MAY THEN BE LISTED OR QUOTED, (b) THAT EITHER (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 WITH RESPECT TO THE SHARES SHALL BE IN EFFECT, OR (ii) IN THE OPINION OF COUNSEL FOR THE COMPANY, THE PROPOSED PURCHASE SHALL BE EXEMPT FROM REGISTRATION UNDER THAT ACT AND THE PARTICIPANT SHALL HAVE MADE SUCH UNDERTAKINGS AND AGREEMENTS WITH THE COMPANY AS THE COMPANY MAY REASONABLY REQUIRE, AND (c) THAT SUCH OTHER STEPS, IF ANY, AS COUNSEL FOR THE COMPANY SHALL CONSIDER NECESSARY TO COMPLY WITH ANY LAW APPLICABLE TO THE ISSUE OF SUCH SHARES BY THE COMPANY SHALL HAVE BEEN TAKEN BY THE COMPANY OR THE PARTICIPANT, OR BOTH. THE CERTIFICATES REPRESENTING THE SHARES PURCHASED UNDER THIS OPTION MAY CONTAIN SUCH LEGENDS AS COUNSEL FOR THE COMPANY SHALL CONSIDER NECESSARY TO COMPLY WITH ANY APPLICABLE LAW. 9. PAYMENT OF TAXES. THE PARTICIPANT SHALL PAY TO THE COMPANY, OR MAKE PROVISION SATISFACTORY TO THE COMPANY FOR PAYMENT OF ANY TAXES REQUIRED BY LAW TO BE WITHHELD WITH RESPECT TO THE EXERCISE OF THIS OPTION. THE COMMITTEE MAY, IN ITS DISCRETION, REQUIRE ANY OTHER FEDERAL OR STATE TAXES IMPOSED ON THE SALE OF THE SHARES TO BE PAID BY THE PARTICIPANT. IN THE COMMITTEE'S DISCRETION, SUCH TAX OBLIGATIONS MAY BE PAID IN WHOLE OR IN PART IN SHARES OF COMMON STOCK, INCLUDING SHARES RETAINED FROM THE EXERCISE OF THIS OPTION, VALUED AT THEIR FAIR MARKET VALUE ON THE DATE OF DELIVERY. THE COMPANY AND ITS AFFILIATES MAY, TO THE EXTENT PERMITTED BY LAW, DEDUCT ANY SUCH TAX OBLIGATIONS FROM ANY PAYMENT OF ANY KIND OTHERWISE DUE TO THE PARTICIPANT. 10. RIGHTS LIMITED. THE COMMITTEE, IN ITS SOLE DISCRETION, SHALL DETERMINE FROM THE GROUP OF ELIGIBLE PERSONS WHETHER AN INDIVIDUAL SHALL BE A PARTICIPANT UNDER THE PLAN. ANY OPTION GRANT MADE UNDER THE PLAN SHALL BE MADE IN THE SOLE DISCRETION OF THE COMMITTEE, OR ITS DELEGATE AS APPOINTED IN ACCORDANCE WITH THE PLAN, AND NO PRIOR OPTION GRANT SHALL ENTITLE A PERSON TO ANY FUTURE AWARD. IN NO EVENT SHALL THE PLAN, OR ANY OPTION GRANT MADE UNDER THE PLAN, FORM A PART OF AN EMPLOYEE'S OR CONSULTANT'S CONTRACT OF EMPLOYMENT OR SERVICE, IF ANY. NEITHER THE PLAN, NOR ANY OPTION GRANT MADE UNDER THE PLAN, SHALL CONFER UPON ANY EMPLOYEE OR CONSULTANT OF THE COMPANY OR ITS AFFILIATE ANY RIGHT WITH RESPECT TO THE CONTINUANCE OF HIS OR HER EMPLOYMENT BY, OR OTHER SERVICE WITH, THE COMPANY OR ITS AFFILIATE, NOR SHALL THEY LIMIT THE RIGHTS OF THE COMPANY OR ITS AFFILIATE TO TERMINATE THE EMPLOYEE OR CONSULTANT OR OTHERWISE CHANGE THE TERMS OF SERVICE. NO PARTICIPANT OR DESIGNATED BENEFICIARY SHALL HAVE ANY RIGHTS AS A SHAREHOLDER WITH RESPECT TO ANY SHARES OF COMMON STOCK TO BE ISSUED UNDER THE PLAN OR ANY OPTION UNTIL HE OR SHE BECOMES THE HOLDER THEREOF. THE LOSS OF EXISTING OR POTENTIAL PROFIT IN AN OPTION GRANT SHALL NOT CONSTITUTE AN ELEMENT OF DAMAGES IN THE EVENT OF TERMINATION OF EMPLOYMENT OR SERVICE FOR ANY REASON, EVEN IF THE TERMINATION IS IN VIOLATION OF AN OBLIGATION OF THE COMPANY OR ITS AFFILIATE TO THE PARTICIPANT. - ---------- (1) The exercisability of options held by Henri A. Termeer and Peter Wirth upon a change in control of the Company is governed by the terms of their respective Employment Agreements. This sentence therefore is not included in the form of Terms and Conditions for stock option grants to Mr. Termeer and Mr. Wirth. 11. ACCEPTANCE. FAILURE OF THE PARTICIPANT TO ACCEPT THE TERMS AND CONDITIONS OF THIS OPTION IN ACCORDANCE WITH THE REQUIREMENTS OF THE COMMITTEE OR ITS DELEGATE, AS APPLICABLE, CAN RESULT IN ADVERSE CONSEQUENCES TO THE PARTICIPANT, INCLUDING CANCELLATION OF THE OPTION. ACKNOWLEDGED AND AGREED: - ------------------------------------ Participant Signature - ------------------------------------ Participant Name (Print) - ------------------------------------ Date EX-10.8 9 a2161257zex-10_8.txt EXHIBIT 10.8 EXHIBIT 10.8 GENZYME CORPORATION 2004 EQUITY INCENTIVE PLAN 1. PURPOSE The 2004 Equity Incentive Plan (the "Plan") has been established to promote the interests of the Company and its shareholders by strengthening the Company's ability to attract, motivate, and retain key employees and consultants of the Company and its Affiliates upon whose judgment, initiative, and efforts the financial success and growth of the business of the Company largely depend. The Plan is intended to provide an additional incentive for such individuals through stock ownership and other rights that promote and recognize the financial success and growth of the Company and create value for shareholders. Certain capitalized terms used herein and certain operating rules related thereto are defined and set forth in Section 10 below. The Plan provides for the grant of Stock Options, including ISOs and NSOs. The Plan shall become effective upon shareholder approval (the "Effective Date") and unless sooner terminated, shall terminate ten years from the Effective Date. After the Plan is terminated, no Stock Options may be granted, but Stock Options previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan's terms and conditions. 2. ADMINISTRATION The Compensation Committee shall be the Administrator of the Plan except as hereinafter provided. The Compensation Committee may delegate to one or more of its members such of its duties, powers and responsibilities as it may determine. To the extent determined by the Compensation Committee and permitted by applicable law, the Compensation Committee may also (i) delegate to one or more executive officers of the Company the power to grant Stock Options to, or allocate Stock Options among, Participants who are not Reporting Persons or Covered Employees and to make such determinations under the Plan with respect thereto as the Compensation Committee determines; and (ii) authorize any such executive officer to further delegate to an Employee or another executive officer temporary authority to grant or allocate Stock Options when the executive officer is unavailable. The Compensation Committee may also delegate to such Employees or other persons as it determines such ministerial tasks as it deems appropriate. In the event of any delegation described in this paragraph, the term "Administrator" shall include the person or persons so delegated to the extent of such delegation. The Administrator has discretionary authority, subject only to the express provisions of the Plan, to interpret the Plan; determine eligibility for and grant Stock Options; select the Participants to receive Stock Options and determine, modify or waive the terms and conditions of any Stock Option; prescribe forms, rules and procedures; and otherwise do all things necessary to carry out the purposes of the Plan. The terms of each Stock Option grant need not be identical, and the Administrator need not treat Participants uniformly. Except as otherwise provided by the Plan or a particular Stock Option, any determination with respect to a Stock Option may be made by the Administrator at the time of grant or at any time thereafter. In the case of any Stock Option intended to be eligible for the performance-based compensation exception under Section 162(m), the Administrator will exercise its discretion consistent with qualifying the Stock Option for that exception. Determinations made by the Administrator shall be final and binding upon Participants, the Company, and all other interested parties. 3. STOCK AVAILABLE FOR GRANT; LIMITS (a) NUMBER OF SHARES. Subject to adjustment as provided under Section 6, the maximum number of shares available for issuance to Participants under the Plan shall be 16,800,000 shares. Subject to such overall maximum, up to 16,800,000 shares of Stock may be issued upon the exercise of ISOs and up to16,800,000 shares of Stock may be issued upon exercise of NSOs. Stock delivered by the Company under the Plan may be authorized but unissued Stock or previously issued Stock acquired by the Company. No fractional shares of Stock will be delivered under the Plan. To the extent consistent with the requirements of Section 422 of the Code, and with other applicable legal requirements (including applicable NASDAQ or stock exchange requirements), Stock issued under option grants of an acquired company that are assumed in connection with the acquisition, or under Stock Options issued in substitution for options of an acquired-company, shall not reduce the number of shares available for issuance under the Plan. (b) SECTION 162(m) LIMITS. The maximum number of shares of Stock for which Stock Options may be granted to any person in any calendar year will be 2,000,000. The foregoing provision will be construed in a manner consistent with Section 162(m). 4. ELIGIBILITY AND PARTICIPATION All employees and consultants of the Company or any Affiliate capable of contributing significantly to the successful performance of the Company, other than a person who has irrevocably elected not be eligible, are eligible to be Participants in the Plan. Eligibility for ISOs is limited to employees of the Company or of a "parent corporation" or "subsidiary corporation" of the Company as those terms are defined in Section 424 of the Code. The Administrator, in its sole discretion, shall determine from the group of eligible persons whether an individual shall be a Participant under the Plan. Any grant made under the Plan shall be made in the sole discretion of the Administrator and no prior grant shall entitle a person to any future grant. 5. RULES APPLICABLE TO STOCK OPTIONS (a) DOCUMENTATION. Each Stock Option granted under the Plan shall be evidenced by a writing specifying the terms and conditions thereof and containing such other terms and conditions not inconsistent with the provisions of the Plan as the Administrator considers necessary or advisable to achieve the purposes of the Plan or to comply with applicable tax and regulatory laws and accounting principles. (b) TRANSFERABILITY. In the discretion of the Administrator, any Stock Option may be made transferable upon such terms and conditions and to such extent as the Administrator determines, provided that ISOs may not be transferred other than by will or by the laws of descent and distribution. Any non-transferable Stock Option requiring exercise, including any ISO, may be exercised only by the Participant during the Participant's lifetime. The Administrator may in its discretion, other than in the case of Stock Options intended to continue to qualify as ISOs, waive any restriction on transferability. (c) VESTING; EXERCISABILITY. The Administrator shall determine the time or times at which a Stock Option will vest or become exercisable and the terms on which a Stock Option will remain exercisable during or following termination of Employment. Without limiting the foregoing, the Administrator may at any time accelerate the vesting or exercisability of a Stock Option, regardless of any adverse or potentially adverse tax consequences resulting from such acceleration. (d) TAXES. The Participant shall pay to the Company, or make provision satisfactory to the Administrator for payment of, any taxes required by law to be withheld in respect of Stock Options granted under the Plan no later than the date of the event creating the tax liability. The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind due to the Participant hereunder or otherwise. In the Administrator's discretion, the minimum tax obligations required by law to be withheld in respect of Stock Options may be paid in whole or in part in shares of Stock, including shares retained from the event creating the tax obligation, valued at their Fair Market Value on the date of retention or delivery. (e) DIVIDEND EQUIVALENTS, ETC. The Administrator may provide for the payment of amounts in lieu of cash dividends or other cash distributions with respect to Stock subject to a Stock Option. (f) RIGHTS LIMITED. Nothing in the Plan will be construed as giving any person the right to continued employment or service with the Company or its Affiliates, or any rights as a shareholder except as to shares of Stock actually issued under the Plan. In no event shall the Plan, or any grant made under the Plan, form a part of an employee's or consultant's contract of employment or service, if any. The loss of existing or potential profit in Stock Options will not constitute an element of damages in the event of termination of employment or service for any reason, even if the termination is in violation of an obligation of the Company or Affiliate to the Participant. (g) NON-U.S. STOCK OPTIONS. Stock Options may be granted under the Plan to any eligible person regardless of the jurisdiction in which he or she works or resides. In order to comply with the laws in other countries in which the Company operates, the Administrator, in its sole discretion, shall have the power and authority to: (i) Establish one or more separate sub-plans or programs under the Plan for the grant of Stock Options to eligible persons in a specified jurisdiction or jurisdictions; (ii) Include in any such sub-plan or program such special rules as it determines to be necessary or advisable; and (iii) Take any action, before or after a Stock Option grant is made, that it deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approvals. Notwithstanding the above, the Administrator may not take any actions hereunder, and no Stock Options shall be granted, that would violate applicable law. (h) EXERCISE PRICE. The exercise price of a Stock Option will not be less than 100% of the Fair Market Value of the Stock on the date of grant. Notwithstanding the foregoing sentence, a NSO may be granted to a new employee or consultant in connection with the hiring of such person at a lower exercise price, provided that it is not less than the lower of (i) 100% of the Fair Market Value on the date the person accepts the Company's offer of employment or (ii) the date employment commences. Once granted, no Stock Option may be repriced (as that term is used under applicable NASDAQ or stock exchange rules) without shareholder approval. (i) TIME AND MANNER OF EXERCISE. Unless the Administrator expressly provides otherwise, a Stock Option will not be deemed to have been exercised until the Company receives a notice of exercise (in a form acceptable to the Administrator) signed by the appropriate person and accompanied by payment of the exercise price. If the Stock Option is exercised by any person other than the Participant, the Administrator may require satisfactory evidence that the person exercising the Stock Option has the right to do so. All Stock Options granted pursuant to the Plan shall terminate if not exercised within ten years of the date of grant, or such earlier date as the Administrator may determine. (j) PAYMENT. No shares shall be delivered pursuant to any exercise of a Stock Option until payment in full of the exercise price therefore is received by the Company. Such payment may be made in whole or in part in cash or, to the extent permitted by the Administrator at or after the grant of the Stock Option, in shares of Stock owned by the Participant (which shares must be owned for at least six months) valued at their Fair Market Value on the date of delivery, or such other lawful consideration, including use of a broker-assisted exercise program or similar program, as the Administrator may determine. The delivery of shares in payment of the exercise price may be accomplished either by actual delivery or by constructive delivery through attestation of ownership, subject to such rules as the Administrator may prescribe. 6. EFFECT OF CERTAIN TRANSACTIONS (a) COVERED TRANSACTIONS. Except as otherwise provided under the terms of a Stock Option grant, in the event of a Covered Transaction in which there is an acquiring or surviving entity, the Administrator may provide for the assumption of some or all outstanding Stock Options, or for the grant of new Stock Options in substitution therefor, by the acquiror or survivor or an affiliate of the acquiror or survivor, in each case on such terms and subject to such conditions as the Administrator determines. In the absence of such an assumption or if there is no substitution, except as otherwise provided in the Stock Option, each Stock Option will become fully exercisable, prior to the Covered Transaction so as to give the holder of the Stock Option a reasonable opportunity, as determined by the Administrator, following exercise of the Stock Option to participate as a shareholder in the Covered Transaction, and the Stock Option will terminate upon consummation of the Covered Transaction. Without limiting the general scope of the Administrator's discretionary authority under the Plan, the Administrator may provide, as to some or all Stock Options, if any, that in the event of a Change in Control of the Company, whether or not such Change in Control is also a Covered Transaction, the vesting and exercisability of, or the payment of benefits under, any Stock Option will be accelerated on such terms as the Administrator determines. (b) DISTRIBUTIONS; CHANGES IN CAPITAL STOCK. Basic Adjustment Provisions. In the event of a stock dividend, stock split (including reverse stock split) or combination of shares, recapitalization or other change in the Company's capital structure, the Administrator will make appropriate adjustments to the maximum number of shares specified in Section 3(a) that may be delivered under the Plan, to the maximum number of shares specified in Section 3(a) that may be issued upon the exercise of ISOs, to the maximum number of shares specified in Section 3(a) that may be issued upon exercise of NSOs, and to the maximum share limits described in Section 3(b). The Administrator will also make appropriate adjustments to the number and kind of shares of stock or securities subject to Stock Options then outstanding or subsequently granted, any exercise prices relating to Stock Options and any other provision of the Stock Options affected by such change. (c) CERTAIN OTHER ADJUSTMENTS. To the extent consistent with qualification of ISOs under Section 422 of the Code and with the performance-based compensation rules of Section 162(m), where applicable, the Administrator may also make adjustments of the type above to take into account distributions to shareholders other than those provided for in Section 6(a), or any other event, if the Administrator determines that adjustments are appropriate to avoid distortion in the operation of the Plan and to preserve the value of Stock Option grants made hereunder. (d) CONTINUING APPLICATION OF PLAN TERMS. References in the Plan to shares of Stock will be construed to include any stock or securities resulting from an adjustment pursuant to this Section 6. 7. LEGAL CONDITIONS ON DELIVERY OF STOCK The Company will not be obligated to deliver any shares of Stock pursuant to the Plan or to remove any restriction from shares of Stock previously delivered under the Plan until: (i) the Company is satisfied that all legal matters in connection with the issuance and delivery of such shares have been addressed and resolved; (ii) if the outstanding Stock is at the time of delivery listed on any stock exchange or national market system, the shares to be delivered have been listed or authorized to be listed on such exchange or system upon official notice of issuance; and (iii) all conditions of the grant have been satisfied or waived. If the sale of Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Stock Option, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such Act. The Company may require that certificates evidencing Stock issued under the Plan bear an appropriate legend reflecting any restriction on transfer applicable to such Stock. 8. AMENDMENT AND TERMINATION The Administrator may at any time or times amend the Plan or any outstanding Stock Option for any purpose which may at the time be permitted by law, and may at any time terminate the Plan as to any future grants of Stock Options; PROVIDED, that except as otherwise expressly provided in the Plan the Administrator may not, without the Participant's consent, alter the terms of a Stock Option so as to affect adversely a Participant's rights under the Stock Option, unless the Administrator expressly reserved the right to do so at the time of grant. Amendments to the Plan shall be conditioned upon shareholder approval only to the extent, if any, such approval is required by law (including the Code and applicable NASDAQ or stock exchange requirements), as determined by the Administrator. Notwithstanding the foregoing, the Company shall submit for shareholder approval any amendment to the Plan (other than an amendment or adjustment pursuant to Section 6) that would: (a) increase the maximum number of shares for which options may be granted under the plan; (b) reduce the price at which a Stock Option may be granted below the price provided for in Section 5(h); (c) reduce the exercise price of outstanding Stock Options; or (d) increase the limits set forth in Section 3. 9. OTHER COMPENSATION ARRANGEMENTS The existence of the Plan or the grant of any Stock Option will not in any way affect the Company's right to award a person bonuses or other compensation in addition to grants made under the Plan. 10. DEFINITIONS The following terms, when used in the Plan, will have the meanings and be subject to the provisions set forth below: "ADMINISTRATOR": has the meaning set forth in Section 2. "AFFILIATE": Any corporation or other entity owning, directly or indirectly, 50% or more of the outstanding Stock of the Company, or in which the Company or any such corporation or other entity owns, directly or indirectly, 50% of the outstanding capital stock (determined by aggregate voting rights) or other voting interests. "BOARD": The Board of Directors of the Company. "CHANGE IN CONTROL": A change in ownership or control of the Company or a change in the ownership of a substantial portion of the Company's assets, determined in accordance with such rules, if any, as may be established by the Administrator. "CODE": The U.S. Internal Revenue Code of 1986 as from time to time amended and in effect, or any successor statute as from time to time in effect. "COMPENSATION COMMITTEE": The Compensation Committee of the Board. "COMPANY": Genzyme Corporation. "COVERED EMPLOYEES": A "covered employee" within the meaning of Section 162(m). "COVERED TRANSACTION": Any of (i) a consolidation, merger, or similar transaction or series of related transactions in which the Company is not the surviving corporation or which results in the acquisition of all or substantially all of the Company's then outstanding common stock by a single person or entity or by a group of persons and/or entities acting in concert, (ii) a sale or transfer of all or substantially all the Company's assets, or (iii) a dissolution or liquidation of the Company. Where a Covered Transaction involves a tender offer that is reasonably expected to be followed by a merger described in clause (i) (as determined by the Administrator), the Covered Transaction shall be deemed to have occurred upon consummation of the tender offer. "EMPLOYEE": Any person who is employed by the Company or an Affiliate. "EMPLOYMENT": A Participant's employment or other service relationship with the Company and its Affiliates. Employment will be deemed to continue, unless the Administrator expressly provides otherwise, so long as the Participant is employed by, or otherwise is providing services in a capacity described in Section 4 to the Company or its Affiliates. If a Participant's employment or other service relationship is with an Affiliate and that entity ceases to be an Affiliate, the Participant's Employment will be deemed to have terminated when the entity ceases to be an Affiliate unless the Participant transfers Employment to the Company or its remaining Affiliates. "EXCHANGE ACT": The Securities Exchange Act of 1934, as amended, as from time to time further amended and in effect, or any successor statute as from time to time in effect. "FAIR MARKET VALUE": The fair market value as determined by the Compensation Committee in good faith, or in the manner established by the Compensation Committee in good faith, from time to time. "ISO": A Stock Option intended to be an "incentive stock option" within the meaning of Section 422 of the Code. Each option granted pursuant to the Plan will be treated as providing by its terms that it is to be a non-incentive option unless, as of the date of grant, it is expressly designated as an ISO. "NSO": A Stock Option that is not an ISO. "PARTICIPANT": A person who is granted a Stock Option under the Plan. "PLAN": The Genzyme Corporation 2004 Equity Incentive Plan as from time to time amended and in effect. "REPORTING PERSON": A person subject to the reporting requirements of Section 16 of the Exchange Act. "SECTION 162(m)": Section 162(m) of the Code. "STOCK": Common Stock of the Company, par value $.01 per share. "STOCK OPTIONS": Options entitling the recipient to acquire shares of Stock upon payment of the exercise price. EX-10.9 10 a2161257zex-10_9.txt EXHIBIT 10.9 EXHIBIT 10.9 GENZYME CORPORATION NOTICE OF GRANT OF STOCK OPTIONS ID: 06-1047163 AND OPTION AGREEMENT 500 Kendall Street Cambridge, MA 02142 OPTIONEE NAME OPTION NUMBER: OPTIONEE ADDRESS PLAN: ID: Effective _________, you have been granted a(n) Incentive Stock Option to buy _____ shares of GENZYME CORPORATION (the Company) stock at $_______ per share. The total option price of the shares granted is $_________. Shares in each period will become fully vested on the date shown.
Shares Vest Type Full Vest Expiration
MAINTAIN THIS COPY FOR YOUR RECORDS. These options are granted under and governed by the terms and conditions of the Company's Stock Option plan as amended and the Option Agreement, all of which are attached and made a part of this document. Date: Time: GENZYME CORPORATION 2004 EQUITY INCENTIVE PLAN OFFICER (TIER I/II) INCENTIVE STOCK OPTION TERMS AND CONDITIONS 1. PLAN INCORPORATED BY REFERENCE. THIS STOCK OPTION IS ISSUED PURSUANT TO THE TERMS OF THE PLAN AND MAY BE AMENDED AS PROVIDED IN THE PLAN. CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED IN THIS CERTIFICATE HAVE THE MEANINGS GIVEN TO THEM IN THE PLAN. THIS CERTIFICATE DOES NOT SET FORTH ALL OF THE TERMS AND CONDITIONS OF THE PLAN, WHICH ARE INCORPORATED HEREIN BY REFERENCE. COPIES OF THE PLAN MAY BE OBTAINED UPON WRITTEN REQUEST WITHOUT CHARGE FROM THE SHAREHOLDER RELATIONS DEPARTMENT OF THE COMPANY. 2. OPTION PRICE. THE PRICE TO BE PAID FOR EACH SHARE OF STOCK ISSUED UPON EXERCISE OF THE WHOLE OR ANY PART OF THIS STOCK OPTION IS THE OPTION PRICE SET FORTH ON THE FACE OF THIS CERTIFICATE (THE "OPTION PRICE"). 3. EXERCISABILITY SCHEDULE. THIS STOCK OPTION MAY BE EXERCISED AT ANY TIME AND FROM TIME TO TIME UP TO THE NUMBER OF SHARES AND IN ACCORDANCE WITH THE EXERCISABILITY SCHEDULE SET FORTH ON THE FACE OF THIS CERTIFICATE, BUT ONLY FOR THE PURCHASE OF WHOLE SHARES. THIS STOCK OPTION MAY NOT BE EXERCISED AS TO ANY SHARES AFTER THE DATE OF EXPIRATION SET FORTH ON THE FACE OF THIS CERTIFICATE (THE "EXPIRATION DATE"). 4. METHOD OF EXERCISE. TO EXERCISE THIS STOCK OPTION, THE PARTICIPANT SHALL DELIVER WRITTEN NOTICE OF EXERCISE TO THE COMPANY SPECIFYING THE NUMBER OF SHARES WITH RESPECT TO WHICH THE STOCK OPTION IS BEING EXERCISED ACCOMPANIED BY PAYMENT OF THE OPTION PRICE FOR SUCH SHARES IN CASH, BY CERTIFIED CHECK OR IN SUCH OTHER FORM, INCLUDING SHARES OF STOCK OF THE COMPANY VALUED AT THEIR FAIR MARKET VALUE ON THE DATE OF DELIVERY, AS THE ADMINISTRATOR MAY APPROVE. PROMPTLY FOLLOWING SUCH NOTICE, THE COMPANY WILL DELIVER TO THE PARTICIPANT A CERTIFICATE REPRESENTING THE NUMBER OF SHARES WITH RESPECT TO WHICH THE STOCK OPTION IS BEING EXERCISED. 5. RECAPITALIZATION, MERGERS, ETC. IN THE EVENT OF A COVERED TRANSACTION, THE ADMINISTRATOR MAY UPON WRITTEN NOTICE TO THE PARTICIPANT PROVIDE THAT THIS STOCK OPTION SHALL TERMINATE ON A DATE NOT LESS THAN 20 DAYS AFTER THE DATE OF SUCH NOTICE UNLESS THERETOFORE EXERCISED. IN CONNECTION WITH SUCH NOTICE, THE ADMINISTRATOR MAY IN ITS DISCRETION ACCELERATE OR WAIVE ANY DEFERRED EXERCISE PERIOD. [ NOTWITHSTANDING THE FOREGOING, IN THE EVENT OF A CHANGE IN CONTROL OF THE COMPANY (AS DEFINED IN A VOTE OF THE COMPENSATION COMMITTEE ADOPTED MAY 29, 2002), THIS STOCK OPTION SHALL BECOME EXERCISABLE AS TO ALL SHARES WITHOUT REGARD TO ANY DEFERRED EXERCISABILITY SCHEDULE OR DEFERRED EXERCISE PERIOD.](1) 6. STOCK OPTION NOT TRANSFERABLE. THIS STOCK OPTION IS NOT TRANSFERABLE BY THE PARTICIPANT OTHERWISE THAN BY WILL OR THE LAWS OF DESCENT AND DISTRIBUTION, AND IS EXERCISABLE, DURING THE PARTICIPANT'S LIFETIME, ONLY BY THE PARTICIPANT. THE NAMING OF A DESIGNATED BENEFICIARY DOES NOT CONSTITUTE A TRANSFER. A "DESIGNATED BENEFICIARY" MEANS THE BENEFICIARY DESIGNATED BY THE PARTICIPANT, IN A MANNER DETERMINED BY THE ADMINISTRATOR, TO RECEIVE AMOUNTS DUE OR EXERCISE RIGHTS OF THE PARTICIPANT IN THE EVENT OF THE PARTICIPANT'S DEATH. IN THE ABSENCE OF AN EFFECTIVE DESIGNATION BY THE PARTICIPANT, "DESIGNATED BENEFICIARY" MEANS THE PARTICIPANT'S ESTATE. 7. EXERCISE OF STOCK OPTION AFTER TERMINATION OF EMPLOYMENT. IF THE PARTICIPANT'S EMPLOYMENT WITH (a) THE COMPANY, (b) AN AFFILIATE, OR (c) A CORPORATION (OR PARENT OR SUBSIDIARY CORPORATION OF SUCH CORPORATION) ISSUING OR ASSUMING A STOCK OPTION IN A TRANSACTION TO WHICH SECTION 424(a) OF THE CODE APPLIES, IS TERMINATED FOR ANY REASON OTHER THAN BY DISABILITY (WITHIN THE MEANING OF SECTION 22(e)(3) OF THE CODE), DEATH OR RETIREMENT, THE PARTICIPANT MAY EXERCISE THE RIGHTS WHICH WERE AVAILABLE TO THE PARTICIPANT AT THE TIME OF SUCH TERMINATION ONLY WITHIN THREE MONTHS FROM THE DATE OF TERMINATION. IF PARTICIPANT'S EMPLOYMENT IS TERMINATED AS A RESULT OF DISABILITY, THIS STOCK OPTION SHALL BECOME EXERCISABLE AS TO ALL SHARES WITHOUT REGARD TO ANY DEFERRED EXERCISE PERIOD, AND SUCH RIGHTS MAY BE EXERCISED WITHIN TWELVE MONTHS FROM THE DATE OF TERMINATION. IF PARTICIPANT'S EMPLOYMENT IS TERMINATED AS A RESULT OF RETIREMENT (WHICH IS DEFINED AS A MINIMUM OF AGE 60 PLUS A MINIMUM OF FIVE YEARS OF SERVICE), THIS STOCK OPTION SHALL BECOME EXERCISABLE AS TO ALL SHARES WITHOUT REGARD TO ANY DEFERRED EXERCISE PERIOD, AND SUCH RIGHTS MAY BE EXERCISED WITHIN THREE YEARS FROM THE DATE OF TERMINATION. UPON THE DEATH OF THE PARTICIPANT, THIS STOCK OPTION SHALL BECOME EXERCISABLE AS TO ALL SHARES WITHOUT REGARD TO ANY DEFERRED EXERCISE PERIOD, AND HIS OR HER DESIGNATED BENEFICIARY SHALL HAVE THE RIGHT, AT ANY TIME WITHIN TWELVE MONTHS AFTER THE DATE OF DEATH, TO EXERCISE IN WHOLE OR IN PART ANY RIGHTS THAT WERE AVAILABLE TO THE PARTICIPANT AT THE TIME OF DEATH. NOTWITHSTANDING THE FOREGOING, NO RIGHTS UNDER THIS STOCK OPTION MAY BE EXERCISED AFTER THE EXPIRATION DATE. 8. PAYMENT OF TAXES. THE PARTICIPANT SHALL PAY TO THE COMPANY, OR MAKE PROVISION SATISFACTORY TO THE COMPANY FOR PAYMENT OF ANY TAXES REQUIRED BY LAW TO BE WITHHELD WITH RESPECT TO THE EXERCISE OF THIS STOCK OPTION. THE ADMINISTRATOR MAY, IN ITS DISCRETION, REQUIRE ANY OTHER FEDERAL OR STATE TAXES IMPOSED ON THE SALE OF THE SHARES TO BE PAID BY THE PARTICIPANT. IN THE ADMINISTRATOR'S DISCRETION, SUCH TAX OBLIGATIONS MAY BE PAID IN WHOLE OR IN PART IN SHARES OF STOCK, INCLUDING SHARES RETAINED FROM THE EXERCISE OF THIS STOCK OPTION, VALUED AT THEIR FAIR MARKET VALUE ON THE DATE OF DELIVERY. THE COMPANY AND ITS AFFILIATES MAY, TO THE EXTENT PERMITTED BY LAW, DEDUCT ANY SUCH TAX OBLIGATIONS FROM ANY PAYMENT OF ANY KIND OTHERWISE DUE TO THE PARTICIPANT. 9. NOTICE OF SALE OF SHARES REQUIRED. THE PARTICIPANT AGREES TO NOTIFY THE COMPANY IN WRITING WITHIN 30 DAYS OF THE DISPOSITION OF ANY SHARES PURCHASED UPON EXERCISE OF THIS STOCK OPTION IF SUCH DISPOSITION OCCURS WITHIN TWO YEARS OF THE DATE OF THE GRANT OF THIS STOCK OPTION OR WITHIN ONE YEAR AFTER SUCH PURCHASE. 10. RIGHTS LIMITED. THE ADMINISTRATOR, IN ITS SOLE DISCRETION, SHALL DETERMINE FROM THE GROUP OF ELIGIBLE PERSONS WHETHER AN INDIVIDUAL SHALL BE A PARTICIPANT UNDER THE PLAN. ANY GRANT MADE UNDER THE PLAN SHALL BE MADE IN THE SOLE DISCRETION OF THE ADMINISTRATOR AND NO PRIOR GRANT SHALL ENTITLE A PERSON TO ANY FUTURE GRANT. NOTHING IN THE PLAN OR ANY STOCK OPTION GRANT WILL BE CONSTRUED AS GIVING ANY PERSON THE RIGHT TO CONTINUED EMPLOYMENT OR SERVICE WITH THE COMPANY OR ITS AFFILIATES, OR ANY RIGHTS AS A SHAREHOLDER EXCEPT AS TO SHARES OF STOCK ACTUALLY ISSUED UNDER THE PLAN. IN NO EVENT SHALL THE PLAN, OR ANY GRANT MADE UNDER THE PLAN, FORM A PART OF AN EMPLOYEE'S OR CONSULTANT'S CONTRACT OF EMPLOYMENT OR SERVICE, IF ANY. THE LOSS OF EXISTING OR POTENTIAL PROFIT IN STOCK OPTIONS WILL NOT CONSTITUTE AN ELEMENT OF DAMAGES IN THE EVENT OF TERMINATION OF EMPLOYMENT OR SERVICE FOR ANY REASON, EVEN IF THE TERMINATION IS IN VIOLATION OF AN OBLIGATION OF THE COMPANY OR AFFILIATE TO THE PARTICIPANT. 11. ACCEPTANCE. FAILURE OF THE PARTICIPANT TO ACCEPT THE TERMS AND CONDITIONS OF THIS STOCK OPTION IN ACCORDANCE WITH THE REQUIREMENTS OF THE ADMINISTRATOR CAN RESULT IN ADVERSE CONSEQUENCES TO THE PARTICIPANT INCLUDING CANCELLATION OF THE STOCK OPTION. ACKNOWLEDGED AND AGREED: - ---------- (1) The exercisability of options held by Henri A. Termeer and Peter Wirth upon a change in control of the Company is governed by the terms of their respective Employment Agreements. This sentence therefore is not included in the form of Terms and Conditions for stock option grants to Mr. Termeer and Mr. Wirth. - ------------------------------------ Participant Signature - ------------------------------------ Participant Name (Print) - ------------------------------------ Date EX-10.10 11 a2161257zex-10_10.txt EXHIBIT 10.10 EXHIBIT 10.10 GENZYME CORPORATION NOTICE OF GRANT OF STOCK OPTIONS ID: 06-1047163 AND OPTION AGREEMENT 500 Kendall Street Cambridge, MA 02142 OPTIONEE NAME OPTION NUMBER: OPTIONEE ADDRESS PLAN: ID: Effective _________, you have been granted a(n) Non-Qualified Stock Option to buy _____ shares of GENZYME CORPORATION (the Company) stock at $_______ per share. The total option price of the shares granted is $_________. Shares in each period will become fully vested on the date shown.
Shares Vest Type Full Vest Expiration
MAINTAIN THIS COPY FOR YOUR RECORDS. These options are granted under and governed by the terms and conditions of the Company's Stock Option plan as amended and the Option Agreement, all of which are attached and made a part of this document. Date: Time: GENZYME CORPORATION 2004 EQUITY INCENTIVE PLAN OFFICER (TIER I/II) NONSTATUTORY STOCK OPTION TERMS AND CONDITIONS 1. PLAN INCORPORATED BY REFERENCE. THIS STOCK OPTION IS ISSUED PURSUANT TO THE TERMS OF THE PLAN AND MAY BE AMENDED AS PROVIDED IN THE PLAN. CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED IN THIS CERTIFICATE HAVE THE MEANINGS GIVEN TO THEM IN THE PLAN. THIS CERTIFICATE DOES NOT SET FORTH ALL OF THE TERMS AND CONDITIONS OF THE PLAN, WHICH ARE INCORPORATED HEREIN BY REFERENCE. COPIES OF THE PLAN MAY BE OBTAINED UPON WRITTEN REQUEST WITHOUT CHARGE FROM THE SHAREHOLDER RELATIONS DEPARTMENT OF THE COMPANY. 2. OPTION PRICE. THE PRICE TO BE PAID FOR EACH SHARE OF STOCK ISSUED UPON EXERCISE OF THE WHOLE OR ANY PART OF THIS STOCK OPTION IS THE OPTION PRICE SET FORTH ON THE FACE OF THIS CERTIFICATE (THE "OPTION PRICE"). 3. EXERCISABILITY SCHEDULE. THIS STOCK OPTION MAY BE EXERCISED AT ANY TIME AND FROM TIME TO TIME UP TO THE NUMBER OF SHARES AND IN ACCORDANCE WITH THE EXERCISABILITY SCHEDULE SET FORTH ON THE FACE OF THIS CERTIFICATE, BUT ONLY FOR THE PURCHASE OF WHOLE SHARES. THIS STOCK OPTION MAY NOT BE EXERCISED AS TO ANY SHARES AFTER THE DATE OF EXPIRATION SET FORTH ON THE FACE OF THIS CERTIFICATE (THE "EXPIRATION DATE"). 4. METHOD OF EXERCISE. TO EXERCISE THIS STOCK OPTION, THE PARTICIPANT SHALL DELIVER WRITTEN NOTICE OF EXERCISE TO THE COMPANY SPECIFYING THE NUMBER OF SHARES WITH RESPECT TO WHICH THE STOCK OPTION IS BEING EXERCISED ACCOMPANIED BY PAYMENT OF THE OPTION PRICE FOR SUCH SHARES IN CASH, BY CERTIFIED CHECK OR IN SUCH OTHER FORM, INCLUDING SHARES OF STOCK OF THE COMPANY VALUED AT THEIR FAIR MARKET VALUE ON THE DATE OF DELIVERY, AS THE ADMINISTRATOR MAY APPROVE. PROMPTLY FOLLOWING SUCH NOTICE, THE COMPANY WILL DELIVER TO THE PARTICIPANT A CERTIFICATE REPRESENTING THE NUMBER OF SHARES WITH RESPECT TO WHICH THE STOCK OPTION IS BEING EXERCISED. 5. RECAPITALIZATION, MERGERS, ETC. IN THE EVENT OF A COVERED TRANSACTION, THE ADMINISTRATOR MAY UPON WRITTEN NOTICE TO THE PARTICIPANT PROVIDE THAT THIS STOCK OPTION SHALL TERMINATE ON A DATE NOT LESS THAN 20 DAYS AFTER THE DATE OF SUCH NOTICE UNLESS THERETOFORE EXERCISED. IN CONNECTION WITH SUCH NOTICE, THE ADMINISTRATOR MAY IN ITS DISCRETION ACCELERATE OR WAIVE ANY DEFERRED EXERCISE PERIOD. [NOTWITHSTANDING THE FOREGOING, IN THE EVENT OF A CHANGE IN CONTROL OF THE COMPANY (AS DEFINED IN A VOTE OF THE COMPENSATION ADMINISTRATOR ADOPTED MAY 29, 2002), THIS STOCK OPTION SHALL BECOME EXERCISABLE AS TO ALL SHARES WITHOUT REGARD TO ANY DEFERRED EXERCISABILITY SCHEDULE OR DEFERRED EXERCISE PERIOD.](1) 6. TRANSFERABILITY. THIS STOCK OPTION MAY BE TRANSFERRED WITHOUT CONSIDERATION (OR FOR SUCH CONSIDERATION AS THE ADMINISTRATOR MAY FROM TIME TO TIME DEEM APPROPRIATE) BY THE HOLDER THEREOF TO ANY FAMILY MEMBER; PROVIDED, HOWEVER, THAT NO SUBSEQUENT TRANSFER OF SUCH OPTION SHALL BE PERMITTED EXCEPT FOR TRANSFERS: (i) TO A FAMILY MEMBER; (ii) BACK TO THE PARTICIPANT; OR (iii) PURSUANT TO THE APPLICABLE LAWS OF DESCENT AND DISTRIBUTION. FOR THIS PURPOSE, "FAMILY MEMBER" SHALL MEAN (i) ANY CHILD, STEPCHILD, GRANDCHILD, PARENT, STEPPARENT, GRANDPARENT, SPOUSE, FORMER SPOUSE, SIBLING, NIECE, NEPHEW, MOTHER-IN-LAW, FATHER-IN-LAW, SON-IN-LAW, DAUGHTER-IN-LAW, BROTHER-IN-LAW OR SISTER-IN-LAW, INCLUDING ANY ADOPTIVE RELATIONSHIPS, AND ANY OTHER PERSON SHARING THE PARTICIPANT'S HOUSEHOLD (OTHER THAN AS A TENANT OR EMPLOYEE); (ii) ANY TRUST IN WHICH ANY OF THE PERSONS DESCRIBED IN CLAUSE (i) HOLDS A GREATER THAN 50% BENEFICIAL INTEREST; (iii) ANY FOUNDATION IN WHICH ANY OF THE PERSONS DESCRIBED IN CLAUSE (i) OR THE PARTICIPANT CONTROLS THE MANAGEMENT OF ASSETS; OR (iv) ANY OTHER ENTITY IN WHICH ANY OF THE PERSONS DESCRIBED IN CLAUSE (i) OR THE PARTICIPANT HOLDS MORE THAN 50% OF THE VOTING INTERESTS. 7. EXERCISE OF STOCK OPTION AFTER TERMINATION OF EMPLOYMENT. IF THE PARTICIPANT'S STATUS AS AN EMPLOYEE OR CONSULTANT OF (a) THE COMPANY, (b) AN AFFILIATE, OR (c) A CORPORATION (OR PARENT OR SUBSIDIARY CORPORATION OF SUCH CORPORATION) ISSUING OR ASSUMING A STOCK OPTION IN A TRANSACTION TO WHICH SECTION 424(a) OF THE CODE APPLIES, IS TERMINATED FOR ANY REASON OTHER THAN BY DISABILITY (WITHIN THE MEANING OF SECTION 22(e)(3) OF THE CODE), DEATH OR RETIREMENT, THE PARTICIPANT MAY EXERCISE THE RIGHTS WHICH WERE AVAILABLE TO THE PARTICIPANT AT THE TIME OF SUCH TERMINATION ONLY WITHIN THREE MONTHS FROM THE DATE OF TERMINATION. IF SUCH STATUS IS TERMINATED AS A RESULT OF DISABILITY, THIS STOCK OPTION SHALL BECOME EXERCISABLE AS TO ALL SHARES WITHOUT REGARD TO ANY DEFERRED EXERCISE PERIOD, AND SUCH RIGHTS MAY BE EXERCISED WITHIN TWELVE MONTHS FROM THE DATE OF TERMINATION. IF SUCH STATUS IS TERMINATED AS A RESULT OF RETIREMENT (WHICH IS DEFINED AS A MINIMUM OF AGE 60 PLUS A MINIMUM OF FIVE YEARS OF SERVICE), THIS STOCK OPTION SHALL BECOME EXERCISABLE AS TO ALL SHARES WITHOUT REGARD TO ANY DEFERRED EXERCISE PERIOD, AND SUCH RIGHTS MAY BE EXERCISED WITHIN THREE YEARS FROM THE DATE OF TERMINATION. UPON THE DEATH OF THE PARTICIPANT, THIS STOCK OPTION SHALL BECOME EXERCISABLE AS TO ALL SHARES WITHOUT REGARD TO ANY DEFERRED EXERCISE PERIOD, AND HIS OR HER DESIGNATED BENEFICIARY SHALL HAVE THE RIGHT, AT ANY TIME WITHIN TWELVE MONTHS AFTER THE DATE OF DEATH, TO EXERCISE IN WHOLE OR IN PART ANY RIGHTS THAT WERE AVAILABLE TO THE PARTICIPANT AT THE TIME OF DEATH. NOTWITHSTANDING THE FOREGOING, NO RIGHTS UNDER THIS STOCK OPTION MAY BE EXERCISED AFTER THE EXPIRATION DATE. A "DESIGNATED BENEFICIARY" MEANS THE BENEFICIARY DESIGNATED BY THE PARTICIPANT, IN A MANNER DETERMINED BY THE ADMINISTRATOR, TO RECEIVE AMOUNTS DUE OR EXERCISE RIGHTS OF THE PARTICIPANT IN THE EVENT OF THE PARTICIPANT'S DEATH. IN THE ABSENCE OF AN EFFECTIVE DESIGNATION BY THE PARTICIPANT, "DESIGNATED BENEFICIARY" MEANS THE PARTICIPANT'S ESTATE. 8. PAYMENT OF TAXES. THE PARTICIPANT SHALL PAY TO THE COMPANY, OR MAKE PROVISION SATISFACTORY TO THE COMPANY FOR PAYMENT OF ANY TAXES REQUIRED BY LAW TO BE WITHHELD WITH RESPECT TO THE EXERCISE OF THIS STOCK OPTION. THE ADMINISTRATOR MAY, IN ITS DISCRETION, REQUIRE ANY OTHER FEDERAL OR STATE TAXES IMPOSED ON THE SALE OF THE SHARES TO BE PAID BY THE PARTICIPANT. IN THE ADMINISTRATOR'S DISCRETION, SUCH TAX OBLIGATIONS MAY BE PAID IN WHOLE OR IN PART IN SHARES OF STOCK, INCLUDING SHARES RETAINED FROM THE EXERCISE OF THIS STOCK OPTION, VALUED AT THEIR FAIR MARKET VALUE ON THE DATE OF DELIVERY. THE COMPANY AND ITS AFFILIATES MAY, TO THE EXTENT PERMITTED BY LAW, DEDUCT ANY SUCH TAX OBLIGATIONS FROM ANY PAYMENT OF ANY KIND OTHERWISE DUE TO THE PARTICIPANT. 9. RIGHTS LIMITED. THE ADMINISTRATOR, IN ITS SOLE DISCRETION, SHALL DETERMINE FROM THE GROUP OF ELIGIBLE PERSONS WHETHER AN INDIVIDUAL SHALL BE A PARTICIPANT UNDER THE PLAN. ANY GRANT MADE UNDER THE PLAN SHALL BE MADE IN THE SOLE DISCRETION OF THE ADMINISTRATOR AND NO PRIOR GRANT SHALL ENTITLE A PERSON TO ANY FUTURE GRANT. NOTHING IN THE PLAN OR ANY STOCK OPTION GRANT WILL BE CONSTRUED AS GIVING ANY PERSON THE RIGHT TO CONTINUED EMPLOYMENT OR SERVICE WITH THE COMPANY OR ITS AFFILIATES, OR ANY RIGHTS AS A SHAREHOLDER EXCEPT AS TO SHARES OF STOCK ACTUALLY ISSUED UNDER THE PLAN. IN NO EVENT SHALL THE PLAN, OR ANY GRANT MADE UNDER THE PLAN, FORM A PART OF AN EMPLOYEE'S OR CONSULTANT'S CONTRACT OF EMPLOYMENT OR SERVICE, IF ANY. THE LOSS OF EXISTING OR POTENTIAL PROFIT IN STOCK OPTIONS WILL NOT CONSTITUTE AN ELEMENT OF DAMAGES IN THE EVENT OF TERMINATION OF EMPLOYMENT OR SERVICE FOR ANY REASON, EVEN IF THE TERMINATION IS IN VIOLATION OF AN OBLIGATION OF THE COMPANY OR AFFILIATE TO THE PARTICIPANT. 10. ACCCEPTANCE. FAILURE OF THE PARTICIPANT TO ACCEPT THE TERMS AND CONDITIONS OF THIS STOCK OPTION IN ACCORDANCE WITH THE REQUIREMENTS OF THE ADMINISTRATOR CAN RESULT IN ADVERSE CONSEQUENCES TO THE PARTICIPANT INCLUDING CANCELLATION OF THE STOCK OPTION. ACKNOWLEDGED AND AGREED: - ---------- (1) The exercisability of options held by Henri A. Termeer and Peter Wirth upon a change in control of the Company is governed by the terms of their respective Employment Agreements. This sentence therefore is not included in the form of Terms and Conditions for stock option grants to Mr. Termeer and Mr. Wirth. - ------------------------------------ Participant Signature - ------------------------------------ Participant Name (Print) - ------------------------------------ Date EX-10.11 12 a2161257zex-10_11.txt EXHIBIT 10.11 EXHIBIT 10.11 GENZYME CORPORATION 1999 EMPLOYEE STOCK PURCHASE PLAN 1. PURPOSE. The purpose of this 1999 Employee Stock Purchase Plan (the "Plan") is to provide employees of Genzyme Corporation (the "Company") and its subsidiaries who wish to become shareholders of the Company an opportunity to purchase shares of the Company's common stock, $0.01 par value (the "Shares"). The Plan is intended to qualify as an "employee stock purchase plan" within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). The Plan constitutes an amendment and restatement of the Company's 1990 Employee Stock Purchase Plan (the "1990 Plan"), which is hereby merged with and into the Plan, and the separate existence of the 1990 Plan shall terminate on the effective date of the Plan. The rights and privileges of the holders of outstanding rights under the 1990 Plan shall not be adversely affected by the foregoing action. 2. ELIGIBLE EMPLOYEES. Subject to the provisions of Sections 7, 8 and 9 below, any individual who is in the full-time employment (as defined below) of the Company, or any of its subsidiaries (as defined in Section 425(f) of the Code), the employees of which are designated by the Board of Directors as eligible to participate in the Plan, is eligible to participate in any Offering of Shares (as defined in Section 3 below) made by the Company hereunder. Full-time employment shall include all employees whose customary employment is: (a) 20 hours or more per week; and (b) more than five months in the calendar year during which said Offering Date (as defined in Section 3 below) occurs or in the calendar year immediately preceding such year. 3. OFFERING DATES. From time to time, the Company, by action of the Board of Directors, will grant rights to purchase the Shares to employees eligible to participate in the Plan pursuant to one or more offerings (each of which is an "Offering") on a date or series of dates (each of which is an "Offering Date") designated for this purpose by the Board of Directors. 4. PRICES. The price per share for each grant of rights hereunder shall be the lesser of: (a) eighty-five percent (85%) of the fair market value of a Share on the Offering Date on which such right was granted; or (b) eighty-five percent (85%) of the fair market value of a Share on the date such right is exercised. At its discretion, the Board of Directors may determine a higher price for a grant of rights. 1 5. EXERCISE OF RIGHTS AND METHOD OF PAYMENT. (a) Rights granted under the Plan will be exercisable periodically on specified dates as determined by the Board of Directors. (b) The method of payment for Shares purchased upon exercise of rights granted shall be through regular payroll deductions or by lump sum cash payment or both, as determined by the Board of Directors. No interest shall be paid upon payroll deductions unless specifically provided for by the Board of Directors. (c) Any payments received by the Company from a participating employee and not utilized for the purchase of Shares upon exercise of a right granted hereunder shall be promptly returned to such employee by the Company after termination of the right to which the payment relates. 6. TERM OF RIGHTS. The total period from an Offering Date to the last date on which rights granted on that Offering Date are exercisable (the "Offering Period") shall in no event be longer than twenty-seven (27) months. The Board of Directors when it authorizes an Offering may designate one or more exercise periods during the Offering Period. Rights granted on an Offering Date shall be exercisable in full on the Offering Date or in such proportion on the last day of each exercise period as the Board of Directors determines. 7. SHARES SUBJECT TO THE PLAN. The aggregate number of shares that may be issued upon exercise of options granted under this Plan is 5,829,391. Appropriate adjustments in the number of Shares subject to the Plan, in the number of Shares covered by outstanding rights granted hereunder, in the exercise price of the rights and in the maximum number of Shares which an employee may purchase (pursuant to Section 8 below) shall be made to give effect to any mergers, consolidations, reorganizations, recapitalizations, stock splits, stock dividends or other relevant changes in the capitalization of the Company occurring after the effective date of the Plan, provided that no fractional Shares shall be subject to a right and each right shall be adjusted downward to the nearest full Share. Any agreement of merger or consolidation shall include provisions for protection of the then existing rights of participating employees under the Plan. Either authorized and unissued Shares or issued Shares heretofore or hereafter reacquired by the Company may be subject to rights under the Plan. If for any reason any right under the Plan terminates in whole or in part, Shares subject to such terminated right may be subject to a right under the Plan. 8. LIMITATIONS ON GRANTS. (a) No employee shall be granted a right hereunder if such employee, immediately after the right is granted would own stock or rights to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all series of common stock of the Company, or of any subsidiary, computed in accordance with Section 423(b)(3) of the Code. (b) No employee shall be granted a right which permits the employee's rights to purchase shares under all employee stock purchase plans of the Company and its subsidiaries to accrue at a rate which exceeds twenty-five thousand dollars ($25,000) (or such other maximum as may be prescribed from time to time by the Code) of the fair market value of such shares (determined at the time such right is granted) for each calendar year in which such right is outstanding at any time in accordance with the provisions of Section 423(b)(8) of the Code. 2 (c) No right granted to any participating employee under an Offering, when aggregated with rights granted under any other Offering still exercisable by the participating employee, shall cover more shares than may be purchased at an exercise price not to exceed fifteen percent (15%) of the employee's annual rate of compensation on the date the employee elects to participate in the Offering or such lesser percentage as the Board of Directors may determine. 9. LIMIT ON PARTICIPATION. Participation in an Offering shall be limited to eligible employees who elect to participate in such Offering in the manner, and within the time limitations, established by the Board of Directors when it authorizes the Offering. 10. CANCELLATION OF ELECTION TO PARTICIPATE. An employee who has elected to participate in an Offering may cancel such election as to all (but not part) of the unexercised rights granted under such Offering by giving written notice of such cancellation to the Company before the expiration of any exercise period. Any amounts paid by the employee for the Shares or withheld for the purchase of Shares from the employee's compensation through payroll deductions shall be paid to the employee, without interest unless otherwise determined by the Board of Directors, upon such cancellation. 11. TERMINATION OF EMPLOYMENT. Upon the termination of employment for any reason, including the death of the employee, before the date on which any rights granted under the Plan are exercisable, all such rights shall immediately terminate and amounts paid by the employee for the Shares or withheld for the purchase of Shares from the employee's compensation through payroll deductions shall be paid to the employee or to the employee's estate, without interest unless otherwise determined by the Board of Directors. 12. EMPLOYEE'S RIGHTS AS SHAREHOLDER. No participating employee shall have any rights as a shareholder in the Shares covered by a right granted hereunder until such right has been exercised, full payment has been made for the corresponding Share and the Share certificate is actually issued. 13. RIGHTS NOT TRANSFERABLE. Rights under the Plan are not assignable or transferable by a participating employee and are exercisable only by the employee. 14. AMENDMENTS TO OR DISCONTINUATION OF THE PLAN. The Board of Directors of the Company shall have the right to amend, modify or terminate the Plan at any time without notice; provided, however, that the then existing rights of all participating employees shall not be adversely affected thereby, and provided further that, subject to the provisions of Section 7 above, no such amendment to the Plan shall, without the approval of the shareholders of the Company, increase the total number of Shares which may be offered under the Plan. 15. EFFECTIVE DATE AND APPROVALS. Subject to the approval of the shareholders of the Company, this Plan shall be effective on March 24, 1999, the date it was adopted by the Board of Directors. 3 The Company's obligation to offer, sell and deliver its Shares under the Plan is subject to (i) the approval of any governmental authority required in connection with the authorization, issuance or sale of such Shares, (ii) satisfaction of the listing requirements of any national securities exchange on which the Shares are then listed and (iii) compliance, in the opinion of the Company's counsel, with all applicable federal and state securities and other laws. 16. TERM OF PLAN. No rights shall be granted under the Plan after March 24, 2009. 17. ADMINISTRATION OF THE PLAN. The Board of Directors or any committee or person(s) to whom it delegates its authority (the "Administrator") shall administer, interpret and apply all provisions of the Plan as it deems necessary. Nothing contained in this Section shall be deemed to authorize the Administrator to alter or administer the provisions of the Plan in a manner inconsistent with the provisions of Section 423 of the Code. 18. RIGHTS LIMITED. In no event shall the Plan form a part of an employee's contract of employment or service, if any. The Plan shall not confer upon any employee of the Company or its subsidiaries any right with respect to the continuance of his or her employment by, or other service with, the Company or its subsidiary, nor shall it limit the right of the Company or its subsidiaries to terminate the employee or otherwise change the terms of employment. The loss of existing or potential profit in any Offering of Shares shall not constitute an element of damages in the event of termination of employment for any reason, even if the termination is in violation of an obligation of the Company or its subsidiary to the employee. 4 EX-31.1 13 a2161257zex-31_1.htm EXHIBIT 31.1
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Exhibit 31.1

CERTIFICATION

I, Henri A. Termeer, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Genzyme Corporation (the "Registrant");

2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;

4.
The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

(d)
disclosed in this quarterly report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5.
The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: August 5, 2005.

    /s/  HENRI A. TERMEER      
Henri A. Termeer
 Chief Executive Officer



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 EX-31.2 14 a2161257zex-31_2.htm EXHIBIT 31.2
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Exhibit 31.2

CERTIFICATION

I, Michael S. Wyzga, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Genzyme Corporation (the "Registrant");

2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;

4.
The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

(d)
disclosed in this quarterly report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5.
The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: August 5, 2005.

    /s/  MICHAEL S. WYZGA      
Michael S. Wyzga
 Chief Financial Officer



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 EX-32.1 15 a2161257zex-32_1.htm EXHIBIT 32.1
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EXHIBIT 32.1

Written Statement of the Chief Executive Officer

        Pursuant to 18 U.S.C. Section 1350, I, the undersigned Chief Executive Officer of Genzyme Corporation (the "Company"), hereby certify that the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2005 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  HENRI A. TERMEER      
Henri A. Termeer
 Chief Executive Officer
August 5, 2005		    



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 EX-32.2 16 a2161257zex-32_2.htm EXHIBIT 32.2
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EXHIBIT 32.2

Written Statement of the Chief Financial Officer

        Pursuant to 18 U.S.C. Section 1350, I, the undersigned Chief Financial Officer of Genzyme Corporation (the "Company"), hereby certify that the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2005 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  MICHAEL S. WYZGA      
Michael S. Wyzga
 Chief Financial Officer
August 5, 2005		    



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