-----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, Qy3M9j9Qe5VLEPdQRNjl+uo/RU96BfGVVdvy7j+Tuw0Z7W/KhiVWGYgN2XFNTzSP 62B3E9xX6NmmRE82zigOCA== /in/edgar/work/20000814/0000912057-00-037193/0000912057-00-037193.txt : 20000921 0000912057-00-037193.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-037193 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSKARYOTIC THERAPIES INC CENTRAL INDEX KEY: 0000885259 STANDARD INDUSTRIAL CLASSIFICATION: [2836 ] IRS NUMBER: 043027191 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21481 FILM NUMBER: 698238 BUSINESS ADDRESS: STREET 1: 195 ALBANY ST CITY: CAMBRIDGE STATE: MA ZIP: 02139 BUSINESS PHONE: 6173490200 10-Q 1 a10-q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 2000 COMMISSION FILE NUMBER 0-21481 TRANSKARYOTIC THERAPIES, INC. (Exact name of registrant as specified in its charter) ---------------------- DELAWARE 04-3027191 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 195 ALBANY STREET CAMBRIDGE, MASSACHUSETTS 02139 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 349-0200 ---------------------- 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 |X| No | | At July 31, 2000, there were 22,687,999 shares of Common Stock, $.01 par value. Transkaryotic Therapies, Inc. INDEX PAGE NUMBER PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (unaudited) Condensed Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999 3 Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2000 and 1999 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2000 and 1999 5 Notes to Condensed Consolidated Financial Statements 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-13 Item 3. Quantitative and Qualitative Disclosures about Market Risk 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 6. Exhibits and Reports on Form 8-K 15 SIGNATURES 16 EXHIBIT INDEX 17 2
Part 1- Item 1- Condensed Consolidated Financial Statements Transkaryotic Therapies, Inc. Condensed Consolidated Balance Sheets (unaudited) (in thousands, except par values) June 30, December 31, 2000 1999 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $193,797 $151,202 Marketable securities 73,668 41,293 Prepaid expenses and other current assets 1,793 2,054 ------------- ------------- Total current assets 269,258 194,549 Property and equipment, net 21,766 20,384 Other assets 279 358 ------------- ------------- Total assets $291,303 $215,291 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,801 $ 2,000 Accrued expenses 4,833 4,009 Current maturities of long-term debt 2,000 2,000 ------------- ------------- Total current liabilities 8,634 8,009 Long-term debt, less current maturities 10,500 11,500 ------------- ------------- 19,134 19,509 Total liabilities ------------- ------------- Stockholders' equity: Convertible preferred stock, Series A, $.01 par value, 10,000 shares authorized; 10 shares issued and outstanding at June 30, 2000 and no shares issued and outstanding at December 31, 1999 1 - Common stock, $.01 par value; 100,000 shares authorized; 22,684 and 22,592 shares issued and outstanding at June 30, 2000 and December 31, 1999, respectively 227 226 Additional paid-in capital 413,034 311,817 Accumulated deficit (139,727) (114,408) Deferred compensation (1,225) (1,645) Accumulated other comprehensive loss (141) (208) ------------- ------------- Total stockholders' equity 272,169 195,782 ------------- ------------- Total liabilities and stockholders' equity $291,303 $215,291 ============= ============= See accompanying Notes to Condensed Consolidated Financial Statements
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Part 1- Item 1- Condensed Consolidated Financial Statements Transkaryotic Therapies, Inc. Condensed Consolidated Statements of Operations (unaudited) (in thousands, except per share amounts) Three Months Ended June 30, Six Months Ended June 30, -------------------------- -------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ License and research revenues $1,514 $0 $1,514 $721 Operating expenses: Research and development 13,643 11,076 26,327 21,034 General and administrative 3,012 2,634 6,049 4,198 ------------ ------------ ------------ ------------ 16,655 13,710 32,376 25,232 ------------ ------------ ------------ ------------ Loss from operations (15,141) (13,710) (30,862) (24,511) Interest income 2,921 1,193 5,543 2,536 ============ ============ ============ ============ Net loss $(12,220) $(12,517) $(25,319) $(21,975) ============ ============ ============ ============ Basic and diluted net loss per share $(0.54) $(0.65) $(1.12) $(1.15) ============ ============ ============ ============ Shares used to compute basic and diluted net loss per share 22,684 19,199 22,657 19,176 ============ ============ ============ ============ See accompanying Notes to Condensed Consolidated Financial Statements
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Part 1- Item 1- Condensed Consolidated Financial Statements Transkaryotic Therapies, Inc. Condensed Consolidated Statements of Cash Flows (unaudited) (in thousands) Six Months Ended June 30, 2000 1999 ------------- ------------- OPERATING ACTIVITIES: Net loss $(25,319) $(21,975) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 1,166 990 Compensation expense related to equity issuances 379 515 Changes in operating assets and liabilities 887 5,405 ------------- ------------- Net cash used for operating (22,887) (15,065) activities ------------- ------------- INVESTING ACTIVITIES: Proceeds from maturities of marketable securities 58,080 51,592 Purchases of marketable securities (90,388) (56,583) Purchases of property and equipment (2,548) (10,114) Changes in other assets 78 (29) ------------- ------------- Net cash used for investing (34,778) (15,134) activities ------------- ------------- FINANCING ACTIVITIES: Issuance of convertible preferred stock 99,940 - Issuance of common stock 1,320 171 Repayment of long-term debt (1,000) - Proceeds from issuance of long-term debt - 7,391 ------------- ------------- Net cash provided by financing activities 100,260 7,562 ------------- ------------- Net increase (decrease) in cash and cash 42,595 (22,637) equivalents Cash and cash equivalents at January 1 151,202 31,760 ------------- ------------- Cash and cash equivalents at June 30 $193,797 $9,123 ============= ============= See accompanying Notes to Condensed Consolidated Financial Statements
5 PART I - Item 1 - Condensed Consolidated Financial Statements Transkaryotic Therapies, Inc. Notes to Condensed Consolidated Financial Statements (unaudited) June 30, 2000 and 1999 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION Transkaryotic Therapies, Inc. ("TKT" or "the Company") is a biopharmaceutical company engaged in the development and commercialization of products based on its three proprietary product development platforms: Gene-Activated-TM- proteins, Niche Protein-TM- products and Gene Therapy. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial condition, results of operations and cash flows for the periods presented. The results of operations for the interim period ended June 30, 2000 are not necessarily indicative of the results to be expected for the year ending December 31, 2000. These financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 1999 included in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission. 2. BASIC AND DILUTED NET LOSS PER SHARE Basic and diluted net loss per share is calculated under Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per Share." Basic earnings per share is calculated by dividing income available to common stockholders by the weighted average common shares outstanding. Diluted earnings per share is calculated by dividing net income by the sum of weighted average common shares outstanding during the period plus common stock equivalents. Common stock equivalents are shares assumed to be issued if outstanding stock options and warrants were exercised. Basic and diluted net loss per share are the same for the three and six months ended June 30, 2000 and 1999 since common equivalent shares from stock options and warrants have been excluded as their effect is antidilutive. 3. COMPREHENSIVE INCOME The Company had total comprehensive loss of $12,178,000 and $12,701,000 for the three months ended June 30, 2000 and 1999, respectively. For the six months ended June 30, 2000 and 1999, total comprehensive loss was $25,252,000 and $22,228,000, respectively. 6 4. LEGAL PROCEEDINGS In April 1997, Amgen Inc. filed a civil action in the U.S. District Court for the District of Massachusetts against the Company and Aventis Pharma ("Aventis"), formerly Hoechst Marion Roussel, Inc., the Company's collaborative partner. The complaint in the action, as amended, alleges that Gene-Activated-TM-erythropoietin ("GA-EPO-TM") and the processes for producing GA-EPO infringe five U.S. patents assigned to Amgen and requests that TKT and Aventis be enjoined from making, using, or selling GA-EPO and that the District Court award Amgen monetary damages. After suspending proceedings pursuant to the Waxman-Hatch Act, TKT and Aventis filed a motion in June 1999 in the District Court to reopen the case. In April 2000, the Court granted Amgen's Motion for Summary Judgment of literal infringement on Claim 1 of U.S. Patent No 5,955,422 against the Company and Aventis. The Court left open for trial the question of whether this claim is invalid or unenforceable. The District Court commenced trial in May 2000. In June 2000, the District Court ruled that Claims 4, 5, 6, 7, 8 and 9 of U.S. Patent No. 5,618,698 were not infringed and dismissed this patent from the suit. The District Court also ruled that Claims 2, 3 and 4 of U.S. Patent No. 5,621,080 were not literally infringed, but left open the questions of infringement under the doctrine of equivalents and whether the patent is invalid or unenforceable. In July 2000, the District Court ruled that TKT and Aventis had not met their burden of proving by clear and convincing evidence that U.S. Patent Nos. 5,621,080, 5,547,933 and 5,576,349 are invalid on the grounds of obviousness and anticipation. However, the Court left open TKT and Aventis' remaining invalidity and unenforceability defenses directed to these patents. A final ruling from the District Court on these and the other outstanding issues is not expected until after the close of evidence which will occur no earlier than September, 2000. In addition, in July 1999, the Company commenced legal proceedings in the U.K. against Kirin-Amgen, Inc., seeking a declaration that a U.K. patent held by Kirin-Amgen will not be infringed by the sale of GA-EPO and that numerous claims of Kirin-Amgen's U.K. patent are invalid. The trial is scheduled to commence in 2001. Pursuant to the Amended and Restated License Agreement, dated March 1995, by and between Aventis and the Company, Aventis has assumed the legal cost of the Amgen and Kirin-Amgen litigations. The Company is required to reimburse Aventis for the Company's share of litigation expenses, as defined, from future royalties, if any, received from the sale of GA-EPO and in certain other circumstances. On July 25, 2000, Genzyme Corporation ("Genzyme") brought suit against TKT in the U. S. District Court for the District of Delaware claiming that TKT's activities relating to Replagal-TM- (agalsidase alfa) infringe one or more claims of U.S. Patent No. 5,356,804. Replagal 7 is TKT's investigational enzyme replacement therapy for the treatment of Fabry disease. The Company believes it has substantial defenses to the allegations in the suit and expects its position will be vindicated in court. The Company can provide no assurance as to the outcome of these proceedings. A decision by a court in Amgen's, Kirin-Amgen's or Genzyme's favor, or other conclusions of either litigation in a manner adverse to the Company, would have a material adverse effect on the Company's business, financial condition, and results of operations. 5. RECENT ACCOUNTING PRONOUNCEMENTS In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin 101 ("SAB 101"), "Revenue Recognition in Financial Statements," which provides guidance related to revenue recognition based on interpretations and practices followed by the SEC. The effective date of SAB 101 was deferred to no later than the fourth quarter of 2000. SAB 101 requires companies to report any changes in revenue recognition as a cumulative change in accounting principle at the time of implementation in accordance with Accounting Principles Board Opinion No. 20, "Accounting Changes." The Company is evaluating the effects, if any, of this accounting bulletin. In April 2000, the Financial Accounting Standards Board issued Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation, an Interpretation of APB No. 25." The Interpretation will be applied prospectively to new awards, modifications to outstanding awards, and changes in employee status on or after July 1, 2000, except in certain circumstances. The Company is currently in the process of evaluating the impact this interpretation will have on its financial position and results of operations. 6. CONVERTIBLE PREFERRED STOCK In June 2000, the Company sold 10,000 shares of Series A Convertible Preferred Stock for an aggregate price of $100,000,000 to investment funds affiliated with E.M. Warburg, Pincus & Co., L.L.C. pursuant to a Stock Purchase Agreement dated as of May 18, 2000. The Convertible Preferred Stock converts, at the option of the holder, into approximately 3,571,000 shares of the Company's common stock based on a conversion price of $28.00 per share, subject to adjustment under specified terms and conditions. The Company, at its option, may redeem all, but not less than all, of the shares of the Convertible Preferred Stock, at any time after December 15, 2000 at a price of $10,000 per share, plus dividends thereon declared but unpaid, provided certain specified criteria are met. In the event of any liquidation, dissolution or winding up of the Company, the holders of the Convertible Preferred Stock are entitled to receive, prior to and in preference to the holders of common stock, $10,000 per share (subject to adjustments) plus any dividends thereon declared but unpaid. Each issued and outstanding share of Convertible Preferred Stock is entitled to the number of votes equal to the number of shares of common stock into which each share of Convertible Preferred Stock is then convertible. 8 PART I - Financial Information Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW Since its inception in 1988, Transkaryotic Therapies, Inc. ( "TKT" or "the Company") has been primarily engaged in the development and commercialization of products based on the Company's three proprietary development platforms: Gene-Activated proteins, Niche Protein products and Gene Therapy. No revenues have been derived from the sale of any products, and the Company does not expect to receive revenues from product sales until late 2000, at the earliest. The Company expects that its research and development expenditures will increase substantially in future years as product development efforts accelerate. With the exception of 1995, the Company has incurred substantial annual operating losses since inception and expects to incur substantial operating losses in the future. At June 30, 2000, the Company's accumulated deficit was $139,727,000. As a result, the Company is dependent upon existing cash resources, interest income, external financing from equity offerings, debt financings or collaborative research and development arrangements with corporate sponsors to finance its operations. Results of operations may vary significantly from period to period depending on, among other factors, the progress of the Company's research and development efforts, the receipt, if any, of additional license fees and milestone payments, the timing of certain expenses, and the establishment of additional collaborative research agreements. The following discussion of the financial condition and results of operation of the Company should be read in conjunction with the accompanying condensed consolidated financial statements and the related footnotes thereto. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999 License and research revenues totaled $1,514,000 for the three months ended June 30, 2000. There were no revenues earned for the three months ended June 30, 1999. Revenues in 2000 were earned under a collaboration and license agreement with Genetics Institute, Inc. Research and development expenses totaled $13,643,000 in the second quarter of 2000, as compared to $11,076,000 during the same period in 1999. The increase in 2000 of $2,567,000, or 23%, was principally due to increases in research and development staff as well as increases in clinical and regulatory costs for the Company's clinical programs. At June 30, 2000, the Company has four programs in clinical testing, two of which are funded by the Company. In addition, the Company has three late stage preclinical programs, which 9 could enter the clinic within twelve months. As a result, the Company expects that, during the remainder of 2000, the costs related to preclinical and clinical programs will increase significantly. General and administrative expenses were $3,012,000 in the quarter ended June 30, 2000, compared with $2,634,000 during the same period in 1999. The increase in 2000 of $378,000, or 14%, was principally due to costs incurred in building a business development and commercialization infrastructure, including both U.S. and European sales and marketing capabilities related to the commercialization of products in the Company's Niche Protein product platform. During the remainder of 2000, general and administrative costs are expected to increase significantly as product launch activities related to the Company's Fabry disease program accelerate. Interest income was $2,921,000 and $1,193,000 for the three months ended June 30, 2000 and 1999, respectively. The average cash and marketable securities balances were $198,799,000 and $96,379,000 in 2000 and 1999, respectively. The increase in interest income of $1,728,000 resulted from higher average cash and marketable securities balances, as well as higher interest rates in 2000. The Company had a net loss of $12,220,000 and $12,517,000 for the three months ended June 30, 2000 and 1999, respectively. Basic and diluted net loss per share was $0.54 for the three months ended June 30, 2000, as compared to a basic and diluted net loss per share of $0.65 for the corresponding period in 1999. FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998 License and research revenues totaled $1,514,000 and $721,000 for the six months ended June 30, 2000 and 1999, respectively. All revenues were earned under collaboration and license agreements. Research and development expenses totaled $26,327,000 in the first six months of 2000, as compared to $21,034,000 during the same period in 1999. The increase in 2000 of $5,293,000, or 25%, was principally due to increases in external development services and research and development staffing in each of the Company's product development platforms. General and administrative expenses were $6,049,000 in the six months ended June 30, 2000, compared with $4,198,000 during the same period in 1999. The increase in 2000 of $1,851,000, or 44%, was principally due to costs in building a business development and commercialization infrastructure, including both U.S. and European sales and marketing capabilities related to the commercialization of products in the Company's Niche Protein product platform. Interest income was $5,543,000 and $2,536,000 for the six months ended June 30, 2000 and 1999, respectively. The average cash and marketable securities balances were $194,424,000 and $100,918,000 in 2000 and 1999, respectively. The increase in interest income of $3,007,000 resulted from higher average cash and marketable securities balances, as 10 well as higher interest rates in 2000. The Company had a net loss of $25,319,000 and $21,975,000 for the six months ended June 30, 2000 and 1999, respectively. Basic and diluted net loss per share was $1.12 for the six months ended June 30, 2000, as compared to a basic and diluted net loss per share of $1.15 for the corresponding period in 1999. LIQUIDITY AND SOURCES OF CAPITAL Since its inception, the Company has financed its operations through the sale of common and preferred stock, borrowings under debt agreements, revenues from collaborative agreements, and interest income. The Company had unrestricted cash, cash equivalents and marketable securities totaling $267,465,000 at June 30, 2000. Cash equivalents and marketable securities are invested in U.S. Treasury notes, agencies of the U.S. government, and money market funds. In June 2000, the Company sold 10,000 shares of Series A Convertible Preferred Stock to investment funds affiliated with E. M. Warburg, Pincus & Co., L.L.C. resulting in net proceeds to the Company of $99,940,000. In November 1999, the Company completed a private placement of 3,300,000 shares of Common Stock, resulting in net proceeds to the Company of approximately $124,576,000. The Company leased additional facilities in the fourth quarter of 1998, which are used for research and development. In December 1998, the Company obtained an unsecured term loan facility for up to $14,000,000 to finance the capital costs related to the leased space. The loan is payable beginning in December 1999 on the basis of a seven year amortization schedule over a five year period, with a final payment for any remaining amount in September 2004. The loan bears interest at either the prime rate or LIBOR plus 1.50% at the Company's election. The interest rate of the loan was 7.78% as of June 30, 2000. The note contains certain restrictive covenants, including, among other things, minimum cash and tangible net asset requirements and limitations on the payment of dividends. At June 30, 2000, $12,500,000 was outstanding under the loan. In August 2000, the Company entered into a ten-year lease for a new headquarters and research and development facility in Cambridge, MA. The lease agreement calls for minimum annual rent of $6,700,000 for the first five years and $7,600,000 for years six to ten. Lease payments are expected to commence in the first quarter of 2002, at the earliest. The Company expects to spend up to an additional $20,000,000 for leasehold improvements. The Company intends to seek financing for all or a significant portion of the cost of the leasehold improvements. There can be no guarantee that financing will be available on favorable terms, if at all. 11 At December 31, 1999, the Company had net operating loss carryforwards of approximately $100,287,000, which expire at various times through 2019. Due to the degree of uncertainty related to the ultimate use of loss carryforwards and tax credits, the Company has fully reserved against any potential tax benefit. The future utilization of net operating loss carryforwards and tax credits may be subject to limitation under the changes in stock ownership rules of the Internal Revenue Code. Because of this limitation, it is possible that taxable income in future years, which would otherwise be offset by net operating losses, will not be offset and, therefore, will be subject to tax. Substantial additional funds will be required to support the Company's research and development programs, for acquisition of technologies, for preclinical and clinical testing of its products, pursuit of regulatory approvals, acquisition of capital equipment, expansion of laboratory and office facilities, establishment of production capabilities, establishment of sales and marketing capabilities, and for general and administrative expenses. Until such time, if any, as the Company's operations generate significant revenues from product sales, cash resources and proceeds from equity offerings, debt financings and funding from collaborative arrangements will be required to fund operations. The Company expects to pursue opportunities to obtain additional financing in the future through equity offerings, debt financings, lease arrangements related to facilities and capital equipment and collaborative research agreements. The source, timing and availability of any future financing will depend principally upon equity and debt market conditions, interest rates and, more specifically, on the Company's continued progress in its exploratory, preclinical and clinical development programs. There can be no assurance that such funds will be available on favorable terms, if at all. The Company expects that its existing capital resources, together with revenues from collaborative agreements and interest income, will be sufficient to fund its operations into 2003. The Company's cash requirements may vary, however, depending on numerous factors. Lack of necessary funds may require the Company to delay, scale back or eliminate some or all of its research and product development programs or to license its potential products or technologies to third parties. The Company is engaged in litigation with Amgen Inc. and Kirin-Amgen, Inc. with respect to the development of GA-EPO. Pursuant to TKT's agreements with Aventis, Aventis has assumed the cost of the litigation. The Company is required to reimburse Aventis for the Company's share of litigation expenses from future royalties, if any, otherwise payable by Aventis as to the sale of GA-EPO and in certain other circumstances. In addition, Genzyme has brought suit against TKT with respect to the development and commercialization of Replagal-TM-, TKT's investigational enzyme replacement therapy for the treatment of Fabry disease. See Note 4 to Notes to Condensed Consolidated Financial Statements. FORWARD-LOOKING STATEMENTS Statements that are not historical facts, including statements about the Company's confidence and strategies and its expectations about future products, technologies and 12 opportunities, market demand or acceptance of future products are forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "intends" and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause the Company's actual results to differ materially from those indicated by such forward-looking statements, including, without limitation, whether any of the Company's Gene-Activated protein, Niche Protein product, or Gene Therapy product candidates will advance in the clinical trial process, the timing of such clinical trials, whether the clinical trial results will warrant continued product development, the timing of making required regulatory filings such as Investigational New Drug applications and Biologics License Applications, whether the Company's products will receive approval from the U.S. Food and Drug Administration or equivalent foreign regulatory agencies, and, if such products receive approval, whether they will be successfully marketed; the results of patent litigation in which the Company is involved or may become involved; competition; the Company's dependence on collaborators; and other risks set forth under the caption "Certain Factors That May Affect Future Results" in the Company's Annual Report on Form 10-K for the year ended December 31, 1999 which are incorporated by reference herein. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company does not believe that there is any material market risk exposure with respect to derivative or other financial instruments that would require disclosure under this item. 13 PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS On July 25, 2000, Genzyme Corporation ("Genzyme") brought suit against TKT in the U. S. District Court for the District of Delaware claiming that TKT's activities relating to Replagal-TM- (agalsidase alfa) infringe one or more claims of U.S. Patent No. 5,356,804. Replagal is TKT's investigational enzyme replacement therapy for the treatment of Fabry disease. The Company believes it has substantial defenses to the allegations in the suit and expects its position will be vindicated in court. The Company is engaged in litigation with Amgen Inc. and Kirin-Amgen, Inc. with respect to the development and commercialization of GA-EPO. See Note 4 to Notes to Condensed Consolidated Financial Statements, which is incorporated by reference herein. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The following matters were submitted to a vote of security holders at the Annual Meeting of Stockholders held on June 15, 2000: 1. The election of Walter Gilbert, William R. Miller, Rodman W. Moorhead, III, Richard F Selden, James E. Thomas and Wayne P. Yetter to serve as directors until the 2001 Annual Meeting of Stockholders. NOMINEE VOTES FOR VOTES WITHHELD ------- --------- -------------- Walter Gilbert 14,289,445 24,958 William R. Miller 14,289,475 24,928 Rodman W. Moorhead, III 14,232,048 82,355 Richard F Selden 13,430,156 884,247 James E. Thomas 14,247,355 67,048 Wayne P. Yetter 14,288,945 25,458 2. The approval of the amendment to the Company's Amended and Restated Certificate of Incorporation increasing the number of authorized shares of the Company's Common Stock from 30,000,000 shares to 100,000,000 shares. Votes totaling 12,264,438 were cast for this matter; 2,033,068 were cast against this matter. There were a total of 15,917 abstentions and 980 broker non-votes. 14 Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS The Exhibits filed as part of this Form 10-Q are listed on the Exhibit Index immediately preceding such Exhibits, which Exhibit Index is incorporated herein by reference. (b) Reports on Form 8-K Current Report on Form 8-K dated May 18, 2000 regarding the execution of Stock Purchase Agreement with investment funds affiliated with E.M. Warburg, Pincus & Co., L.L.C. Current Report on Form 8-K dated June 9, 2000 regarding the sale of 9,000 shares of the Company's Series A Convertible Preferred Stock, $0.01 par value per share, for an aggregate price of $90,000,000 to investment funds affiliated with E.M. Warburg, Pincus & Co., L.L.C. Current Report on Form 8-K dated June 16, 2000 regarding the sale of 1,000 shares of the Company's Series A Convertible Preferred Stock, $0.01 par value per share, for an aggregate price of $10,000,000 to investment funds affiliated with E.M. Warburg, Pincus & Co., L.L.C. 15 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. TRANSKARYOTIC THERAPIES, INC. Date: August 14, 2000 By: /S/ DANIEL E. GEFFKEN ----------------------------------------- Daniel E. Geffken Vice President, Finance and Chief Financial Officer (Principal Financial and Accounting Officer) 16 Transkaryotic Therapies, Inc. EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION 3.1 Amendment No. 1 to Transkaryotic Therapies, Inc.'s Amended and Restated By-Laws 3.2 Certificate of Amendment of Amended and Restated Certificate of Incorporation of Transkaryotic Therapies, Inc. dated June 15, 2000 3.3 Certificate of Designation, Number, Voting Powers, Preferences and Rights of Series A Convertible Preferred Stock of Transkaryotic Therapies, Inc. dated June 9, 2000 10.34 Registration Rights Agreement dated June 9, 2000 by and between the Series A Convertible Preferred Stock Investors and the Registrant 10.35 Agreement dated April 20, 2000 by and between Dr. Walter Gilbert and the Registrant 10.36 Agreement dated June 16, 2000 by and between James E. Thomas and the Registrant 10.37 Employment agreement dated May 18, 2000 by and between Michael J. Astrue and the Registrant 27 Financial Data Schedule (for EDGAR filing purposes only) *99.1 Certain Factors That May Affect Future Results * Incorporated herein by reference to the exhibits to the Quarterly Report on Form 10-Q for the Quarter ended March 31, 2000
17 EX-3.1 2 ex-3_1.txt EXHIBIT 3.1 EXHIBIT 3.1 AMENDMENT NO. 1 TO TRANSKARYOTIC THERAPIES, INC.'S AMENDED AND RESTATED BY-LAWS Section 1 of Article III of Transkaryotic Therapies, Inc.'s Amended and Restated By-Laws be and hereby is deleted in its entirety and the following is inserted in lieu thereof: "Section 1. Number and Qualifications: The number of directors which shall constitute the whole Board of Directors shall be determined by resolution of the Board of Directors, but in no event shall be less than three (3) or more than seven (7). The number of directors may be increased at any time and from time to time by a majority of the directors then in office. The number of directors may be decreased at any time and from time to time by a majority of the directors then in office, but only to eliminate vacancies existing by reason of death, resignation, removal or expiration of the term of one or more directors. Directors need not be stockholders of the Corporation." EX-3.2 3 ex-3_2.txt EXHIBIT 3.2 EXHIBIT 3.2 CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF TRANSKARYOTIC THERAPIES, INC. Pursuant to Section 242 of the General Corporation Law of the State of Delaware Transkaryotic Therapies, Inc. (hereinafter called the "Corporation"), organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows: At a meeting of the Board of Directors of the Corporation a resolution was duly adopted, pursuant to Section 242 of the General Corporation Law of the State of Delaware, setting forth an amendment to the Certificate of Incorporation of the Corporation and declaring said amendment to be advisable. The stockholders of the Corporation duly approved said proposed amendment at a meeting in accordance with Section 242 of the General Corporation Law of the State of Delaware. The resolution setting forth the amendment is as follows: RESOLVED: That the first paragraph of Article FOURTH of the Certificate of Incorporation of the Corporation be and hereby is deleted in its entirety and the following paragraph is inserted in lieu thereof: FOURTH: The total number of all classes of stock which the Corporation shall have authority to issue is 110,000,000 shares, consisting of (i) 100,000,000 shares of Common Stock, $.01 par value per share ("Common Stock"), and (ii) 10,000,000 shares of Preferred Stock, $.01 par value per share ("Preferred Stock"). IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its President this 15th day of June, 2000. Transkaryotic Therapies, Inc. By: /s/ RICHARD F SELDEN ------------------------------------ Richard F Selden, M.D., Ph.D., President 2 EX-3.3 4 ex-3_3.txt EXHIBIT 3.3 EXHIBIT 3.3 CERTIFICATE OF DESIGNATION, NUMBER, VOTING POWERS, PREFERENCES AND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK OF TRANSKARYOTIC THERAPIES, INC. Pursuant to Section 151 of the General Corporation Law of the State of Delaware The undersigned DOES HEREBY CERTIFY that the following resolution was duly adopted by the Board of Directors of Transkaryotic Therapies, Inc., a Delaware corporation (hereinafter called the "Corporation"), with the preferences and rights set forth therein relating to dividends, conversion, redemption, dissolution and distribution of assets of the Corporation having been fixed by the Board of Directors pursuant to authority granted to it under Article IV of the Corporation's Certificate of Incorporation and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware: RESOLVED: That, pursuant to authority conferred upon the Board of Directors by the Certificate of Incorporation of the Corporation, the Board of Directors hereby authorizes the issuance of 10,000 shares of Series A Convertible Preferred Stock of the Corporation, and hereby fixes the designations, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of such shares, in addition to those set forth in the Certificate of Incorporation of the Corporation, as follows: 1. DESIGNATION AND AMOUNT. The shares of such series shall be designated "Series A Convertible Preferred Stock" (the "Series A Preferred Stock"), par value $0.01 per share, and the number of shares constituting such series shall be 10,000. 2. DIVIDENDS. The holders of Series A Preferred Stock shall be entitled to receive, when, as and if dividends are declared on shares of Common Stock by the Board of Directors of the Corporation (the "Board of Directors"), dividends per share of Series A Preferred Stock in such an amount as the holders of the Series A Preferred Stock would have received had such holders converted Series A Preferred Stock into Common Stock immediately prior to the record date for such distribution. All dividends declared upon Series A Preferred Stock shall be declared pro rata per share. 3. LIQUIDATION, DISSOLUTION OR WINDING UP. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any other Preferred Stock of the Corporation ranking on liquidation prior and in preference to the Series A Preferred Stock (such Preferred Stock being referred to hereinafter as "Senior Preferred Stock") upon such liquidation, dissolution or winding up, but before any payment shall be made to the holders of Common Stock, an amount in cash equal to Ten Thousand Dollars ($10,000) per share, subject to appropriate adjustment in the event of any stock dividend, stock split, stock distribution or combination with respect to the Series A Preferred Stock (the "Stated Value") plus any dividends thereon declared but unpaid (such amount being referred to hereinafter as the "Series A Liquidation Value"). If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets of the Corporation available for the distribution to its stockholders after payment in full of amounts required to be paid or distributed to holders of Senior Preferred Stock shall be insufficient to pay the holders of shares of Series A Preferred Stock the full amount to which they shall be entitled, the holders of shares of Series A Preferred Stock, and any class of stock ranking on liquidation on a parity with the Series A Preferred Stock, shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective amounts which would otherwise be payable in respect to the shares held by them upon such distribution if all amounts payable on or with respect to said shares were paid in full. (b) After the payment of all preferential amounts required to be paid to the holders of Senior Preferred Stock and Series A Preferred Stock and any other series of Preferred Stock upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of Common Stock then outstanding shall be entitled to receive the remaining assets and funds of the Corporation available for distribution to its stockholders. (c) The merger or consolidation of the Corporation into or with another corporation, the merger or consolidation of any other corporation into or with the Corporation, or the sale, conveyance, mortgage, pledge or lease of all or substantially all the assets of the Corporation to a person shall not be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Section 3. 4. VOTING. (a) Each issued and outstanding share of Series A Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which each such share of Series A Preferred Stock is convertible (as adjusted from time to time pursuant to Section 6 hereof), at each meeting of stockholders of the Corporation (or pursuant to any action by written consent) with respect to any and all matters presented to the stockholders of the Corporation for their action or consideration. Except as provided by law, by the provisions of Sections 4(b) and 4(c) below or by the provisions establishing any other series of Preferred Stock, holders of Series A Preferred Stock shall vote together with the holders of Common Stock as a single class. (b) For so long as at least 9,000 shares of the Series A Preferred Stock remain outstanding, the holders of Series A Preferred Stock shall have the exclusive right, voting separately as a class, to elect one director (herein referred to as the "Series A Director"). A Series A Director shall be elected by the affirmative vote of the holders of record of a majority of the outstanding shares of Series A Preferred Stock either at meetings of stockholders at which directors are elected or a special meeting of holders of Series A Preferred Stock. A Series A Director so elected shall serve for a term of one year and until his successor is elected and qualified. Any vacancy in the position of a Series A Director may be filled only by the holders of the Series A Preferred Stock. A Series A Director may, during his or her term of office, be removed at any time, with or without cause, by and only by the affirmative vote, at a special meeting of holders of Series A Preferred Stock called for such purpose, or the written consent, of the holders of record of a majority of the outstanding shares of Series A Preferred Stock. Any vacancy created by such removal may also be filled at such meeting or by such consent. (c) In addition to any other rights provided by law, the Corporation shall not, without first obtaining the affirmative vote or written consent of the holders of a majority of the outstanding shares of Series A Preferred Stock, authorize any additional shares of Series A Preferred Stock or amend, alter or repeal the preferences, special rights or other powers of the Series A Preferred Stock so as to affect adversely the Series A Preferred Stock. For purposes of this Section 4(c), the authorization or issuance of any series of Senior Preferred Stock shall be deemed to affect materially and adversely the Series A Preferred Stock. 5. OPTIONAL CONVERSION. Each share of Series A Preferred Stock may be converted at any time, at the option of the holder thereof, into the number of fully-paid and nonassessable shares of Common Stock obtained by dividing the Stated Value by the Conversion Price then in effect (the "Conversion Rate"), PROVIDED, HOWEVER, that on any redemption of any Series A Preferred Stock or any liquidation of the Corporation, the right of conversion shall terminate at the close of business on the full business day next preceding the date fixed for such redemption or for the payment of any amounts distributable on liquidation to the holders of Series A Preferred Stock. (a) The initial conversion price, subject to adjustment as provided herein, is equal to $28.00 (the "Conversion Price"). The initial Conversion Rate for the Series A Preferred Stock shall be 357.142857 shares of Common Stock for each one share of Series A Preferred Stock surrendered for conversion. The applicable Conversion Rate and Conversion Price from time to time in effect is subject to adjustment as hereinafter provided. 2 (b) The Corporation shall not issue fractions of shares of Common Stock upon conversion of Series A Preferred Stock or scrip in lieu thereof. If any fraction of a share of Common Stock would, except for the provisions of this Section 5(b), be issuable upon conversion of any Series A Preferred Stock, the Corporation shall in lieu thereof pay to the person entitled thereto an amount in cash equal to the current value of such fraction, calculated to the nearest one-hundredth (1/100) of a share, to be computed (i) if the Common Stock is listed on any national securities exchange, on the basis of the last sales price of the Common Stock on such exchange (or the quoted closing bid price if there shall have been no sales) on the date of conversion, or (ii) if the Common Stock shall not be listed, on the basis of the mean between the closing bid and asked prices for the Common Stock on the date of conversion as reported by NASDAQ, or its successor, and if there are not such closing bid and asked prices, on the basis of the fair market value per share as determined by the Board of Directors. (c) Whenever the Conversion Rate and Conversion Price shall be adjusted as provided in Section 6 hereof, the Corporation shall forthwith file at each office designated for the conversion of Series A Preferred Stock, a statement, signed by the Chairman of the Board, the President, any Vice President or Treasurer of the Corporation, showing in reasonable detail the facts requiring such adjustment and the Conversion Rate that will be effective after such adjustment. The Corporation shall also cause a notice setting forth any such adjustments to be sent by mail, first class, postage prepaid, to each record holder of Series A Preferred Stock at his or its address appearing on the stock register. If such notice relates to an adjustment resulting from an event referred to in Section 6(d) hereof, such notice shall be included as part of the notice required to be mailed and published under the provisions of Section 6(d) hereof. (d) In order to exercise the conversion privilege, the holder of any Series A Preferred Stock to be converted shall surrender his or its certificate or certificates therefore to the principal office of the transfer agent for the Series A Preferred Stock (or if no transfer agent be at the time appointed, then the Corporation at its principal office), and shall give written notice to the Corporation at such office that the holder elects to convert the Series A Preferred Stock represented by such certificates, or any number thereof. Such notice shall also state the name or names (with address) in which the certificate or certificates for shares of Common Stock which shall be issuable on such conversion shall be issued, subject to any restrictions on transfer relating to shares of the Series A Preferred Stock or shares of Common Stock upon conversion thereof. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly authorized in writing. The date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of the certificates and notice shall be the conversion date. As soon as practicable after receipt of such notice and the surrender of the certificate or certificates for Series A Preferred Stock as aforesaid, the Corporation shall cause to be issued and delivered at such office to such holder, or on his or its written order, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, cash as provided in Section 5(b) hereof in respect of any fraction of a share of Common Stock otherwise issuable upon such conversion and, if less than all shares of Series A Preferred Stock represented by the certificate or certificates so surrendered are being converted, a residual certificate or certificates representing the shares of Series A Preferred Stock not converted. (e) The Corporation shall at all times when the Series A Preferred Stock shall be outstanding reserve and keep available out of its authorized but unissued stock, for the purposes of effecting the conversion of the Series A Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series A Preferred Stock. Before taking any action that would cause an adjustment reducing the Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of the Series A Preferred Stock, the Corporation will take any corporate action that may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully-paid and nonassessable shares of such Common Stock at such adjusted conversion price. (f) All shares of Series A Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall forthwith cease and terminate except only the right of the holder thereof to receive shares of Common Stock in exchange therefor and payment of any declared and unpaid dividends thereon. Any shares of Series A Preferred Stock so converted shall be retired and canceled and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Series A Preferred Stock accordingly. 3 6. CONVERSION PRICE ADJUSTMENTS. (a) In case the Corporation shall at any time (i) subdivide the outstanding Common Stock or (ii) issue a dividend on its outstanding Common Stock payable in shares of Common Stock, the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock shall be proportionately increased by the same ratio as the subdivision or dividend (with appropriate adjustments to the Conversion Price in effect immediately prior to such subdivision or dividend). In case the Corporation shall at any time combine its outstanding Common Stock, the number of shares issuable upon conversion of the Series A Preferred Stock immediately prior to such combination shall be proportionately decreased by the same ratio as the combination (with appropriate adjustments to the Conversion Price in effect immediately prior to such combination). (b) In the event the Corporation shall declare a dividend upon the Common Stock (other than a dividend payable in Common Stock) payable otherwise than out of earnings or earned surplus, determined in accordance with generally accepted accounting principles, including the making of appropriate deductions for minority interests, if any, in subsidiaries (herein referred to as "Liquidating Dividends"), then, as soon as possible after the conversion of any shares of Series A Preferred Stock, the Corporation shall pay to the person converting such shares of Series A Preferred Stock an amount equal to the aggregate value of all Liquidating Dividends that such person would have received had the person converted such shares of Series A Preferred Stock immediately prior to the record date for such Liquidating Dividend. For the purposes of this Section 6(b), a dividend other than in cash shall be considered payable out of earnings or earned surplus only to the extent that such earnings or earned surplus are charged an amount equal to the fair value of such dividend as determined in good faith by the Board of Directors. (c) If any capital reorganization or reclassification of the capital stock of the Corporation, or consolidation or merger of the Corporation with another corporation in which the holders of Common Stock and Series A Preferred Stock prior to such consolidation or merger hold at least 51% of the combined voting power of the surviving person in such merger or consolidation immediately following its effective date, shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, cash or other property with respect to or in exchange for Common Stock, then, as a condition of such reorganization, reclassification, consolidation or merger, lawful and adequate provision shall be made whereby the holders of the Series A Preferred Stock shall have the right to acquire and receive upon conversion of the Series A Preferred Stock such shares of stock, securities, cash or other property issuable or payable (as part of such reorganization, reclassification, consolidation or merger) with respect to or in exchange for such number of outstanding shares of Common Stock as would have been received upon conversion of the Series A Preferred Stock at the Conversion Price then in effect. Any other consolidation or merger of the Corporation with another corporation or the sale of all or substantially all of its assets to another corporation shall be effected in such a way that the holders of the Series A Preferred Stock shall be entitled to receive, in exchange for their shares of Series A Preferred Stock, the stock, securities, cash or other property payable to holders of Common Stock as if the holders of Series A Preferred Stock had converted the Series A Preferred Stock in to Common Stock immediately prior to the effective date of such consolidation, merger or sale. The Corporation will not effect any such consolidation, merger or sale, unless prior to the consummation thereof the successor corporation (if other than the Corporation) resulting from such consolidation or merger or the corporation purchasing such assets shall assume by written instrument mailed or delivered to the holders of the Series A Preferred Stock at the last address of each such holder appearing on the books of the Corporation, the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to receive. (d) In the event that: (1) the Corporation shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights, or (2) there shall be any capital reorganization or reclassification of the capital stock of the Corporation, including any subdivision or combination of its outstanding shares of Common Stock, or consolidation or merger of the Corporation with, or sale of all or substantially all of its assets to, another corporation, or 4 (3) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then, in connection with such event, the Corporation shall give to the holders of the Series A Preferred Stock: (i) at least twenty (20) days prior written notice of the date on which the books of the Corporation shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up; and (ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, at least twenty (20) days prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (ii) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be. Each such written notice shall be given by first class mail, postage prepaid, addressed to the holders of the Series A Preferred Stock at the address of each such holder as shown on the books of the Corporation. (e) If at any time or from time to time on or after the date on which shares of Series A Preferred Stock are initially issued, the Corporation shall grant, issue or sell any options, convertible securities or rights to purchase property (the "Purchase Rights") pro rata to the record holders of any class of Common Stock and such Purchase Rights are not issued to the holders of Series A Preferred Stock and such grants, issuances or sales do not result in an adjustment of the Conversion Price under this Section 6, then each holder of Series A Preferred Stock shall be entitled to acquire (within thirty (30) days after the later to occur of the initial exercise date of such Purchase Rights or receipt by such holder of the notice concerning Purchase Rights to which such holder shall be entitled under Section 6(d)) and upon the terms applicable to such Purchase Rights either: (i) the aggregate Purchase Rights which such holder could have acquired if it had held the number of shares of Common Stock acquirable upon conversion of the Series A Preferred Stock immediately before the grant, issuance or sale of such Purchase Rights; provided that if any Purchase Rights were distributed to holders of Common Stock without the payment of additional consideration by such holders, corresponding Purchase Rights shall be distributed to the holders of the Series A Preferred Stock as soon as possible and it shall not be necessary for the holder of the Series A Preferred Stock specifically to request delivery of such rights; or (ii) in the event that any such Purchase Rights shall have expired or shall expire prior to the end of said thirty (30) day period, the right to acquire the number of shares of Common Stock or the amount of property which such holder could have acquired upon such exercise at the time or times at which the Corporation granted, issued or sold such expired Purchase Rights on the terms of the Purchase Rights so granted. 7. REDEMPTION. (a) The Corporation, at its option, may redeem (to the extent that such redemption shall not violate any applicable provisions of the General Corporation Law of the State of Delaware) all, but not less than all, of the shares of Series A Preferred Stock at a price equal to the then Series A Liquidation Value (subject to adjustment in the event of any stock dividend, stock split, stock distribution or combination with respect to such shares) (such price is hereinafter referred to as the "Redemption Price"), at any time after December 15, 2000 (any such date of redemption is hereafter referred to as an "Redemption Date"), PROVIDED that no shares of Series A 5 Preferred Stock may be so called for redemption unless the average of the closing prices per share of Common Stock for any twenty (20) consecutive trading days ending within twenty (20) business days of the date on which notice of such redemption is given to the holders of the Series A Preferred Stock, shall have been at least $35.00 (subject to appropriate adjustment in the event of any stock dividend, stock split, stock distribution or combination). For purposes of the foregoing calculation, "closing price" shall mean for any given date: (i) if the Common Stock is listed on any national securities exchange or quoted on Nasdaq, on the basis of the last sales price of the Common Stock on such exchange or Nasdaq (or the quoted closing bid price if there shall have been no sales) on such date, or (ii) if no last sales prices are then being quoted for the Common Stock, on the basis of the mean between the closing bid and asked prices for the Common Stock on such date as reported by Nasdaq, or its successor, or (iii) if there are no such closing bid and asked prices, on the basis of the fair market value per share as determined by the Board of Directors of the Corporation. (b) At least thirty (30) days prior to each Redemption Date, written notice shall be mailed, postage prepaid, to each holder of record of Series A Preferred Stock to be redeemed, at his or its post office address last shown on the records of the Corporation, notifying such holder of the number of shares so to be redeemed, specifying the Redemption Date and the date on which such holder's conversion rights (pursuant to Section 5 hereof) as to such shares terminate and calling upon such holder to surrender to the Corporation, in the manner and at the place designated, his or its certificate or certificates representing the shares to be redeemed (such notice is hereinafter referred to as the "Redemption Notice"). On or prior to the Redemption Date, each holder of Series A Preferred Stock to be redeemed shall surrender his or its certificate or certificates representing such shares to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. From and after the Redemption Date, unless there shall have been a default in payment of the Redemption Price, all rights of the holders of the Series A Preferred Stock designated for redemption in the Redemption Notice as holders of Series A Preferred Stock of the Corporation (except the right to receive the Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. (c) Except as provided in paragraph (a) above, the Corporation shall have no right to redeem the shares of Series A Preferred Stock other than with the consent of the holders of 66 2/3% of the then outstanding shares of Series A Preferred Stock. Any shares of Series A Preferred Stock so redeemed shall be permanently retired, shall no longer be deemed outstanding and shall not under any circumstances be reissued, and the Corporation may from time to time take such appropriate corporate action as may be necessary to reduce the authorized Series A Preferred Stock accordingly. Nothing herein contained shall prevent or restrict the purchase by the Corporation, from time to time either at public or private sale, of the whole or any part of the Series A Preferred Stock at such price or prices as the Corporation may determine, subject to the provisions of applicable law. IN WITNESS WHEREOF, Transkaryotic Therapies, Inc. has caused this Certificate of Designation, Number, Voting Powers, Preferences and Rights of Series A Convertible Preferred Stock to be duly executed by its VP of Finance and CFO this 9th day of June, 2000. TRANSKARYOTIC THERAPIES, INC. By /s/ DANIEL E. GEFFKEN --------------------------- [Name:] Daniel E. Geffken [Title:] VP of Finance and CFO 6 EX-10.34 5 ex-10_34.txt EXHIBIT 10.34 EXHIBIT 10.34 EXHIBIT C TRANSKARYOTIC THERAPIES, INC. REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of June 9, 2000, among the investors listed on Schedule I hereto (the "Investors") and Transkaryotic Therapies, Inc., a Delaware corporation (the "Company"). R E C I T A L S WHEREAS, the Investors have, pursuant to the terms of the Stock Purchase Agreement, dated as of May 18, 2000, by and among the Company and the Investors (the "Purchase Agreement"), agreed to purchase shares of Series A Convertible Preferred Stock, par value $0.01 per share, of the Company (the "Series A Preferred Stock"); and WHEREAS, the shares of Series A Preferred Stock are convertible into shares of common stock, par value $0.01 per share, of the Company (the "Common Stock"); and WHEREAS, the Company has agreed, as a condition precedent to the Investors' obligations under the Purchase Agreement, to grant the Investors certain registration rights; and WHEREAS, the Company and the Investors desire to define the registration rights of the Investors on the terms and subject to the conditions herein set forth. NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following terms have the respective meaning set forth below: (a) COMMISSION: shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act; (b) EXCHANGE ACT: shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations of the Commission issued under such Act as they may, from time to time, be in effect; (c) HOLDER: shall mean the Investors and any persons or entities to whom the rights granted under this Agreement are transferred by any Investor in accordance with the terms of this Agreement; (d) INITIATING HOLDER: shall mean any Holder or Holders who in the aggregate are Holders of more than 50% of the then outstanding Registrable Securities; (e) PERSON: shall mean an individual, partnership, joint-stock company, corporation, trust or unincorporated organization, and a government or agency or political subdivision thereof; (f) REGISTER, REGISTERED and REGISTRATION: shall mean a registration effected by preparing and filing a registration statement in compliance with the Securities Act (and any post-effective amendments filed or required to be filed) and the declaration or ordering of effectiveness of such registration statement; (g) REGISTRABLE SECURITIES: shall mean (A) shares of Common Stock issuable upon conversion of the shares of Series A Preferred Stock and (B) any additional shares of Common Stock acquired by the Investors, and (C) any stock of the Company issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares of Series A Preferred Stock or Common Stock referred to in clause (A) or (B); PROVIDED, HOWEVER, that shares of Common Stock which are Registrable Shares shall cease to be Registrable Shares upon (i) any sale pursuant to a Registration Statement or Rule 144 under the Securities Act or (ii) any sale in any manner to a person or entity which is not entitled to the rights provided by this Agreement. Wherever reference is made in this Agreement to a request or consent of holders of a certain percentage of Registrable Shares, the determination of such percentage shall include shares of Common Stock issuable upon conversion of the Shares even if such conversion has not been effected. (h) REGISTRATION EXPENSES: shall mean all expenses incurred by the Company in compliance with Sections 2(a), (b) and (c) hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, fees and expenses of one counsel for all the Holders in an amount not to exceed $15,000, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company, which shall be paid in any event by the Company), but excluding Selling Expenses; (i) SECURITY, SECURITIES: shall have the meaning set forth in Section 2(1) of the Securities Act; (j) SECURITIES ACT: shall mean the Securities Act of 1933, as amended; and (k) SELLING EXPENSES: shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities and all fees and disbursements of counsel for each of the Holders other than fees and expenses of one counsel for all the Holders in an amount not to exceed $15,000. -2- SECTION 2. REGISTRATION RIGHTS (a) REQUESTED REGISTRATION. (i) REQUEST FOR REGISTRATION. If the Company shall receive from an Initiating Holder, at any time, a written request that the Company effect any registration with respect to all or a part of the Registrable Securities, the Company will: (1) promptly give written notice of the proposed registration, qualification or compliance to all other Holders; and (2) as soon as practicable, use its commercially reasonable efforts to effect such registration (including, without limitation, filing post-effective amendments and effecting appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within 10 business days after written notice from the Company is given under Section 2(a)(i)(1) above; PROVIDED that the Company may effect such registration on such available form of registration statement as the Company determines (but, in the case of an underwritten offering, shall include such additional information, such as a customary "Business" section, as the Initiating Holders shall reasonably request); and PROVIDED further that the Company shall not be obligated to effect, or take any action to effect, any such registration pursuant to this Section 2(a): (w) Within 180 days of the effective date of the most recent registration pursuant to this Section 2 in which securities held by the requesting Holder could have been included for sale or distribution. (x) In any particular jurisdiction in which the Company would be required to qualify to do business as a foreign corporation or execute a general consent to service of process in effecting such registration, qualification or compliance, unless the Company is already subject to qualification to do business or service in such jurisdiction and except as may be required by the Securities Act or applicable rules or regulations thereunder; (y) After the Company has effected (A) two (2) registrations pursuant to this Section 2(a) or (B) three (3) registrations pursuant to Section 2(a) or 2(c), whichever occurs sooner, and such registrations have been declared or ordered effective; or (z) If the Registrable Securities requested by all Holders to be registered pursuant to such request do not have an anticipated -3- aggregate public offering price (before any underwriting discounts and commissions) of not less than $15,000,000. The registration statement filed pursuant to the request of the Initiating Holders may, subject to the provisions of Section 2(a)(ii) below, include other securities of the Company which are held by Persons who, by virtue of agreements with the Company, are entitled to include their securities in any such registration ("Other Stockholders"). In the event any Holder requests a registration pursuant to this Section 2(a) in connection with a distribution of Registrable Securities to its partners, the registration shall provide for the resale by such partners, if requested by such Holder if distributee partners are transferees under the last paragraph of this Section 2(a)(i)(2). The registration rights set forth in this Section 2 may be assigned by an Investor to (i) any person or entity to which at least 15% of the Registrable Securities held by such Investor are transferred by such Investor, provided that the transferee provides written notice of such assignment to the Company and agrees in writing to be bound hereby or (ii) to any partner of such Investor (or nominee or subsidiary of such partner), and such transferee shall be deemed an "Investor" for purposes of this Agreement;. (ii) UNDERWRITING. If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 2(a). If Other Stockholders request such inclusion, the Holders shall offer to include the securities of such Other Stockholders in the underwriting and may condition such offer on their acceptance of the further applicable provisions of this Section 2. The Holders whose shares are to be included in such registration and the Company shall (together with all Other Stockholders proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected for such underwriting by the Initiating Holders and reasonably acceptable to the Company. Notwithstanding any other provision of this Section 2(a), if the representative advises the Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, the securities of the Company held by Other Stockholders shall be excluded from such registration to the extent so required by such limitation. If, after the exclusion of such shares, further reductions are still required, the number of shares included in the registration by each Holder shall be reduced on a pro rata basis (based on the number of shares held by such Holder), by such minimum number of shares as is necessary to comply with such request. No Registrable Securities or any other securities excluded from the underwriting by reason of the underwriter's marketing limitation shall be included in such registration. If any Other Stockholder who has requested inclusion in such registration as provided above disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company, the underwriter and the Initiating Holders. The securities so withdrawn shall also be withdrawn from registration. If the underwriter has not limited the number of Registrable Securities or other securities to be underwritten, the Company and officers and directors of the Company may include its or their securities for its or their own account in such registration if the representative so -4- agrees and if the number of Registrable Securities and other securities which would otherwise have been included in such registration and underwriting will not thereby be limited. (b) COMPANY REGISTRATION. (i) If the Company shall determine to register any of its equity securities either for its own account or for the account of Other Stockholders, other than a registration relating solely to employee benefit plans, or a registration relating solely to a Commission Rule 145 transaction, or a registration on any registration form which does not permit secondary sales or does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities, the Company will: (1) promptly give to each of the Holders a written notice thereof (which shall include a list of the jurisdictions in which the Company intends to attempt to qualify such securities under the applicable blue sky or other state securities laws); and (2) include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made by the Holders within fifteen (15) days after receipt of the written notice from the Company described in clause (1) above, except as set forth in Section 2(b)(ii) below. Such written request may specify all or a part of the Holders' Registrable Securities. In the event any Holder requests inclusion in a registration pursuant to this Section 2(b) in connection with a distribution of Registrable Securities to its partners, the registration shall provide for the resale by such partners, if requested by such Holder if distributee partners are transferees under the last paragraph of Section 2(a)(i)(2); PROVIDED that the Company shall have the right to postpone or withdraw any registration effected pursuant to this Section 2(b) without obligation to any Holder. (ii) UNDERWRITING. (1) If the registration of which the Company gives notice is for a registered public offering involving an underwriting initiated by the Company or initiated pursuant to a demand by Other Stockholders, the Company shall so advise each of the Holders as a part of the written notice given pursuant to Section 2(b)(i)(1). In such event, the right of each of the Holders to registration pursuant to this Section 2(b) shall be conditioned upon such Holders' participation in such underwriting and the inclusion of such Holders' Registrable Securities in the underwriting to the extent provided herein. The Holders whose shares are to be included in such registration shall (together with the Company and the Other Stockholders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected for underwriting by the Company. -5- (2) Notwithstanding any other provision of this Section 2(b), if the underwriting is initiated by the Company and if the representative determines that marketing factors require a limitation on the number of shares to be underwritten, the Company shall have priority in including shares in the underwriting and the representative may (subject to the allocation priority set forth below) limit the number of Registrable Securities to be included in the registration and underwriting. The Company shall so advise all holders of securities requesting registration, and the number of shares of securities that are entitled to be included in the registration and underwriting shall be allocated in the following manner: The securities of the Company held by officers, directors and Other Stockholders of the Company (other than Registrable Securities and other than securities held by Other Stockholders) shall be excluded from such registration and underwriting to the extent required by such limitation, and, if a limitation on the number of shares is still required, the number of shares that may be included in the registration and underwriting by each of the Holders and Other Stockholders shall be reduced, on a pro rata basis (based on the number of shares held by such Holder or Other Stockholder), by such minimum number of shares as is necessary to comply with such limitation. If any of the Holders or any officer, director or Other Stockholder disapproves of the terms of any such underwriting, he may elect to withdraw therefrom by written notice to the Company and the underwriter. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. (3) Notwithstanding any other provision of this Section 2(b), if the underwriting is initiated pursuant to a demand by Other Stockholders and if the representative determines that marketing factors require a limitation on the number of shares to be underwritten, the Other Stockholders shall have priority in including shares in the underwriting and the representative may (subject to the allocation priority set forth below) limit the number of Registrable Securities to be included in the registration and underwriting. The Company shall so advise all holders of securities requesting registration, and the number of shares of securities that are entitled to be included in the registration and underwriting shall be allocated in the following manner: The securities of the Company held by the Company and officers and directors of the Company (other than Other Stockholders) shall be excluded from such registration and underwriting to the extent required by such limitation, and, if a limitation on the number of shares is still required, the number of shares that may be included in the registration and underwriting by each of the Holders shall be reduced, on a pro rata basis (based on the number of shares held by such Holder), by such minimum number of shares as is necessary to comply with such limitation. If any of the Holders or the Company, or any officer or director of the Company disapproves of the terms of any such underwriting, he may elect to withdraw therefrom by written notice to the Company and the underwriter. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. -6- (c) FORM S-3. The Holders shall have the right to request three (3) registrations on Form S-3 (such requests shall be in writing and shall state the number of shares of Registrable Securities to be disposed of and the intended method of disposition of shares by such holders), subject only to the following: (i) The Company shall not be required to effect a registration pursuant to this Section 2(c) unless the Holder or Holders requesting registration propose to dispose of shares of Registrable Securities having an aggregate price to the public (before deduction of underwriting discounts and expenses of sale) of more than $10,000,000; (ii) The Company shall not be required to effect a registration pursuant to this Section 2(c) within 180 days of the effective date of the most recent registration pursuant to this Section 2 in which securities held by the requesting Holder could have been included for sale or distribution; (iii) The Company shall not be required to effect a registration pursuant to this Section 2(c) after the Company has effected (A) two (2) registrations pursuant to Section 2(a) or (B) three (3) registrations pursuant to Section 2(a) or this Section 2(c), whichever occurs sooner, and such registrations have been declared or ordered effective; and (iv) The Company shall not be obligated to effect any registration pursuant to this Section 2(c) in any particular jurisdiction in which the Company would be required to qualify to do business as a foreign corporation or execute a general consent to service of process in effecting such registration, qualification or compliance, unless the Company is already subject to qualification to do business or service in such jurisdiction and except as may be required by the Securities Act or applicable rules or regulations thereunder. The Company shall give written notice to all Holders of the receipt of a request for registration pursuant to this Section 2(c) and shall provide a reasonable opportunity (not to exceed 20 days after the date of such notice) for other Holders to participate in the registration, provided that if the registration is for an underwritten offering, the terms of Section 2(a)(ii) shall apply to all participants in such offering. Subject to the foregoing, the Company will use its commercially reasonable efforts to effect promptly the registration of all shares of Registrable Securities on Form S-3 to the extent requested by the Holder or Holders thereof for purposes of disposition. In the event any Holder requests a registration pursuant to this Section 2(c) in connection with a distribution of Registrable Securities to its partners, the registration shall provide for the resale by such partners, if requested by such Holder if distributee partners are transferees under the last paragraph of Section 2(a)(i)(2). (d) EXPENSES OF REGISTRATION. All Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to this Section 2 shall be borne by the Company (unless at the request of the Holders, the registration statement is not filed or is withdrawn, in which case the Holders shall pay all of the Registration Expenses), and all Selling Expenses shall be borne by the Holders of the securities so registered pro rata on the basis of the number of their shares so registered. -7- (e) REGISTRATION PROCEDURES. In the case of each registration effected by the Company pursuant to this Section 2, the Company will keep the Holders, as applicable, advised in writing as to the initiation of each registration and as to the completion thereof. At its expense, the Company will: (i) keep such registration effective for a period of ninety (90) days or until the Holders (or in the case of a distribution to the partners of such Holder, such partners), as applicable, have completed the distribution described in the registration statement relating thereto, whichever first occurs; PROVIDED, HOWEVER, that in the case of any registration of Registrable Securities on Form S-3 which are intended to be offered on a continuous or delayed basis, such 90-day period shall be extended until all such Registrable Securities are sold (but in no event later than two years after the effective date of the registration statement); provided that Rule 415, or any successor rule under the Securities Act, permits an offering on a continuous or delayed basis, and PROVIDED FURTHER that applicable rules under the Securities Act governing the obligation to file a post-effective amendment permit, in lieu of filing a post-effective amendment which (y) includes any prospectus required by Section 10(a) of the Securities Act or (z) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement, the incorporation by reference of information required to be included in (y) and (z) above to be contained in periodic reports filed pursuant to Section 12 or 15(d) of the Exchange Act in the registration statement (and the Company is eligible to incorporate by reference such information into the applicable registration statement); (ii) furnish such number of prospectuses and other documents incident thereto as each of the Holders, as applicable, from time to time may reasonably request; (iii) notify each Holder of Registrable Securities covered by such registration at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; and (iv) furnish, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (1) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders participating in such registration, addressed to the underwriters, if any, and to the Holders participating in such registration and (2) a letter, dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders participating -8- in such registration, addressed to the underwriters, if any, and if permitted by applicable accounting standards, to the Holders participating in such registration. (f) LIMITATIONS ON REGISTRATION RIGHTS. (i) Notwithstanding the provisions of this section 2, the Company may by written notice to the Holders (x) delay filing a Registration Statement requested by a Holder (a "Delayed Registration Statement") or (y) require that the Holders immediately cease sales of shares under any effective Registration Statement ("Suspended Registration Statement"), in any period during which the Company is engaged in (i) a registered public offering of the Company, or (ii) any activity or transaction or preparations or negotiations for any activity or transaction ("Company Activity") that the Company desires to keep confidential for business reasons, if the Company determines in good faith that the public disclosure requirements imposed on the Company under the Securities Act in connection with any such Registration Statement would require disclosure of the Company Activity; provided, that, (i) in the aggregate, all such delays of filing Delayed Registration Statements and/or cessations of sales under Suspended Registration Statements shall not exceed 90 days in any 12-month period and (ii) the Company shall cause any Suspended Registration Statement to remain effective for one additional day for each day, or any portion of a day, that the Holders were required to cease sales of shares thereunder; and (ii) If the Company requires the Holders to cease sales of shares pursuant to Section 2f(i) above, the Company shall, as promptly as practicable following the termination of the circumstance which entitled the Company to do so, give prompt written notice to the Holders that such circumstance has terminated and that they may resume sales pursuant to the Suspended Registration Statement. If the prospectus included in such Suspended Registration Statement has been amended to comply with the requirements of the Securities Act, the Company shall enclose such revised prospectus with the notice to Holders given pursuant to this section 2f(ii) and the Holders shall make no offers or sales of shares pursuant to such Suspended Registration Statement other than by means of such revised prospectus. (g) INDEMNIFICATION. (i) The Company will indemnify each of the Holders, as applicable, each of its officers, directors and partners, and each person controlling each of the Holders, with respect to each registration which has been effected pursuant to this Section 2, and each underwriter, if any, and each person who controls any underwriter, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of the Securities Act or the Exchange Act or any rule or regulation thereunder applicable to the Company and relating to action or -9- inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse each of the Holders, each of its officers, directors and partners, and each person controlling each of the Holders, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by the Holders or underwriter and stated to be specifically for use therein. (ii) Each of the Holders will, if Registrable Securities held by it are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers and each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter, each Other Stockholder and each of their officers, directors, and partners, and each person controlling such Other Stockholder against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document made by such Holder, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements by such Holder therein not misleading, and will reimburse the Company and such Other Stockholders, directors, officers, partners, persons, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by such Holder and stated to be specifically for use therein; provided, however, that the obligations of each of the Holders hereunder shall be limited to an amount equal to the net proceeds to such Holder of securities sold as contemplated herein. (iii) Each party entitled to indemnification under this Section 2(f) (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld) and the Indemnified Party may participate in such defense at such party's expense (unless the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Indemnifying Party and the Indemnified Party in such action, in which case the fees and expenses of counsel shall be at the expense of the Indemnifying Party), and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 2 unless the -10- Indemnifying Party is materially prejudiced thereby. No Indemnifying Party, in the defense of any such claim or litigation shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. No Indemnified Party may settle or agree to settle any claim or litigation as to which indemnification may be sought hereunder without the prior written consent of the Indemnifying Party. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom. (iv) If the indemnification provided for in this Section 2(f) is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue (or alleged untrue) statement of a material fact or the omission (or alleged omission) to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (v) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with any underwritten public offering contemplated by this Agreement are in conflict with the foregoing provisions, the provisions in such underwriting agreement shall be controlling. (vi) The foregoing indemnity agreement of the Company and Holders is subject to the condition that, insofar as they relate to any loss, claim, liability or damage arising out of a statement made in or omitted from a preliminary prospectus but eliminated or remedied in the amended prospectus on file with the Commission at the time the registration statement in question becomes effective or the amended prospectus filed with the Commission pursuant to Commission Rule 424(b) (the "Final Prospectus"), such indemnity or contribution agreement shall not inure to the benefit of any underwriter or Holder if a copy of the Final Prospectus was furnished to the underwriter or Holder and was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act. (h) INFORMATION BY THE HOLDERS. -11- (i) Each of the Holders holding securities included in any registration shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Section 2. (ii) In the event that, either immediately prior to or subsequent to the effectiveness of any registration statement, any Holder shall distribute Registrable Securities to its partners, such Holder shall so advise the Company and provide such information as shall be necessary to permit an amendment to such registration statement to provide information with respect to such partners, as selling securityholders. Promptly following receipt of such information, the Company shall file an appropriate amendment to such registration statement reflecting the information so provided. Any incremental expense to the Company resulting from such amendment shall be borne by such Holder. Any Holder who shall have effected such a distribution shall indemnify the Company in accordance with Section 2(g) with respect to the information so provided to the Company. (i) RULE 144 REPORTING. With a view to making available the benefits of certain rules and regulations of the Commission which may permit the sale of restricted securities to the public without registration, the Company agrees to: (i) make and keep public information available as those terms are understood and defined in Rule 144 under the Securities Act ("Rule 144"), at all times; (ii) use its best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (iii) so long as the Holder owns any Registrable Securities, furnish to the Holder upon request, a written statement by the Company as to its compliance with the reporting requirements of Rule 144, and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as the Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing the Holder to sell any such securities without registration. (j) TERMINATION. The registration rights set forth in this Section 2 shall not be available to any Holder if, (i) in the opinion of counsel to the Company, all of the Registrable Securities then owned by such Holder could be sold in any 90-day period pursuant to Rule 144 or (ii) all of the Registrable Securities held by such Holder have been sold in a registration pursuant to the Securities Act or pursuant to Rule 144. -12- SECTION 3. MISCELLANEOUS (a) DIRECTLY OR INDIRECTLY. Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. (b) GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed entirely within such State. (c) SECTION HEADINGS. The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof. (d) NOTICES. (i) All communications under this Agreement shall be in writing and shall be delivered by hand or facsimile or mailed by overnight courier or by registered or certified mail, postage prepaid, return receipt requested: (1) if to the Company, to Daniel E. Geffken, Vice President-Finance and Chief Financial Officer, Transkaryotic Therapies, Inc., 195 Albany Street, Cambridge, MA 02139 (facsimile: (617) 491-7903) or at such other address as it may have furnished in writing to the Holders with a copy to David E. Redlick, Esq., Hale and Dorr LLP, 60 State Street, Boston, Ma 02109 (facsimile: (617) 526-5000); (2) if to the Holders, at the address or facsimile number listed on Schedule I hereto, or at such other address or facsimile number as may have been furnished the Company in writing. (ii) Any notice so addressed shall be deemed to be given: if delivered by hand or facsimile, on the date of such delivery; if sent by overnight courier, on the first business day following the date of such sending; and if mailed by registered or certified mail, on the third business day after the date of such mailing. (e) REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating thereto, including, without limitation, any consents, waivers and modifications which may hereafter be executed may be reproduced by the Holders by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and the Holders may destroy any original document so reproduced. The parties hereto agree and stipulate that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by the Holders in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. -13- (f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties. (g) ENTIRE AGREEMENT; AMENDMENT AND WAIVER. This Agreement constitutes the entire understanding of the parties hereto and supersedes all prior understanding among such parties. This Agreement may be amended, and the observance of any term of this Agreement may be waived, with (and only with) the written consent of the Company and the Holders holding a majority of the then outstanding Registrable Securities. (h) SEVERABILITY. In the event that any part or parts of this Agreement shall be held illegal or unenforceable by any court or administrative body of competent jurisdiction, such determination shall not affect the remaining provisions of this Agreement which shall remain in full force and effect. (i) COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement. -14- IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above. TRANSKARYOTIC THERAPIES, INC. By: /s/ DANIEL E. GEFFKEN ------------------------ Name: Daniel E. Geffken Title: VP of Finance and CFO WARBURG, PINCUS EQUITY PARTNERS, L.P. By: WARBURG, PINCUS & CO., General Partner By: /s/ JONATHAN LEFF -------------------- Name: Jonathan Leff Title: Partner WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I, C.V. By: WARBURG, PINCUS & CO., General Partner By: /s/ JONATHAN LEFF -------------------- Name: Jonathan Leff Title: Partner WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS II, C.V. By: WARBURG, PINCUS & CO., General Partner By: /s/ JONATHAN LEFF --------------------- Name: Jonathan Leff Title: Partner WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS III, C.V. By: WARBURG, PINCUS & CO., General Partner By: /s/ JONATHAN LEFF --------------------- Name: Jonathan Leff Title: Partner -15- SCHEDULE I INVESTORS INVESTOR NAME AND ADDRESS Warburg, Pincus Equity Partners, L.P. 466 Lexington Avenue New York, NY 10017 Facsimile: (212) 878-9351 Attention: Jonathan Leff Warburg, Pincus Netherlands Equity Partners I, C.V. 466 Lexington Avenue New York, NY 10017 Facsimile: (212) 878-9351 Attention: Jonathan Leff Warburg, Pincus Netherlands Equity Partners II, C.V. 466 Lexington Avenue New York, NY 10017 Facsimile: (212) 878-9351 Attention: Jonathan Leff Warburg, Pincus Netherlands Equity Partners III, C.V. 466 Lexington Avenue New York, NY 10017 Facsimile: (212) 878-9351 Attention: Jonathan Leff -16- EX-10.35 6 ex-10_35.txt EXHIBIT 10.35 EXHIBIT 10.35 April 20, 2000 Walter Gilbert, Ph.D. Carl M. Loeb University Professor Department of Molecular and Cellular Biology Harvard University 15 Gray Gardens West Cambridge, MA 02138 Dear Wally: We are pleased to offer you a position on Transkaryotic Therapies, Inc. ("TKT" or the "Company") Board of Directors effective as of April 20, 2000, upon the following terms and conditions: 1. TERM. Unless you earlier resign or are removed, you will serve until the next annual meeting of the Company's stockholders and until your successor is duly elected and qualified. 2. DIRECTORS' FEES. As compensation for your services, you will receive a Director's fee of $1,000 for attendance at each meeting of the Board including Annual Meeting, other than telephonic meetings. The Company will also reimburse you for reasonable out-of-pocket expenses incurred by you in the performance of your duties as a Director of the Company upon presentation to the Company of an itemized and appropriately documented invoice for such expenses. 3. STOCK. Upon your election to the Board of Directors at this year's annual meeting, the Company will grant you an option to purchase 2,500 shares of Common Stock at an exercise price per share equal to the fair market value on that date. The options will be granted under the terms and conditions of the 1993 Directors' Plan. Thereafter, at each subsequent annual meeting, contingent upon your continued election, you will receive an annual option grant under the 1993 Directors' Plan to purchase 6,750 shares of Common Stock at an exercise price per share equal to the fair market value on that date. 4. CONFIDENTIALITY. (a) You recognize and acknowledge that the Company's trade secrets, know-how and proprietary processes as they may exist Page 2 from time to time (including, without limitation, information regarding methods, cultures, vectors, plasmids, synthesis techniques, nucleic acid sequences, purification techniques and assay procedures) as well as the Company's confidential business plans and financial data are valuable, special and unique assets of the Company's business, access to and knowledge of which are essential to the performance of your duties as a Director of the Company. You agree that you will not, while you are serving as a Director of the Company or thereafter, in whole or in part, disclose such secrets, know-how, processes, business plans or financial data to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, nor shall you make use of any such property for your own purposes or for the benefit of any person, firm, corporation or other entity (except the Company) under any circumstances while you are serving as a Director of the Company or thereafter, provided that these restrictions shall not apply to such secrets, know-how and processes which you can establish by competent proof: (i) were known to you, as evidenced by written documents, other than under binder of secrecy, prior to your serving as a Director of the Company; (ii) have passed into the public domain prior to or after their development by or for the Company, other than through acts or omissions attributable to you; or (iii) were subsequently obtained by you, other than under binder of secrecy, from a third party not acquiring the information under an obligation of confidentiality from the disclosing party. (b) Upon your resignation, removal or completion of your term as a Director of the Company, you shall promptly turn over to the Company all originals and copies of the Company's confidential information described in this Section 4 then in your possession or under your control. 5. COVENANTS NOT TO COMPETE. (a) While you serve as a Director of the Company, you shall not engage in any business (whether as an officer, director, owner, employee, partner, consultant, advisor or other direct or Page 3 indirect participant) engaged in the development of gene activation methods, and/or the sale of products or rendering of services related to gene activation, and/or to any other activities which directly compete with the Company's business activities. (b) During the period in which this covenant not to compete is in effect you also shall not interfere with, disrupt or attempt to disrupt the relationship, contractual or otherwise, between the Company and any customer, supplier, lessor, lessee, employee, consultant, research partner or investor of the Company. (c) It is the desire and intent of the parties that the provisions of this Section 5 shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular subsection or portion of this Section 5 shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion shall apply only with respect to the operation of this Section in the particular jurisdiction in which such adjudication is made. If you agree to accept this offer, please so indicate by countersigning the enclosed duplicate of this letter and returning it to me. Very truly yours, TRANSKARYOTIC THERAPIES, INC. By: /s/ RICHARD F SELDEN --------------------- Richard F Selden President & Chief Executive Officer Accepted and agreed to: /s/ WALTER GILBERT - --------------------- Walter Gilbert 4/20/00 - --------------------- Date EX-10.36 7 ex-10_36.txt EXHIBIT 10.36 EXHIBIT 10.36 June 16, 2000 Mr. James E. Thomas Woods End Road (2nd House on Right) New Canaan, CT 06840 Dear James: We are pleased to offer you a position as an independent Director on Transkaryotic Therapies, Inc. ("TKT" or the "Company") Board of Directors effective as of June 15, 2000, upon the following terms and conditions: 1. TERM. Unless you earlier resign or are removed, you will serve until the next annual meeting of the Company's stockholders and until your successor is duly elected and qualified. 2. DIRECTORS' FEES. As compensation for your services, you will receive a Director's fee of $1,000 for attendance at each meeting of the Board including Annual Meeting, other than telephonic meetings. The Company will also reimburse you for reasonable out-of-pocket expenses incurred by you in the performance of your duties as a Director of the Company upon presentation to the Company of an itemized and appropriately documented invoice for such expenses. 3. STOCK. As a result of your election to the Board of Directors at this year's annual meeting, the Company has granted you an option to purchase 6,750 shares of Common Stock at an exercise price per share of $32.688 on June 15, 2000. The options are granted under the terms and conditions of the 1993 Directors' Plan. Thereafter, at each subsequent annual meeting, contingent upon your continued election, you will receive an annual option grant under the 1993 Directors' Plan to purchase 6,750 shares of Common Stock at an exercise price per share equal to the fair market value on that date. 4. CONFIDENTIALITY. (a) You recognize and acknowledge that the Company's trade secrets, know-how and proprietary processes as they may exist from time to time (including, without limitation, information regarding methods, cultures, vectors, plasmids, synthesis techniques, nucleic acid sequences, purification techniques and assay procedures) as well as the Company's confidential Page 2 business plans and financial data are valuable, special and unique assets of the Company's business, access to and knowledge of which are essential to the performance of your duties as a Director of the Company. You agree that you will not, while you are serving as a Director of the Company or thereafter, in whole or in part, disclose such secrets, know-how, processes, business plans or financial data to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, nor shall you make use of any such property for your own purposes or for the benefit of any person, firm, corporation or other entity (except the Company) under any circumstances while you are serving as a Director of the Company or thereafter, provided that these restrictions shall not apply to such secrets, know-how and processes which you can establish by competent proof: (i) were known to you, as evidenced by written documents, other than under binder of secrecy, prior to your serving as a Director of the Company; (ii) have passed into the public domain prior to or after their development by or for the Company, other than through acts or omissions attributable to you; or (iii) were subsequently obtained by you, other than under binder of secrecy, from a third party not acquiring the information under an obligation of confidentiality from the disclosing party. (b) Upon your resignation, removal or completion of your term as a Director of the Company, you shall promptly turn over to the Company all originals and copies of the Company's confidential information described in this Section 4 then in your possession or under your control. 5. COVENANTS NOT TO COMPETE. (a) While you serve as a Director of the Company, you shall not engage in any business (whether as an officer, director, owner, employee, partner, consultant, advisor or other direct or indirect participant) engaged in the development of gene activation methods, and/or the sale of products or rendering of services related to gene activation, and/or to any other activities which directly compete with the Company's business activities. Page 3 (b) During the period in which this covenant not to compete is in effect you also shall not interfere with, disrupt or attempt to disrupt the relationship, contractual or otherwise, between the Company and any customer, supplier, lessor, lessee, employee, consultant, research partner or investor of the Company. (c) It is the desire and intent of the parties that the provisions of this Section 5 shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular subsection or portion of this Section 5 shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion shall apply only with respect to the operation of this Section in the particular jurisdiction in which such adjudication is made. If you agree to accept this offer, please so indicate by countersigning the enclosed duplicate of this letter and returning it to me. Very truly yours, TRANSKARYOTIC THERAPIES, INC. By: /s/ RICHARD F SELDEN -------------------- Richard F Selden President & Chief Executive Officer Accepted and agreed to: /s/ JAMES E. THOMAS - -------------------- James E. Thomas 8/1/00 - ------ Date EX-10.37 8 ex-10_37.txt EXHIBIT 10.37 EXHIBIT 10.37 EMPLOYMENT AGREEMENT AGREEMENT, dated as of May 18, 2000, between Transkaryotic Therapies, Inc., a Delaware corporation (the "Company"), and Michael J. Astrue (the "Executive"). 1. EMPLOYMENT. The Company hereby employs the Executive and the Executive hereby accepts employment with the Company upon the terms and conditions herein set forth. 2. DUTIES. The Executive shall be engaged as a full-time employee to act as the Company's Senior Vice President, Administration and General Counsel, and shall report to the Company's Founder and Chief Executive Officer. The Executive shall perform the duties consistent with such position as the Founder and Chief Executive Officer shall from time to time reasonably designate. The Executive shall devote his entire time, attention and energies to the business of the Company and shall not engage in any other business activity or activities, whether or not such business activity is pursued for gain, profit or other pecuniary advantage that, in the judgment of the Company, may conflict with the proper performance of the Executive's duties under this Agreement. Notwithstanding the foregoing, (a) with respect to businesses which do not compete with the Company, the Executive may invest his personal or family assets in such form or manner as will not require any services on the part of the Executive in the operation of the affairs of the companies in which such investments are made and in which his participation is solely that of an investor, and (b) the Executive may purchase securities in any corporation whose securities are regularly traded in recognized securities markets, provided that such investments shall not result in his collectively owning beneficially at any time one percent (1%) or more of the equity securities of any corporation engaged in a business competitive to that of the Company. 3. COMPENSATION. (a) BASE SALARY. For services rendered under this Agreement, the Company shall pay the Executive an annual salary of $250,000 (the "Base Salary"), payable (after deduction of applicable withholding for Federal and state income and payroll taxes) in equal semi-monthly installments. The Company may review the Executive's compensation annually and make such increases to the Base Salary as the Company determines are merited, based upon the Executive's performance and -1- consistent with the Company's compensation policies as established by the Compensation Committee of the Company's Board of Directors. Any such increase in annual Base Salary shall be communicated to the Executive shortly after the January meeting of the Board of Directors and shall be made effective on the first day of January each year. (b) BONUS. The Chief Executive Officer and the Executive shall establish objective performance goals for the Executive for such calendar year. Upon the attainment of such performance goals, but subject to the overall performance of the Company during such year, the Executive may be entitled to a bonus targeted at forty percent (40%) of base compensation, as determined by the Compensation Committee of the Company's Board of Directors. Within thirty (30) days after the close of each such calendar year, the Company shall evaluate the attainment of the performance goals for such calendar year and determine the amount of any performance bonus payable hereunder. Any such performance bonus shall be payable within ninety (90) days after the calendar year to which it relates. (c) FRINGE BENEFITS. In addition to Base Salary and Bonus payments under Sections 3(a), (b), and (c) above, the Executive shall be eligible for and participate in such fringe benefits, in accordance with the terms of each such benefit, as shall be generally provided to executives of the company, including incentive compensation, the Company's 401(k) Plan, health and dental insurance, and any retirement programs, stock options plans or employee stock purchase plans which may be adopted from time to time during the term hereof by the Company. Nothing herein contained shall be deemed to preclude the Company from granting such additional compensation or benefits to the Executive as it shall in its sole discretion determine. (d) STOCK OPTIONS. Upon authorization by the Company's Board of Directors or Compensation Committee, the Company will promptly grant the Executive under the Company's 1993 Long-Term Incentive Plan (the "Plan") a nonstatutory stock option to purchase an aggregate of one hundred fifty thousand (150,000) shares of the Common Stock of the Company, par value $.01 per share, at a purchase price of twenty-seven and 625/100 dollars ($27.625) per share. Of such options, 12,000 will vest immediately on May 18, 2000, with the remaining 138,000 vesting annually for a period of six (6) years on the anniversary date of this Agreement in installments of 23,000 options each. Such option shall be exercisable during the ten (10) year period following its date of vesting and shall be subject to all the terms and conditions of the Plan -2- and the Company's standard form of Stock Option Agreement, copies of which have been delivered to the Executive separately. 4. VACATION. During the term of this Agreement, the Executive shall be entitled to fifteen (15) annual vacation days accrued at the rate of 1.25 days per month. 5. SICK LEAVE. During the term of this Agreement, the Executive shall be entitled to sick leave consistent with the Company's customary sick leave policy. 6. EXPENSES. During the term of this Agreement, the Company shall reimburse the Executive in accordance with the Company's customary policies for all reasonable out-of-pocket expenses incurred by the Executive in connection with the business of the Company and in performance of his duties under this Agreement upon the Executive's presentation to the Company of an itemized accounting of such expenses with reasonable supporting data. 7. TERM. (a) The Executive's employment under this Agreement shall commence on May 18, 2000 (the "Commencement Date") and shall continue until terminated by the Company as provided in this Section 7(a) or by the Executive as provided in Section 7(c) below. The Company may, at its election, terminate the obligations of the Company under this Agreement as follows: (i) Upon at least sixty (60) days' prior written notice if the Executive becomes physically or mentally incapacitated or is injured so that he is unable to perform the services required of him hereunder and such inability to perform continues for a period in excess of six (6) months and is continuing at the time of such notice; or (ii) For "Cause" upon prior written notice of such termination to the Executive. For purposes of this Agreement, the Company shall have "Cause" to terminate its obligations hereunder upon (a) the Company's determination that the Executive has ceased or failed to substantially perform his duties hereunder (other than as a result of his incapacity due to physical or mental illness or injury), and at least thirty (30) days' prior written notice to the Executive, (b) the Executive's death, (c) the Company's determination that the Executive has engaged or -3- is about to engage in conduct materially injurious to the Company, (d) the Executive's having been convicted of a felony, or (e) the Executive's participation in activities proscribed by the provisions of Sections 2, 9, or 11 hereof or material breach of any of the other covenants herein; or (iii) Without Cause upon at least sixty (60) days' prior written notice of such termination to the Executive. (b) If, subsequent to six (6) months of the date the Executive's employment hereunder commences, this Agreement is terminated pursuant to Section 7(a)(i) above, subject to Section 11(d) below, the Executive shall receive severance pay until the fourth anniversary of the date hereof at the rate of one hundred percent (100%) of Base Salary, reduced by applicable payroll taxes and further reduced by the amount received by the Executive during such period under any Company maintained disability insurance policy or plan or under Social Security or similar laws. Such severance payments shall be paid periodically to the Executive as provided in Section 3(a) for the payment of Base Salary. If this Agreement is terminated at any time pursuant to Section 7(a)(ii) above, the Executive shall receive no severance pay. If this Agreement is terminated pursuant to Section 7(a)(iii) above, the Executive shall receive severance pay, for a period of twelve (12) months from and after such termination, equal to the Base Salary less the amount, if any, earned by the Executive during such twelve (12) month period, whether as salary, consulting fees, deferred payments or other direct or indirect compensation. Such severance payments (less applicable withholding and payroll taxes) shall be paid periodically to the Executive as provided in Section 3(a) for the payment of Base Salary. (c) The Executive may terminate his employment under this Agreement upon breach by the Company or for Good Reason. Termination of the Executive's employment for "breach" shall mean in the event that the Company fails to perform, in any material respect, its obligations under the Agreement, after written notice to the Company setting forth in reasonable detail the nature of such breach, if such breach remains uncured for a period of 90 days following such notice to the Company. Termination of the Executive's employment for "Good Reason" shall only mean termination based on (i) a substantial diminution in the responsibilities, duties, and powers of the Executive including, without limitation, the Executive ceasing to be the Senior Vice President, Administration and General Counsel of the Company; and/or (ii) the relocation of the Executive's present office -4- location to an area more than 100 miles from the metropolitan Boston area. In the event of termination of employment pursuant to this paragraph (c), the Company shall pay to the Executive severance pay for a period of twelve (12) months in an amount equal to (x) 100% of the Executive's Base Salary immediately prior to such termination; plus, (y) any bonus payment for the fiscal year preceding the year in which such termination occurs that was earned but not paid at the date of such termination. The Executive shall not be required to mitigate the amount of any payment provided for in this paragraph (c) by seeking other employment or otherwise, but the amount of any payment or benefit provided for in this paragraph (c) shall be reduced by an amount equal to any compensation earned by the Executive as a result of employment with another employer after termination of employment with the Company, or otherwise. (d) The Executive may terminate his employment under this Agreement for any reason upon at least sixty (60) days' prior written notice. In the event of any such termination of employment pursuant to this paragraph (d) (excluding any termination of employment paragraph (c) above), the Executive shall not be entitled to any severance payments. 8. REPRESENTATIONS. The Executive hereby represents to the Company that (a) he is legally entitled to enter into this Agreement and to perform the services and other obligations contemplated herein; (b) he has, and throughout the term of this Agreement will continue to have, the full right, power and authority, subject to no rights of third parties, to grant to the Company the rights contemplated by Section 10 hereof; and (c) he is not subject to any agreement, rule, regulation or policy of any university, research institution or other third party inconsistent with the foregoing representations. 9. DISCLOSURE OF INFORMATION. (a) The Executive recognizes and acknowledges that the Company's trade secrets, know-how and proprietary processes as they may exist from time to time (including, without limitation, information regarding methods, cultures, vectors, plasmids, synthesis techniques, nucleic acid sequences, purification techniques and assay procedures) as well as the Company's confidential business plans and financial data are valuable, special and unique assets of the Company's business, access to and knowledge of which are essential to the performance of the Executive's duties hereunder. The Executive shall not, during or after the term of his employment by the Company, in whole or in part, -5- disclose such secrets, know-how, processes, business plans or financial data to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, nor shall the Executive make use of any such property for his own purposes or for the benefit of any person, firm, corporation or other entity (except the Company) under any circumstances during or after the term of his employment, provided that after the term of his employment, these restrictions shall not apply to such secrets, know-how, and processes which the Executive can establish by competent proof: (i) were known, other than under binder of secrecy, to the Executive prior to his employment by the Company; (ii) were passed into the public domain prior to or after their development by or for the Company, other than through acts or omissions attributable to the Executive; or (iii) were subsequently obtained, other than under binder of secrecy, from a third party not acquiring the information under an obligation of confidentiality from the disclosing party. (b) Upon termination of his employment hereunder, the Executive shall promptly turn over to the Company all originals and copies which he may have of any of the Company's confidential information described in this Section 9. 10. INTELLECTUAL PROPERTY. The Executive hereby sells, transfers, and assigns to the Company, or to any person or entity designated by the Company, the entire right, title, and interest of the Executive in and to all inventions, ideas, discoveries, and improvements (including, without limitation, all microorganisms, strains or cultures) whether patented or unpatented, and copyrightable material made or conceived by the Executive, solely or jointly, during the term hereof, which arise out of research or other activities conducted by, for or under the direction of the Company, whether or not conducted at the Company's facilities, or which relate to methods, apparatus, designs, products, processes or devices, sold, leased, used or under consideration or development by the Company. The Executive acknowledges that all copyrightable materials developed or produced by the Executive within the scope of his employment constitute works made for hire. The Executive shall communicate promptly and disclose to the Company, in such form as the Company may reasonably request, all information, details, and data pertaining to any such inventions, ideas, discoveries, and improvements; and the Executive shall execute and deliver to the Company such formal transfers and assignments and such other papers and documents -6- and shall give such testimony as may be necessary or required of the Executive to permit the Company or any person or entity designated by the Company to file and prosecute patent applications and, as to copyrightable material, to obtain copyrights thereof. Any such invention, idea, discovery or improvement disclosed by the Executive within one (1) year following the termination of this Agreement shall be deemed to fall within the provisions of this Section 10 unless proved to have been first conceived and made following such termination. 11. COVENANTS NOT TO COMPETE OR INTERFERE. (a) Subject to Section 11(b) below, during the term of this Agreement and the period ending twenty-four (24) months from and after the termination of the Executive's employment hereunder, the Executive shall not engage in any business (whether as an officer, director, owner, employee, partner, consultant, advisor or other direct or indirect participant) engaged in the development of non-viral gene therapy and/or gene targeting and/or gene activation methods and/or the sale of products or rendering of services related to non-viral gene therapy and/or gene targeting and/or gene activation and/or to any other activities which directly compete with the Company's business activities. This Agreement shall not be construed to restrict the Executive's right to be employed as a faculty member of any university or employee of any nonprofit agency or foundation after any termination of this Agreement where this covenant not to compete shall continue to be in effect. During the period in which this covenant not to compete is in effect the Executive also shall not interfere with, disrupt or attempt to disrupt the relationship, contractual or otherwise, between the Company and any customer, supplier, lessor, lessee, employee, consultant, research partner or investor of the Company. (b) If this Agreement is terminated by the Company pursuant to Section 7(a)(iii) above, the provisions of the first sentence of Section 11(a) shall apply until twelve (12) months from and after such termination. (c) It is the desire and intent of the parties that the provisions of this Section 11 shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular Subsection or portion of this Section 11 shall be adjudicated to be invalid or unenforceable, this Section 11 shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, -7- such deletion to apply only with respect to the operation of this Section in the particular jurisdiction in which such adjudication is made. (d) In the event of any breach of the provisions of this Section 11 by the Executive, any and all rights of the Executive to receive severance payments under Section 7(b) above shall automatically terminate. 12. INJUNCTIVE RELIEF. If there is a breach or threatened breach of the provisions of Section 9, 10, or 11 of this Agreement, the Company shall be entitled to an injunction, without bond, restraining the Executive from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach. 13. INSURANCE. The Company may, at its election and for its benefit, insure the Executive against accidental loss or death, and the Executive shall submit to such physical examinations and supply such information as may be required in connection therewith. 14. NOTICES. Any notice required or permitted to be given under this Agreement to the Executive shall be sufficient if in writing and if sent by certified or registered mail to his residence, or in the case of the Company, to Transkaryotic Therapies, Inc., 195 Albany Street, Cambridge, MA 02139, Attention: Chief Executive Officer, or to such other offices or addresses as the company shall designate from time to time in writing to the Executive. Any such notice shall be effective on the earlier of (a) the date on which it is personally delivered or (b) three (3) days after it is deposited in the United States mails, postage prepaid. 15. WAIVER OF BREACH. A waiver by the Company or the Executive of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by the other party. 16. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the Commonwealth of Massachusetts. 17. ASSIGNMENT. This Agreement may be assigned, without the consent of the Executive, by the Company to any person, partnership, corporation or other entity which succeeds to the business of the Company or which has purchased substantially all the assets of the Company, provided such assignee assumes all the liabilities of the Company hereunder. -8- 18. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties and supersedes any prior understandings or agreements between the Executive and the Company. This agreement may be changed only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the date first above written. TRANSKARYOTIC THERAPIES, INC. By: /s/ RICHARD F SELDEN -------------------- Richard F Selden, M.D., Ph.D. Founder and Chief Executive Officer /s/ MICHAEL J. ASTRUE --------------------- Michael J. Astrue -9- EX-27 9 ex-27.txt EX. 27
5 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 193,797 73,668 0 0 0 1,793 34,432 12,666 291,303 8,634 10,500 0 1 227 271,941 291,303 0 1,514 0 16,655 0 0 0 (12,220) 0 (12,220) 0 0 0 (12,220) (.54) (.54)
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