8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

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

Date of Report (Date of earliest event reported): April 29, 2004

Transkaryotic Therapies, Inc.

(Exact name of registrant as specified in charter)

Delaware	000-21481	04-3027191
(State or other juris- diction of incorporation	(Commission File Number)	(IRS Employer Identification No.)

700 Main Street, Cambridge, Massachusetts	02139
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (617) 349-0200

(Former name or former address, if changed since last report)

TABLE OF CONTENTS

	Item 5. Other Events and Required FD Disclosure
Risk factors
	Item 7. Financial Statements and Exhibits
SIGNATURE
EXHIBIT INDEX
Ex-1.1 Underwriting Agreement
Ex-4.1 Supplemental Indenture
Ex-5.1 Opinion of Hale and Dorr LLP
Ex-99.1 Press Release dated April 28, 2004

Item 5. Other Events and Required FD Disclosure

     On April 28, 2004, Transkaryotic Therapies, Inc. (“TKT” or the “Company”) announced that it has agreed to sell $90 million principal amount of 1.25% senior convertible notes due 2011 (the “Notes”). The Company has granted to the underwriters an overallotment option to purchase an additional $10 million principal amount of the Notes within 30 days of the offering. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K, and is incorporated herein by reference.

     The Company filed a Registration Statement on Form S-3 (File No. 333-51772) (the “Registration Statement”) covering common stock, preferred stock, debt securities and warrants, which was declared effective by the Securities and Exchange Commission (the “Commission”) on December 21, 2000. On April 29, 2004, the Company filed with the Commission a supplement to the prospectus included in the Registration Statement (the “Prospectus Supplement”) dated April 28, 2004, relating to the issuance and sale of the Notes.

     In connection with the offering of the Notes, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with JP Morgan Securities Inc., as representative of the several underwriters, on April 28, 2004. The Company anticipates entering into an indenture with The Bank of New York, as trustee, on May 4, 2004 (a form of which was filed as an exhibit to the Registration Statement), and a supplemental indenture with the trustee on May 4, 2004, which will set forth certain terms of the Notes and include as an exhibit a form of Note (the “Supplemental Indenture”).

     In connection with the offering of the Notes and the filing of the Prospectus Supplement with the Commission, the Company is filing the Underwriting Agreement, the form of Supplemental Indenture, the form of Note and a legal opinion of Hale and Dorr LLP relating to the Notes as Exhibits 1.1, 4.1, 4.2 and 5.1, respectively, to this Current Report on Form 8-K.

     The Prospectus Supplement contains an updated description of the risks and uncertainties that could materially affect the Company’s business, financial condition and results of operations, which description is set forth below under the caption “Risk Factors.”

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Risk factors

Financing risks

We have not been profitable and expect to continue to incur substantial losses.

We have experienced significant operating losses since our inception in 1988. As of March 31, 2004, our accumulated deficit was $454.8 million. We had net losses of $14.2 million in the three months ended March 31, 2004, $75.2 million in 2003, $129.8 million in 2002 and $70.2 million in 2001.

We expect that we will continue to incur substantial losses and that, until we have substantial product sales, our cumulative losses will continue to increase. We recorded $17.4 million in product sales in the three months ended March 31, 2004, $57.2 million in product sales in 2003 and $34.7 million in product sales in 2002. We expect that the losses that we incur will fluctuate from quarter to quarter and that these fluctuations may be substantial.

We may need additional financing, which may be difficult to obtain. If we do not obtain additional financing, our business, results of operations and financial condition may be adversely affected.

Our cash requirements for operating activities, financing activities and investment activities have historically exceeded our internally generated funds. We expect that our cash requirements for such activities will continue to exceed our internally generated funds until we are able to generate substantial product sales.

We expect that our existing capital resources, together with the net proceeds from the offering of the Notes, anticipated proceeds from collections on existing accounts receivable, anticipated future product sales and margins on such sales, anticipated cash payments under collaborative agreements, and interest income, will be sufficient to fund our operations into 2006 and to fund our expected purchase of the minority stockholders’ interest in our majority-owned subsidiary in Europe, TKT Europe-5S AB, for between $55 million and $65 million. However, our existing capital resources, the net proceeds from the offering, and our other anticipated sources of capital may not provide adequate funds to satisfy our capital requirements. Our future capital requirements will depend on many factors, including the following:

• the timing and amount of Replagal product sales, as well as the cash collections on receivables;

• continued progress in our research and development programs, particularly with respect to iduronate-2-sulfate, or I2S, and Gene-Activated glucocerebrosidase, or GA-GCB;

• our ability to commence the manufacturing of Dynepo on a timely and cost-effective basis and the timing and commercial success of the launch of Dynepo in the European Union;

• the scope and results of our clinical trials;

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• the timing of, and the costs involved in, obtaining regulatory approvals;

• the cost of expansion of our internal manufacturing facilities;

• the inherent variability of product yields in biological manufacturing activities;

• fluctuations in foreign exchange rates for sales denominated in currencies other than the United States dollar;

• the quality and timeliness of the performance of third party suppliers;

• the cost of commercialization activities, including product marketing, sales and distribution;

• the costs involved in preparing, filing, prosecuting, maintaining, and enforcing patent claims and other patent-related costs, including litigation costs and the results of such litigation;

• the outcome of pending purported class action and other related, or potentially related, actions and the litigation costs with respect to such actions;

• the timing and cost of our purchase of the minority interest in TKT Europe;

• the outcome of the SEC investigation referred to below; and

• our ability to establish and maintain collaborative arrangements.

Because we expect to incur substantial operating losses in the future, we may need to seek additional funding for our operations. We may do so through collaborative arrangements and public or private debt or equity financings. Additional financing may not be available to us on acceptable terms, if at all. If we do not obtain additional financing, our financial condition may be adversely affected.

If we raise additional funds by issuing equity securities, further dilution to our then existing stockholders will result. If we raise additional funds by issuing debt securities, our total indebtedness will increase and we may subject ourselves to covenants that limit or restrict our ability to take specified actions, such as incurring additional debt or making capital expenditures. In addition, the terms of the financing may adversely affect the holdings or the rights of our stockholders. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail one or more of our research or development programs or some of our commercialization activities. We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to certain of our technologies, product candidates, or products which we would otherwise pursue on our own.

We have significant indebtedness and we may incur additional indebtedness in the future. Our current indebtedness and any future indebtedness we incur exposes us to risks that could adversely affect our business, operating results and financial condition.

We incurred $90 million of indebtedness when we sold the notes. We may also incur additional long-term indebtedness or obtain working capital lines of credit to meet future financing needs. This indebtedness could have significant negative consequences for our business, operating results and financial condition, including:

• increasing our vulnerability to adverse economic and industry conditions;

• limiting our ability to obtain additional financing;

• requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, thereby reducing the amount of our cash flow available for other purposes;

• limiting our flexibility in planning for, or reacting to, changes in our business; and

• placing us at a possible competitive disadvantage with less leveraged competitors and competitors that may have better access to capital resources.

If we experience a decline in revenues, we could have difficulty making required payments on the notes and any indebtedness which we may incur in the future. If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments, or if we fail to comply with the various requirements of the notes or any indebtedness which we may incur in the future, we would be in default, which would permit the holders of the notes and any such indebtedness to accelerate the maturity of the notes and any such indebtedness and could cause defaults under the notes or any such indebtedness we may incur in the future. Any default under the notes or any indebtedness which we may incur in the future could have a material adverse effect on our business, operating results and financial condition.

Our stock price has been and may in the future be volatile. This volatility may make it difficult for you to sell common stock when you want or at attractive prices.

Our common stock has been and in the future may be subject to substantial price volatility. The value of your investment could decline due to the effect of any of the following factors upon the market price of our common stock:

• announcements of technological innovations or new commercial products by our competitors;

• disclosure of results of clinical testing or regulatory proceedings by us or our competitors;

• results of litigation;

• the timing, amount and receipt of revenue from sales of our products and margins on sales of our products;

• the timing of our expected purchase of, and the purchase price for, the holdings of the minority stockholders in TKT Europe;

• governmental regulation and approvals;

• developments in patent or other proprietary rights;

• public concerns as to the safety of products developed by us or the fields of study in which we work; and

• general market conditions.

In addition, the stock market has experienced significant price and volume fluctuations, and the market prices of biotechnology companies have been highly volatile. Moreover, broad market and industry fluctuations that are not within our control may adversely affect the trading price of our common stock. During the period from January 1, 2002 to March 31, 2004, the closing sale price of our common stock on the Nasdaq National Market ranged from a low of $3.74 per share to a high of $46.50 per share. You must be willing to bear the risk of fluctuations in the price of our common stock and the risk that the value of your investment in our securities could decline.

Our corporate governance structure, including provisions in our certificate of incorporation and by-laws, our stockholder rights plan and Delaware law, may prevent a change in control or management that securityholders may consider desirable.

Section 203 of the Delaware General Corporation Law and our certificate of incorporation, by-laws and stockholder rights plan contain provisions that might enable our management to resist a takeover of our company or discourage a third party from attempting to take over our company. These provisions include the inability of stockholders to act by written consent or to call special meetings, and the ability of our board of directors to designate the terms of and issue new series of preferred stock without stockholder approval.

These provisions could have the effect of delaying, deferring, or preventing a change in control of us or a change in our management that securityholders may consider favorable or beneficial. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors and take other corporate actions. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock or our other securities.

Development, clinical and regulatory risks

If our clinical trials are not successful, we may not be able to develop and commercialize our products, including I2S.

In order to obtain regulatory approvals for the commercial sale of our potential products, we and our collaborators will be required to complete extensive clinical trials in humans to demonstrate the safety and efficacy of our products. However, we may not be able to commence or complete these clinical trials in any specified time period, or at all, either because the U.S. Food and Drug Administration, or FDA, or other regulatory agencies object, because we are unable to attract or retain clinical trial participants, or for other reasons. Even if we complete a clinical trial of one of our potential products, the data collected from the clinical trial may not indicate that our product is safe or effective to the extent required by the FDA, the European Commission, or other regulatory agencies to approve the potential product.

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For example, in November 2002, the FDA indicated to us that the data for Replagal that we submitted in connection with our biologics license application, or BLA, was not adequate for approval, and in January 2003, the FDA’s Endocrinologic & Metabolic Drugs Advisory Committee concluded that our clinical data did not provide substantial evidence of efficacy. In January 2004, we withdrew our BLA for Replagal.

The results from preclinical testing of a product that is under development may not be predictive of results that will be obtained in human clinical trials. In addition, the results of early human clinical trials may not be predictive of results that will be obtained in larger scale, advanced-stage clinical trials. Furthermore, we, one of our collaborators, or a regulatory agency with jurisdiction over the trials may suspend clinical trials at any time if the patients participating in such trials are being exposed to unacceptable health risks, or for other reasons.

The timing of completion of clinical trials is dependent in part upon the rate of enrollment of patients. Patient accrual is a function of many factors, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the study, the existence of competitive clinical trials, and the availability of alternative treatments. Delays in planned patient enrollment may result in increased costs and prolonged clinical development. In addition, patients may withdraw from a clinical trial for a variety of reasons. If we fail to accrue and maintain the number of patients into one of our clinical trials for which the clinical trial was designed, the statistical power of that clinical trial may be reduced which would make it harder to demonstrate that the products being tested in such clinical trial are safe and effective.

Regulatory authorities, clinical investigators, institutional review boards, data safety monitoring boards and the hospitals at which our clinical trials are conducted all have the power to stop our clinical trials prior to completion. If our studies are not completed, we would be unable to show the safety and efficacy required to obtain marketing authorization for our products.

We may not be able to obtain marketing approvals for our products, which would materially impair our ability to generate revenue.

We are not able to market any of our products in the United States, Europe or in any other jurisdiction without marketing approval from the FDA, the European Commission, or any equivalent foreign regulatory agency. The regulatory process to obtain marketing approval for a new drug or biologic takes many years and requires the expenditure of substantial resources. This process can vary substantially based on the type, complexity, novelty and indication of the product candidate involved.

In August 2001, the European Commission granted marketing authorization of Replagal in the European Union, approximately one year after we submitted our marketing authorization application, or MAA, to the European Agency for the Evaluation of Medicinal Products, or EMEA, and approximately five years after we filed our investigational new drug application, or IND, with the FDA. The FDA never approved Replagal in the United States and, in January 2004, we withdrew our BLA for Replagal. We are continuing to seek marketing approval for Replagal in a number of other countries in the world. However, we may not obtain approvals in one or more of these countries.

We are currently conducting a pivotal clinical trial of I2S in 96 patients with Hunter syndrome at nine sites around the world. If the results are positive, we expect to submit applications for marketing approval in the United States and in the European Union in the second half of 2005. However, even if we submit such applications, the FDA, the European Commission and other regulatory agencies to which we submit applications may not agree that our product is safe and effective and may not approve our product.

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Although the European Commission has granted marketing approval of Dynepo in the European Union, Dynepo has not been approved in the United States. In 2000, Aventis Pharmaceuticals Inc. submitted a BLA to the FDA seeking marketing authorization for Dynepo in the United States. The FDA did not accept the BLA for filing, and requested that Aventis provide additional manufacturing data. Aventis has not yet submitted the requested additional data to the FDA, and we cannot predict whether or when Aventis will do so.

There can be no assurance as to whether or when any of our applications for marketing authorization relating to any of our products, including Replagal, I2S, and Dynepo, or additional applications for marketing authorization that we may make in the future as to these or other products, will be approved by the relevant regulatory authorities. Among other things, we have had only limited experience in preparing applications and obtaining regulatory approvals. If approval is granted, it may be subject to limitations on the indicated uses for which the product may be marketed or contain requirements for costly post-marketing testing and surveillance to monitor safety or efficacy of the product. For example, there are conditions associated with our European Union approval of Replagal, including an obligation to conduct additional clinical trials and an obligation to submit an annual assessment of Replagal for review by the Committee for Proprietary Medicinal Products, or CPMP. If we do not complete these clinical trials on a timely basis or the results of these trials are not satisfactory to the CPMP, the European Commission may withdraw or suspend our Replagal approval. If approval of an application to market a product is not granted on a timely basis or at all, or we are unable to maintain our approval, our business may be materially harmed.

We may not be able to obtain orphan drug exclusivity for our products for the treatment of rare genetic diseases. If our competitors are able to obtain orphan drug exclusivity for their products, we may not be able to have our competitive products approved by the applicable regulatory authority for a significant period of time.

Some jurisdictions, including the European Union and the United States, may designate drugs for relatively small patient populations as “orphan drugs.” Orphan drug designation must be requested before submitting an application for marketing authorization. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process, but does make the product eligible for orphan drug exclusivity and, in the United States, certain tax credits. Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to orphan drug exclusivity. Orphan drug exclusivity means that another application to market the same drug for the same indication may not be approved for a period of up to 10 years in the European Union, and for a period of seven years in the United States, except in limited circumstances set forth in the U.S. Food, Drug and Cosmetic Act and its implementing regulations, which we refer to as the FDA law. Obtaining orphan drug designations and orphan drug exclusivity for our products for the treatment of rare genetic diseases may be critical to the success of these products. Our competitors may obtain orphan drug exclusivity for products competitive with our products before we do as Genzyme Corporation did with its Fabrazyme product in the United States, as discussed below. Even if we obtain orphan drug exclusivity for any of our potential products, we may not be able to maintain it. For example, if a competitive product is shown to be clinically superior to our product, any orphan drug exclusivity we have obtained will not block the approval of such competitive product.

In August 2001, the European Commission granted marketing authorization of Replagal in the European Union. The European Commission also granted marketing authorization of Genzyme Corporation’s Fabrazyme product in the European Union in August 2001. In connection with these approvals, the European Commission granted Replagal and Fabrazyme co-exclusive orphan drug status in the European Union for up to 10 years.

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In April 2003, Genzyme received marketing authorization in the United States for Fabrazyme. Because Fabrazyme had received orphan drug designation in the United States, upon its marketing approval, Fabrazyme received orphan drug exclusivity. Because Fabrazyme received marketing approval in the United States before Replagal and received orphan drug exclusivity, the FDA may not approve Replagal and Replagal will be excluded from the United States market for seven years, until April 2010, unless we receive approval to market and sell Replagal in the United States and we can demonstrate that Replagal satisfies the limited criteria for exceptions set forth in the FDA law. In January 2004, we withdrew our BLA for Replagal. We will not be able to market Replagal in the United States unless we resubmit, and obtain the FDA’s approval of, our BLA for Replagal.

In November 2001, our I2S product for the treatment of Hunter syndrome was designated an orphan drug in the United States and in the European Union. If our I2S product is the first such product to receive marketing approval for Hunter syndrome, then our I2S product will be entitled to orphan drug exclusivity and no other application to market the same drug for the same indication may be approved, except in limited circumstances, for a period of up to 10 years in the European Union and for a period of seven years in the United States. If we are not able to maintain this orphan drug exclusivity, our business may be adversely affected.

If we fail to comply with the extensive regulatory requirements to which we and our products are subject, our products could be subject to restrictions or withdrawal from the market and we could be subject to penalties.

The testing, manufacturing, labeling, advertising, promotion, export, and marketing, among other things, of our products, both before and after approval, are subject to extensive regulation by governmental authorities in the United States, Europe and elsewhere throughout the world. Failure to comply with the law administered by the FDA, the EMEA, or other governmental authorities could result in any of the following:

• delay in approving or refusal to approve a product;

• product recall or seizure;

• interruption of production;

• operating restrictions;

• warning letters;

• injunctions;

• criminal prosecutions; and

• unanticipated expenditures.

For example, the European Commission approved Replagal under “exceptional circumstances.” Approval under exceptional circumstances means that the European Commission accepted less-than-complete clinical data because it determined that it would be impractical or unethical for the drug sponsor to carry out full-scale pivotal clinical trials. The European Commission imposes specific obligations on the drug sponsor when granting such approvals. These obligations form part of the formal marketing authorization issued by the European Commission and are reviewed by the CPMP at the intervals specified, minimally on an annual basis. The annual review includes a reassessment of the overall benefit/risk ratio of the product. If the drug sponsor does not fulfill the specific obligations imposed in connection with approval, the European Commission may vary, suspend or withdraw the marketing authorization for the product. The European Commission required us as part of its post-approval requirements for Replagal to conduct additional clinical trials of Replagal. If we

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do not complete these clinical trials on a timely basis, the results of these studies are not satisfactory to the CPMP or we otherwise fail to comply with the conditions imposed on us pursuant to the approval under exceptional circumstances, the European Commission could withdraw or suspend its approval of Replagal. Because Replagal is currently our only commercial product, the withdrawal or suspension of the European Commission’s approval of Replagal could materially adversely affect our business, results of operations and financial condition.

We are required to maintain pharmacovigilance systems for collecting and reporting information concerning suspected adverse reactions to our products. In response to pharmacovigilance reports, regulatory authorities may initiate proceedings to revise the prescribing information for our products or to suspend or revoke our marketing authorizations. Procedural safeguards are often limited, and marketing authorizations can be suspended with little or no advance notice.

Both before and after approval of a product, quality control and manufacturing procedures must conform to current good manufacturing practice regulations, or GMP. Regulatory authorities, including the EMEA and the FDA, periodically inspect manufacturing facilities to assess compliance with GMP. Accordingly, we and our contract manufacturers will need to continue to expend time, monies, and effort in the area of production and quality control to maintain GMP compliance.

In addition to regulations adopted by the EMEA, the FDA, and other foreign regulatory authorities, we are also subject to regulation under the Occupational Safety and Health Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act, and other federal, state, and local regulations.

If we fail to obtain marketing authorizations in a timely manner, our costs associated with clinical trials will increase.

After completion of a clinical trial designed to show safety or effectiveness, we often enroll patients taking our products in maintenance clinical trials in which these patients continue to receive treatment with our products pending approval for marketing authorization in the relevant jurisdiction. We receive no payments for such treatment. The costs associated with maintaining open-ended maintenance clinical trials can be significant. If we fail to obtain marketing authorizations in a timely manner for the product being tested in such trials, our costs associated with these maintenance clinical trials will increase and we may continue to supply the product for use in clinical trials without remuneration to us.

Our research and development efforts may not result in products appropriate for testing in human clinical trials.

We expend significant resources on research and development and preclinical studies of product candidates. However, these efforts may not result in the development of products appropriate for testing in human clinical trials. For example, our research may result in product candidates that are not expected to be effective in treating diseases or may reveal safety concerns with respect to product candidates. We may postpone or terminate research and development of a product candidate or a program at any time for any reason such as the safety or effectiveness of the potential product, allocation of resources or unavailability of qualified research and development personnel.

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Adverse events in the field of gene therapy may impair our ability to enter into collaborative arrangements for our gene therapy programs.

In connection with our restructuring in the first quarter of 2003, we terminated internal development of our gene therapy programs and now are seeking collaborators with which to continue to develop these programs. Adverse events in the field of gene therapy, although not occurring in our clinical trials, may impair our ability to generate value from our gene therapy programs or to enter into collaborations for our programs. In particular, in November 1999, a patient with a rare metabolic disorder died in a gene therapy trial conducted at the University of Pennsylvania. In addition, in October 2002, a French boy developed a leukemia-like disease nearly three years after participating in a gene therapy study as a baby. As a result of these and other events, a number of gene therapy clinical trials have been terminated or suspended in the United States and in other countries, and regulatory authorities have grown increasingly concerned about the safety of gene therapy.

Litigation and intellectual property risks

We are a party to litigation with Kirin-Amgen, Inc. and Amgen Inc. involving Dynepo which could preclude us from manufacturing or selling Dynepo in the United Kingdom and the United States.

In July 1999, we commenced legal proceedings with Aventis in the United Kingdom against Kirin-Amgen, which sought a declaration that a U.K. patent held by Kirin-Amgen will not be infringed by our activities relating to Dynepo and that certain claims of Kirin-Amgen’s U.K. patent are invalid. In April 2001, the High Court of Justice in the United Kingdom ruled that Dynepo infringed one of four claims of the patent asserted by Kirin-Amgen. In July 2002, the Court of Appeals in the United Kingdom reversed the High Court of Justice and ruled that Dynepo did not infringe Kirin-Amgen’s patent. Kirin-Amgen petitioned the House of Lords to hear an appeal from the decision of the Court of Appeals. The House of Lords agreed to hear this appeal during the summer of 2004. Although Kirin-Amgen’s U.K. patent expires in December 2004, if Kirin-Amgen’s appeal to the House of Lords is successful, Kirin-Amgen will have the right to seek a post-expiry injunction against Aventis and us to preclude us from manufacturing or selling Dynepo in the United Kingdom for a period of time after the U.K. patent expires equal to the period during which Kirin-Amgen alleges that we and Aventis infringed the U.K. patent.

In addition, in April 1997, Amgen commenced a patent infringement action against us and Aventis in the United States District Court of Massachusetts. In January 2001, the United States District Court of Massachusetts concluded that Dynepo infringed eight of the 18 claims of five patents that Amgen had asserted. Amgen did not seek and was not awarded monetary damages.

In January 2003, the United States Court of Appeals for the Federal Circuit issued a decision affirming in part and reversing in part the decision of the United States District Court of Massachusetts and remanded the action to the United States District Court of Massachusetts for further proceedings. In particular, the United States Court of Appeals for the Federal Circuit:

• upheld the United States District Court of Massachusetts’ determination of invalidity of one of Amgen’s patents;

• upheld the United States District Court of Massachusetts’ determination that some claims of two other Amgen patents were infringed, but vacated the United States District Court of Massachusetts’ determination that those patents were not invalid; and

• vacated the United States District Court of Massachusetts’ determination that Dynepo infringed some claims of the two remaining Amgen patents, and vacated the United States District Court of Massachusetts’ determination that one of these patents was not invalid.

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As part of the United States Court of Appeals for the Federal Circuit’s ruling, it remanded the case to the United States District Court of Massachusetts and instructed it to reconsider the validity of Amgen’s patents in light of potentially invalidating prior art. The United States District Court of Massachusetts has concluded the remand proceedings and heard oral argument on some of these issues in July 2003. We expect that the United States District Court of Massachusetts will enter a decision on the remanded issues at some point during the first half of 2004. The United States District Court of Massachusetts also recently issued a decision upholding its earlier findings that Amgen successfully rebutted the presumption of prosecution history estoppel with respect to certain of its patents, and therefore, that we and Aventis infringe such patents in light of recent Supreme Court precedents. On remand, we and Aventis presented affirmative defenses with respect to such patents. We, Amgen and Aventis all have the right to appeal the decision of the United States District Court of Massachusetts to the United States Court of Appeals for the Federal Circuit.

We can provide no assurance as to the outcome of either litigation. If we and Aventis are not successful in the Dynepo litigation, we and Aventis would be precluded from making, using and selling Dynepo in the United States and/or in the United Kingdom, as applicable. We are required to reimburse Aventis, which controls the U.S. litigation and is paying the U.S. litigation expenses, for 50% of the expenses incurred in connection with the U.S. litigation from and after March 26, 2004. Aventis is entitled to deduct up to 50% of any royalties that Aventis may otherwise owe us with respect to the sale of Dynepo until Aventis has recouped the full amount of our share of the U.S. litigation expenses. We have the right to control the U.K. litigation and any other litigation that might arise outside of the United States and are responsible for all litigation expenses incurred in connection with such litigation from and after March 26, 2004.

We are a party to a shareholder lawsuit and a derivative action regarding the adequacy of our public disclosure which could have a material adverse affect on our business, results of operations and financial condition.

In January and February 2003, various parties filed purported class action lawsuits against us and Richard Selden, our former Chief Executive Officer, in the United States District Court for the District of Massachusetts. The complaints generally allege securities fraud during the period from January 2001 through January 2003. Each of the complaints asserts claims under Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act, and alleges that we and our officers made false and misleading statements and failed to disclose material information concerning the status and progress for obtaining United States marketing approval of our Replagal product to treat Fabry disease during that period.

In March 2003, various plaintiffs filed motions to consolidate, to appoint lead plaintiff, and to approve plaintiff’s selections of lead plaintiffs’ counsel. In April 2003, various plaintiffs filed a Joint Stipulation and Proposed Order of Lead Plaintiff Applicants to Consolidate Actions, To Appoint Lead Plaintiffs and to Approve Lead Plaintiffs’ Selection of Lead Counsel, Executive Committee and Liaison Counsel. In April 2003, the Court endorsed the Proposed Order, thereby consolidating the various matters under one matter: In re Transkaryotic Therapies, Inc., Securities Litigation, C.A. No. 03-10165-RWZ.

In July 2003, the plaintiffs filed a Consolidated and Amended Class Action Complaint, which we refer to as the Amended Complaint, against us; Dr. Selden; Daniel Geffken, our former Chief Financial Officer; Walter Gilbert, Jonathan S. Leff, Rodman W. Moorhead, III, and Wayne P. Yetter, members of our board of directors; William R. Miller and James E. Thomas, former members of our board of directors; and SG Cowen Securities Corporation, Deutsche Bank Securities Inc., Pacific Growth Equities, Inc. and Leerink Swann & Company, underwriters of our common stock in prior public offerings.

The Amended Complaint alleges securities fraud during the period from January 4, 2001 through January 10, 2003. The Amended Complaint alleges that the defendants made false and misleading

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statements and failed to disclose material information concerning the status and progress for obtaining United States marketing approval of Replagal during that period. The Amended Complaint asserts claims against each of the defendants under Section 11 of the Securities Act of 1933 and against Dr. Selden under Section 15 of the Securities Act; against SG Cowen Securities Corporation, Deutsche Bank Securities, Pacific Growth Equities, Inc., and Leerink Swann & Company under Section 12(a)(2) of the Securities Act; against Dr. Selden and us under Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder; and against Dr. Selden under Section 20(a) of the Exchange Act. The plaintiffs seek equitable and monetary relief, an unspecified amount of damages, with interest, and attorney’s fees and costs.

In September 2003, we filed a motion to dismiss the Amended Complaint. A hearing of the motion occurred in December 2003. A class has not been certified, and the court has not made any decision on the motion.

In April 2003, South Shore Gastrointerology UA 6/6/1980 FBO Harold Jacob, and Nancy R. Jacob Ttee filed a Shareholder Derivative Complaint against Dr. Selden; against the following members of our board of directors: Jonathan S. Leff, Walter Gilbert, Wayne P. Yetter, Rodman W. Moorhead III; against the following former members of our board of directors: James E. Thomas, and William Miller; and against us as nominal defendant, in Middlesex Superior Court in the Commonwealth of Massachusetts, Civil Action No. 03-1669. On May 29, 2003, the parties moved to transfer venue to the Business Litigation Session in Suffolk Superior Court in the Commonwealth of Massachusetts. The parties’ motion was allowed, and in June 2003 the matter was accepted into the Business Litigation Session as Civil Action No. 03-02630-BLS.

The complaint alleges that the individual defendants breached fiduciary duties owed to us and our shareholders by disseminating materially false and misleading statements to the market and causing or allowing us to conduct our business in an unsafe, imprudent and unlawful manner. The complaint purports to assert derivative claims against the individual defendants for breach of fiduciary duty, and to assert a claim for contribution and indemnification on behalf of us for any liability we incur as a result of the individual defendants’ alleged misconduct. The complaint seeks declaratory, equitable and monetary relief, an unspecified amount of damages, with interest, and attorney’s fees and costs. In August 2003, the plaintiff filed its Verified Amended Derivative Complaint, which we refer to as the Amended Derivative Complaint. The Amended Derivative Complaint alleges that the individual defendants breached fiduciary duties owed to us and our stockholders by causing us to issue materially false and misleading statements to the public, by signing our Form 10-Ks for the years 2000 and 2001 and by signing a registration statement. The Amended Derivative Complaint also alleges that defendant Dr. Selden sold our stock while in possession of material non-public information. The plaintiffs seek declaratory, equitable and monetary relief, an unspecified amount of damages, with interest, and attorney’s fees and costs.

In September 2003, we served a motion to dismiss the Amended Derivative Complaint. A hearing of the motion was held in January 2004, and the court has not made any decision on the motion.

As of March 31, 2004, we had spent approximately $1.1 million related to these lawsuits. We expect that the costs related to these suits will be significant. We can provide no assurance as to the outcome of any of these suits. If we are not successful in defending these actions, our business, results of operations and financial condition could be materially adversely affected. In addition, even if we are successful, the defense of these actions may divert the attention of our management and other resources that would otherwise be engaged in running our business.

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The SEC is investigating us regarding our public disclosures and filings, as well as transactions in our securities, which could have a material adverse effect on our business, results of operations and financial condition.

In May 2003, we received a copy of a formal order of investigation by the SEC. The order of investigation relates to our disclosures and public filings with regard to Replagal and the status of the FDA’s approval process for Replagal, as well as transactions in our securities. We are cooperating fully and will continue to cooperate fully with the SEC in the investigation. As of March 31, 2004, we had spent approximately $1.4 million related to this matter.

If this investigation results in a determination that we have failed to properly disclose information relating to Replagal and the status of the FDA’s approval process for Replagal or that there were improper transactions in our securities, we could be subject to substantial fines or penalties and other sanctions. An adverse determination could have a material adverse effect on our business, results of operations and financial condition. However, at this time, we cannot accurately predict the outcome of this proceeding. In addition, even if we are successful, this investigation may divert the attention of our management and other resources that would otherwise be engaged in running our business.

We may become involved in additional and expensive patent litigation or other proceedings, which could result in our incurring substantial costs and expenses or substantial liability for damages or require us to stop our development and commercialization efforts.

The biotechnology industry has been characterized by significant litigation, and other proceedings regarding patents, patent applications, and other intellectual property rights. We may become a party to additional patent litigation beyond the Amgen litigation described above and to other proceedings with respect to our products and technologies.

An adverse outcome in any patent litigation or other proceeding involving patents could subject us to significant liabilities to third parties and require us to cease using the technology or product that is at issue or to license the technology or product from third parties. We may not be able to obtain any required licenses on commercially acceptable terms, or at all.

The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. In addition, any such litigation or proceeding will divert management’s attention and resources. Some of our competitors may be able to sustain these costs more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to develop, manufacture, and market products, form collaborations, and compete in the marketplace.

If we are unable to obtain and maintain patent protection for our discoveries, the value of our technology and products may be adversely affected.

Our success will depend in large part on our ability to obtain and maintain patent protection for our processes and products in the United States and other countries. The patent situation in the field of biotechnology generally is highly uncertain and involves complex legal, scientific and factual questions. We may not be issued patents relating to our technology or products. Even if issued, patents may be challenged, invalidated, or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length of term of patent protection we may have for our products. Changes in patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection.

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Our patents also may not afford us protection against competitors with similar technology. Because some patent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing or are maintained in secrecy until patents issue from those patent applications, third parties may have filed or maintained patent applications for technology used by us or covered by our pending patent applications without our being aware of these applications. For this reason, we cannot be certain that we were the first to make the inventions claimed in issued patents or pending patent applications, or that we were the first to file for protection of the inventions set forth in these patent applications. As a result, third parties could assert claims against us concerning our gene activation or other technology.

Our overall patent strategy with respect to our gene activation technology and our protein products made using our gene activation technology is to attempt to obtain patent coverage for gene activation of the gene that encodes the product, the composition of matter of the product, the method of making the product, cells or cell lines capable of expressing the product, and the genetic constructs used to obtain the product. We have been unable to obtain patent claims in all categories with respect to all of our Gene-Activated protein products. Nonetheless, while our patent portfolio may afford us protection against competitors with similar technology and competitors which attempt to make products in human cell or cell lines, it may not afford us protection against all competitors, such as those who make the same products in mouse, rodent, bacterial or yeast cells.

The expiration dates for the patents and patent applications covering our principal products are as follows:

• Replagal—The principal issued patents and patents that may issue from pending patent applications covering Replagal expire or will expire in the United States in 2017 and in Europe at various dates from 2012 to 2017.

• I2S—The principal issued patents and patents that may issue from pending patent applications covering I2S expire or will expire in the United States at various dates from 2011 to 2016. There are no European patents or pending patent applications covering I2S.

• GA-GCB—The principal issued patents and patents that may issue from pending patent applications covering GA-GCB expire or will expire in the United States at various dates from 2014 to 2017 and in Europe in 2012.

• Dynepo—The principal issued patents and patents that may issue from pending patent applications covering Dynepo expire or will expire in the United States at various dates from 2011 to 2018 and in Europe in 2012.

Third parties may own or control patents or patent applications and require us to seek licenses, which would increase our development and commercialization costs, or prevent us from developing or marketing our products or technologies.

We may not hold proprietary rights to certain product patents, process patents, and use patents related to our products or their methods of manufacture. In some cases, these patents may be owned or controlled by third parties. Therefore, in some cases, in order to develop, manufacture, sell or import some of our existing and proposed products or processes, we may choose to seek, or be required to seek, licenses under third party patents or those patents that might issue from patent applications. In such event, we would be required to pay license fees or royalties or both to the licensor. If licenses are not available to us on acceptable terms, we or our collaborators may not be able to develop, manufacture, sell, use or import the affected products or processes.

For example, we are aware of third party patents and patent applications that relate to gene activation. We believe that our gene activation technology does not infringe any third party patents

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that we believe to be valid. We use our gene activation technology to manufacture Replagal, Dynepo, GA-GCB and other products. If the use of our gene activation technology were found to infringe a valid third party patent, we could be precluded from manufacturing and selling such products and our business, results of operations and financial condition would be materially adversely affected.

If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products will be adversely affected.

We rely upon unpatented proprietary technology, processes, and know-how. We seek to protect this information in part by confidentiality agreements with our employees, consultants, and other third party contractors. These agreements may be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently developed by competitors.

If we fail to comply with our obligations under the agreements under which we license commercialization rights to products or technology from third parties, we could lose license rights.

We are a party to over 20 patent licenses under which we have acquired rights to proprietary technology of third parties, including licenses to patents related to I2S and Dynepo, and expect to enter into additional patent licenses in the future. These licenses impose various commercialization, sublicensing, royalty, insurance, and other obligations on us. If we fail to comply with these obligations, the licensor may have the right to terminate the license and we could lose our license to use the acquired rights. If these rights are lost, we may not be able to market products that were covered by the license.

Business risks

Our revenue from product sales is dependent on the commercial success of Replagal.

Replagal is our only commercial product. We expect that Replagal will account for all of our product sales until at least the fourth quarter of 2005. The commercial success of Replagal will depend on its acceptance by physicians, patients and other key decision-makers for the treatment of Fabry disease. The commercial success of Replagal will also depend in part upon Replagal receiving marketing approval in Japan and other countries. We have ceased our efforts to seek the approval of Replagal in the United States. If Replagal is not commercially successful, our business, results of operations and financial condition will be materially adversely affected.

Our revenue from sales of Replagal and our cash held by TKT Europe are subject to foreign currency fluctuations.

We have exposure to currency risk for Replagal sales in Europe. Country-by-country pricing of Replagal was initially established as the local currency equivalent of between approximately $165,000 and $175,000 per patient per year for an average patient weighing 70 kilograms. The price generally remains fixed in the local currencies and varies in United States dollars with exchange rate fluctuations. Since the approval of Replagal in August 2001, the United States dollar has weakened substantially versus most European currencies, including the Euro, which has resulted in increased revenues for us from sales of Replagal. If the United States dollar were to strengthen versus these currencies, this currency fluctuation would adversely impact our Replagal product sales. Foreign currency fluctuations favorably contributed $2.4 million to product sales for the three months ended March 31, 2004 as compared to first quarter of 2003 and $9.4 million to product sales for the year ended December 31, 2003 as compared to the same period of 2002.

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We also have exposure to currency risk for cash and cash equivalents held by TKT Europe, which are primarily denominated in Swedish Krona, British Pound and Euro. Any change in the value of the U.S. dollar as compared to these foreign currencies may have an adverse effect on our liquidity. For example, a hypothetical 10 percent strengthening of the U.S. dollar relative to these foreign currencies would result in an approximate $6.8 million decrease in our cash and marketable securities held by TKT Europe as of March 31, 2004.

The continuity of our sales of Replagal in Europe may be affected by our expected purchase of the holdings of the minority stockholders of TKT Europe.

In April 2000, we established an 80%-owned subsidiary, TKT Europe, for the purpose of marketing, selling and distributing Replagal in Europe. Under the stockholders’ agreement for TKT Europe, we agreed that the holders of the remaining 20% interest in TKT Europe would, with specified exceptions, manage the day-to-day operations of TKT Europe. As a result, our ability to successfully market and sell Replagal in Europe has been dependent on the efforts of the minority stockholders of TKT Europe.

Under the stockholders’ agreement for TKT Europe, we are entitled to purchase the minority stockholders’ 20% ownership interest in TKT Europe beginning in September 2004 for a price determined in accordance with a formula. Should we not exercise that right, the minority stockholders of TKT Europe can require us to purchase the minority stockholders’ ownership interest sixty days thereafter. We currently expect that we will purchase the minority stockholders’ interest in TKT Europe for between $55 million and $65 million based on our current estimates for sales and expenses.

If we purchase the minority stockholders’ interest in TKT Europe or if the minority stockholders exercise their contractual right to require us to purchase their interest, our ability to successfully market and sell Replagal in Europe thereafter will depend in part on our ability to integrate the functions of TKT Europe into our infrastructure. In addition, if we cannot retain existing marketing and sales personnel of TKT Europe, it is likely that the current relationships that TKT Europe maintains with patients, physicians and other key decision-makers for the treatment of Fabry disease will be affected, which could adversely affect our business and results of operations in Europe, including our sales of Replagal, and could result in the loss of sales and market share for Replagal in Europe.

We face significant competition, which may result in others discovering, developing or commercializing products before, or more successfully, than we do.

The biotechnology industry is highly competitive and characterized by rapid and significant technological change. Our competitors include pharmaceutical companies, biotechnology firms, universities, and other research institutions. Many of these competitors have substantially greater financial and other resources than we do and are conducting extensive research and development activities on technologies and products similar to, or competitive with, ours.

We may be unable to develop technologies and products that are more clinically efficacious or cost-effective than products developed by our competitors. Even if we obtain marketing approval for our product candidates, many of our competitors have more extensive and established sales, marketing, and distribution capabilities than we do. Litigation with third parties, such as our litigation with Amgen, could delay our time to market or preclude us from reaching the market for certain products and enable our competitors to more quickly and effectively penetrate certain markets.

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Therapeutics for the treatment of rare genetic diseases

We believe that the primary competition with respect to our products for the treatment of rare genetic diseases is from biotechnology and smaller pharmaceutical companies. Competitors include Actelion Ltd., BioMarin Pharmaceutical Inc., and Genzyme. The markets for some of the potential therapeutics for rare genetic diseases caused by protein deficiencies are quite small. As a result, if competitive products exist, we may not be able to successfully commercialize our products.

Our primary competition with respect to Replagal is Genzyme. Replagal and Fabrazyme were each granted marketing authorization in the European Union and were also granted co-exclusive orphan drug status in the European Union for up to 10 years. Fabrazyme has received marketing authorization and orphan drug exclusivity in the United States.

We believe that our primary competition with respect to our GA-GCB product for the treatment of Gaucher disease will be Genzyme’s product for the treatment of Gaucher disease, Cerezyme.

Gene-Activated versions of proteins that would compete with currently-marketed proteins

We have developed several Gene-Activated protein products that would compete with proteins that are currently being marketed by third parties. For instance, in the case of Dynepo, competing products are marketed by Amgen, Johnson & Johnson, F. Hoffmann-La Roche Ltd. (Boehringer Mannheim GmbH), Sankyo Company Ltd., Chugai Pharmaceutical Co., Ltd., and the pharmaceutical division of Kirin Brewery Co., Ltd. in Japan. Additional competitors to Dynepo may emerge following the expiration of Amgen’s European patents in December 2004.

Many of the products against which our Gene-Activated protein products, such as Dynepo and GA-GCB, would compete have well-known brand names, have been promoted extensively, and have achieved market acceptance by third party payors, hospitals, physicians, and patients. In addition, many of the companies that produce these protein products have patents covering techniques used to produce these products, which have often served as effective barriers to entry in the therapeutic proteins market. As with Amgen and its erythropoietin product, these companies may seek to block our entry into the market by asserting that our Gene-Activated protein products infringe their patents. Many of these companies are also seeking to develop and commercialize new or potentially improved versions of their proteins.

Gene therapy

Our gene therapy system will have to compete with other gene therapy systems, as well as with conventional methods of treating the disease and conditions targeted. Although no gene therapy product is currently marketed, a number of companies, including major biotechnology companies, pharmaceutical companies and development stage companies, are actively involved in this field.

The commercial success of our products will depend on the degree that the market is receptive to our products upon introduction.

The commercial success of any of our products for which we obtain marketing approval from the European Commission, the FDA, and other regulatory authorities will depend upon their acceptance by patients, the medical community and third party payors as clinically effective, safe and cost-effective. It may be difficult for us to achieve market acceptance of our products.

Other factors that we believe will materially affect market acceptance of our products include:

• the timing of the receipt of marketing approvals;

• the countries in which such approvals are obtained; and

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• the safety, efficacy, convenience, and cost-effectiveness of the product as compared to competitive products.

If we cannot achieve market acceptance for our products, our business, results of operations and financial condition will be adversely affected.

We have limited manufacturing experience and may not be able to develop the experience and capabilities needed to manufacture our products in compliance with regulatory requirements. If we cannot develop this experience or capabilities, we may not be able to manufacture our products, the manufacture of our products may be subject to significant delays or we may incur significant costs.

The manufacture of proteins is complicated and technical. We have limited manufacturing experience. In order to continue to develop products, apply for regulatory approvals, and commercialize our products, we will need to develop, contract for, or otherwise arrange for the necessary manufacturing capabilities. We have manufactured, and plan to continue in the future to manufacture, the bulk drug substance for Replagal, I2S and GA-GCB for preclinical testing, clinical trials, and commercial sale. We intend to engage third party contract manufacturers to manufacture Dynepo for us.

Any manufacturing of our products must comply with GMP as required by the countries in which we intend to sell our products. Before approving an application for marketing authorization for a product, the FDA, the European Commission, or any other equivalent foreign regulatory agency will inspect the facilities at which the product is manufactured. If we or our third party manufacturers do not comply with applicable GMP, such regulatory agency may refuse to approve our application for marketing authorization. Once the regulatory agency approves a product, we or our third party manufacturers must continue to comply with GMP. If we or our third party manufacturers fail to maintain compliance with GMP, adverse consequences can result, including suspension or withdrawal of an approved product from the market, operating restrictions, and the imposition of civil and criminal penalties.

We are developing new manufacturing processes to produce bulk drug substance for Replagal. In the European Union, we will need to obtain regulatory approval of an amendment to our MAA describing these processes for Replagal before we can sell Replagal manufactured using these processes. If we cannot obtain this regulatory approval, we will not be able to sell Replagal manufactured using these processes.

In some of our manufacturing processes, we use bovine-derived serum sourced from Canada and the United States. The discovery of cattle in both Canada and the United States with bovine spongiform encephalopathy, or mad cow disease, could cause the regulatory agencies in some countries to impose restrictions on our products, or prohibit us from using our products at all in such countries.

We are incurring significant costs to expand and renovate our manufacturing facility. Any delays in completing the expansion and renovation of our facility and bringing the facility into compliance with GMP could adversely affect our ability to supply the bulk drug substance needed to manufacture our products other than Dynepo.

We are investing substantial funds to expand the capacity of our manufacturing facility in Cambridge, Massachusetts and to configure the facility for the production at a commercial scale of additional products. In anticipation of this expansion and renovation, in the third quarter of 2003, we ceased all manufacturing operations at our manufacturing facility, including the manufacture of Replagal. We expect to complete this expansion and renovation in the first half of 2004 and recommence manufacturing operations in the second half of 2004. Following completion of this expansion and

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renovation, our manufacturing facility will have to comply with GMP before we can ship bulk drug substance made at our manufacturing facility for commercial sale and clinical trials. If we are unable to successfully complete this expansion and renovation in a timely manner or to bring the facility into compliance with GMP, our ability to supply our products for commercial sale and clinical use, including Replagal, I2S and GA-GCB, could be interrupted and our sales of Replagal and the timing of our I2S or GA-GCB clinical trials could be adversely affected.

We depend on third party contract manufacturers for various aspects of the manufacture of Replagal, I2S and GA-GCB, including the preparation and packaging of TKT-manufactured bulk drug substance into finished product, and plan to depend entirely on third party contract manufacturers for the manufacture of Dynepo. If these manufacturers fail to meet our requirements or applicable regulatory requirements, our product development and commercialization efforts may be materially harmed.

To the extent that we are a party to manufacturing arrangements with third parties, we are dependent upon these third parties to perform their obligations in a timely manner and in accordance with applicable government regulations. For instance, other than with respect to the manufacturing of the bulk drug substance for Replagal, I2S, and GA-GCB, we rely on contract manufacturing arrangements with third parties for all aspects of the manufacture of our products, including the preparation and packaging of TKT-manufactured bulk drug substance into finished product. Each of these manufacturing arrangements relates to only some aspects of the manufacturing process. In the event that any one of these manufacturers fails to or is unable to comply with its obligations under its manufacturing, agreement with us, and if the manufacturer’s failure materially delays the ultimate production of Replagal, I2S, or GA-GCB or adversely affects our inventory levels, our sales of Replagal or the timing of our I2S or GA-GCB clinical trials could be adversely affected.

Before we can market and sell Dynepo in the European Union, we will need to establish manufacturing capabilities for Dynepo outside of the United States. Specifically, we will need to enter into arrangements with contract manufacturers, work with the contract manufacturers to set up and validate manufacturing processes and obtain the approval from the European Commission of an amendment to the MAA for Dynepo reflecting the new manufacturing sites. If we cannot establish contract manufacturing arrangements on favorable terms or at all, successfully set up and validate manufacturing processes or obtain the approval of the European Commission, we will not be able to sell Dynepo in the European Union when planned, which could result in Dynepo being subject to additional competition and which would adversely affect our cash resources.

The value of the inventory under the control of our third party contract manufacturers far exceeds the amount of liability such third parties are willing to assume for their negligence. In the event that inventory in the possession of one of our third party manufacturers is damaged, we could face significant financial losses and we could also experience an interruption in supply which could have a significant adverse affect on our sales.

There are a limited number of third party manufacturers capable of manufacturing our protein products with a limited amount of production capacity. As a result, we may experience difficulty in obtaining adequate manufacturing capacity for our needs. If we are unable to obtain or maintain contract manufacturing of our products, or to do so on commercially reasonable terms, we may not be able to complete development of our products or market them.

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If we fail to manage our inventory correctly, or our inventory is destroyed, damaged or expires, we could experience supply shortages and significant costs to build inventory or a significant build-up of high-cost products and raw materials, which could cause us to experience cash flow difficulties as well as financial losses.

Manufacture of proteins, including our products and potential products, is expensive and requires lengthy production cycle times. We build inventory of both bulk drug substance and of finished product in order to ensure the adequate supply to patients of our products and potential products, including Replagal and I2S. Accordingly, we have significant capital invested in inventory because of the high cost of manufacturing protein products, including Replagal and I2S. In the event that any of our facilities containing inventory are damaged, the inventory at the facility could be destroyed or damaged. We may not be able to produce or have produced replacement inventory on a timely basis or at all. We also have limited experience in managing our supply for Replagal and our other potential products. If we fail to keep an adequate inventory of our products, it is possible that patients could miss treatments, which could have an adverse effect on our ability to sell our products and on our clinical trials. Conversely, if we are unable to sell our high-cost inventory in a timely manner, or if our high-cost inventory were to be destroyed or expire, we could experience cash flow difficulties as well as financial losses.

Some of the raw materials used to manufacture our products are expensive and are available from a small number of suppliers. If we fail to keep an adequate inventory of our raw materials, it is possible that we would be unable to manufacture our products in a timely manner. Conversely, if we are unable to use our high-cost raw materials, or if our high-cost raw materials were to be destroyed or expire, we could experience cash flow difficulties as well as financial losses.

If we fail to obtain reimbursement, or an adequate level of reimbursement, by third party payors in a timely manner for our products, or if we are unable to collect payment in a timely manner, we may not have commercially viable markets for our products.

In certain countries, particularly the countries of the European Union, the pricing of prescription pharmaceuticals and the level of reimbursement are subject to governmental control. In some countries, it can take an extended period of time to establish and obtain reimbursement, and reimbursement approval may be required at the individual patient level, which can lead to further delays. In addition, in some countries such as Italy, Spain and Belgium, it can take an extended period of time to collect payment even after reimbursement has been established.

In the United States and elsewhere, the availability of reimbursement by governmental and other third party payors affects the market for any pharmaceutical product. These third party payors continually attempt to contain or reduce the costs of health care by challenging the prices charged for medical products and services. For example, in Germany, the reimbursement authority unilaterally reduced the price that it would reimburse for pharmaceutical products, including Replagal, by six percent in 2003 and an additional 10 percent in 2004. Governmental and reimbursement authorities or third party payors in other countries may attempt to control costs by limiting access to pharmaceutical products such as Replagal and the other products we are developing or by narrowing the class of patients for which a pharmaceutical product such as Replagal or the other products we are developing may be prescribed. If we are not able to obtain pricing and reimbursement at satisfactory levels for our products that receive marketing approval, our revenues and results of operations will be adversely affected, possibly materially.

We expect that the prices for many of our products, when commercialized, including in particular our products for the treatment of rare genetic diseases, may be high compared to other pharmaceutical products. For example, we have established pricing and reimbursement for substantially all patients receiving Replagal in the European Union. Country-by-country pricing was initially established as the

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local currency equivalent of between approximately $165,000 and $175,000 per patient per year for an average patient weighing 70 kilograms. The price generally remains fixed in the local currencies and varies in United States dollars with exchange rate fluctuations. We may encounter particular difficulty in obtaining satisfactory pricing and reimbursement for products for which we seek a high price.

We also may experience pricing pressure with respect to Replagal and other products for which we may obtain marketing approval due to the trend toward managed health care, the increasing influence of health maintenance organizations and legislative proposals. We may not be able to sell our products profitably if reimbursement is unavailable or is limited in scope or amount.

We have limited sales and marketing experience and capabilities and will need to develop this expertise or depend on third parties to successfully sell and market our products on our behalf to generate revenue.

Except for TKT Europe with respect to the marketing and selling of Replagal, we have limited sales and marketing experience and capabilities, and limited resources to devote to sales and marketing activities. In order to market our products, including Replagal and Dynepo, we will need to develop this experience and these capabilities or rely upon third parties to perform these functions. If we rely on third parties to sell, market, or distribute our products, our success will be dependent upon the efforts of these third parties in performing these functions. In many instances, we may have little or no control over the activities of these third parties in selling, marketing, and distributing our products. If we choose to conduct these activities directly, as we plan to do with respect to some of our potential products and with Replagal following our expected purchase of the minority stockholders’ interests in TKT Europe, we may not be able to recruit and maintain sales and marketing personnel, which would adversely affect our sales efforts in Europe.

Competition for technical, commercial and administrative personnel is intense in our industry and we may not be able to sustain our operations or grow if we are unable to attract and retain qualified personnel.

While we do not feel that any single individual is indispensable, our success is highly dependent on the retention of principal members of our technical, commercial, and administrative staff.

Our future growth will require hiring a significant number of qualified technical, commercial and administrative personnel. Accordingly, recruiting and retaining such personnel in the future will be critical to our success. There is intense competition from other companies and research and academic institutions for qualified personnel in the areas of our activities. If we are not able to continue to attract and retain, on acceptable terms, the qualified personnel necessary for the continued development of our business, we may not be able to sustain our operations or grow.

We depend on our collaborators to develop, conduct clinical trials of, obtain regulatory approvals for, and manufacture, distribute, market and sell products on our behalf and their efforts may not be scientifically or commercially successful.

We are parties to collaborative agreements with third parties relating to certain of our principal products. We are relying on Genzyme to develop and commercialize I2S in Japan and certain other countries in Asia; on Aventis to develop, obtain regulatory approvals for, and manufacture, market, and sell Dynepo in the United States; and Sumitomo to develop and commercialize Replagal in Japan, Korea, China and Taiwan. We also use third party distributors to distribute Replagal in many areas of the world including Australia, Canada, Europe, and Israel. Our collaborators may not devote the resources necessary or may otherwise be unable or unwilling to complete development and commercialization of these potential products. Our existing collaborations are subject to termination

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without cause on short notice under specified circumstances. In some cases, we may not receive payments contemplated in the agreements with our collaborators if our collaborators fail to achieve certain regulatory and commercial milestones.

Our existing collaborations and any future collaborative arrangements with third parties may not be scientifically or commercially successful. Factors that may affect the success of our collaborations include the following:

• reductions in marketing or sales efforts or a discontinuation of marketing or sales of our products by our collaborators would reduce our revenues;

• under our collaboration agreements, we cannot conduct specified types of research and development and marketing and sales activities in the field that is the subject of the collaboration. These agreements have the effect of limiting the areas of research and development that we may pursue, either alone or in cooperation with third parties;

• our collaborators may underfund or not commit sufficient resources to the testing, marketing, distribution or other development of our products;

• our collaborators may be pursuing alternative technologies or developing alternative products, either on their own or in collaboration with others, that may be competitive with the product as to which they are collaborating with us or that could affect our collaborators’ commitment to the collaboration with us;

• our collaborators may not properly maintain or defend our intellectual property rights or they may utilize our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our proprietary information or expose us to potential liability;

• our collaborators may terminate their collaborations with us, as Aventis has done with respect to our GA-GCSF product, which could make it difficult for us to attract new collaborators or adversely affect the perception of us in the business and financial communities; and

• our collaborators may pursue higher priority programs or change the focus of their development programs, which could affect the collaborator’s commitment to us.

If third parties on whom we rely for clinical trials do not perform as contractually required or as we expect, we may not be able to obtain regulatory approval for or commercialize our product candidates, and our business may suffer.

We do not have the ability to independently conduct the clinical trials required to obtain regulatory approval for our products. We depend on independent clinical investigators, contract research organizations and other third party service providers to conduct the clinical trials of our product candidates and expect to continue to do so. Although we rely heavily on these parties for successful execution of our clinical trials, we do not control many aspects of their activities. For example, the investigators are not our employees. However, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Third parties may not complete activities on schedule, or may not conduct our clinical trials in accordance with regulatory requirements or our stated protocols. The failure of these third parties to carry out their obligations could delay or prevent the development, approval and commercialization of our product candidates.

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A significant portion of our revenues are concentrated among a limited number of significant customers. The loss of a significant customer could lower our revenues and adversely affect our business, results of operations and financial condition.

We have three significant customers who accounted for 18%, 12% and 12%, respectively, of our product sales in 2003. The same customers accounted for 8%, 6% and 22% of our product sales in 2002. The loss of any significant customer may significantly lower our revenues and adversely affect our business, results of operations and financial conditions.

We may be exposed to product liability claims and may not be able to obtain adequate product liability insurance. If we cannot successfully defend ourselves against such claims, we may incur substantial liabilities and may be required to limit commercialization of our products.

Our business exposes us to the risk of product liability claims that is inherent in the manufacturing, testing, and marketing of human therapeutic products. We maintain clinical trial liability insurance and product liability insurance in amounts that we believe to be reasonable. This insurance is subject to deductibles and coverage limitations. We may not be able to obtain additional insurance or maintain insurance on acceptable terms or at all. Moreover, any insurance that we do obtain may not provide adequate protection against potential liabilities. If we are unable to obtain insurance at acceptable cost or otherwise protect against potential product liability claims, we will be exposed to significant liabilities, which may materially and adversely affect our business and financial position. These liabilities could prevent or interfere with our product commercialization efforts.

22

Item 7. Financial Statements and Exhibits

Exhibit No.	Description
1.1	Underwriting Agreement, dated April 28, 2004, between the Company and JP Morgan Securities Inc.
4.1	Form of Supplemental Indenture, to be dated May 4, 2004, between the Company and The Bank of New York, as Trustee.
4.2	Form of Senior Convertible Note (contained in Exhibit 4.1).
5.1	Opinion of Hale and Dorr LLP.
23.1	Consent of Hale and Dorr LLP (contained in Exhibit 5.1).
99.1	Press release issued by Transkaryotic Therapies, Inc. on April 28, 2004.

26

SIGNATURE

     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 hereunto duly authorized.

Date: April 29, 2004	TRANSKARYOTIC THERAPIES, INC.
	By:	/s/Gregory D. Perry
		Gregory D. Perry
		Vice President and
		Chief Financial Officer

27

EXHIBIT INDEX

Exhibit No.	Description
1.1	Underwriting Agreement, dated April 28, 2004, between the Company and JP Morgan Securities Inc.
4.1	Form of Supplemental Indenture, to be dated May 4, 2004, between the Company and The Bank of New York, as Trustee.
4.2	Form of Senior Convertible Note (contained in Exhibit 4.1).
5.1	Opinion of Hale and Dorr LLP.
23.1	Consent of Hale and Dorr LLP (contained in Exhibit 5.1).
99.1	Press release issued by Transkaryotic Therapies, Inc. on April 28, 2004.

28

EX-1.1

                                                                     EXHIBIT 1.1

                                  $90,000,000

                         Transkaryotic Therapies, Inc.

                1.25% Convertible Senior Notes due May 15, 2011

                             Underwriting Agreement

                                                                  April 28, 2004

J.P. Morgan Securities Inc.
SG Cowen & Co., LLC
Pacific Growth Equities, LLC
RBC Capital Markets Corporation
c/o      J.P. Morgan Securities Inc.
         277 Park Avenue
         9th Floor
         New York, New York 10172

Ladies and Gentlemen:

         Transkaryotic Therapies, Inc., a Delaware corporation (the "COMPANY"),
proposes to issue and sell to the several Underwriters listed in Schedule I
hereto (the "UNDERWRITERS"), for whom J.P. Morgan Securities Inc. is acting as
representative (the "REPRESENTATIVE"), $90,000,000 aggregate principal amount of
its 1.25% Convertible Senior Notes due 2011 (the "FIRM SECURITIES") to be issued
pursuant to the provisions of an Indenture dated as of May 4, 2004 (the "BASE
INDENTURE") between the Company and The Bank of New York, as Trustee (the
"TRUSTEE"), and a first supplemental indenture dated as of May 4, 2004 (the
"FIRST SUPPLEMENTAL INDENTURE", together with the Base Indenture, the
"INDENTURE") between the Company and the Trustee. The Company also proposes to
issue and sell to the Underwriters not more than an additional $10,000,000
aggregate principal amount of its 1.25% Convertible Senior Notes due 2011 (the
"ADDITIONAL SECURITIES") if and to the extent that the Underwriters shall have
determined to exercise the right to purchase such 1.25% Convertible Senior Notes
due 2011 granted to the Underwriters in Section 1 hereof. The Firm Securities
and the Additional Securities are hereinafter collectively referred to as the
"SECURITIES". The Securities will be convertible into shares (the "UNDERLYING
SECURITIES") of common stock of the Company, par value $.01 per share (the
"COMMON STOCK").

         The Company hereby confirms its agreement with the several Underwriters
concerning the purchase and sale of the Securities, as follows:

         1. Registration Statement. The Company has (i) prepared and filed with
the Securities and Exchange Commission (the "COMMISSION") under the Securities
Act of 1933, as amended,

                                       1


and the rules and regulations of the Commission thereunder (collectively, the
"SECURITIES ACT"), a registration statement on Form S-3 (File No. 333-51772) (as
amended and supplemented to the date of this Agreement, the "REGISTRATION
STATEMENT", which term shall include the information, if any, deemed pursuant to
Rule 430A under the Securities Act to be part of the registration statement at
the time of its effectiveness) including a prospectus, covering the registration
of certain securities of the Company, including the Securities and (ii) filed
with, or transmitted for filing to, or shall promptly hereafter file with or
transmit for filing to, the Commission a prospectus supplement specifically
relating to the Securities (the "PROSPECTUS SUPPLEMENT") pursuant to Rule 424(a)
under the Securities Act. The term "BASIC PROSPECTUS" means the prospectus
included in the Registration Statement at the time of its effectiveness. The
term "PROSPECTUS" means the Basic Prospectus together with the Prospectus
Supplement. The term "PRELIMINARY PROSPECTUS" means a preliminary prospectus
supplement specifically relating to the Securities, together with the Basic
Prospectus. Any reference in this Agreement to the Registration Statement, any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and include
the documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the Securities Act, as of the effective date of the Registration Statement
or the date of such Preliminary Prospectus or the Prospectus, as the case may be
and any reference to "amend", "amendment" or "supplement" with respect to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any documents filed after such date under the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission thereunder (collectively, the "EXCHANGE ACT") that are deemed to
be incorporated by reference therein, and shall not be deemed to refer to the
prospectus supplements filed with the Commission on June 26, 2001, December 13,
2001 and December 20, 2001.

         2. Purchase, Sale and Delivery of the Securities. (a) The Company
agrees to issue and sell the Firm Securities to the several Underwriters as
hereinafter provided, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees to purchase, severally and not jointly, from the
Company the Firm Securities at a purchase price of 97.0% of the principal amount
thereof (the "PURCHASE PRICE"), in the respective principal amount of Securities
set forth opposite such Underwriter's name in Schedule I hereto plus accrued
interest, if any, from May 4, 2004 to the date of payment and delivery.

         (b) On the basis of the representations and warranties contained in
this Agreement, and subject to its terms and conditions, the Company agrees to
sell to the Underwriters the Additional Securities, and the Underwriters shall
have the right to purchase in whole, or from time to time in part, up to
$10,000,000 principal amount of Additional Securities at the Purchase Price plus
accrued interest, if any, from the Closing Date (as defined below) to the date
of payment and delivery. If the Representative, on behalf of the Underwriters,
exercise such option, the Representative shall so notify the Company in writing
not later than 30 days after the date of this Agreement, which notice shall
specify the principal amount of Additional Securities to be purchased by the
Underwriters and the date on which such Additional Securities are to be
purchased. Such date may be the same as the Closing Date but not earlier than
the Closing Date nor later than seven business days after the date of such
notice.

                                       2


         (c) The Company understands that the Underwriters intend to make a
public offering of the Securities as soon after the effectiveness of this
Agreement as in the judgment of the Representative is advisable, and initially
to offer the Securities on the terms set forth in the Prospectus. The Company
acknowledges and agrees that the Underwriters may offer and sell Securities to
or through any affiliate of an Underwriter and that any such affiliate may offer
and sell Securities purchased by it to or through any Underwriter.

         (d) Payment for the Firm Securities shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Firm Securities for the account of the Underwriters at 10:00 a.m., New
York City time, on May 4, 2004, or at such other time on the same or such other
date, not later than May 14, 2004, as shall be designated in writing by the
Representative. The time and date of such payment are hereinafter referred to as
the "CLOSING DATE".

         (e) Payment for any Additional Securities shall be made to the Company
in Federal or other funds immediately available in New York City against
delivery of such Additional Securities for the account of the Underwriters at
10:00 a.m., New York City time, on the date specified in the notice described in
Section 2(b) or at such other time on the same or on such other date, in any
event not later than June 7, 2004, as shall be designated in writing by the
Representative. The time and date of such payment are hereinafter referred to as
the "OPTION CLOSING DATE".

         (f) Certificates for the Firm Securities and Additional Securities
shall be in definitive form or global form, as specified by the Representative,
and registered in such names and in such denominations as the Representative
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Securities and Additional Securities shall be delivered to
the Representative on the Closing Date or the Option Closing Date, as the case
may be, for the account of the several Underwriters, with any transfer taxes
payable in connection with the transfer of the Securities to the Underwriter
duly paid, against payment of the Purchase Price there for plus accrued
interest, if any, to the date of payment and delivery.

         3. Representations and Warranties. The Company represents and warrants
to each Underwriter that:

         (a) Preliminary Prospectus. Each Preliminary Prospectus, as of the date
thereof, did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that the Company makes no representation and
warranty with respect to any statements or omissions made in reliance upon and
in conformity with information relating to any Underwriter furnished to the
Company in writing by such Underwriter through the Representative expressly for
use in any Preliminary Prospectus.

         (b) Registration Statement and Prospectus. The Registration Statement
has been declared effective by the Commission. No order suspending the
effectiveness of the Registration

                                       3


Statement has been issued by the Commission and no proceeding for that purpose
has been initiated or threatened by the Commission. As of the applicable
effective date of the Registration Statement and any amendment thereto, the
Registration Statement complied and will comply in all material respects with
the Securities Act, and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and as of the
applicable filing date of the Prospectus and any amendment or supplement thereto
and as of the Closing Date and as of the Additional Closing Date, as the case
may be, the Prospectus complied and will comply in all material respects with
the Securities Act, and does not contain and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided
that the Company makes no representation and warranty with respect to any
statements or omissions made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through the Representative expressly for use in the Prospectus, or
to any statement in or omission from the Form T-1 filed by the Trustee with the
Commission on April 27, 2004.

         (c) Incorporated Documents. The documents incorporated by reference in
the Prospectus, when they became effective or were filed with the Commission, as
the case may be, conformed in all material respects to the requirements of the
Securities Act or the Exchange Act, as applicable, and none of such documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
and any further documents so filed and incorporated by reference in the
Prospectus, when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material respects to the
requirements of the Securities Act or the Exchange Act, as applicable, and will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.

         (d) Financial Statements. The financial statements and the related
notes thereto of the Company and its consolidated subsidiaries (as defined in
Rule 1-02 of Regulation S-X) ("SUBSIDIARIES"), included or incorporated by
reference in the Prospectus comply in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as applicable, and
present fairly the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates indicated and the results of their
operations and the changes in their consolidated cash flows for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles and practices applied on a consistent
basis, except as described in the notes to such financial statements; and the
other financial data set forth in the Prospectus under the captions "Summary
Financial Data" and "Capitalization" have been derived from the accounting
records of the Company and its Subsidiaries and presents fairly the information
shown thereby on a basis consistent with that of the audited financial
statements incorporated by reference in the Registration Statement and
Prospectus.

                                       4


         (e) No Material Adverse Change. Since the date of the most recent
audited financial statements of the Company included or incorporated by
reference in the Prospectus, there has not been any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates as of which
information is given in the Prospectus, there has not been any change in the
capital stock or long-term debt of the Company or any of its Subsidiaries, or
any issuance of any options, warrants, convertible securities or rights to
purchase capital stock of the Company or any of the Subsidiaries, or any
material adverse change, or any development involving a prospective material
adverse change, in or affecting the business, financial position, stockholders'
equity or results of operations of the Company and its Subsidiaries, taken as a
whole (a "MATERIAL ADVERSE EFFECT").

         (f) Organization and Good Standing of the Company. The Company has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with power and authority
(corporate and other) to own its properties and conduct its business as
described in the Prospectus, and has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under the
laws of each other jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such qualification, other than where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect.

         (g) Organization and Good Standing of the Company's Subsidiaries. Each
of the Company's Subsidiaries has been duly incorporated and is validly existing
as a corporation under the laws of its jurisdiction of incorporation, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each jurisdiction in which it owns or leases properties or
conducts any business, so as to require such qualification, other than where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect; and all the outstanding shares of capital stock of each Subsidiary of
the Company have been duly authorized and validly issued, are fully-paid and
non-assessable, and are owned by the Company, directly or indirectly, free and
clear of all liens, encumbrances, security interests and claims, except for TKT
Europe-5S AB and Eminent Pharmaceutical Services, LLC, in which, with respect to
each such entity, the Company owns 80% of the total outstanding shares of
capital stock. The Company does not own or control, directly or indirectly, any
corporations, associations or other entities, except such corporations as are
set forth on the Company's Form 10-K for the year ended December 31, 2003,
including the exhibits thereto or such corporations as would not be required to
be listed as a subsidiary under Item 601 of Regulation S-K under the Securities
Act.

         (h) Due Authorization. This Agreement has been duly authorized,
executed and delivered by the Company.

         (i) Capitalization. The Company has an authorized capitalization as set
forth in the Prospectus under the caption "Capitalization"; there are no
outstanding options to purchase, or any rights or warrants to subscribe for, or
any securities or obligations convertible into, or any

                                       5


contracts or commitments to issue or sell, any shares of Common Stock, any
shares of capital stock of any subsidiary, or any such warrants, convertible
securities or obligations, except as set forth in the Prospectus and except for
options granted under, or contracts or commitments pursuant to, the Company's
previous or currently existing stock option and other similar officer, director
or employee benefit plans; except for stock purchase plans, there are no
contracts, commitments, agreements, arrangements, understandings or undertakings
of any kind to which the Company is a party, or by which it is bound, granting
to any person the right to require either the Company to file a registration
statement under the Securities Act with respect to any securities of the Company
or requiring the Company to include such securities with the Securities
registered pursuant to any registration statement.

         (j) The Securities. The Securities have been duly authorized by the
Company, and when duly executed, authenticated, issued and delivered as provided
in the Indenture (assuming due authentication of the Securities by the Trustee)
and paid for as provided herein will constitute valid and binding obligations of
the Company, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity); and the
Securities will conform to the descriptions thereof in the Prospectus.

         (k) The Indenture. The Indenture has been duly authorized by the
Company, and when executed and delivered by the Company (assuming the due
authorization, execution and delivery by the Trustee) will be a valid and
binding instrument of the Company; enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity); as of the Closing Date, the Indenture has been duly qualified under
the Trust Indenture Act of 1939, as amended; and the Indenture will conform to
the description thereof in the Prospectus.

         (l) The Common Stock. Upon issuance and delivery of the Securities in
accordance with the Agreement and the Indenture, the Securities will be
convertible at the option of the holder thereof into shares of the Underlying
Securities in accordance the terms of the Securities; the Underlying Securities
reserved for issuance upon conversion of the Securities have been duly
authorized and reserved and, when issued upon conversion of the Securities in
accordance with the terms of the Securities, will be validly issued, fully paid
and non-assessable, and the issuance of the Underlying Securities will not be
subject to any preemptive or similar rights. The shares of Common Stock
outstanding on the date hereof have been duly authorized and are validly issued,
fully paid and non-assessable; except as otherwise disclosed in the Prospectus,
there are no preemptive or other rights to subscribe for or to purchase, nor any
restriction upon the voting or transfer of, any shares of the Common Stock under
the Company's Articles of Incorporation or Bylaws or under the Delaware General
Corporation Law.

                                       6


         (m) No Violation or Default. Neither the Company nor any of its
Subsidiaries is, or with the giving of notice or lapse of time or both would be,
in violation of or in default under, (i) its Certificate of Incorporation,
Bylaws or other organizational documents, (ii) any law, statute or judgment,
order, rule or regulation of any court or arbitrator or governmental or
regulatory authority or (iii) under any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which it or any of them or any of their respective
properties is bound, except in the case of clauses (ii) and (iii) above, for
violations and defaults which, individually or in the aggregate, would not have
a Material Adverse Effect.

         (n) No Conflicts. The issue and sale of the Securities and the issuance
by the Company of the Underlying Securities upon conversion of the Securities
and the performance by the Company of all its obligations under the Securities,
the Indenture and this Agreement, and the consummation of the transactions
herein and therein contemplated, (i) will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its Subsidiaries under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound or to which any of the
property or assets of the Company or any of its Subsidiaries is subject, (ii)
nor will any such action result in any violation of (x) the provisions of the
Certificate of Incorporation or the Bylaws of the Company or (y) any applicable
law or statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company, its Subsidiaries or any of
their respective properties, except in the case of clauses (i) and (ii)(y)
above, for such conflicts, defaults or violations that would not individually or
in the aggregate, have a Material Adverse Effect.

         (o) No Consents Required. No consent, approval, authorization, order,
license, registration or qualification of or with any such court or governmental
agency or body is required for the issue and sale of the Securities or the
consummation by the Company of the transactions contemplated by this Agreement
or the Indenture, except such consents, approvals, authorizations, orders,
licenses, registrations or qualifications as may be required under state
securities or Blue Sky Laws in connection with the purchase and distribution of
the Securities by the Underwriters or under the Securities Act with respect to
the registration of the Securities and the Underlying Securities.

         (p) Legal Proceedings. Other than as set forth in the Prospectus, there
are no legal or governmental investigations, actions, suits or proceedings
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries or any of their respective properties or to
which the Company or any of its Subsidiaries is or may be a party or to which
any property of the Company or any of its Subsidiaries is or may be the subject
which, if determined adversely to the Company or any of its Subsidiaries, could
individually or in the aggregate have, or reasonably be expected to have, (i) a
Material Adverse Effect, or (ii) a material adverse effect on the consummation
of the transactions contemplated in this Agreement.

         (q) Investment Company Act. The Company is not and, after giving effect
to the offering and sale of the Securities and the application of the proceeds
thereof as described in the

                                       7


Prospectus, will not be required to register as an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.

         (r) Independent Accountants. To the knowledge of the Company, after due
inquiry, Ernst & Young LLP, who have certified the consolidated financial
statements of the Company included or incorporated by reference in the
Prospectus are independent public accountants as required under the Securities
Act.

         (s) Taxes. The Company and its Subsidiaries have filed all federal,
state, local and foreign tax returns which have been required to be filed and
have paid all taxes shown thereon and all assessments received by them or any of
them to the extent that such taxes have become due and are not being contested
in good faith, except where the failure to do so would not have a Material
Adverse Effect; and, except as disclosed in the Prospectus, to the Company's
knowledge, there is no tax deficiency which has been or might reasonably be
expected to be asserted or threatened against the Company or any Subsidiary.

         (t) No Labor Disputes. No labor disputes exist or, to the best of the
Company's knowledge, is imminent, with employees of the Company or of its
Subsidiaries which are likely to have a Material Adverse Effect. The Company is
not aware that any employee or significant group of employees of the Company or
any Subsidiary plans to terminate employment with the Company or any such
Subsidiary, which termination would reasonably be expected to have a Material
Adverse Effect.

         (u) Compliance With Environmental Laws. Each of the Company and its
Subsidiaries is in compliance with any and all applicable foreign, federal,
state and local laws and regulations relating to the protection of human health
or the environment or imposing liability or standards of conduct concerning any
Hazardous Material (collectively, "ENVIRONMENTAL LAWS"), except where such
non-compliance with Environmental Laws could not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The term "HAZARDOUS
MATERIAL" means (i) any "HAZARDOUS SUBSTANCE" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, (ii)
any "HAZARDOUS WASTE" as defined by the Resource Conservation and Recovery Act,
as amended, (iii) any petroleum or petroleum product, (iv) any polychlorinated
biphenyl, and (v) any pollutant or contaminant or hazardous, dangerous, or toxic
chemical, material, waste or substance regulated under or within the meaning of
any other Environmental Law.

         (v) Intellectual Property. For the purposes hereof, "INTELLECTUAL
PROPERTY" means (i) patents and patent applications, (ii) trademarks, service
marks, trade names, domain names, trade dress and logos, (iii) copyrights, (iv)
computer software (other than off-the-shelf software that is commercially
available), (v) confidential and proprietary information, including trade
secrets, know-how, inventions, technology, whether patented or not, and (v)
registrations and applications for registration of the foregoing.

                  (i) The Company and its Subsidiaries own or have valid
         licenses, or, to the Company's knowledge, can acquire rights on
         reasonable terms, to use all Intellectual Property used by the Company
         and its Subsidiaries in the operation of the business

                                       8


         currently conducted or as contemplated to be conducted by them as
         described in the Prospectus (collectively "COMPANY INTELLECTUAL
         PROPERTY"), except where the failure to own, license, or otherwise be
         able to acquire, or use such Intellectual Property would not, singly or
         in the aggregate, have a Material Adverse Effect. To the Company's
         knowledge, each patent owned by or licensed to the Company included
         within the Company Intellectual Property is valid and enforceable, and
         has not been adjudged invalid or unenforceable in whole or in part.

                  (ii) Except as disclosed in the Prospectus, to the Company's
         knowledge, the operation of the business of the Company and its
         Subsidiaries as currently conducted or as contemplated to be conducted
         by them as described in the Prospectus, including services provided by,
         processes used by, or products manufactured or sold by them, and the
         use of the Company Intellectual Property, do not conflict with,
         infringe, misappropriate or otherwise violate the Intellectual Property
         of any third party, which conflict, infringement, misappropriation or
         violation would have a Material Adverse Effect, and no actions, suits,
         claims or proceedings have been asserted, are pending or, to the
         knowledge of the Company after due inquiry, threatened against the
         Company or any of its Subsidiaries (i) alleging any of the foregoing,
         or (ii) based upon or challenging or seeking to deny or restrict the
         use by the Company or any of its Subsidiaries of any of the Company
         Intellectual Property, which, singly or in the aggregate, would have a
         Material Adverse Effect.

                  (iii) Except as disclosed in the Prospectus, to the Company's
         knowledge, no third party is engaging in any activity that infringes,
         misappropriates or otherwise violates the Company Intellectual
         Property, which infringement, misappropriation or violation would have
         a Material Adverse Effect.

                  (iv) With respect to each material agreement governing the
         license to or by the Company or any of its Subsidiaries of any Company
         Intellectual Property, including those agreements filed with the
         Registration Statement or incorporated therein by reference and the
         agreements referenced in the Supplemental Prospectus, (a) such
         agreement is valid and binding against the Company or its Subsidiaries,
         as the case may be, and in full force and effect; (b) the Company has
         not received any notice of termination or cancellation under such
         agreement, received any notice of breach or default under such
         agreement, which breach has not been cured, and granted to any other
         third party any rights, adverse or otherwise, under such agreement that
         would constitute a breach of such agreement; and (c) neither the
         Company (or any of its Subsidiaries) or, to the Company's knowledge,
         any other party to such agreement, is in breach or default thereof in
         any material respect, and no event has occurred that, with notice or
         lapse of time, would constitute such a breach or default or permit
         termination, modification or acceleration under such agreement.

         (w) Licenses and Permits. Except as described in the Prospectus, the
Company and each of its Subsidiaries possesses such permits, licenses,
approvals, consents and other authorizations (including, licenses, pharmacy
licenses, accreditation and other similar documentation or approvals of any
local health departments) (collectively, "GOVERNMENTAL LICENSES") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies,
including, without

                                       9


limitation, the Food and Drug Administration ("FDA"), necessary to conduct its
business as described in the Prospectus; the Company is in compliance with the
terms and conditions of all such Governmental Licenses and all applicable FDA
statutes and regulations, except where the failure so to comply would not ,
singly or in the aggregate, result in a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except where the
invalidity of such Governmental Licenses or the failure of such Governmental
Licenses to be in full force and effect would not result in a Material Adverse
Effect; and the Company has not received any notice of proceedings relating to
the revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, would result in a Material Adverse Effect.

         (x) Clinical Trials. To the knowledge of the Company, the human
clinical trials conducted by the Company or in which the Company has
participated that are described in, or incorporated by reference into, the
Prospectus, or the results of which are referred to in, or incorporated by
reference into, the Prospectus were and, if still pending, are being, conducted
in accordance with experimental protocols, procedures and controls pursuant to
accepted professional scientific standards; the descriptions of the results of
such studies, tests and trials contained in, or incorporated by reference into,
the Prospectus are accurate in all material respects. The Company has not
received any notices or correspondence from the FDA or any other governmental
agency requiring the termination or suspension of any clinical trials conducted
by, or on behalf of, the Company or in which the Company has participated that
are described in, or incorporated by reference into, the Prospectus or the
results of which are referred to in, or incorporated by reference into, the
Prospectus.

         (y) Title to Real and Personal Property. The Company and its
Subsidiaries have good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by them, or have
valid rights to lease or otherwise use all property which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in the Prospectus
or such as do not interfere with the use made and proposed to be made of such
property by the Company and its Subsidiaries and would not have, individually or
in the aggregate, a Material Adverse Effect; and any real property and buildings
held under lease by the Company and its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its Subsidiaries, in each case except
as described in the Prospectus.

         (z) Compliance with ERISA. The Company is in compliance with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"), except where the failure to be in such compliance would
not, individually or in the aggregate, have a Material Adverse Effect; no
"reportable event" (as defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) for which the Company would have any
liability, except where such liability would not, individually or in the
aggregate, have a Material Adverse Effect; except for matters that would not,
individually or in the aggregate, have a Material Adverse Effect, the Company
has not incurred and does not expect to incur liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any "pension plan" or
(ii) Section 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations

                                       10


thereunder ("CODE"); and each "pension plan" for which the Company and each of
its Subsidiaries would have any liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material respects and nothing
has occurred, whether by action or by failure to act, which would reasonably be
expected cause the loss of such qualification; and no "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of Code or "accumulated
funding deficiency" (as defined in section 302 of ERISA) has occurred.

         (aa) Accounting Controls. (i) The Company and each of its Significant
Subsidiaries (as such term is defined in Regulation S-X under the Securities
Act) maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (A) transactions are executed in accordance with
management's general or specific authorization; (B) transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets; (C) access to assets is permitted only in accordance with management's
general or specific authorization; and (D) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences, and (ii) the Company maintains
a system of "disclosure controls and procedures" (as such term is defined in
Rule 13a-14(c) under the Exchange Act).

         (bb) Sarbanes-Oxley Act. The Company is in substantial compliance with
the applicable provisions of the Sarbanes-Oxley Act of 2002 that are effective.

         (cc) Insurance. The Company and each of its Subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as is customary
for companies engaged in similar businesses in similar industries with products
in a similar stage of development.

         (dd) Adequate Disclosure. There is no franchise, lease, contract,
agreement or document required by the Securities Act to be described in the
Prospectus which is not described as required; and all descriptions of any such
franchises, leases, contracts, agreements or documents contained in the
Prospectus are accurate and complete descriptions of such documents in all
material respects. No relationship, direct or indirect, exists between or among
the Company on the one hand, and the directors, officers or 5% stockholders of
the Company on the other hand, which is required to be described in the
Prospectus and which is not so described.

         (ee) Forward-Looking Statements. No forward-looking statement (within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) contained in the Prospectus has been made or reaffirmed without a
reasonable basis or has been disclosed other than in good faith.

         (ff) Reporting Requirements. The Company is subject to and in
compliance with the reporting requirements of Section 13 or Section 15(d) of the
Exchange Act. The Common Stock is registered pursuant to Section 12(g) of the
Exchange Act and is listed on the Nasdaq Stock Market's National Market and the
Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from the Nasdaq National Market, nor has the Company
received any

                                       11


notification that the Commission or the Nasdaq National Market is contemplating
terminating such registration or listing.

         (gg) No Rated Securities. There are not outstanding any securities of
or guaranteed by the Company that are rated by any "nationally recognized
statistical rating organization", as such term is defined for purposes of Rule
436(g)(2) under the Securities Act.

         4. Covenants of the Company. The Company covenants and agrees with each
of the several Underwriters as follows:

         (a) Filing of Prospectus Supplement. The Company will prepare the
Prospectus Supplement in a form approved by the Representative and will file
such Prospectus Supplement pursuant to Rule 424(b) under the Securities Act not
later than the second business day following the date hereof.

         (b) Delivery of Copies. The Company will furnish promptly to the
Representative and to counsel for the Underwriters a signed copy of the
Registration Statement as originally filed with the Commission, and each
amendment thereto filed with the Commission, including all consents and exhibits
filed therewith. The Company will deliver promptly to the Representative in New
York City such number of the following documents as the Representative shall
reasonably request: (i) the Prospectus (not later than 10:00 A.M., New York
time, on the business day following the execution and delivery of this
Agreement), (ii) any document incorporated by reference in the Prospectus
(excluding exhibits thereto) and (iii) during the Prospectus Delivery Period, as
many copies of the Prospectus (including all amendments and supplements thereto
and documents incorporated by reference therein) as the Representative may
reasonably request. As used herein, the term "PROSPECTUS DELIVERY PERIOD" means
such period of time after the first date of the public offering of the
Securities as in the opinion of counsel for the Underwriters a prospectus
relating to the Securities is required by law to be delivered in connection with
sales of the Securities by any Underwriter or dealer.

         (c) Amendments or Supplements. Before filing any amendment or
supplement to the Registration Statement or the Prospectus with respect to the
Securities, the Company will furnish to the Representative and counsel for the
Representative a copy of the proposed amendment or supplement for review and
will not file any such proposed amendment or supplement to which the
Representative shall reasonably object by notice in writing to the Company.

         (d) Notice to Representative. The Company will advise the
Representative promptly, and confirm such advice in writing, (i) when any
amendment to the Registration Statement has been filed or becomes effective;
(ii) when any supplement to the Prospectus or any amendment to the Prospectus
has been filed; (iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or the
receipt of any comments from the Commission relating to the Registration
Statement or any other request by the Commission for any additional information;
(iv) of the issuance by the Commission of any order suspending the effectiveness
of the Registration Statement or preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or the initiation or threatening of any
proceeding for that purpose; (v) of the occurrence of any event within the
Prospectus Delivery

                                       12


Period as a result of which the Prospectus as then amended or supplemented would
include any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances existing when the Prospectus is delivered to a purchaser, not
misleading; and (vi) of the receipt by the Company of any notice with respect to
any suspension of the qualification of the Securities for offer and sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and the Company will use its best efforts to prevent the issuance of
any such order suspending the effectiveness of the Registration Statement,
preventing or suspending the use of any Preliminary Prospectus or the Prospectus
or suspending any such qualification of the Securities and, if any such order is
issued, will use best efforts to obtain as soon as possible the withdrawal
thereof.

         (e) Ongoing Compliance of the Prospectus. The Company shall file
promptly all reports and any definitive proxy or information statements required
to be filed by the Company with the Commission pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for
so long as the delivery of a Prospectus is required in connection with the
offering or sale of the Securities; if during the Prospectus Delivery Period (i)
any event shall occur or condition shall exist as a result of which the
Prospectus as then amended or supplemented would include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances existing when the Prospectus is delivered to a purchaser, not
misleading or (ii) it is necessary to amend or supplement the Prospectus to
comply with law, the Company will immediately notify the Underwriters thereof
and forthwith prepare and, subject to paragraph (c) above, file with the
Commission and furnish to the Underwriters and to such dealers as the
Representative may designate, such amendments or supplements to the Prospectus
as may be necessary so that the statements in the Prospectus as so amended or
supplemented will not, in the light of the circumstances existing when the
Prospectus is delivered to a purchaser, be misleading or so that the Prospectus
will comply with law.

         (f) Use of Proceeds. The Company will use the net proceeds received by
the Company from the sale of the Securities pursuant to this Agreement in the
manner specified in the Prospectus under the caption "Use of Proceeds".

         (g) Payments of Costs and Expenses. Whether or not the transactions
contemplated in this Agreement are consummated or this Agreement is terminated,
the Company will pay or cause to be paid all costs and expenses incident to the
performance of its obligations hereunder, including without limiting the
generality of the foregoing, all fees, costs and expenses (i) incident to the
preparation, issuance, execution, authentication and delivery of the Securities,
including any expenses of the Trustee, (ii) incident to the preparation,
printing, distribution and filing under the Securities Act of the Preliminary
Prospectus and the Prospectus (including in each case all exhibits, amendments
and supplements thereto), (iii) related to any filing with the National
Association of Securities Dealers, Inc., (iv) in connection with the printing
(including word processing and duplication costs) and delivery of this
Agreement, the Indenture and any Legal Investment Survey and the furnishing to
Underwriters and dealers of copies of the Preliminary Prospectus and Prospectus,
including mailing and shipping, as herein provided, (v) payable to rating
agencies in connection with the rating of the Securities, (vi) in connection
with the quotation of the Underlying Securities on the National Association of
Securities Dealers

                                       13


Automated Quotations National Market (the "NASDAQ NATIONAL MARKET"), and (vii)
any expenses incurred by or on behalf of the Company in connection with a "road
show" presentation to potential investors (it being understood that, except as
expressly set forth in this Section 4(h) and elsewhere in this Agreement
(including, but not limited to, Sections 6 and 9 hereof), the Company shall have
no obligation to pay any costs and expenses of the Underwriters).

         (h) No Stabilization. Neither the Company nor any of its affiliates
will take any action prohibited by Regulation M under the Exchange Act, in
connection with the distribution of the Securities contemplated hereby.

         (i) Reservation of Common Stock. The Company will reserve and keep
available at all times, free of pre-emptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy all obligations to issue the
Underlying Securities upon conversion of the Securities.

         (j) Listing of Underlying Securities. The Company will use its
reasonable best efforts to cause all shares of the Underlying Securities to be
listed for quotation on the Nasdaq National Market.

         (k) Agreement Not to Offer or Sell Additional Securities. Without the
prior written consent of J.P. Morgan Securities Inc., the Company will not,
during the period ending 90 days after the date hereof, (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock or (iii) file with the Commission a registration statement
under the Securities Act relating to any additional shares of its Common Stock
or securities convertible into, or exchangeable for, any shares of its Common
Stock, or publicly disclose the intention to effect any transaction described in
clause (i), (ii) or (iii), whether any such transaction described in clause (i)
or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the sale of the Securities under this Agreement or the issuance of the
Underlying Securities, (B) the grant by the Company of Common Stock or stock
options in the ordinary course of business pursuant to any stock option, stock
purchase, stock bonus or other stock plan or employee benefit plan or dividend
reinvestment plan existing as of the date hereof, or rights pursuant to The
Rights Agreement dated December 13, 2000 by and between the Company and
Equiserve Trust Company, N.A. and (C) the issuance by the Company of shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock as consideration for mergers, acquisitions, other business
combinations, or strategic alliances, occurring after the date of this
Agreement, provided that each recipient of the Company's securities pursuant to
this sub-clause (C) agrees in writing that all such securities remain subject to
restrictions substantially similar to those contained in this paragraph.

         (l) Furnishing Reports. During the period of five years from the date
hereof, the Company will deliver to the Representative and, upon request, to
each of the other Underwriters,

                                       14


(i) as soon as they are available, copies of all reports or other communications
furnished to stockholders and (ii) as soon as they are available, copies of any
reports and financial statements furnished or filed by the Company with the
Commission pursuant to the Exchange Act or any national securities exchange or
automatic quotation system on which the Common Stock is listed or quoted, in
each case other than such documents as are available on the internet.

         (m) Unaudited Financial Statements. Prior to the Closing Date or the
Option Closing Date, as the case may be, the Company will furnish to the
Representative, as soon as they have been prepared, copies of any unaudited
interim consolidated financial statements of the Company for any monthly periods
subsequent to the periods covered by the financial statements appearing in the
Registration Statement and the Prospectus.

         (n) Press Releases. Prior the Closing Date, the Company will not issue
any press release or other communication directly or indirectly or hold any
press conference with respect to the Company, its condition, financial or
otherwise, or earnings, business affairs or business prospects (except for
routine oral marketing communications in the ordinary course of business and
consistent with the past practices of the Company and of which the
Representative is notified), without the prior written consent of the
Representative, unless in the judgment of the Company and its counsel, and after
notification to the Representative, such press release or communication is
required by law.

         5. Conditions to the Underwriters' Obligations. The several obligations
of the Underwriters hereunder to purchase the Firm Securities on the Closing
Date or the Option Securities on the Option Closing Date, as the case may be,
are subject to the performance by the Company of its obligations hereunder and
to the following additional conditions:

         (a) No Stop Order. No order suspending the effectiveness of the
Registration Statement shall be in effect, and no proceeding for such purpose
shall be pending before or threatened by the Commission, and any request for
additional information on the part of the Commission (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the reasonable satisfaction of the Representative. The Prospectus shall
have been timely filed with the Commission in accordance with Section 4(a)
hereof.

         (b) Representations and Warranties. The representations and warranties
of the Company contained herein are true and correct on and as of the Closing
Date or the Option Closing Date, as the case may be, as if made on and as of the
Closing Date or the Option Closing Date, as the case may be, and the Company
shall have complied with all agreements and all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date or the Option
Closing Date, as the case may be.

         (c) No Material Adverse Change. Subsequent to the execution and
delivery of this Agreement, there shall not have been any (i) change in the
capital stock or long-term debt of the Company or any of the Subsidiaries or any
material adverse change, or any development involving a prospective material
adverse change, in or affecting the business, its financial condition,
management or results of operations of the Company and its Subsidiaries, taken
as a whole, otherwise than as set forth in the Prospectus; or (ii) any
suspension or material limitation

                                       15


of trading in the capital stock of the Company on the Nasdaq National Market,
the effect of which in the judgment of the Representative makes it impracticable
or inadvisable to proceed with the offering or the delivery of the Securities on
the Closing Date or the Option Closing Date, as the case may be, on the terms
and in the manner contemplated by this Agreement and the Prospectus.

         (d) Officer's Certificate. The Representative shall have received on
and as of the Closing Date or the Option Closing Date, as the case may be, a
certificate of the Chief Financial Officer or Chief Accounting Officer of the
Company and one additional senior executive officer of the Company, satisfactory
to the Representative to the effect set forth in Sections 5(a) and (b) and to
the further effect that there has not occurred any material adverse change, or
any development involving a prospective material adverse change, in or affecting
the business, financial position, stockholders' equity or results of operations
of the Company and its Subsidiaries, taken as a whole from that set forth in the
Prospectus.

         (e) Opinion of Counsel for the Company. Hale and Dorr LLP, counsel for
the Company, shall have furnished to the Underwriters their written opinion,
dated the Closing Date or the Option Closing Date, as the case may be, in form
and substance satisfactory to the Representative, to the effect that:

                  (i) the Company has been duly incorporated and is validly
         existing as a corporation in good standing under the laws of the State
         of Delaware and has all corporate power and authority to carry on its
         business and to own, lease and operate its properties, as such business
         and properties are described in the Prospectus; the Company is duly
         qualified and is in good standing as a foreign corporation authorized
         to do business in the Commonwealth of Massachusetts;

                  (ii) The Company has an authorized capitalization as set forth
         in the Prospectus under the heading "Capitalization";

                  (iii) the Securities have been duly authorized and, when
         executed by the Company and authenticated by the Trustee in accordance
         with the terms of the Indenture and delivered to the Underwriters
         against payment therefore as provided by this Agreement, will be legal,
         valid and binding obligations of the Company, entitled to the benefits
         of the Indenture, subject, as to their binding nature, to bankruptcy,
         insolvency, fraudulent transfer, moratorium, reorganization and similar
         laws of general applicability relating to or affecting creditors'
         rights to general equity principles;

                  (iv) the Underlying Securities reserved for issuance upon
         conversion of the Securities have been duly authorized and reserved
         and, when issued upon conversion of the Securities in accordance with
         the terms of the Securities, will be validly issued, fully paid and
         non-assessable and the issuance of the Underlying Securities will not
         be subject to any preemptive or similar rights under the Company's
         Articles of Incorporation or Bylaws or under the Delaware General
         Corporation Law;

                                       16


                  (v) this Agreement has been duly authorized, executed and
         delivered by the Company;

                  (vi) the Indenture has been duly authorized, executed and
         delivered by the Company and, assuming the due authorization, execution
         and delivery thereof by the Trustee, constitutes a valid and binding
         obligation of the Company, enforceable against the Company in
         accordance with its terms, subject, as to its binding nature and
         enforceability, to bankruptcy, insolvency, fraudulent transfer,
         moratorium, reorganization and similar laws of general applicability
         relating to or affecting creditors' rights and to general equity
         principles; and the Indenture has been duly qualified under the Trust
         Indenture Act;

                  (vii) each of the Indenture and the Securities conform in all
         material respects to the description thereof contained in the
         Prospectus under the caption "Description of Notes";

                  (viii) no filing with, or authorization, approval, consent,
         license, order, registration, qualification or decree of any United
         States federal or Massachusetts state governmental authority or agency
         is necessary for the issuance and sale of the Securities and the
         issuance of the Underlying Securities by the Company pursuant to this
         Agreement or the consummation by the Company of the transactions
         contemplated by this Agreement or the Indenture, except such as have
         been obtained under the Securities Act and the rules and regulations of
         the Commission thereunder and the Trust Indenture Act and the rules and
         regulations of the Commission thereunder, and such as may be required
         under state securities or Blue Sky laws (as to the applicability of
         which no opinion need be expressed) in connection with the purchase and
         distribution of the Securities by the Underwriters;

                  (ix) the execution and delivery of this Agreement by the
         Company and the consummation by the Company of the transactions
         contemplated hereby will not conflict with or result in a breach or
         violation of any of the terms or provisions of, or constitute a default
         under any indenture, mortgage, deed of trust, loan agreement or other
         agreement or instrument (a "MATERIAL CONTRACT") to which the Company or
         any of its Subsidiaries is a party or by which the Company or any of
         its Subsidiaries is bound or to which any of the properties or assets
         of the Company or any of its Subsidiaries is subject, which has been
         filed as an exhibit to the Registration Statement or as an exhibit to
         any report filed under the Exchange Act that has been incorporated by
         reference in the Prospectus, nor will such actions result in any
         violation of the Charter or by-laws of the Company or of any of its
         United States Subsidiaries or any Federal or Massachusetts statute,
         rule or regulation, or any order known to such counsel of any court or
         governmental agency or body or court having jurisdiction over the
         Company or any of its Subsidiaries or any of their properties;

                  (x) to such counsel's knowledge, there are no action,
         proceeding or litigation pending or threatened against the Company
         before any court, governmental or administrative agency or body that is
         required by the Securities Act or the rules and

                                       17


         regulations of the Commission thereunder to be described in the
         Registration Statement or the Prospectus that is not so described;

                  (xi) the Company is not and, after giving effect to the
         offering and sale of the Securities and the application of the proceeds
         thereof as described in the Prospectus, will not be an "investment
         company" as defined in the Investment Company Act of 1940, as amended;

                  (xii) the statements in the Prospectus under the captions
         "Description of Notes" and "Certain United States Federal Income Tax
         Considerations", insofar as such statements constitute summaries of the
         legal matters, documents or proceedings referred to therein, fairly
         present the information called for with respect to such legal matters,
         documents or proceedings;

                  (xiii) the Registration Statement, as of its effective date,
         and the Prospectus, as of its date, in each case other than the
         financial statements and other financial data, including notes and
         schedules contained therein, as to which such counsel need express no
         opinion, complied as to form in all material respects with the
         requirements of the Securities Act and the rules and regulations of the
         Commission thereunder; and

                  (xiv) the documents incorporated by reference in the
         Prospectus (other than the financial statements and other financial
         data, including notes and schedules contained therein, as to which such
         counsel need express no opinion), when they became effective or were
         filed with the Commission, as the case may be, complied as to form in
         all material respects with the requirements of the Securities Act or
         the Exchange Act, as applicable, and the rules and regulations of the
         Commission thereunder.

                  Such counsel shall also state, without passing upon or
         assuming any responsibility for the accuracy or completeness of the
         statements contained in any of the following documents that nothing has
         come to their attention that has led them to believe (a) that, as of
         the effective date of the Registration Statement, the Registration
         Statement (or as of its date, any amendment or supplement thereto made
         by the Company prior to the date of such opinion) contained any untrue
         statement of a material fact or omitted to state a material fact
         required to be stated therein or necessary to make the statements
         therein not misleading or (b) that, as of its date, the Prospectus as
         amended or supplemented or any further amendment or supplement thereto
         made by the Company prior to the Closing Date or the Option Closing
         Date, as the case may be, contained any untrue statement of a material
         fact or omitted to state a material fact required to be stated therein
         or necessary in order to make the statements therein, in the light of
         the circumstances under which they were made, not misleading or (c)
         that, as of the date hereof, the Registration Statement as amended
         contained any untrue statement of a material fact or omitted to state a
         material fact required to be stated therein or necessary to make the
         statements therein not misleading, or (d) that, as of the Closing Date
         or the Option Closing Date, as the case may be, the Prospectus as
         amended or supplemented contained any untrue statement of a material
         fact or omitted to state a material fact required to be stated therein
         or necessary to make the statements therein, in the light of the
         circumstances under which they were

                                       18


         made, not misleading. Notwithstanding the foregoing, such counsel need
         express no belief as to (a) the financial statements, including the
         notes and schedules thereto, or any other financial, statistical or
         accounting data and information set forth or referred to in the
         Registration Statement or the Prospectus as amended or supplemented,
         (b) any matters arising under the published rules, regulations and
         policies of the FDA or any other federal statute or regulation
         governing the provision of drug administration, and (c) any matters
         arising under state statues and regulations governing the provision of
         drug administration. Such counsel may note that, with respect to the
         foregoing statement, such counsel does not serve as the Company's
         intellectual property or regulatory counsel.

         (f) Opinion of Intellectual Property and Regulatory Counsel.
Intellectual property counsel and regulatory counsel shall have furnished to the
Representative such counsels' written opinions, as counsels to the Company,
addressed to the Underwriters and dated the Closing Date or the Option Closing
Date, as the case may be, in form and substance reasonably satisfactory to the
Representative, to such effect as the Underwriters have previously specified to
the Company.

         (g) Comfort Letter. On the date of this Agreement and on the Closing
Date or the Option Closing Date, as the case may be, Ernst & Young LLP shall
have furnished to the Underwriters letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to the Representative,
containing statements and information of the type customarily included in
accountants "comfort letters" to underwriters with respect to the financial
statements and certain financial information contained or incorporated by
reference in Prospectus as of a date no more than three business days prior to
the date hereof or prior to the Closing Date or Option Closing Date, as the case
may be.

         (h) Opinion of Counsel for the Underwriters. The Underwriters shall
have received on and as of the Closing Date or the Option Closing Date, as the
case may be, an opinion of Shearman & Sterling LLP, counsel to the Underwriters,
in form and substance satisfactory to the Representative.

         (i) Lock-up Agreements. The "lock-up" agreements, each substantially in
the form of Exhibit A hereto, between the Underwriters and the officers and
directors of the Company and a significant stockholder of the Company identified
on Exhibit A-1 relating to sales and certain other dispositions of shares of
Common Stock or certain other securities, delivered to the Representative on or
before the date hereof, shall be in full force and effect on the Closing Date or
the Option Closing Date, as the case may be.

         (j) Listing of the Underlying Securities. An application for the
listing of the Underlying Securities shall have been submitted to the Nasdaq
National Market.

         (k) Additional Documents. On or prior to the Closing Date or the Option
Closing Date, as the case may be, the Company shall have furnished to the
Underwriters such further certificates and documents as the Underwriters or
their counsel shall reasonably request.

         6. Indemnity and Contribution.

                                       19


         (a) Indemnification of the Underwriters. The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including without limitation the legal
fees and other expenses incurred in connection with any suit, action or
proceeding or any claim asserted) caused by any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement,
Preliminary Prospectus (and any amendment or supplement thereto) or the
Prospectus (and any amendment or supplement thereto if the Company shall have
furnished any amendments or supplements thereto), or caused by 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, except insofar as
such losses, claims, damages or liabilities are caused by any untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Underwriter furnished to the Company
in writing by such Underwriter through the Representative expressly for use
therein.

         (b) Indemnification of the Company. Each Underwriter agrees, severally
and not jointly, to indemnify and hold harmless the Company, its directors, its
officers and each person who controls the Company within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to each Underwriter, but only with
reference to information relating to such Underwriter furnished to the Company
in writing by such Underwriter through the Representative expressly for use in
the Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto.

         (c) Notice and Procedures. If any suit, action, proceeding (including
any governmental or regulatory investigation), claim or demand shall be brought
or asserted against any person in respect of which indemnity may be sought
pursuant to either of the two preceding paragraphs, such person (the
"INDEMNIFIED PERSON") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PERSON") in writing, provided that
the failure to so notify such Indemnifying Person shall not relieve the
Indemnifying Person of its obligations under Section 6(a) or (b), as applicable,
except to the extent the Indemnifying Person has been materially prejudiced by
such failure and provided further that no such failure to provide notice shall
relieve such Indemnifying Person from any liability that it may have to such
Indemnified person otherwise than under Section 6(a) or (b), as applicable; and
the Indemnifying Person, upon request of the Indemnified Person, shall retain
counsel reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person and any others the Indemnifying Person may designate in such
proceeding and shall pay the fees and expenses of such counsel related to such
proceeding. In any such proceeding, any Indemnified Person shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) the Indemnifying Person and
the Indemnified Person shall have mutually agreed to the contrary, (ii) the
Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person or (iii) the named parties in
any such proceeding (including any impleaded parties) include both the
Indemnifying Person and the Indemnified Person and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Person
shall not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition

                                       20


to any local counsel) for all Indemnified Persons, and that all such fees and
expenses shall be reimbursed as they are incurred. Any such separate firm for
the Underwriters and such control persons of the Underwriters shall be
designated in writing by the Representative and any such separate firm for the
Company, its directors, its officers and such control persons of the Company
shall be designated in writing by the Company. The Indemnifying Person shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified
Person shall have requested an Indemnifying Person to reimburse the Indemnified
Person for fees and expenses of counsel as contemplated by the third sentence of
this paragraph, the Indemnifying Person agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such Indemnifying
Person of the aforesaid request and (ii) such Indemnifying Person shall not have
reimbursed the Indemnified Person in accordance with such request prior to the
date of such settlement. No Indemnifying Person shall, without the prior written
consent of the Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement includes an unconditional release of
such Indemnified Person from all liability on claims that are the subject matter
of such proceeding on terms reasonably satisfactory to such Indemnified Person.

         (d) Contribution. If the indemnification provided for in the first and
second paragraphs of this Section 6 is unavailable to an Indemnified Person or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each Indemnifying Person under such paragraph, in lieu of
indemnifying such Indemnified Person thereunder, shall contribute to the amount
paid or payable by such Indemnified Person as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other hand from the offering of the Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and the Underwriters on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other shall be deemed
to be in the same respective proportions as the net proceeds from the offering
of such Securities (before deducting expenses) received by the Company and the
total discounts and commissions received by the Underwriters bear to the
aggregate offering price of the Securities. The relative fault of the Company on
the one hand and the Underwriters on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.

                                       21


         (e) Limitation on Liability. The Company and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
6 were determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Person as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 6, in no event shall an
Underwriter be required to contribute any amount in excess of the amount by
which the total price at which the Securities purchased by it were offered
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 6 are several in proportion to the respective principal amount of the
Securities set forth opposite their names in Schedule I hereto, and not joint.

         (f) Non-Exclusive Remedies. The remedies provided for in this Section 6
are not exclusive and shall not limit any rights or remedies which may otherwise
be available to any indemnified party at law or in equity.

         (g) Survival. The indemnity and contribution agreements contained in
this Section 6 and the representations and warranties of the Company set forth
in this Agreement shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement, (ii) any investigation made by or on
behalf of any Underwriter or any person controlling any Underwriter or by or on
behalf of the Company, its officers or directors or any other person controlling
the Company and (iii) acceptance of and payment for any of the Securities.

         7. Termination. Notwithstanding anything herein contained, this
Agreement may be terminated in the absolute discretion of the Representative, by
notice given to the Company, if after the execution and delivery of this
Agreement and prior to the Closing Date or in the case of the Option Securities,
the Option Closing Date, as the case may be, (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of or guaranteed by the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities, or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in the judgment of the Representative, is material and
adverse and which, in the judgment of the Representative, makes it impracticable
or inadvisable to offer, sell or deliver the Securities on the terms and in the
manner contemplated in the Prospectus or to enforce contracts for the sale of
the Securities.

                                       22


         8. Effectiveness; Defaulting Underwriters. (a) This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.

         (b) If, on the Closing Date, or the Option Closing Date, as the case
may be, any one or more of the Underwriters shall fail or refuse to purchase
Securities which it or they have agreed to purchase hereunder on such date, and
the aggregate principal amount of Securities which such defaulting Underwriter
or Underwriters agreed but failed or refused to purchase is not more than
one-tenth of the aggregate principal amount of the Securities to be purchased on
such date, the other Underwriters shall be obligated severally in the
proportions that the principal amount of Securities set forth opposite their
respective names in Schedule I (in the column titled "Total") bears to the
aggregate principal amount of Securities set forth opposite the names of all
such non-defaulting Underwriters (in the column titled "Total"), or in such
other proportions as the Underwriters may specify, to purchase the Securities
which such defaulting Underwriter or Underwriters agreed but failed or refused
to purchase on such date; provided that in no event shall the principal amount
of Securities that any Underwriter has agreed to purchase pursuant to Section 1
be increased pursuant to this Section 8 by an amount in excess of one-tenth of
such principal amount of Securities without the written consent of such
Underwriter. If, on the Closing Date or the Option Closing Date, as the case may
be, any Underwriter or Underwriters shall fail or refuse to purchase Securities
which it or they have agreed to purchase hereunder on such date, and the
aggregate principal amount of Securities with respect to which such default
occurs is more than one-tenth of the aggregate principal amount of Securities to
be purchased on such date, and arrangements satisfactory to the Underwriters and
the Company for the purchase of such Securities are not made within 36 hours
after such default, this Agreement shall terminate without liability on the part
of any non-defaulting Underwriter or the Company. In any such case either the
Underwriters or the Company shall have the right to postpone the Closing Date or
the Option Closing Date, as the case may be, for up to five full business days
in order to effect any changes that in the opinion of counsel for the Company or
counsel for the Underwriters may be necessary in the Registration Statement and
the Prospectus or in any other document or arrangement, and the Company agrees
to promptly prepare any amendment or supplement to the Registration Statement
and the Prospectus that effects any such changes. As used in this Agreement, the
term "Underwriter" includes, for all purposes of this Agreement unless the
context otherwise requires, any person not listed in Schedule I hereto that,
pursuant to this Section 8, purchases Securities that a defaulting Underwriter
agreed but failed to purchase.

         9. Reimbursement. If this Agreement shall be terminated by the
Underwriters, or any of them, because of any failure or refusal on the part of
the Company to comply with the terms or to fulfill any of the conditions of this
Agreement, or if for any reason the Company shall be unable to perform its
obligations under this Agreement or any condition of the Underwriters'
obligations cannot be fulfilled, the Company agrees to reimburse the
Underwriters or such Underwriters as have so terminated this Agreement with
respect to themselves, severally, for all out-of-pocket expenses (including the
reasonable fees and expenses of their counsel) incurred by such Underwriters in
connection with this Agreement or the offering contemplated hereunder. If this
Agreement is terminated pursuant to Section 8 by reason of the default of one or
more Underwriters, the Company shall not be obligated to reimburse any
defaulting Underwriting on account of those expenses.

                                       23


         10. Parties. This Agreement shall inure to the benefit of and be
binding upon the Company, the Underwriters, any controlling persons referred to
herein and their respective successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person, firm or corporation any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provision herein contained. No purchaser
of Securities from any Underwriter shall be deemed to be a successor by reason
merely of such purchase.

         11. Notices. Any action by the Underwriters hereunder may be taken by
the Representative on behalf of the Underwriters, and any such action taken by
the Representative shall be binding upon the Underwriters. All notices and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if mailed or transmitted by any standard form of telecommunication.
Notices to the Underwriters shall be given to the Underwriters c/o J.P. Morgan
Securities Inc., 277 Park Avenue, 9th Floor, New York, New York 10172 (telefax:
(212) 622-8358); Attention: Syndicate Desk. Notices to the Company shall be
given to it at 700 Main Street, Cambridge, MA, 02139, Attention: Chief Financial
Officer.

         12. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

         13. Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original and all of which together shall constitute one and
the same instrument.


                                       24


         If the foregoing is in accordance with your understanding, please sign
and return four counterparts hereof.

                          Very truly yours,

                          Transkaryotic Therapies, Inc.

                          By: /s/ Michael J. Astrue
                              _____________________________________
                              Name: Michael J. Astrue
                              Title: President and Chief Executive Officer

The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the date
first above written.

J.P. MORGAN SECURITIES INC.

By: J.P. MORGAN SECURITIES INC.,
         Acting on behalf of themselves
         and as Representative
         of the Underwriters

    By: /s/ Vivek Jain
        ________________________________
        Name: Vivek Jain
        Title: Managing Director

                                       25


                                   SCHEDULE I



                                                         AGGREGATE
                                                         PRINCIPAL
                                                         AMOUNT OF FIRM
                                                         NOTES TO BE
UNDERWRITER                                              PURCHASED
                                                      
J.P. Morgan Securities Inc.                              $54,000,000

SG Cowen & Co., LLC                                      $18,000,000

Pacific Growth Equities, LLC                             $13,500,000

RBC Capital Markets Corporation                          $ 4,500,000

         Total.................................          $90,000,000





                                                                       EXHIBIT A

                            [FORM OF LOCK-UP LETTER]

___________, 2004

J.P. Morgan Securities Inc.
277 Park Avenue
9th Floor
New York, NY  10172

Dear Sirs and Mesdames:

         The undersigned understands that J.P. Morgan Securities Inc. ("J.P.
MORGAN"), acting on behalf of itself and as representative of the several
Underwriters (as defined below) proposes to enter into an Underwriting Agreement
("UNDERWRITING AGREEMENT") with Transkaryotic Therapies, Inc., a Delaware
corporation (the "COMPANY"), providing for the offering (the "OFFERING") by the
several Underwriters, including J.P. Morgan (the "Underwriters") of Convertible
Senior Notes (the "SECURITIES"). The Securities will be convertible into shares
of common stock of the company, par value $.01 per share (the "COMMON STOCK").

         To induce the Underwriters that may participate in the Offering to
continue their efforts in connection with the Offering, the undersigned hereby
agrees that, without the prior written consent of J.P. Morgan on behalf of the
Underwriters, it will not, during the period commencing on the date hereof and
ending 90 days after the date of the Underwriting Agreement, (1) offer, pledge,
sell contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase,
lend, or otherwise transfer or dispose of, directly or indirectly, any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock currently or hereafter owned either of record or beneficially
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) or (2) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Common Stock, or publicly disclose the intention to effect any
transaction described in clause (1) or (2), whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise. The foregoing sentence
shall not apply to (a) transfers of Common Stock by gift, will or intestacy,
including without limitation transfers by gift, will or intestacy to family
members of the undersigned or to a settlement or trust established under the
laws of any country or (b) transfers or sales of Common Stock pursuant to any
contract, instruction or plan, including a contract, instruction or plan
complying with Rule 10b5-1 of the Regulations of the Exchange Act, that has been
entered into by the undersigned prior to the date of this Lock-Up Agreement
provided that in the event of any transfer pursuant to clause (a), the
transferee shall enter into a lock-up agreement substantially in the form of
this Lock-Up Agreement covering the remainder of the 90-day period referred to
herein. In addition, the

                                      A-1


undersigned agrees that, without the prior written consent of J.P. Morgan on
behalf of the Underwriters, it will not, during the period commencing on the
date hereof and ending 90 days after the date of the Underwriting Agreement,
make any demand for or exercise any right with respect to, the registration of
any shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock. The undersigned also agrees and consents to the
entry of stop transfer instructions with the Company's transfer agent and
registrar against the transfer of the undersigned's shares of Common Stock
except in compliance with the foregoing restrictions.

         The undersigned understands that the Company and the Underwriters are
relying upon this Lock-Up Agreement in proceeding toward consummation of the
Offering. The undersigned further understands that this Lock-Up Agreement is
irrevocable and shall be binding upon the undersigned's heirs, legal
representatives, successors and assigns.

         Whether or not the Offering actually occurs depends on a number of
factors, including market conditions. Any offering will only be made pursuant to
an Underwriting Agreement, the terms of which are subject to negotiation between
the Company and the Underwriters.

                                       Very truly yours,

                                       _________________________________________
                                       (Name)

                                       _________________________________________
                                       (Address)

                                      A-2


                                   EXHIBIT A-1

                           PERSONS SUBJECT TO LOCK-UP

Michael J. Asture
Renato Fuchs
Walter Gilbert
Dennis H. Langer
Jonathan S. Leff
Rodman W. Moorhead, III
David D. Pendergast
Gregory D. Perry
Wayne P. Yetter
Warburg, Pincus Equity Partners, L.P.

                                     A-1-1


                                Table of Contents



Page
- ----
                                                                                                     
1.       Registration Statement...........................................................              1

2.       Purchase, Sale and Delivery of the Securities....................................              2

3.       Representations and Warranties...................................................              3

         (a)      Preliminary Prospectus..................................................              3

         (b)      Registration Statement and Prospectus...................................              3

         (c)      Incorporated Documents..................................................              4

         (d)      Financial Statements....................................................              4

         (e)      No Material Adverse Change..............................................              5

         (f)   Organization and Good Standing of the Company..............................              5

         (g)      Organization and Good Standing of the Company's Subsidiaries............              5

         (h)      Due Authorization.......................................................              5

         (i)   Capitalization.............................................................              5

         (j)   The Securities.............................................................              6

         (k)      The Indenture...........................................................              6

         (l)   The Common Stock...........................................................              6

         (m)      No Violation or Default.................................................              7

         (n)      No Conflicts............................................................              7

         (o)      No Consents Required....................................................              7

         (p)      Legal Proceedings.......................................................              7

         (q)      Investment Company Act..................................................              7

         (r)   Independent Accountants....................................................              8

         (s)      Taxes...................................................................              8

         (t)   No Labor Disputes..........................................................              8

         (u)      Compliance With Environmental Laws......................................              8

         (v)      Intellectual Property...................................................              8

         (w)      Licenses and Permits....................................................              9

         (x)      Clinical Trials.........................................................             10

         (y)      Title to Real and Personal Property.....................................             10

         (z)      Compliance with ERISA...................................................             10

         (aa)     Accounting Controls.....................................................             11


                                       i


                                                                                                    
         (bb)     Sarbanes-Oxley Act......................................................             11

         (cc)     Insurance...............................................................             11

         (dd)     Adequate Disclosure.....................................................             11

         (ee)     Forward-Looking Statements..............................................             11

         (ff)     Reporting Requirements..................................................             11

         (gg)     No Rated Securities.....................................................             12

4.       Covenants of the Company.........................................................             12

         (a)      Filing of Prospectus Supplement.........................................             12

         (b)      Delivery of Copies......................................................             12

         (c)      Amendments or Supplements...............................................             12

         (d)      Notice to Representative................................................             12

         (e)      Ongoing Compliance of the Prospectus....................................             13

         (f)   Use of Proceeds............................................................             13

         (g)      Payments of Costs and Expenses..........................................             13

         (h)      No Stabilization........................................................             14

         (i)   Reservation of Common Stock................................................             14

         (j)   Listing of Underlying Securities...........................................             14

         (k)      Agreement Not to Offer or Sell Additional Securities....................             14

         (l)   Furnishing Reports.........................................................             14

         (m)      Unaudited Financial Statements..........................................             15

         (n)      Press Releases..........................................................             15

5.       Conditions to the Underwriters' Obligations......................................             15

         (a)      No Stop Order...........................................................             15

         (b)      Representations and Warranties..........................................             15

         (c)      No Material Adverse Change..............................................             15

         (d)      Officer's Certificate..................................................              16

         (e)      Opinion of Counsel for the Company.....................................              16

         (f)   Opinion of Intellectual Property and Regulatory Counsel...................              19

         (g)      Comfort Letter.........................................................              19

         (h)      Opinion of Counsel for the Underwriters................................              19

         (i)   Lock-up Agreements........................................................              19

         (j)   Listing of the Underlying Securities......................................              19



                                       ii



                                                                                                    
         (k)      Additional Documents...................................................              19

6.       Indemnity and Contribution......................................................              19

         (a)      Indemnification of the Underwriters....................................              20

         (b)      Indemnification of the Company.........................................              20

         (c)      Notice and Procedures..................................................              20

         (d)      Contribution...........................................................              21

         (e)      Limitation on Liability................................................              22

         (f)   Non-Exclusive Remedies....................................................              22

         (g)      Survival...............................................................              22

7.       Termination.....................................................................              22

8.       Effectiveness; Defaulting Underwriters..........................................              23

9.       Reimbursement...................................................................              23

10.      Parties.........................................................................              24

11.      Notices.........................................................................              24

12.      Governing Law...................................................................              24

13.      Counterparts....................................................................              24



                                      iii

EX-4.1

                                                                     EXHIBIT 4.1
                                    FORM OF
                          FIRST SUPPLEMENTAL INDENTURE

                                     BETWEEN

                          TRANSKARYOTIC THERAPIES, INC.

                                       AND

                              THE BANK OF NEW YORK

                                   MAY 4, 2004

                                  TO INDENTURE
                             DATED AS OF MAY 4, 2004
                           PROVIDING FOR THE ISSUANCE
                            OF SENIOR DEBT SECURITIES



                               TABLE OF CONTENTS



                                                                                                     Page
                                                                                                  
ARTICLE ONE THE 2011 NOTES...............................................................              2

         SECTION 101. DESIGNATION OF 2011 NOTES; ESTABLISHMENT OF FORM...................              2
         SECTION 102. AMOUNT 3
         SECTION 103. INTEREST...........................................................              3
         SECTION 104. DENOMINATIONS......................................................              4
         SECTION 105. PLACE OF PAYMENT...................................................              4
         SECTION 106. REDEMPTION.........................................................              4
         SECTION 107. DISCHARGE OF LIABILITY ON 2011 NOTES...............................              4
         SECTION 108. CONVERSION.........................................................              4
         SECTION 109. MATURITY...........................................................              4
         SECTION 110. REPURCHASE.........................................................              4
         SECTION 111. OTHER TERMS OF 2011 NOTES..........................................              5

ARTICLE TWO AMENDMENTS TO THE INDENTURE..................................................              5

         SECTION 201. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION............              5
         SECTION 202. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE................              8
         SECTION 203. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES...................              8
         SECTION 204. CANCELLATION.......................................................              9
         SECTION 205. REDEMPTION.........................................................              9
         SECTION 206. MAINTENANCE OF OFFICE OR AGENCY....................................             10
         SECTION 207. EVENTS OF DEFAULT; LIMITATION ON SUITS.............................             11
         SECTION 208. SUPPLEMENTAL INDENTURES............................................             13
         SECTION 209. COMPANY MAY CONSOLIDATE, ETC.......................................             16
         SECTION 210. CONVERSION.........................................................             17

ARTICLE THREE MISCELLANEOUS PROVISIONS...................................................             36

         SECTION 301. INTEGRAL PART......................................................             36
         SECTION 302. GENERAL DEFINITIONS................................................             36
         SECTION 303. ADOPTION, RATIFICATION AND CONFIRMATION............................             36
         SECTION 304. COUNTERPARTS.......................................................             36
         SECTION 305. GOVERNING LAW......................................................             36

ANNEX A - FORM OF 2011 NOTE


                                       i



                          TRANSKARYOTIC THERAPIES, INC.

                          FIRST SUPPLEMENTAL INDENTURE

         THIS FIRST SUPPLEMENTAL INDENTURE to the Indenture (as defined below),
dated as of May 4, 2004, is made between Transkaryotic Therapies, Inc., a
Delaware corporation (the "COMPANY") and The Bank of New York, a New York
banking corporation, as trustee (the "TRUSTEE"). All terms defined in the
Indenture and used in this Supplemental Indenture but not specifically defined
herein are used herein as so defined.

                               W I T N E S S E T H

         WHEREAS, the Company has executed and delivered to the Trustee an
Indenture, of even date herewith (the "INDENTURE"), providing for the issuance
from time to time of its debentures, notes, bonds or other evidence of
indebtedness in one or more fully registered series;

         WHEREAS, the Indenture provides for the Company's issuance from time to
time of senior unsecured debt securities;

         WHEREAS, no Securities have heretofore been issued under the indenture
and no securityholders currently exist thereunder;

         WHEREAS, Section 9.01(g) of the Indenture provides that the Company and
the Trustee may from time to time without the consent of any Securityholders
enter into one or more indentures supplemental to the Indenture to establish the
form and terms of Securities of any series, including redemption, conversion and
repurchase terms and procedures;

         WHEREAS, Section 2.01 of the Indenture provides that the Company may
enter into supplemental indentures to establish the terms and provisions of a
series of Securities issued pursuant to the Indenture;

         WHEREAS, the Company desires to issue a series of 1.25% senior
convertible notes due May 15, 2011 under the Indenture, and has duly authorized
the creation and issuance of such notes and the execution and delivery of this
Supplemental Indenture to modify the Indenture and provide certain additional
provisions as hereinafter described;

         WHEREAS, the Company and the Trustee deem it advisable to enter into
this Supplemental Indenture for the purpose of establishing the terms of such
convertible senior debt securities and providing for the rights, obligations and
duties of the Trustee with respect to such debt securities;

         WHEREAS, concurrent with the execution hereof, the Company has
delivered an Officers' Certificate and has caused its counsel to deliver to the
Trustee an Opinion of Counsel or a reliance letter upon an Opinion of Counsel to
the effect that the execution of this Supplemental Indenture is authorized or
permitted by the Indenture;

                                       1


         WHEREAS, all conditions and requirements of the Indenture necessary to
make this Supplemental Indenture a valid, binding and legal instrument in
accordance with its terms have been performed and fulfilled by the parties
hereto.

         NOW THEREFORE:

         In consideration of the premises provided for herein, the Company and
the Trustee mutually covenant and agree for the equal and proportionate benefit
of all Holders of the Securities as follows:

                                  ARTICLE ONE

                                 THE 2011 NOTES

SECTION 101. DESIGNATION OF 2011 NOTES; ESTABLISHMENT OF FORM.

         There shall be a series of securities designated "1.25% Senior
Convertible Notes Due May 15, 2011" of the Company (the "2011 NOTES"), and the
form thereof shall be substantially as set forth in Annex A hereto, which is
incorporated into and shall be deemed a part of this First Supplemental
Indenture, in each case with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by the
Indenture, and which may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers of the Company executing
such 2011 Notes, as evidenced by their execution of the 2011 Notes.

         Securities of this series need not be issued at the same time and,
unless specifically provided otherwise, this series may be reopened, without the
consent of the Holders, for issuances of additional securities of such series.

         The 2011 Notes will initially be issued in permanent form as a Global
Security (as defined in the Indenture), substantially in the form set forth in
Annex A hereto, as a book-entry security. Each Global Security shall represent
such of the Outstanding 2011 Notes as shall be specified therein and shall
provide that it shall represent the aggregate amount of Outstanding 2011 Notes
from time to time endorsed thereon and that the aggregate amount of Outstanding
2011 Notes represented thereby may from time to time be increased or reduced to
reflect exchanges, conversions, repurchases and redemptions. Any endorsement of
a Global Security to reflect the amount, or any increase or decrease in the
amount, of Outstanding 2011 Notes represented thereby shall be made by the
Trustee in accordance with written instructions or such other written form of
instructions as is customary for the Depositary, from the Depositary or its
nominee on behalf of any Person having the beneficial interest in the Global
Security.

         The Company initially appoints The Depository Trust Company to act as
Depositary with respect to the Global Securities.

         The Company shall maintain an office or agency where the 2011 Notes may
be presented for purchase or payment ("PAYING AGENT") and an office or agency
where the 2011 Notes may

                                       2


be presented for conversion ("CONVERSION AGENT"). The Company may have one or
more additional paying agents and one or more additional conversion agents.

         The Company shall enter into an appropriate agency agreement with any
Paying Agent or Conversion Agent (other than the Trustee). The agreement shall
implement the provisions of the Indenture and this Supplemental Indenture that
relate to such agent. The Company shall notify the Trustee of the name and
address of any such agent. If the Company fails to maintain a Paying Agent or
Conversion Agent, the Trustee shall act as such and shall be entitled to
appropriate compensation therefor pursuant to Section 7.06 of the Indenture. The
Company or any Subsidiary or an Affiliate of either of them may act as Paying
Agent or Conversion Agent.

         The Company initially appoints the Trustee to act as its agent, Paying
Agent and Conversion Agent with respect to the 2011 Notes.

SECTION 102. AMOUNT.

         (a)      The Trustee shall authenticate and deliver 2011 Notes for
original issue in an initial aggregate Principal Amount of up to $100,000,000
upon a Company Order for the authentication and delivery of the 2011 Notes,
without any further action by the Company.

         (b)      The Company may not issue new 2011 Notes to replace 2011 Notes
that it has paid or delivered to the Trustee for cancellation or that any Holder
has converted pursuant to Article 14 of the Indenture.

SECTION 103. INTEREST.

                  The 2011 Notes shall bear interest at the rate and from the
date specified on the face of the form of 2011 Note attached as Annex A hereto.
Interest shall be payable semi-annually in arrears on each Interest Payment Date
to holders of record on the Regular Record Date immediately preceding such
Interest Payment Date. Interest on the 2011 Notes shall be computed on the basis
of a 360-day year comprised of twelve 30-day months.

         Interest on the 2011 Notes shall accrue from the most recent date to
which interest has been paid, or if no interest has been paid, from May 4, 2004,
until the Principal Amount is paid or duly made available for payment.

         Interest on any 2011 Note that is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security is registered at the close of business on the Regular
Record Date for such interest at the office or agency of the Company maintained
for such purpose. Each installment of interest on any 2011 Note shall be made by
check mailed to the address of the Holder specified in the register of
Securities, provided, however, that, with respect to any Holder with an
aggregate Principal Amount in excess of $2,000,000, at the request of such
Holder in writing to the Company, interest on such Holder's Securities shall be
paid by wire transfer in immediately available funds in accordance with the
written wire transfer instruction supplied by such Holder from time to time to
the Trustee and Paying Agent (if different from the Trustee) at least ten days
prior to the applicable Interest Payment Date. In the case of a Global Security,
interest payable on any Interest Payment Date will be paid by wire transfer of
immediately available funds to the account of the

                                       3


Depositary, with respect to that portion of such Global Security held for its
account by Cede & Co. for the purpose of permitting such party to credit the
interest received by it in respect of such Global Security to the accounts of
the beneficial owners thereof.

SECTION 104. DENOMINATIONS.

         The 2011 Notes shall be in fully registered form without coupons in
denominations of $1,000 of Principal Amount or any integral multiple thereof.

SECTION 105. PLACE OF PAYMENT.

         The "PLACE OF PAYMENT" for the 2011 Notes and the place or places where
the 2011 Notes may be surrendered for registration of transfer, exchange,
repurchase, redemption or conversion and where notices may be given to the
Company in respect of the 2011 Notes is at the office of the Trustee in New
York, New York and at the agency of the Trustee maintained for that purpose at
the office of the Trustee; provided that payment of interest may be made at the
option of the Company by check mailed to the address of the person entitled
thereto as such address shall appear in the Security Register.

SECTION 106. REDEMPTION.

         (a) There shall be no sinking fund for the retirement of the 2011
Notes.

         (b) The Company, at its option, may redeem the 2011 Notes in accordance
with the provisions of and at the redemption price set forth under the captions
"Redemption" and "Notice of Redemption" in the 2011 Notes and in accordance with
the provisions of the Indenture, including, without limitation, Article Three
thereof.

SECTION 107. DISCHARGE OF LIABILITY ON 2011 NOTES.

         Article 11 of the Indenture shall be applicable to the 2011 Notes as
amended by Section 211 hereto.

SECTION 108. CONVERSION.

         The 2011 Notes shall be convertible in accordance with the provisions
and at the conversion price set forth under the caption "Conversion" in the 2011
Notes and in accordance with any applicable provisions of the Indenture,
including, without limitation, Article 14 thereof.

SECTION 109. MATURITY.

         The Stated Maturity of the 2011 Notes is May 15, 2011.

SECTION 110. REPURCHASE.

         The Company, at the option of the Holders thereof, shall repurchase the
2011 Notes in accordance with the provisions of and at the Fundamental Change
Repurchase Price as set forth under the caption "Purchase of 2011 Notes at
Option of Holder Upon a Fundamental Change" in

                                       4


the 2011 Notes and in accordance with the provisions of the Indenture,
including, without limitation, Article 15 thereof.

SECTION 111. OTHER TERMS OF 2011 NOTES.

         Without limiting the foregoing provisions of this Article One, the
terms of the 2011 Notes shall be as set forth in the form of 2011 Notes set
forth in Annex A hereto and as provided in the Indenture. In the event of a
conflict or inconsistency between the Indenture and this First Supplement, this
First Supplement will control.

                                   ARTICLE TWO

                           AMENDMENTS TO THE INDENTURE

         The amendments contained herein shall apply to the 2011 Notes only and
not to any other series of Security issued under the Indenture and any covenants
provided herein are expressly being included solely for the benefit of the 2011
Notes. These amendments shall be effective for so long as any 2011 Notes remain
Outstanding.

SECTION 201. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.

         Section 101 of the Indenture is amended by inserting, amending or
restating, as the case may be, in their appropriate alphabetical position, the
following definitions:

         "Capital Stock" or "capital stock" of any Person means any and all
shares, interests, partnership interests, participations, rights or other
equivalents (however designated) of such Person's equity interest (however
designated) issued by that Person.

         "Change of Control Event" means any transaction or event (whether by
means of an exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization, sale of all or substantially
all the Company's consolidated assets or otherwise) in connection with which all
or substantially all of the Company's Common Stock is exchanged for, converted
into, acquired for or constitutes solely the right to receive, consideration
which is not all or substantially all Common Stock or American Depositary Shares
that:

         -        is listed on, or immediately after the transaction or event
                  will be listed on, a United States national securities
                  exchange, or

         -        is approved, or immediately after the transaction or event
                  will be approved, for quotation on the Nasdaq National Market
                  System or any similar United States system of automated
                  dissemination of quotations of securities prices.

         "Closing Price" with respect to the Company's Common Stock on any date
means the closing price on such date as reported on the National Association of
Securities Dealers Automated Quotation System or the principal U.S. securities
exchange on which the Company's Common Stock is then listed, or, if the
Company's Common Stock is not quoted on the National Association of Securities
Dealers Automated Quotation System and is not listed on a U.S. national or
regional exchange or, as reported on the principal other market on which the

                                       5


Company's Common Stock is then traded. In the absence of such quotations, the
Board of Directors of the Company will make a good faith determination of the
sale price.

         "Common Stock" means the shares of Common Stock, par value $0.01 per
share, of the Company as it exists on the date of this Indenture or any other
shares of Capital Stock of the Company into which the Common Stock shall be
reclassified or changed or, in the event of a merger, consolidation or other
similar transaction involving the Company that is otherwise permitted hereunder
in which the Company is not the surviving corporation, the common stock, common
equity interests, ordinary shares or depositary shares or other certificates
representing common equity interests of such surviving corporation or its direct
or indirect parent corporation.

         "Conversion Agent" has the meaning specified in Section 1.01 hereto.

         "Conversion Date" has the meaning specified in Section 14.02(a) hereto.

         "Conversion Price" has the meaning specified in Section 14.01(c)
hereto.

         "Conversion Rate" has the meaning specified in Section 14.01(c) hereto.

         "Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office at the date of original execution of this Indenture is located at
101 Barclay Street, Floor 8W, New York, New York 10286, Attention: Corporate
Trust Administration, except that, with respect to presentation of the 2011
Notes for payment or registration of transfers or exchanges and the location of
the register, such term means the office or agency of the Trustee at which at
any particular time its principal corporate trust business shall be conducted,
which at the date of original execution of this Indenture is located at 101
Barclay Street, Floor 8W, New York, New York 10286.

         "Current Market Price" has the meaning specified in Section 14.06(f) of
the Indenture.

         "Determination Date" has the meaning specified in Section 14.06(d) of
the Indenture.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute.

         "Expiration Date" has the meaning specified in Section 14.06(e) of the
Indenture.

         "Expiration Time" has the meaning specified in Section 14.06(e) of the
Indenture.

         "Fundamental Change" means any transaction or event resulting in either
a Change of Control Event or a Termination of Trading.

         "Fundamental Change Company Notice" has the meaning specified in
Section 15.01(b) of the Indenture.

         "Fundamental Change Repurchase Date" has the meaning specified in
Section 15.01(a) of the Indenture.

                                       6


         "Fundamental Change Repurchase Notice" has the meaning specified in
Section 15.01(b) of the Indenture.

         "Fundamental Change Repurchase Price" has the meaning specified in
Section 15.01(a) of the Indenture.

         "Global Securities" has the meaning specified in Section 101 hereof.

         "Holder" means a person in whose name a security is registered on the
Registrar's books.

         "interest", when used with respect to the 2011 Notes means any interest
payable under the terms of the 2011 Notes.

         "Interest Payment Date" means May 15 and November 15 of each year,
commencing November 15, 2004.

         "Issue Date" of any 2011 Note means the date on which the 2011 Note was
originally issued as specified on the face of the 2011 Note.

         "Issue Price" of any 2011 Note means, in connection with the original
issuance of such 2011 Note, the initial issue price at which the 2011 Note is
sold to the public as set forth on the face of the 2011 Note.

         "Notice of Conversion" has the meaning specified in Section 14.02(a) of
the Indenture.

         "Principal Amount" of a 2011 Note means the Principal Amount as set
forth on the face of the 2011 Note.

         "Purchased Shares" has the meaning specified in 14.05 of the Indenture.

         "Registrar" has the meaning special in Section 4.02 of the Indenture.

         "Redemption Price" has the meaning specified in the Securities.

         "Regular Record Date" means, with respect to each Interest Payment
Date, the close of business on the May 1 or November 1 next preceding such
Interest Payment Date (whether or not a Business Day).

         "Rights Plan" has the meaning specified in Section 14.06(c) of the
Indenture.

         "Sale Price" means the closing per share sale price (or, if no closing
sale price is reported, the average of the bid and ask prices or, if more than
one in either case, the average of the average bid and average ask prices) on
such date as reported in the composite transactions for the principal United
States securities exchange on which the Common Stock is traded or, if the Common
Stock is not listed on a United States national or regional securities exchange,
as reported by the Nasdaq National Market System or its successors.

         "Securities Act" means the Securities Act of 1933, as amended, or any
successor statute.

                                       7


         "Surviving Entity" has the meaning specified in Section 10.01 of the
Indenture.

         "Termination of Trading" means the Company's Common Stock or other
common stock into which the 2011 Notes are convertible is neither listed for
trading on a United States national securities exchange nor approved for listing
on the Nasdaq National Market System or any similar United States system of
automated dissemination of quotations of securities prices, and no American
Depositary Shares or similar instruments for such common stock are so listed or
approved for listing in the United States.

         "Trading Day" means (x) if the applicable security is quoted on the
Nasdaq National Market System or Nasdaq SmallCap Market, a day on which trades
may be made on thereon or (y) if the applicable security is listed or admitted
for trading on the New York Stock Exchange or another national security
exchange, a day on which the New York Stock Exchange or such other national
security exchange is open for business or (z) if the applicable security is not
so listed, admitted for trading or quoted, any Business Day.

         "Trigger Event" has the meaning specified in Section 14.06(c) of the
Indenture.

         "Triggering Distribution" has the meaning specified in Section 14.06(d)
of the Indenture.

         "2011 Notes" means the 1.25% Senior Convertible Notes due August 2011
of the Company authorized by resolution of the Board of Directors.

SECTION 202. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.

         The Indenture shall be amended by replacing clause (d) of Section 2.05
with the following paragraph:

                  "(d) The Company shall not be required (i) to issue, exchange
         or register the transfer of any Securities during a period beginning at
         the opening of business 15 days before the day of the mailing of a
         notice of redemption of less than all the Outstanding Securities of the
         same series and ending at the close of business on the day of such
         mailing, (ii) to register the transfer of or exchange any Securities of
         any series or portions thereof called for redemption or (iii) to
         exchange or register a transfer of any 2011 Note or portion thereof in
         respect of which a Fundamental Change Repurchase Notice has been
         delivered and not withdrawn by the Holder thereof (except, in the case
         of the purchase of a 2011 Note in part, the portion not to be
         purchased). The provisions of this Section 2.05 are, with respect to
         any Global Security, subject to Section 2.11 hereof."

SECTION 203. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.

         The Indenture shall be amended by replacing the fifth sentence of the
first paragraph of Section 2.07 with the following sentence:

                  "In case any Security that has matured or is about to mature,
         or is about to be repurchased by the Company upon a Fundamental Change
         or redeemed by the Company on a Redemption Date, shall become mutilated
         or be destroyed, lost or stolen, the Company may, instead of issuing a
         substitute Security, pay or authorize the payment of

                                       8


         the same (without surrender thereof except in the case of a mutilated
         Security) if the applicant for such payment shall furnish to the
         Company and the Trustee such security or indemnity as they may require
         to save them harmless, and, in the case of destruction, loss or theft,
         evidence to the satisfaction of the Company and the Trustee of the
         destruction, loss or theft of such Security and the of the ownership
         thereof."

SECTION 204. CANCELLATION.

         The first sentence of Section 2.08 of the Indenture shall be amended by
inserting the word "conversion" in the first sentence thereof, following the
word "redemption".

Section 205.      REDEMPTION.

         Article III of the Indenture shall be amended by:

                  (a) Section 3.01 of the Indenture is amended to read in its
entirety as follows:

                  "Section 3.01 Redemption

                   Prior to May 20, 2007, the 2011 Notes are not redeemable.
         Thereafter, the 2011 Notes are redeemable as follows:

                  (a) At any time on or after May 20, 2007 and before May 20,
         2009, the 2011 Notes are redeemable for cash, in whole or in part, at a
         Redemption Price equal to 100% expressed as a percentage of the
         Principal Amount of Securities to be redeemed, together with accrued
         and unpaid interest, to, but excluding, the Redemption Date, provided
         that the Closing Price of the Company's Common Stock is greater than
         145% of the Conversion Price then in effect for at least 20 Trading
         Days within a period of 30 consecutive Trading Days ending on the
         Trading Day prior to the date on which the written notice is mailed to
         the Trustee of the Company's redemption; provided further that such
         notice date shall be at least 20 days but not more than 60 days prior
         to the Redemption Date; and

                  (b) At any time on or after May 20, 2009, the 2011 Notes are
         redeemable for cash, in whole or in part, at the option of the Company
         at the Redemption Price equal to 100% expressed as a percentage of the
         Principal Amount of Securities to be redeemed, together with accrued
         and unpaid interest, to, but excluding, the Redemption Date."

                  (b) Section 3.02 of the Indenture is amended by replacing the
         words "90 days" with the words "60 days".

                  (c) A new Section 3.07 shall be inserted as follows:

         "Section 3.07.  Conversion Arrangement on Call for Redemption

                  In connection with the 2011 Notes, the Company may arrange for
         the purchase and conversion of any 2011 Notes called for redemption by
         an agreement with one or more investment bankers or other purchasers to
         purchase such 2011 Notes by paying to a

                                       9


         Paying Agent (other than the Company or any of its Affiliates) in trust
         for the Holders, on or before 11:00 A.M. New York City time on the
         Redemption Date, an amount that, together with any amounts deposited
         with such Paying Agent by the Company for the redemption of such 2011
         Notes, is not less than the Redemption Price of such 2011 Notes.
         Notwithstanding anything to the contrary contained in this Article
         Three, the obligation of the Company to pay the Redemption Price of
         such 2011 Notes, including interest, if any, shall be deemed to be
         satisfied and discharged to the extent such amount is so paid by such
         purchasers; provided, however, that nothing in this Section 3.07 shall
         relieve the Company of its obligation to pay the Redemption Price on
         the 2011 Notes called for redemption. If such an agreement is entered
         into, any 2011 Notes called for redemption and not surrendered for
         conversion by the Holders thereof prior to the relevant Redemption Date
         may, at the option of the Company upon written notice to the Trustee,
         be deemed, to the fullest extent permitted by law, acquired by such
         purchasers from such Holders and (notwithstanding anything to the
         contrary contained in Article Fourteen) surrendered by such purchasers
         for conversion, all as of 11:00 A.M. New York City time on the
         Redemption Date, subject to payment of the above amount as aforesaid.
         The Paying Agent shall hold and pay to the Holders whose 2011 Notes are
         selected for redemption any such amount paid to it for purchase in the
         same manner as it would money deposited with it by the Company for the
         redemption of the 2011 Notes. Without the Paying Agent's prior written
         consent, no arrangement between the Company and such purchasers for the
         purchase and conversion of any 2011 Notes shall increase or otherwise
         affect any of the powers, duties, responsibilities or obligations of
         the Paying Agent as set forth in this Indenture, and the Company agrees
         to indemnify the Paying Agent from, and hold it harmless against, any
         loss, liability or expense arising out of or in connection with any
         such arrangement for the purchase and conversion of any 2011 Notes
         between the Company and such purchasers, including the costs and
         expenses incurred by the Paying Agent in the defense of any claim or
         liability reasonably incurred without negligence or bad faith on its
         part arising out of or in connection with the exercise or performance
         of any of its powers, duties, responsibilities or obligations under
         this Indenture, in accordance with the indemnity provisions applicable
         to the Trustee set forth herein."

SECTION 206. MAINTENANCE OF OFFICE OR AGENCY.

         Section 4.02 of the Indenture shall be amended by replacing it with the
following:

                  "So long as any series of the Securities remain Outstanding,
         the Company agrees to maintain an office or agency in the Borough of
         Manhattan, the City and State of New York, with respect to each such
         series and at such other location or locations as may be designated as
         provided in this Section 4.02, where (i) Securities of that series may
         be presented for payment, (ii) Securities of that series may be
         presented as herein above authorized for registration of transfer and
         exchange (the "Registrar"), (iii) Securities of that series may be
         surrendered as herein authorized for conversion and (iv) notices and
         demands to or upon the Company in respect of the Securities of that
         series and this Indenture may be given or served, such designation to
         continue with respect to such office or agency until the Company shall,
         by written notice signed by its President or a Vice President and
         delivered to the Trustee, designate some other office or agency for
         such purposes or any of them. If at any time the Company shall fail to
         maintain any such

                                       10


         required office or agency or shall fail to furnish the Trustee with the
         address thereof, such presentations, notices and demands may be made or
         served at the Corporate Trust Office of the Trustee, and the Company
         hereby appoints the Trustee as its agent to receive all such
         presentations, notices, surrenders and demands."

SECTION 207. EVENTS OF DEFAULT; LIMITATION ON SUITS.

         (a) Clause (a)(1) of Section 6.01 of the Indenture is amended to read
in its entirety as follows:

                  "(1) the Company defaults in the payment of any installment of
         interest upon any of the Securities of that series, as and when the
         same shall become due, and payable, and continuance of such default for
         a period of 30 days; provided, however, that a valid extension of an
         interest payment period by the Company in accordance with the terms of
         any indenture supplemental hereto, shall not constitute a default in
         the payment of interest for this purpose;"

         (b)      Clause (a)(2) of Section 6.01 of the Indenture is amended by
inserting the words "upon repurchase (including upon a Fundamental Change)," in
the first sentence thereof, following the word "redemption".

         (c)      Clause (a)(3) of Section 6.01 of the Indenture is amended by
replacing the phrase "90 days" with the phrase "60 days".

         (d)      Clause (a)(4) of Section 6.01 of the Indenture is renumbered
as clause (a)(7).

         (e)      Section 6.01(a) of the Indenture is amended by included the
                  following new clauses (4), (5) and (6):

         "(4) the Company defaults in the performance of its obligation to
         convert the 2011 Notes upon the exercise of a Holder's rights pursuant
         to Article 14 and continuance of such default for a period of 10 days;

         (5) the Company or any Subsidiary defaults in the payment of the
         principal or interest on any loan, agreement or other instrument under
         which there may be outstanding, or by which there may be secured or
         evidenced, any of the indebtedness of the Company or any of its
         Subsidiaries for money borrowed in excess of $10,000,000 in the
         aggregate (other than the indebtedness for borrowed money secured only
         by the real property where the indebtedness relates and which is
         non-recourse to the Company or to any Subsidiary, whether such
         indebtedness now exists or shall hereafter be created, resulting in
         such indebtedness becoming or being declared due and payable prior to
         its Stated Maturity, and such acceleration shall not have been
         rescinded or annulled within 30 days after the date on which written
         notice of such acceleration has been received by the Company or such
         Subsidiary from the Trustee or by the Trustee, the Company and such
         Subsidiary by holders of at least 25% in principal amount of the
         Securities of that series at the time Outstanding;

         (6) the Company fails to give the Fundamental Change Notice;"

                                       11


         (c) Section 6.01(b) of the Indenture is amended by: (i) inserting the
words "(other than an Event of Default as specified in Section 6.01(a)(7)" after
the words "such case"; (ii) inserting the words "plus accrued and unpaid
interest, if any, to the acceleration date" after the words "the same" and (iii)
inserting the following words at the end of the paragraph:

         "If an Event of Default specified in Section 6.01(a)(7) occurs, the
principal of all the Securities of that series, plus accrued and unpaid
interest, if any, to the acceleration date, shall be immediately and
automatically due and payable without necessity of further action."

         (c) Section 6.01(c) of the Indenture is amended by inserting the words
"and the Redemption Price or Fundamental Change Repurchase Price, as applicable
on", in the first sentence following the phrase, "the principal of (and premium,
if any, on)".

         (d) Section 6.02(a) of the Indenture is amended by replacing the phrase
"90 Business Days" with the phrase "30 days" and inserting the words, "or
repurchase (including upon a Fundamental Change)", following the word
"redemption".

         (e) Section 6.03 of the Indenture is amended by replacing the words
"and interest" in the third paragraph with the words ", Redemption Price,
Fundamental Change Repurchase Price and interest, as the case may be" and
deleting the words "for principal (and premium, if any) and interest,
respectively" at the end of that paragraph.

         (f) Section 6.04 of the Indenture shall be amended by replacing the
second paragraph of that section with the following:

                           "Notwithstanding anything contained herein to the
                  contrary, any other provisions of this Indenture, the right of
                  any holder of any Security to receive payment of the principal
                  of (and premium, if any) and interest on such Security (or in
                  the case of redemption, to receive the Redemption Price on the
                  Redemption Date or in the case of a Fundamental Change, to
                  receive the Fundamental Change Repurchase Price on the
                  Fundamental Change Repurchase Date), as therein provided, on
                  or after the respective due dates expressed in such Security
                  (or in the case of redemption, on the redemption date), or to
                  institute suit for the enforcement of any such payment on or
                  after such respective dates or redemption date, shall not be
                  impaired or affected without the consent of such holder and by
                  accepting a Security hereunder it is expressly understood,
                  intended and covenanted by the taker and holder of every
                  Security of such series with every other such taker and holder
                  and the Trustee, that no one or more holders of Securities of
                  such series shall have any right in any manner whatsoever by
                  virtue or by availing of any provision of this Indenture to
                  affect, disturb or prejudice the rights of the holders of any
                  other of such Securities, or to obtain or seek to obtain
                  priority over or preference to any other such holder, or to
                  enforce any right under this Indenture, except in the manner
                  herein provided and for the equal, ratable and common benefit
                  of all holders of Securities of such series. For the
                  protection and enforcement of the provisions of this Section,
                  each and every Securityholder and the Trustee shall be
                  entitled to such relief as can be given either at law or in
                  equity."

                                       12


         (g)      Section 6.06 of the Indenture is amended by: (i) inserting the
words "the Redemption Price or the Fundamental Change Repurchase Price,"
following the words "or premium, if any," in the third sentence and inserting
the words "the Redemption Price or the Fundamental Change Repurchase Price"
following the words "and any premium" in the third sentence and (ii) inserting
the following phrase following the words "except a default" in the third
sentence:

                  "(a) in respect of a covenant or provision hereof which under
                  Article Nine cannot be modified or amended without the consent
                  of the Holder of each Security then Outstanding and (b)"

         (h)      Section 6.07 of the Indenture is amended by inserting the
words "or the Redemption Price or the Fundamental Change Repurchase Price"
following the words "(or premium, if any)".

         (i)      Section 6.08 below is hereby added in its entirety to the
Indenture.

         Section 6.08. Unconditional Right of Holders to Receive Payment.

         Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of the Principal Amount, Redemption Price, Fundamental
Change Repurchase Price or interest in respect of the Securities held by such
Holder, on or after the respective due dates expressed in the Securities in
accordance with Article 14, or to bring suit for the enforcement of any such
payment on or after such respective dates or the right to convert, shall not be
impaired or affected adversely without the consent of such Holder.

         (j)      Section 6.09 below is hereby added in its entirety to the
Indenture.

         Section 6.09. Waiver of Stay or Extension Laws.

         The Company covenants (to the extent that it may lawfully do so) that
it will not any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

SECTION 208. SUPPLEMENTAL INDENTURES.

         (a)      Section 9.01 of the Indenture shall be amended by replacing
the entire section with the following:

         "In addition to any supplemental indenture otherwise authorized by this
         Indenture, the Company and the Trustee may from time to time and at any
         time enter into an indenture or indentures supplemental hereto (which
         shall conform to the provisions of the Trust

                                       13


         Indenture Act as then in effect), without the consent of the
         Securityholders, for one or more of the following purposes:

                  (a)      to evidence the succession of another Person to the
                           Company and the assumption by any such successor of
                           the covenants of the Company herein and in the
                           Securities of any series;

                  (b)      to add to the covenants of the Company for the
                           benefit of the Holders, or to surrender any right or
                           power herein conferred upon the Company;

                  (c)      to provide for a successor Trustee with respect to
                           the Securities of any series;

                  (d)      to cure any ambiguity or defect, to correct or
                           supplement any provision herein which may be
                           inconsistent with any other provision herein, or to
                           make any other provisions with respect to matters or
                           questions arising under this Indenture which shall
                           not be inconsistent with the provisions of this
                           Indenture, provided that such action pursuant to this
                           clause (d) shall not adversely affect the interests
                           of the Holders in any material respect;

                  (e)      to add any additional Events of Default for the
                           benefit of the Holders;

                  (f)      to convey, transfer, assign, mortgage or pledge to
                           the Trustee as security for the Securities of any
                           series any property or assets;

                  (g)      to increase the Conversion Rate of the Securities of
                           any series; provided, however, that such increase
                           shall be in accordance with the terms of this
                           Indenture or shall not adversely affect the interests
                           of the Holders of the Securities of any series;

                  (h)      to supplement any provision of this Indenture to such
                           extent as shall be necessary to permit or facilitate
                           the discharge of the Securities of any series;
                           provided that such change or modification does not
                           adversely affect the interests of the Holders of the
                           Securities of any series;

                  (i)      to make any change or modification necessary in
                           connection with the registration of the Securities of
                           any series under the Securities Act; provided that
                           such change or modification does not adversely affect
                           the interests of the Holders of Securities of any
                           series;

                  (j)      to add or modify any other provision herein with
                           respect to matters or questions arising hereunder
                           which the Company and the Trustee may deem necessary
                           or desirable and which would not reasonably be
                           expected to adversely affect the interests of the
                           Holders of Securities of any series in any material
                           respect.

                  The Trustee is hereby authorized to join with the Company in
         the execution of any such supplemental indenture, and to make any
         further appropriate agreements and stipulations that may be therein
         contained, but the Trustee shall not be obligated to enter into any
         such supplemental indenture that affects the Trustee's own rights,
         duties or immunities under this Indenture or otherwise.

                                       14


                  Any supplemental indenture authorized by the provisions of
         this Section may be executed by the Company and the Trustee without the
         consent of the holders of any of the Securities at the time
         Outstanding, notwithstanding any of the provisions of Section 9.02."

         (b)      Section 9.02 of the Indenture shall be amended by replacing
the lettered clauses (i) and (ii) of that section with the following:

                  (a)      reduce the rate of or extend the time for payment of
                           interest, if any, on the Security of any series;

                  (b)      reduce the Principal Amount of, or extend the Stated
                           Maturity of, any Security of any series;

                  (c)      make any change that impairs or adversely affects the
                           conversion rights of any Securities of any series;

                  (d)      reduce the Redemption Price or Fundamental Change
                           Repurchase Price of any Security of any series or
                           amend or modify in any manner adverse to the Holders
                           of Securities of any series the Company's obligation
                           to make such payments, whether through an amendment
                           or waiver of provisions in the covenants, definitions
                           or otherwise;

                  (e)      modify the provisions with respect to the right of
                           Holders to cause the Company to repurchase Securities
                           of any series upon a Fundamental Change in a manner
                           adverse to Holders of Securities of any series;

                  (f)      make any interest or principal on a Security of any
                           series payable in money other than that stated in the
                           Security of any series or other than in accordance
                           with the provisions of this Indenture;

                  (g)      impair the right of any Holder to receive payment of
                           the Principal Amount of or interest on a Holder's
                           Securities of any series on or after the due dates
                           therefor or to institute suit for the enforcement of
                           any payment on or with respect to such Holder's
                           Securities of any series;

                  (h)      reduce the quorum or voting requirements under this
                           Indenture;

                  (i)      change the ranking of the Securities of any series in
                           a manner adverse to the Holders of the Securities of
                           any series;

                  (j)      make any change in the amendment provisions which
                           require each Holder's consent or in the waiver
                           provisions;

                  (k)      reduce the percentage in Principal Amount of the
                           Outstanding Securities, the consent of whose Holders
                           is required for any such supplemental indenture, or
                           the consent of whose Holders is required for any
                           waiver (of compliance with certain

                                       15


                           provisions of this Indenture or certain defaults
                           hereunder and their consequences) provided for in
                           this Indenture;

                  (l)      modify any of the provisions of this Section 9.02 or
                           Section 6.06, except to increase any such percentage
                           or to provide that certain other provisions of this
                           Indenture cannot be modified or waived without the
                           consent of the Holder of each Outstanding Security
                           affected thereby."

SECTION 209. COMPANY MAY CONSOLIDATE, ETC. ONLY ON CERTAIN TERMS

         Article 10 of the Indenture is amended by replacing Sections 10.01,
10.02 and 10.03 with the following:

         "Section 10.01.  Company May Consolidate, Etc., Only on Certain Terms.

         The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:

         (a) either (i) the Company shall be the continuing Person or (ii) the
Person (if other than the Company) formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance or transfer, or
which leases, the properties and assets of the Company substantially as an
entirety (the "SURVIVING ENTITY"), (1) shall be either (a) organized and validly
existing under the laws of the United States of America, any State thereof or
the District of Columbia, or (b) organized under the laws of a jurisdiction
outside of the United States and has common stock traded on a national
securities exchange in the United States and a worldwide total market
capitalization of its equity securities before giving effect to the
consolidation or merger of at least US$2 billion, and (2) the Surviving Entity
shall expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, all of the obligations of the Company under the
Securities and this Indenture;

         (b) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be continuing; and

         (c) the Company or the Surviving Entity has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture comply with the applicable provisions of this Indenture.

         Section 10.02.  Successor Entity Substituted.

         (a) Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety in accordance
with Section 10.01, the successor Person formed by

                                       16


such consolidation or into which the Company is merged or to which such
conveyance, transfer or lease is made shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under this Indenture with
the same effect as if such successor Person had been named as the Company
herein, and thereafter, except in the case of a lease, the predecessor Person
shall be relieved of all obligations and covenants under this Indenture and the
Securities.

         (b) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition such changes in phraseology and form (but not in
substance) may be made in the Securities thereafter to be issued as may be
appropriate."

SECTION 210. CONVERSION.

         The Indenture is amended by adding the following Article Fourteen:

                                   ARTICLE XIV

                            CONVERSION OF 2011 NOTES

         Section 14.01.  Conversion Privilege.

         Subject to and upon compliance with the provisions of this Article, at
the option of the Holder thereof, any 2011 Note or any portion of the principal
amount at which is $1,000 or an integral multiple of $1,000 at Stated Maturity
thereof may be converted based on the principal amount at Stated Maturity
thereof, or of such portion thereof, into fully paid and non-assessable shares
(calculated as to each conversion to the nearest 1/100 of a share) of Common
Stock of the Company, at the conversion price, determined as hereinafter
provided, in effect at the time of conversion. Such conversion right shall
commence on the date of issuance of the 2011 Notes and expire at the close of
business on the date provided for in the 2011 Notes with respect to such 2011
Notes. In case a 2011 Note or portion thereof is called for redemption, such
conversion right in respect of the 2011 Note or portion so called shall expire
at the close of business on the second Business Day immediately preceding the
Redemption Date, unless the Company defaults in making the payment due upon
redemption.

            (b) Conversion Period. Notwithstanding the foregoing, if such 2011
Note is submitted or presented for repurchase pursuant to Article 15, such
conversion right shall terminate at the close of business on the Business Day
prior to the Fundamental Change Repurchase Date for such 2011 Note or such
earlier date as the Holder presents such 2011 Note for repurchase (unless the
Company shall default when due, in which case the conversion right shall
terminate at the close of business on the date such default is cured and such
2011 Note is repurchased).

            (c) Conversion Rate; Conversion Price. The conversion rate per 2011
Note (the "CONVERSION Rate") shall be that set forth in under the caption
"Conversion" in the 2011 Notes, subject to adjustment as herein set forth. The
initial Conversion Rate is 54.0972 shares of Common Stock per $1,000 principal
amount of Securities. The "CONVERSION PRICE" at any particular time is
determined by dividing $1,000 by the then-applicable Conversion Rate and rounded
to the nearest cent.

                                       17


         (d) Delivery of Officers' Certificate. If any of the 2011 Notes is
convertible by the Holders into Common Stock, the Company shall deliver to the
Trustee an Officers' Certificate to that effect stating (i) the fact that such
2011 Notes are so convertible, (ii) the date as of which the 2011 Notes are
convertible, (iii) the reason why the 2011 Notes are convertible and (iv) the
Conversion Rate at which the 2011 Notes are convertible. Unless and until a
Trust Officer of the Trustee receives such Officers' Certificate, the Trustee
may assume without inquiry that the 2011 Notes are not convertible. Whenever any
fact set forth in an Officers' Certificate delivered pursuant to this Section
14.01 changes, the Company shall deliver to the Trustee a new Officers'
Certificate setting forth the correct information. Unless and until a Trust
Officer receives such a correcting Officers' Certificate, the Trustee may assume
without inquiry that the last Officers' Certificate delivered to it remains in
full force and effect and is correct is every respect.

         (e) 2011 Notes Converted in Whole or in Part. Provisions of this
Indenture that apply to conversion of all of a 2011 Note also apply to
conversion of a portion of a 2011 Note.

         (f) Rights of Holders. A Holder of 2011 Notes is not entitled to any
rights of a holder of Common Stock until such Holder has converted its 2011
Notes to Common Stock, and only to the extent such 2011 Notes are deemed to have
been converted into Common Stock pursuant to this Article 14.

         (g) Payment of Interest. Except as provided in the following sentence,
Holders will not receive any cash payment representing accrued and unpaid
interest upon conversion of a 2011 Note and accrued and unpaid interest will be
deemed paid in full rather than canceled, extinguished or forfeited.
Notwithstanding the previous sentence, if a 2011 Note shall be surrendered for
conversion during the period from the close of business on any Regular Record
Date for the payment of interest through the close of business on corresponding
Interest Payment Date, the Holder of such 2011 Note (or portion thereof being
converted) at the close of business on such Regular Record Date shall receive
the interest payable on the corresponding Interest Payment Date notwithstanding
the conversion. Such a 2011 Note must be accompanied by an amount, in funds
acceptable to the Company, equal to the interest payable on such Interest
Payment Date on the Principal Amount being converted; provided, however, that no
such payment shall be required if (i) the 2001 Notes surrendered for conversion
shall have been called for redemption by the Company on a Redemption Date that
is after such Regular Record Date but prior to the corresponding Interest
Payment Date or (ii) there shall exist at the time of conversion a default in
the payment of interest on the 2011 Notes. Except where 2011 Notes surrendered
for conversion must be accompanied by payment as described above, no interest on
converted 2011 Notes will be payable by the Company on any Interest Payment Date
subsequent to the date of conversion.

         Section 14.02. Conversion Procedure.

         (a) To convert a 2011 Note, a Holder must (i) complete and manually
sign the conversion notice on the back of the 2011 Note or facsimile of the
conversion notice and deliver such notice to a Conversion Agent, (ii) surrender
the 2011 Note to a Conversion Agent or, in the case of a Global Security,
deliver, or cause to be delivered, by book-entry delivery an interest in such
2011 Note, (iii) furnish appropriate endorsements and transfer documents if
required by a Registrar or a Conversion Agent, (iii) in the case of a Global
Security, complete, or cause to be

                                       18


completed, the appropriate instruction form for conversion pursuant to the
Depositary's book-entry conversion program, (v) pay any amount as required by
Section 14.01(g), if applicable, and (vi) pay any transfer or similar tax, if
required. Such notice is hereinafter referred to as a "NOTICE OF CONVERSION." A
2011 Note shall be deemed to have been converted as of the close of business on
the date (the "CONVERSION DATE") on which the Holder has complied with the
immediately preceding sentence of this clause (a) of Section 14.02. Anything
herein to the contrary notwithstanding, in the case of Global Securities, a
Notice of Conversion shall be delivered and such 2011 Notes shall be surrendered
for conversion in accordance with the rules and procedures of the Depositary as
in effect from time to time.

         (b) The Company will, as soon as practicable after the Conversion Date,
issue, or cause to be issued, and deliver to the Conversion Agent or to such
Holder, or such Holder's nominee or nominees, in book-entry form, the number of
full shares of Common Stock, if any, to which such Holder shall be entitled. The
Person or Persons entitled to receive such Common Stock upon such conversion
shall be treated for all purposes as the record holder or holders of such Common
Stock, as of the close of business on the applicable Conversion Date; provided,
however, that no surrender of a 2011 Note on any date when the stock transfer
books of the Company shall be closed shall be effective to constitute the Person
or Persons entitled to receive the shares of Common Stock upon such conversion
as the record holder or holders of such shares of Common Stock on such date, but
such surrender shall be effective to constitute the Person or Persons entitled
to receive such shares of Common Stock as the record holder or holders thereof
for all purposes at the close of business on the next succeeding day on which
such stock transfer books are open; provided further that such conversion shall
be at the Conversion Rate in effect on the Conversion Date as if the stock
transfer books of the Company had not been closed. Upon conversion of a 2011
Note, such Person shall no longer be a Holder of such 2011 Note. Except as
otherwise provided in Section 14.06, no payment or adjustment will be made for
dividends or distributions on shares of Common Stock issued upon conversion of a
2011 Note.

         (c) If a Holder converts more than one 2011 Note at the same time, the
number of shares of Common Stock issuable upon the conversion shall be based on
the aggregate Principal Amount of 2011 Notes converted.

         (d) Upon surrender of a 2011 Note that is converted in part, the
Company shall execute, and the Trustee shall authenticate and deliver to the
Holder, a new 2011 Note equal in principal amount to the unconverted portion of
the 2011 Note surrendered.

         (e) If the last day on which 2011 Note may be converted is not a
Business Day in a place where a Conversion Agent is located, the 2011 Notes may
be surrendered to that Conversion Agent on the next succeeding Business Day.

         (f) Holders that have already delivered a Fundamental Change Repurchase
Notice with respect to a 2011 Note may not surrender such 2011 Note for
conversion until the Fundamental Change Repurchase Notice has been withdrawn in
accordance with the procedures set forth in Article 15.

         Section 14.03. Fractional Shares.

                                       19


         The Company will not issue fractional shares of Common Stock upon
conversion of 2011 Notes. In lieu thereof, the Company will pay an amount in
cash for the current market value of the fractional shares. The current market
value of a fractional share shall be determined, (calculated to the nearest
1/1000th of a share) by multiplying the Closing Price of the Common Stock on the
Trading Day immediately prior to the Conversion Date by such fractional share
and rounding the product to the nearest whole cent.

         Section 14.04. Taxes on Conversion.

         If a Holder converts a 2011 Note, the Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issuance of
shares of Common Stock upon such conversion. However, the Holder shall pay any
such tax which is due because the Holder requests the shares to be issued in a
name other than the Holder's name. The Conversion Agent may refuse to deliver
the certificate representing the Common Stock being issued in a name other than
the Holder's name until the Conversion Agent receives a sum sufficient to pay
any tax which will be due because the shares are to be issued in a name other
than the Holder's name. Nothing herein shall preclude any tax withholding
required by law or regulation.

         Section 14.05. Company to Provide Stock.

         (a) The Company shall, prior to issuance of any 2011 Notes hereunder,
and from time to time as may be necessary, reserve, out of its authorized but
unissued Common Stock, a sufficient number of shares of Common Stock to permit
the conversion of all outstanding 2011 Notes into shares of Common Stock
(including after taking into account any adjustments to the Conversion Rate
pursuant to Section 14.06).

         All shares of Common Stock delivered upon conversion of the 2011 Notes
shall be newly issued shares, shall be duly authorized, validly issued, fully
paid and non-assessable and shall be free from preemptive rights and free of any
lien or adverse claim.

         The Company will endeavor promptly to comply with all federal and state
securities laws regulating the offer and delivery of shares of Common Stock upon
conversion of 2011 Notes, if any, and will list or cause to have quoted such
shares of Common Stock on each national securities exchange or on the New York
Stock Exchange, the Nasdaq National Market System or other over-the-counter
market or such other market on which the Common Stock is then listed or quoted;
provided, however, that if rules of such automated quotation system or exchange
permit the Company to defer the listing of such Common Stock until the first
conversion of the 2011 Notes into Common Stock in accordance with the provisions
of this Indenture, the Company covenants to list such Common Stock issuable upon
conversion of the Notes in accordance with the requirements of such automated
quotation system or exchange at such time.

         Section 14.06. Adjustment of Conversion Rate.

         The Conversion Rate shall be adjusted from time to time by the Company
as follows:

                                       20


         (a) In case the Company shall (i) pay a dividend on its Common Stock in
shares of Common Stock, (ii) make a distribution on its Common Stock in shares
of Common Stock, (iii) subdivide its outstanding Common Stock into a greater
number of shares, or (iv) combine its outstanding Common Stock into a smaller
number of shares, the Conversion Rate in effect immediately prior thereto shall
be adjusted so that the Holder of any 2011 Note thereafter surrendered for
conversion shall be entitled to receive that number of shares of Common Stock
which it would have owned had such 2011 Note been converted immediately prior to
the happening of such event. An adjustment made pursuant to this subsection (a)
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of subdivision or combination.

         (b) Subject to the last paragraph of Section 14.06(c), in case the
Company shall issue rights or warrants (other than pursuant to a stockholder
rights plan) to all or substantially all holders of its Common Stock entitling
them (for a period commencing no earlier than the record date described below
and expiring not more than 60 days after such record date) to subscribe for or
purchase shares of Common Stock (or securities convertible into Common Stock) at
a price per share (or having a conversion price per share) less than the Closing
Price per share of Common Stock on the Business Day immediately prior to the
date of announcement of such issuance, the Conversion Rate in effect shall be
adjusted so that the same shall equal the rate determined by multiplying the
Conversion Rate in effect immediately prior to such announcement by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
at the close of business on the date of announcement plus the number of
additional shares of Common Stock offered (or into which the convertible
securities so offered are convertible), and the denominator of which shall be
the number of shares of Common Stock outstanding at the close of business on the
date of announcement plus the number of shares which the aggregate offering
price of the total number of shares of Common Stock so offered (or the aggregate
conversion price of the convertible securities so offered, which shall be
determined by multiplying the number of shares of Common Stock issuable upon
conversion of such convertible securities by the conversion price per share of
Common Stock pursuant to the terms of such convertible securities) would
purchase at the Current Market Price per share of Common Stock on the Business
Day immediately preceding the date of announcement of such issuance. Such
adjustment shall be made successively whenever any such rights or warrants are
issued, and shall become effective on the day following the date of announcement
of such issuance. If at the end of the period during which such rights or
warrants are exercisable not all rights or warrants shall have been exercised,
the adjusted Conversion Rate shall be immediately readjusted to what it would
have been based upon the number of additional shares of Common Stock actually
issued (or the number of shares of Common Stock issuable upon conversion of
convertible securities actually issued).

         (c) In case the Company shall distribute to all or substantially all
holders of its Common Stock any shares of capital stock of the Company (other
than Common Stock), evidences of indebtedness or other non-cash assets
(including securities of any person other than the Company but excluding (1)
dividends or distributions paid exclusively in cash or (2) dividends or
distributions referred to in subsection (a) of this Section 14.06), or shall
distribute to all or substantially all holders of its Common Stock rights or
warrants to subscribe for or purchase any of its securities (excluding those
rights and warrants referred to in

                                       21


subsection (b) of this Section 14.06 and also excluding the distribution of
rights to all holders of Common Stock pursuant to a Rights Plan (as defined
below) or the detachment of such rights to the extent set forth in the second
following paragraph), then in each such case the Conversion Rate shall be
adjusted so that the same shall equal the rate determined by multiplying the
current Conversion Rate by a fraction of which the numerator shall be the
Current Market Price per share of the Common Stock on the record date mentioned
below and the denominator shall be the Current Market Price per share of the
Common Stock on such record date less the fair market value on such record date
(as determined by the Board of Directors, whose determination shall be
conclusive evidence of such fair market value and which shall be evidenced by an
Officers' Certificate delivered to the Trustee) of the portion of the capital
stock, evidences of indebtedness or other non-cash assets so distributed or of
such rights or warrants applicable to one share of Common Stock (determined on
the basis of the number of shares of Common Stock outstanding on the record
date). Such adjustment shall be made successively whenever any such distribution
is made and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such distribution.

         In the event the then fair market value (as so determined) of the
portion of the Capital Stock, evidences of indebtedness or other non-cash assets
so distributed or of such rights or warrants applicable to one share of Common
Stock is equal to or greater than the Current Market Price per share of the
Common Stock on such record date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each holder of a 2011 Note shall have the right
to receive upon conversion the amount of Capital Stock, evidences of
indebtedness or other non-cash assets so distributed or of such rights or
warrants such holder would have received had such holder converted each 2011
Note on such record date. In the event that such dividend or distribution is not
so paid or made, the Conversion Rate shall again be adjusted to be the
Conversion Rate which would then be in effect if such dividend or distribution
had not been declared. If the Board of Directors determines the fair market
value of any distribution for purposes of this Section 14.06 by reference to the
actual or when issued trading market for any securities, it must in doing so
consider the prices in such market over the same period used in computing the
Current Market Price of the Common Stock.

         In the event that the Company has in effect a preferred shares rights
plan ("Rights Plan"), upon conversion of the 2011 Notes into Common Stock, to
the extent that the Rights Plan is still in effect upon such conversion, the
holders of 2011 Notes will receive, in addition to the Common Stock, the rights
described therein (whether or not the rights have separated from the Common
Stock at the time of conversion), subject to the limitations set forth in the
Rights Plan. If the Rights Plan provides that upon separation of rights under
such plan from the Company's Common Stock that the Holders would not be entitled
to receive any such rights in respect of the Common Stock issuable upon
conversion of the 2011 Notes, the Conversion Rate will be adjusted as provided
in this Section 14.06(c) (with such separation deemed to be the distribution of
such rights), subject to readjustment in the event of the expiration,
termination or redemption of the rights. Any distribution of rights or warrants
pursuant to a Rights Plan that would allow a Holder to receive upon conversion,
in addition to the Common Stock, the rights described therein (whether or not
the rights have separated from the Common Stock at the time of conversion),
shall not constitute a distribution of rights or warrants pursuant to this
Article 14.

                                       22


                  Rights or warrants distributed by the Company to all holders
of Common Stock entitling the holders thereof to subscribe for or purchase
shares of the Company's Capital Stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a specified
event or events ("Trigger Event"): (i) are deemed to be transferred with such
shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in
respect of future issuances of Common Stock, shall be deemed not to have been
distributed for purposes of this Section 14.06 (and no adjustment to the
Conversion Rate under this Section 14.06 will be required) until the occurrence
of the earliest Trigger Event, whereupon such rights and warrants shall be
deemed to have been distributed and an appropriate adjustment (if any is
required) to the Conversion Rate shall be made under this clause (c) of Section
14.06. If any such right or warrant, including any such existing rights or
warrants distributed prior to the date of this Indenture, are subject to events,
upon the occurrence of which such rights or warrants become exercisable to
purchase different securities, evidences of indebtedness or other assets, then
the date of the occurrence of any and each such event shall be deemed to be the
date of distribution and record date with respect to new rights or warrants with
such rights (and a termination or expiration of the existing rights or warrants
without exercise by any of the holders thereof). In addition, in the event of
any distribution (or deemed distribution) of rights or warrants, or any Trigger
Event or other event (of the type described in the preceding sentence) with
respect thereto that was counted for purposes of calculating a distribution
amount for which an adjustment to the Conversion Rate under this Section 14.06
was made, (1) in the case of any such rights or warrants which shall all have
been redeemed or repurchased without exercise by any holders thereof, the
Conversion Rate shall be readjusted upon such final redemption or repurchase to
give effect to such distribution or Trigger Event, as the case may be, as though
it were a cash distribution, equal to the per share redemption or repurchase
price received by a holder or holders of Common Stock with respect to such
rights or warrants (assuming such holder had retained such rights or warrants),
made to all holders of Common Stock as of the date of such redemption or
repurchase, and (2) in the case of such rights or warrants which shall have
expired or been terminated without exercise by any holders thereof, the
Conversion Rate shall be readjusted as if such rights and warrants had not been
issued.

            (d) In case the Company shall, by dividend or otherwise, at any time
distribute cash (a "TRIGGERING DISTRIBUTION") to all or substantially all
holders of its Common Stock, the Conversion Rate shall be increased so that the
same shall equal the rate determined by multiplying such Conversion Rate in
effect on the Business Day (the "DETERMINATION DATE") immediately preceding the
day on which such Triggering Distribution is declared by the Company by a
fraction of which the numerator shall be the Current Market Price per share of
the Common Stock on the Determination Date, and the denominator shall be the
Current Market Price per share of the Common Stock on the Determination Date
less the aggregate amount of cash so distributed applicable to one share of
Common Stock (determined on the basis of the number of shares of Common Stock
outstanding on the Determination Date), such increase to become effective
immediately prior to the opening of business on the day following the date on
which the Triggering Distribution is paid. It is expressly understood that a
stock buyback, repurchase or similar transaction or program shall in no event be
considered a Triggering Distribution for purposes of this clause (d) or (e) of
Section 14.06.

                                       23


         (e) In case the Company or any of its Subsidiaries shall purchase any
shares of the Company's Common Stock by means of a tender offer, then, effective
immediately prior to the opening of business on the day after the last date (the
"EXPIRATION DATE") tenders could have been made pursuant to such tender offer
(as it may be amended) (the last time at which such tenders could have been made
on the Expiration Date is hereinafter sometimes called the "EXPIRATION TIME"),
the Conversion Rate shall be increased so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect immediately prior to the
close of business on the Expiration Date by a fraction of which the numerator
shall be the sum of (x) the aggregate consideration (determined as set forth
below) payable to stockholders of the Company based on the acceptance (up to any
maximum specified in the terms of the tender offer) of all shares validly
tendered and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "PURCHASED SHARES")
and (y) the product of the number of shares of Common Stock outstanding (less
any Purchased Shares and excluding any shares held in the treasury of the
Company) immediately prior to the Expiration Time and the Current Market Price
per share of Common Stock (as determined in accordance with clause (f) of
Section 14.06), and the denominator shall be the product of the number of shares
of Common Stock outstanding (including Purchased Shares but excluding any shares
held in the treasury of the Company) immediately prior to the Expiration Time
multiplied by the Current Market Price per share of the Common Stock (as
determined in accordance with clause (f) of Section 14.06). For purposes of this
clause (e) of Section 14.06, the aggregate consideration in any such tender
offer shall equal the sum of the aggregate amount of cash consideration and the
aggregate fair market value (as determined by the Board of Directors, whose
determination shall be conclusive evidence thereof and which shall be evidenced
by an Officers' Certificate delivered to the Trustee) of any other consideration
payable in such tender offer. In the event that the Company is obligated to
purchase shares pursuant to any such tender offer, but the Company is
permanently prevented by applicable law from effecting any or all such purchases
or any or all such purchases are rescinded, the Conversion Rate shall again be
adjusted to be the Conversion Rate which would have been in effect based upon
the number of shares actually purchased. If the application of this clause (e)
of Section 14.06 to any tender offer would result in a decrease in the
Conversion Rate, no adjustment shall be made for such tender offer under this
Section 14.06(e). For purposes of this clause (e) of Section 14.06, the term
"tender offer" shall mean and include both tender offers and exchange offers,
all references to "purchases" of shares in tender offers (and all similar
references) shall mean and include both the purchase of shares in tender offers
and the acquisition of shares pursuant to exchange offers, and all references to
"tendered shares" (and all similar references) shall mean and include shares
tendered in both tender offers and exchange offers.

         (f) For the purpose of any computation under clauses (b), (c) and (d)
of Section 14.06, the current market price (the "CURRENT MARKET PRICE") per
share of Common Stock on any date shall be deemed to be the average of the daily
Closing Prices for the ten consecutive Trading Days commencing 11 Trading Days
before (i) the Determination Date, with respect to distributions under
subsection (c) of this Section 14.06 or (ii) the record date with respect to
distributions, issuances or other events requiring such computation under
subsection (b) or (d) of this Section 14.06. For purposes of any computation
under subsection (e) of this Section 14.06, the Current Market Price per share
of Common Stock shall be deemed to be the average of the

                                       24


daily Closing Prices for the ten consecutive Trading Days commencing on the
Trading Day next succeeding the Expiration Date.

         (g) In any case in which this Section 14.06 shall require that an
adjustment be made following a record date, an announcement date or a
Determination Date or Expiration Date, as the case may be, established for
purposes of this Section 14.06, the Company may elect to defer (but only until
five Business Days following the filing by the Company with the Trustee of the
certificate described in Section 14.09) issuing to the Holder of any 2011 Note
converted after such record date or announcement date or Determination Date or
Expiration Date the shares of Common Stock and other capital stock of the
Company issuable upon such conversion over and above the shares of Common Stock
and other capital stock of the Company issuable upon such conversion only on the
basis of the Conversion Rate prior to adjustment; and, in lieu of the shares the
issuance of which is so deferred, the Company shall issue or cause its transfer
agents to issue due bills or other appropriate evidence prepared by the Company
of the right to receive such shares. If any distribution in respect of which an
adjustment to the Conversion Rate is required to be made as of the record date
or announcement date or Determination Date or Expiration Date therefor is not
thereafter made or paid by the Company for any reason, the Conversion Rate shall
be readjusted to the Conversion Rate which would then be in effect if such
record date had not been fixed or such announcement date or effective date or
Determination Date or Expiration Date had not occurred.

         Section 14.07. No Adjustment.

         (a) No adjustment need be made for issuances of Common Stock pursuant
to a Company plan for reinvestment of dividends or interest or for a change in
the par value or a change to no par value of the Common Stock.

         (b) No adjustment in the Conversion Rate shall be made pursuant to this
Section 14.06 if the Holders may participate in the transaction that would
otherwise give rise to an adjustment pursuant to Section 14.06.

         (c) Other than as described above in Section 14.06, no adjustment to
the Conversion Rate shall be required for any issuance of Common Stock or
convertible or exchangeable securities or rights to purchase Common Stock or
convertible or exchangeable securities.

         (d) Except as provided in Section 14.01(g), no payment or adjustment to
the Conversion Rate shall be required for accrued and unpaid interest.

         Section 14.08. Adjustment for Tax Purposes.

         The Company shall be entitled to make such increases in the Conversion
Rate, in addition to those required by Section 14.06, as it in its discretion
shall determine to be advisable in order that any stock dividends, subdivisions
of shares, distributions of rights to purchase stock or securities or
distributions of securities convertible into or exchangeable for stock hereafter
made by the Company to its stockholders shall not be taxable.

                                       25


         Section 14.09. Notice of Conversion Rate Adjustment.

         Whenever the Conversion Rate or conversion privilege is adjusted, the
Company shall promptly mail to Holders of 2011 Notes a notice of the adjustment
and file with the Trustee an Officers' Certificate briefly stating the facts
requiring the adjustment and the manner of computing it. Unless and until the
Trustee shall receive an Officers' Certificate setting forth an adjustment of
the Conversion Rate, the Trustee may assume without inquiry that the Conversion
Rate has not been adjusted and that the last Conversion Rate of which it has
knowledge remains in effect.

         Section 14.10. Notice of Certain Transactions. In the event that:

         (a) the Company takes any action which would require an adjustment in
the Conversion Rate;

         (b) the Company consolidates or merges with, or transfers all or
substantially all of its property and assets to, another corporation and
shareholders of the Company must approve the transaction; or

         (c) there is a dissolution or liquidation of the Company,

the Company shall mail to Holders and file with the Trustee a notice stating the
proposed record or effective date, as the case may be. The Company shall mail
the notice at least ten days before such date. Failure to mail such notice or
any defect therein shall not affect the validity of any transaction referred to
in clause (a), (b) or (c) of this Section 14.10.

         Section 14.11. Effect of Reclassification, Consolidation, Merger or
Sale on Conversion Privilege.

         If any of the following shall occur, namely: (a) any reclassification
or change of shares of Common Stock issuable upon conversion of the 2011 Notes
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination, or any
other change for which an adjustment is provided in Section 14.06); (b) any
consolidation or merger or combination to which the Company is a party other
than a merger in which the Company is the continuing corporation and which does
not result in any reclassification of, or change (other than in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination) in, outstanding shares of Common Stock;
or (c) any sale or conveyance as an entirety or substantially as an entirety of
the property and assets of the Company, directly or indirectly, to any Person,
then the Company, or such successor, purchasing or transferee corporation, as
the case may be, shall, as a condition precedent to such reclassification,
change, combination, consolidation, merger, sale or conveyance, execute and
deliver to the Trustee a supplemental indenture providing that the Holder of
each 2011 Note then outstanding shall have the right to convert such 2011 Note
into the kind and amount of shares of stock and other securities and property
(including cash) receivable upon such reclassification, change, combination,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock deliverable upon conversion

                                       26


of such 2011 Note immediately prior to such reclassification, change,
combination, consolidation, merger, sale or conveyance. Such supplemental
indenture shall provide for adjustments of the Conversion Rate which shall be as
nearly equivalent as may be practicable to the adjustments of the Conversion
Rate provided for in this Article 14. If, in the case of any such consolidation,
merger, combination, sale or conveyance, the stock or other securities and
property (including cash) receivable thereupon by a holder of Common Stock
include shares of stock or other securities and property of a person other than
the successor, purchasing or transferee corporation, as the case may be, in such
consolidation, merger, combination, sale or conveyance, then such supplemental
indenture shall also be executed by such other person and shall contain such
additional provisions to protect the interests of the Holders of the 2011 Notes
as the Board of Directors shall reasonably consider necessary by reason of the
foregoing. The provisions of this Section 14.11 shall similarly apply to
successive reclassifications, changes, combinations, consolidations, mergers,
sales or conveyances.

         In the event the Company shall execute a supplemental indenture
pursuant to this Section 14.11, the Company shall promptly file with the Trustee
(x) an Officers' Certificate briefly stating the reasons therefor, the kind or
amount of shares of stock or other securities or property (including cash)
receivable by Holders of the 2011 Notes upon the conversion of their 2011 Notes
after any such reclassification, change, combination, consolidation, merger,
sale or conveyance, any adjustment to be made with respect thereto and that all
conditions precedent have been complied with and (y) an Opinion of Counsel that
all conditions precedent have been complied with, and shall promptly mail notice
thereof to all Holders.

         Section 14.12. Trustee's Disclaimer.

         The Trustee shall have no duty to determine when an adjustment under
this Article 14 should be made, how it should be made or what such adjustment
should be, but may accept as conclusive evidence of that fact or the correctness
of any such adjustment, and shall be protected in relying upon, an Officers'
Certificate including the Officers' Certificate with respect thereto which the
Company is obligated to file with the Trustee pursuant to Section 14.09. The
Trustee makes no representation as to the validity or value of any securities or
assets issued upon conversion of 2011 Notes, and the Trustee shall not be
responsible for the Company's failure to comply with any provisions of this
Article 14.

         The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 14.11, but may accept as conclusive evidence of the
correctness thereof, and shall be fully protected in relying upon, the Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 14.11.

         Section 14.13. Voluntary Increase.

         The Company from time to time may increase the Conversion Rate by any
amount for any period of time if the period is at least 20 days and if the
increase is irrevocable during the period if the Board of Directors determines
that such increase would be in the best interest of the Company or the Board of
Directors deems it advisable to avoid or diminish income tax to

                                       27


holders of shares of our Common Stock in connection with any stock or rights
dividend or distribution or similar event, and the Company provides 15 days
prior notice of any increase in the Conversion Rate.

         Section 14.14. Company Determination Final.

         Any determination that the Company or the Board of Directors must make
pursuant to this Article 14 shall be conclusive if made in good faith and in
accordance with the provisions of this Article 14, absent manifest error, and
set forth in a resolution of the Board of Directors.

SECTION 216. REPURCHASE AT OPTION OF HOLDER; REPURCHASE UPON CHANGE IN CONTROL;
TAX EVENTS.

         The Indenture is amended by inserting the following new Article 15:

                                   ARTICLE XV

               REPURCHASE OF 2011 NOTES UPON A FUNDAMENTAL CHANGE

         Section 15.01. Repurchase of 2011 Notes at Option of the Holder Upon
Fundamental Change.

         (a) General. If prior to the Stated Maturity there shall have occurred
a Fundamental Change, 2011 Notes shall be repurchased by the Company at a price
(the "FUNDAMENTAL CHANGE REPURCHASE PRICE") equal to 100% of the Principal
Amount plus accrued and unpaid interest to, but excluding, the Fundamental
Change Repurchase Date (as defined below) on a date specified by the Company
that is not less than 25 days nor more than 35 days after the date of the
mailing of a Fundamental Change Company Notice pursuant to clause (b) of this
Section 15.01 (the "FUNDAMENTAL CHANGE REPURCHASE DATE"), at the option of the
Holder thereof, in accordance with the following procedures; provided that the
Company shall not be required to repurchase the 2011 Notes pursuant to this
Section 15.01 if the Sale Price per share of Common Stock for any five Trading
Days within the period of ten consecutive Trading Days ending immediately after
the later of the Fundamental Change and the public announcement of the
Fundamental Change equals or exceeds 110% of the Conversion Price of the 2011
Notes in effect on each of those five Trading Days.

         (b) Company Notice of Fundamental Change. Within 15 days after the
occurrence of a Fundamental Change, the Company shall, if Holders have the right
to require the Company to repurchase 2011 Notes hereunder, deliver a written
notice of Fundamental Change (the "FUNDAMENTAL CHANGE COMPANY NOTICE") by
first-class mail or by overnight courier to the Trustee and to each Holder (and
to beneficial owners as required by applicable law). The notice shall include a
form of Fundamental Change Repurchase Notice to be completed by the Holder of a
2011 Note and shall state:

                  (i) the events causing a Fundamental Change and the date of
         such Fundamental Change;

                                       28


                  (ii) the date by which a Holder must deliver a Fundamental
         Change Repurchase Notice to elect the repurchase option pursuant to
         this Section 15.01;

                  (iii) the Fundamental Change Repurchase Date;

                  (iv) the Fundamental Change Repurchase Price;

                  (v) whether the Fundamental Change Repurchase Price will be
         paid in cash, shares of Common Stock or a combination thereof,
         specifying the percentages of each;

                  (vi) if shares of Common Stock will be used to pay all or part
         of the Fundamental Change Repurchase Price, state:

                           (a) the method for valuing the shares of Common
                  Stock to be delivered in connection with the repurchase; and

                           (b) that holders of the 2011 Notes will bear the
                  market risk with respect to the value of the shares of Common
                  Stock to be delivered from the date the number of shares is
                  determined;

                  (vii) the name and address of the Paying Agent and the
         Conversion Agent;

                  (viii) the Conversion Rate applicable on the date of the
         Fundamental Change Company Notice;

                  (ix) that 2011 Notes as to which a Fundamental Change
         Repurchase Notice has been given may be converted pursuant to Article
         14 hereof only if the Fundamental Change Repurchase Notice has been
         withdrawn in accordance with the terms of this Indenture;

                  (x) that 2011 Notes must be surrendered to the Paying Agent
         for cancellation to collect payment;

                  (xi) that the Fundamental Change Repurchase Price for any 2011
         Note as to which a Fundamental Change Repurchase Notice has been duly
         given and not withdrawn will be paid promptly following the later of
         the Fundamental Change Repurchase Date and the time of surrender of
         such 2011 Note as described in clause (x) above;

                  (xii) the procedures the Holder must follow to exercise rights
         under this Section 15.01;

                  (xiii) the conversion rights of the 2011 Notes;

                                       29


                  (xiv) the procedures for withdrawing a Fundamental Change
         Repurchase Notice;

                  (xv) that, unless the Company defaults in making payment of
         such Fundamental Change Repurchase Price, 2011 Notes covered by any
         Fundamental Change Repurchase Notice will cease to be outstanding and
         interest will cease to accrue on and after the Fundamental Change
         Repurchase Date; and

                  (xvi) the CUSIP number of the 2011 Notes.

         At the Company's request, the Trustee shall give such Fundamental
Change Company Notice in the Company's name and at the Company's expense;
provided that, in all cases, the text of such Fundamental Change Company Notice
shall be prepared by the Company. In connection with delivery of the Fundamental
Change Company Notice to the Holders, the Company shall publish a notice
containing substantially the same information that is required in the
Fundamental Change Company Notice in a newspaper published in the English
language, customarily published each Business Day and of general circulation in
The City of New York, or publish such information on the Company's website or
through such other public medium as the Company may use at such time.

         (c) Fundamental Change Repurchase Notice. Holders must deliver to the
Paying Agent:

                  (1) a written notice of repurchase (a "FUNDAMENTAL CHANGE
         REPURCHASE NOTICE"), substantially in the form of Exhibit A hereto, at
         any time from the opening of business on the date of the Fundamental
         Change Company Notice until the close of business on Business Day prior
         to the Fundamental Change Repurchase Date stating:

                           (A) the certificate number (if such 2011 Note
                  is held other than in global form) of the 2011 Note which the
                  Holder will deliver to be purchased;

                           (B) the portion of the Principal Amount of the
                  2011 Note which the Holder will deliver to be purchased,
                  which portion must be in a Principal Amount of $1,000 or
                  integral multiples thereof; and

                           (C) that such 2011 Note shall be purchased as
                  of the Fundamental Change Repurchase Date pursuant to the
                  terms and conditions specified in the 2011 Notes and in this
                  Indenture; and

                  (2) the 2011 Note (if such 2011 Note is held other than in
         global form) to the Paying Agent for cancellation prior to, on or after
         the Fundamental Change Repurchase Date (together with all necessary
         endorsements) at the offices of the Paying Agent, such delivery being a
         condition to receipt by the Holder of the Fundamental Change Repurchase
         Price therefor; provided that such Fundamental Change Repurchase Price
         shall be so paid pursuant to this Section 15.01 only if the 2011 Note
         so delivered to

                                       30


         the Paying Agent shall conform in all respects to the description
         thereof in the related Fundamental Change Repurchase Notice.

         The Company shall purchase from the Holder thereof, pursuant to this
Section 15.01, a portion of a 2011 Note if the Principal Amount of such portion
is $1,000 or an integral multiple of $1,000 if so requested by the Holder.
Provisions of this Indenture that apply to the repurchase of all of a 2011 Note
also apply to the repurchase of such portion of such 2011 Note.

         Any repurchase by the Company contemplated pursuant to the provisions
of this Section 15.01 shall be consummated by the delivery to the Paying Agent
of the consideration to be received by the Holder promptly following the later
of the Fundamental Change Repurchase Date and the time of delivery of the 2011
Note.

         Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Fundamental Change Repurchase Notice contemplated by
this Section 15.01(c) shall have the right to withdraw such Fundamental Change
Repurchase Notice at any time prior to the close of business on the Business Day
prior to the Fundamental Change Repurchase Date by delivery of a written notice
of withdrawal to the Paying Agent in accordance with Section 15.02.

         The Paying Agent shall promptly notify the Company of the receipt by it
of any Fundamental Change Repurchase Notice or written notice of withdrawal
thereof.

         (d) Payment of Fundamental Change Repurchase Price. The 2011 Notes to
be repurchased pursuant to this Section 15.01 shall be paid for in cash;
provided that if a Fundamental Change occurs as a result of a Change of Control
Event, the 2011 Notes to be repurchased may be paid for, in whole or in part, at
the election of the Company, in cash or Common Stock or any combination of cash
and Common Stock, subject to the conditions set forth in clause (e) of this
Section 15.01.

         (e) Conditions for Election to Pay Fundamental Change Repurchase Price
in Common Stock. If the Company elects to pay all or any portion of the
Fundamental Change Repurchase Price in Common Stock, the number of shares of
Common Stock to be paid will equal the quotient obtained by dividing (i) the
portion of the Fundamental Change Repurchase Price to be paid in shares of
Common Stock by (ii) 97% of the average Closing Price of the shares of Common
Stock for the five Trading Day period ending on the second Business Day
immediately preceding the Fundamental Change Repurchase Date, appropriately
adjusted to take into account the occurrence, during the period commencing on
the first of the Trading Days during the five Trading Day period and ending on
the Fundamental Change Repurchase Date, of any event described in Section 13.06,
subject to the next succeeding paragraph. The Company shall designate, in the
Fundamental Change Company Notice delivered pursuant to clause (b) of Section
15.01, whether it will repurchase the 2011 Notes for cash or shares of Common
Stock, or, if a combination thereof, the percentages of the Fundamental Change
Repurchase Price of 2011 Notes in respect of which it will pay in cash or shares
of Common Stock; provided that the Company will pay cash for fractional
interests in shares of Common Stock. For purposes of determining the existence
of potential fractional interests, all 2011 Notes subject to repurchase by the
Company held by a Holder shall be considered together (no matter how many
separate

                                       31


certificates are to be presented). Each holder whose 2011 Notes are repurchased
pursuant to this Section 15.01 shall receive the same percentage of cash or
shares of Common Stock in payment of the Fundamental Change Repurchase Price for
such 2011 Notes, except with regard to the payment of cash in lieu of fractional
shares of Common Stock. The Company may not change its election with respect to
the consideration (or components or percentages of components thereof) to be
paid once the Company has given its Fundamental Change Company Notice to holders
except as set forth in the next succeeding paragraph in the event of a failure
to satisfy, prior to the close of business on the Business Day prior to the
Fundamental Change Repurchase Date, any condition to the payment of the
Fundamental Change Repurchase Price, in whole or in part, in shares of Common
Stock.

         The Company shall, at least three Business Days prior to delivering the
Fundamental Change Company Notice, deliver an Officers' Certificate to the
Trustee specifying:

                  (i) the manner of payment selected by the Company,

                  (ii) the information required by the Company Repurchase Notice
         pursuant to clause (b) of Section 15.01,

                  (iii) if the Company elects to pay the Fundamental Change
         Repurchase Price, or a specified percentage thereof, in shares of
         Common Stock, that the conditions to such manner of payment set forth
         in this clause (e) have been or will be complied with, and

                  (iv) whether the Company desires the Trustee to give the
         Fundamental Change Company Notice required by clause (b) of Section
         15.01.

         The Company's right to exercise its election to repurchase 2011 Notes
through the issuance of shares of Common Stock shall be conditioned upon:

                  (v) the Company's giving a timely Fundamental Change Company
         Notice containing an election to purchase all or a specified percentage
         of the 2011 Notes with shares of Common Stock as provided herein;

                  (vi) the registration of such shares of Common Stock under the
         2011 Notes Act and, if required, the Exchange Act;

                  (vii) the listing of such shares of Common Stock on a United
         States national securities exchange or the quotation of such shares of
         Common Stock in an inter-dealer quotation system of any registered
         United States national securities association, in each case, if the
         Common Stock is then listed on a national securities exchange or quoted
         in an inter-dealer quotation system;

                  (viii) any necessary qualification or registration of such
         shares of Common Stock under applicable state securities laws or the
         availability of an exemption from such qualification and registration;
         and

                                       32


                  (ix) the receipt by the Trustee of an (A) Officers'
         Certificate stating that the terms of the issuance of the shares of
         Common Stock are in conformity with this Indenture, (B) an Opinion of
         Counsel to the effect that the shares of Common Stock to be issued by
         the Company in payment of the Fundamental Change Repurchase Price in
         respect of the 2011 Notes have been duly authorized and, when issued
         and delivered pursuant to the terms of this Indenture in payment of the
         Fundamental Change Repurchase Price in respect of the 2011 Notes, will
         be validly issued, fully paid and non-assessable and (c) an Officer's
         Certificate, stating that the conditions to the issuance of the shares
         of Common Stock have been satisfied.

         Such Officers' Certificate shall also set forth the number of shares of
Common Stock to be issued for each $1,000 principal amount of 2011 Notes upon
their Stated Maturity and the Closing Price of a share of Common Stock on each
Trading Day during the period commencing on the fifth Trading Day immediately
preceding but ending on the third Business Day prior to the applicable
Fundamental Change Repurchase Date. If the foregoing conditions are not
satisfied prior to the close of business on the Business Day immediately
preceding the Fundamental Change Repurchase Date and the Company has elected to
repurchase the 2011 Notes through the issuance of shares of Common Stock, the
Company shall pay the entire Fundamental Change Repurchase Price of the 2011
Notes in cash.

         Promptly after determination of the actual number of shares of Common
Stock to be issued upon repurchase of 2011 Notes, the Company shall be required
to disseminate a press release through Dow Jones & Company, Inc. or Bloomberg
Business News containing this information or publish the information on the
Company's web site or through such other public medium as the Company may use at
that time.

         All shares of Common Stock delivered upon repurchase of the 2011 Notes
shall be duly authorized, validly issued, fully paid and non-assessable.

         If a holder of a repurchased 2011 Note is paid in shares of Common
Stock, the Company shall pay any documentary, stamp or similar issue or transfer
tax due on such issue of Common Stock. However, the holder shall pay any such
tax which is due because the holder requests the Common Stock to be issued in a
name other than the holder's name. The Trustee (or other paying agent appointed
by the Company) may refuse to deliver the certificates representing the shares
of Common Stock being issued in a name other than the holder's name until the
Trustee (or other paying agent appointed by the Company) receives a sum
sufficient to pay any tax which will be due because the shares of Common Stock
are to be issued in a name other than the holder's name. Nothing herein shall
preclude any income tax withholding required by law or regulations.

         (f) Procedure Upon Repurchase. The Company shall deposit cash or Common
Stock, if permitted hereunder, at the time and in the manner as provided in
Section 15.04, sufficient to pay the aggregate Fundamental Change Repurchase
Price of all 2011 Notes to be purchased pursuant to this Section 15.01.

         Section 15.02. Effect of Fundamental Change Repurchase Notice.

                                       33


         Upon receipt by the Paying Agent of the Fundamental Change Repurchase
Notice specified in clause (b) of Section 15.01, the Holder of the 2011 Note in
respect of which such Fundamental Change Repurchase Notice was given shall
(unless such Fundamental Change Repurchase Notice is withdrawn as specified in
the following two paragraphs) thereafter be entitled to receive solely the
Fundamental Change Repurchase Price with respect to such 2011 Note. Such
Fundamental Change Repurchase Price shall be paid to such Holder, subject to
receipt of funds by the Paying Agent, promptly following the later of (x) the
Fundamental Change Repurchase Date with respect to such 2011 Note (provided the
conditions in clause (b) of Section 15.01 have been satisfied) and (y) the time
of delivery of such 2011 Note to the Paying Agent by the Holder thereof in the
manner required by clause (b) of Section 15.01. 2011 Notes in respect of which a
Fundamental Change Repurchase Notice has been given by the Holder thereof may
not be converted pursuant to Article 14 on or after the date of the delivery of
such Fundamental Change Repurchase Notice unless such Fundamental Change
Repurchase Notice has first been validly withdrawn as specified in the following
two paragraphs.

         A Fundamental Change Repurchase Notice may be withdrawn only by means
of a written notice of withdrawal delivered to the office of the Paying Agent in
accordance with the procedures set forth in the Fundamental Change Company
Notice at any time prior to the close of business on the Business Day prior to
the Fundamental Change Repurchase Date specifying:

                  (i) the Principal Amount of the 2011 Note with respect to
         which such notice of withdrawal is being submitted; and

                  (ii) the certificate number (if such 2011 Note is held in
         other than global form) of the 2011 Note in respect of which such
         notice of withdrawal is being submitted; and

                  (iii) the Principal Amount, if any, of such 2011 Note which
         remains subject to the original Fundamental Change Repurchase Notice
         and which has been or will be delivered for purchase or repurchase by
         the Company.

         There shall be no repurchase of any 2011 Notes pursuant to Section
15.01 if there has occurred (prior to, on or after, as the case may be, the
giving, by the Holders of such 2011 Notes, of the required Fundamental Change
Repurchase Notice) and is continuing an Event of Default (other than a default
in the payment of the Fundamental Change Repurchase Price with respect to such
2011 Notes). The Paying Agent will promptly return to the respective Holders
thereof any 2011 Notes (x) with respect to which a Fundamental Change Repurchase
Notice has been withdrawn in compliance with this Indenture, or (y) held by it
during the continuance of an Event of Default (other than a default in the
payment of the Fundamental Change Repurchase Price with respect to such 2011
Notes) in which case, upon such return, the Fundamental Change Repurchase Notice
with respect thereto shall be deemed to have been withdrawn.

         Section 15.03. Deposit of Fundamental Change Repurchase Price.

                                       34


         Prior to 10:00 a.m. (local time in The City of New York) on the
Business Day following the Fundamental Change Repurchase Date, as the case may
be, the Company shall deposit with the Trustee or with the Paying Agent (or, if
the Company or a Subsidiary or an Affiliate of either of them is acting as the
Paying Agent, shall segregate and hold in trust as provided herein) an amount of
money (in immediately available funds if deposited on such Business Day) or
Common Stock, if permitted hereunder, sufficient to pay the Fundamental Change
Repurchase Price of all the 2011 Notes or portions thereof which are to be
repurchased as of the Fundamental Change Repurchase Date. The Company shall
promptly notify the Trustee in writing of the amount of any deposits of cash or
Common Stock made pursuant to Section 15.03. If the Trustee or the Paying Agent
holds, in accordance with the terms hereof, money, and/or shares of Common Stock
sufficient to pay the Fundamental Change Repurchase Price of any 2011 Note for
which a Fundamental Change Repurchase Notice has been tendered and not withdrawn
in accordance with this Indenture then, on the Fundamental Change Repurchase
Date, such 2011 Note will cease to be Outstanding and the rights of the Holder
in respect thereof shall terminate (other than the right to receive the
Fundamental Change Repurchase Price as aforesaid).

         Section 15.04. 2011 Notes Repurchased in Whole or in Part.

         Any 2011 Note which is to be repurchased, whether in whole or in part,
shall be surrendered at the office of the Paying Agent (with, if the Company or
the Trustee so requires, due endorsement by, or a written instrument of transfer
in form satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or such Holder's attorney duly authorized in writing) and the Company
shall execute and the Trustee shall authenticate and deliver to the Holder of
such 2011 Note, without service charge, a new 2011 Note or 2011 Notes, of any
authorized denomination as requested by such Holder in aggregate Principal
Amount equal to, and in exchange for, the portion of the Principal Amount of the
2011 Note so surrendered which is not repurchased.

         Section 15.05. Covenant to Comply With Securities Laws Upon Repurchase
of 2011 Notes.

         In connection with any offer to repurchase 2011 Notes under Section
15.01 (provided that such offer or repurchase constitutes an "issuer tender
offer" for purposes of Rule 13e-4 (which term, as used herein, includes any
successor provision thereto) under the Exchange Act at the time of such offer or
repurchase), the Company shall (i) comply with Rule 13e-4 and Rule 14e-1 under
the Exchange Act, (ii) file the related Schedule TO (or any successor schedule,
form or report) under the Exchange Act, and (iii) otherwise comply with all
Federal and state securities laws so as to permit the rights and obligations
under Section 15.01 to be exercised in the time and in the manner specified in
Section 15.01.

         Section 15.06. Repayment to the Company.

         The Trustee and the Paying Agent shall return to the Company any cash
that remains unclaimed, together with interest or dividends, if any, thereon,
held by them for the payment of the Fundamental Change Repurchase Price;
provided that to the extent that the aggregate amount of cash or Common Stock
deposited by the Company pursuant to Section 15.03 exceeds the aggregate
Fundamental Change Repurchase Price of the 2011 Notes or portions thereof which

                                       35


the Company is obligated to repurchase as of the Fundamental Change Repurchase
Date, then as soon as practicable following the Fundamental Change Repurchase
Date, the Trustee or the Paying Agent, as the case may be, shall return any such
excess to the Company.

                                  ARTICLE THREE

                            MISCELLANEOUS PROVISIONS

SECTION 301. INTEGRAL PART.

         This First Supplemental Indenture constitutes an integral part of the
Indenture.

SECTION 302. GENERAL DEFINITIONS.

         For all purposes of this First Supplemental Indenture:

                  (a) capitalized terms used herein without definition shall
         have the meanings specified in the Indenture; and

                  (b) the terms "herein", "hereof", "hereunder" and other words
         of similar import refer to this First Supplemental Indenture.

SECTION 303. ADOPTION, RATIFICATION AND CONFIRMATION.

         The Indenture, as supplemented and amended by this First Supplemental
Indenture, is in all respects hereby adopted, ratified and confirmed.

SECTION 304. COUNTERPARTS.

         This First Supplemental Indenture may be executed in any number of
counterparts, each of which when so executed shall be deemed an original; and
all such counterparts shall together constitute but one and the same instrument.

SECTION 305. GOVERNING LAW.

         THIS FIRST SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

                                       36


         IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed and their respective corporate seals
to be hereunto fixed and attested as of the day and year first written above.

                                  TRANSKARYOTIC THERAPIES, INC.

                                  By: __________________________________________

                                  Name: ________________________________________

                                  Title: _______________________________________

                                  THE BANK OF NEW YORK

                                  By: __________________________________________

                                  Name: ________________________________________

                                  Title: _______________________________________

                                       37


                                     ANNEX A

                                 GLOBAL SECURITY

                         1.25% SENIOR CONVERTIBLE NOTES
                                DUE MAY 15, 2011

                          TRANSKARYOTIC THERAPIES, INC.

Issue Date: ___________                               Maturity: May 15, 2011

Principal Amount: $___________                           CUSIP: __________

Registered: No.  ___

         Unless this certificate is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York, New York) to the issuer
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of The Depository Trust Company and
any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner
hereof, Cede & Co., has an interest herein.

         Unless and until it is exchanged in whole or in part for the individual
2011 Notes represented hereby, this Global Security may not be transferred
except as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the Depositary
or by the Depositary or any such nominee to a successor Depositary or a nominee
of such successor Depositary.

         Transkaryotic Therapies, Inc., a Delaware corporation (herein called
the "COMPANY", which term includes any successor corporation under the indenture
hereinafter referred to), for value received, hereby promises to pay to Cede &
Co., or registered assigns, the principal sum of ________________________ United
States dollars ($_________) (which amount may from time to time be increased or
decreased to reflect redemptions, repurchases, conversions, transfers or
exchanges permitted under the terms of the Indenture, by adjustment made on the
records of the Trustee, as custodian for the Depositary, in accordance with the
rules and procedures of the Depositary) on May 15, 2011 at the office or agency
of the Company maintained for that purpose in accordance with the terms of the
Indenture, in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and private
debts, and to pay interest, semiannually on May 15 and November 15 (each, an
"INTEREST PAYMENT DATE") of each year, commencing November 15, 2004, on said
principal sum at said office or agency, in like coin or currency, at the rate
per annum of 1.25%, from and including May 4, 2004 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for.

         Except as otherwise provided in the Indenture, the interest payable on
the Note pursuant to the Indenture on any May 15 or November 15 will be paid to
the Person entitled thereto as it appears in the Security Register at the close
of business on the Regular Record Date, which shall

                                       38


be the May 1 and November 1 (whether or not a Business Day) next preceding such
May 15 or November 15; provided that any such interest not punctually paid or
duly provided for shall be payable as provided in the Indenture.

         Interest on any Security that is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the person in
whose name that Security is registered at the close of business on the Regular
Record Date for such interest at the office or agency of the Company maintained
for such purpose. Each installment of interest on any Security shall be paid in
same-day funds by transfer to an account maintained by the payee located inside
the United States.

         The Company shall pay Interest (i) on any Security in certificated form
by check mailed to the address of the Person entitled thereto as it appears in
the Security Register (or upon written notice received from the registered
holder thereof prior to the relevant Regular Record Date, by wire transfer in
immediately available funds, if such Person is entitled to interest on Notes
with an aggregate principal amount in excess of $2,000,000) or (ii) on any
Global Security by wire transfer of immediately available funds to the account
of the Depositary or its nominee.

         Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.

         This Security is convertible as specified on the other side of this
Security.

         Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

                                       39


         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.

Dated: ___________

                                            TRANSKARYOTIC THERAPIES, INC.

                                            By: ________________________________
                                                Name:
                                                Title:

________________________________________
Corporate Secretary

TRUSTEE'S CERTIFICATE OF AUTHENTICATION

         This is one of the 2011 Notes of the series designated therein referred
to in the within-mentioned Indenture.

                                            The Bank of New York, as Trustee

                                            ____________________________________
                                            Authorized Signature

                                       40


                       [FORM OF REVERSE SIDE OF SECURITY]

                          TRANSKARYOTIC THERAPIES, INC.

                   1.25% SENIOR CONVERTIBLE NOTE DUE MAY 2011

         This Security is one of a duly authorized issue of senior unsecured
securities of the Company (herein called the "SECURITIES"), issued and to be
issued in one or more series under an Indenture, dated as of May 4, 2004, as
amended by the First Supplemental Indenture thereto, dated as of May 4, 2004 (as
so amended, herein called the "INDENTURE"), between the Company and The Bank of
New York, as Trustee (herein called the "TRUSTEE", which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is one
of the series designated on the face hereof, limited in an initial aggregate
principal amount at Stated Maturity to $100,000,000.

         The indebtedness evidenced by the Securities is unsecured and
unsubordinated senior indebtedness of the Company and ranks equally with the
Company's other unsecured and unsubordinated senior indebtedness.

METHOD OF PAYMENT

         Cash payments in respect of principal and interest on the Securities
shall be made by the Company in immediately available funds. Payments may be
made in stock in certain circumstances as set forth in the Indenture.

SINKING FUND

         No sinking fund is provided for the Securities.

REDEMPTION

         Provisional Redemption. At any time on or after May 20, 2007 and before
May 20, 2009, this Security may be redeemed for cash, in whole or in part, at
100% of the Principal Amount of the Securities (the "REDEMPTION PRICE"),
together with accrued and unpaid interest to, but excluding, the Redemption
Date, if the closing price of the Company's Common Stock is greater than 145% of
the Conversion Price then in effect for at least 20 Trading Days within a period
of 30 consecutive Trading Days ending on the Trading Day prior to the date of
notice of provisional redemption as described below under "Notice of Redemption
by the Company", provided, however, that the notice date is at least 20 days but
not more than 60 days prior to the Redemption Date.

         Optional Redemption. At any time on or after May 20, 2009, the
Securities may be redeemed for cash, in whole or in part, at the option of the
Company at the Redemption Price, together with accrued and unpaid interest to,
but excluding, the Redemption Date.

                                       41


         If the Company redeems less than all of the outstanding Securities, the
Trustee will select the Securities to be redeemed (i) by lot; (ii) pro rata or
(iii) by another method the Trustee considers fair and appropriate. If the
Trustee selects a portion of a Holder's Securities for partial redemption and
the Holder converts a portion of the same Securities, the converted portion will
be deemed to be from the portion selected for redemption.

NOTICE OF REDEMPTION BY THE COMPANY

         Notice of redemption by the Company will be mailed by first-class mail
at least 30 days but not more than 60 days, in the case of Optional Redemption,
and at least 20 days but no more than 60 days, in the case of Provisional
Redemption, before the Redemption Date to each Holder of Securities to be
redeemed at its registered address. Securities in denominations larger than
$1,000 Principal Amount may be redeemed in part, but only in whole multiples of
$1,000. On and after the Redemption Date, subject to the deposit with the Paying
Agent of funds sufficient to pay the Redemption Price, interest ceases to accrue
on Securities or portions thereof called for redemption.

CONVERSION

         A Holder of a Security may convert the Security into Common Stock at
any time until the close of business on the Business Day prior to the Stated
Maturity; provided, however, that if the Security is called for redemption, the
conversion right will terminate at the close of business on the Business Day
immediately preceding the Redemption Date for such Security or such earlier date
as the Holder presents such Security for redemption (unless the Company shall
default in making the redemption payment when due, in which case the conversion
right shall terminate at the close of business on the date such default is cured
and such Security is redeemed). A Security in respect of which a Holder has
delivered a Repurchase Notice exercising the option of such Holder to require
the Company to purchase such Security may be converted only if such notice of
exercise is withdrawn in accordance with the terms of the Indenture. The initial
conversion rate is 54.0972 shares of Common Stock per $1,000 Principal Amount of
Securities at Stated Maturity, subject to adjustment in certain events described
in the Indenture. This is equal to an initial conversion price of $18.49 per
share of Common Stock. The Company will deliver cash or a check in lieu of any
fractional Common Stock.

         Except as provided in the following sentence, holders will not receive
any cash payment representing accrued and unpaid interest upon conversion of a
Security and accrued and unpaid interest will be deemed paid in full rather than
canceled, extinguished or forfeited. Notwithstanding the previous sentence, if a
Security shall be surrendered for conversion during the period from close of
business on any Regular Record Date for the payment of interest through the
close of business on the Business Day next preceding the following Interest
Payment Date, the Holder of such Security (or portion thereof being converted)
at the close of business on such Regular Record Date shall receive the interest
payable on the corresponding Interest Payment Date notwithstanding the
conversion. Such a Security must be accompanied by an amount, in funds
acceptable to the Company, equal to the interest payable on such Interest
Payment Date on the Principal Amount being converted; provided, however, that no
such payment shall be required if there shall exist at the time of conversion a
default in the payment of interest on the Securities.

                                       42


         Except where Securities surrendered for conversion must be accompanied
by payment as described above, no interest on converted Securities will be
payable by the Company on any Interest Payment Date subsequent to the date of
conversion.

         A Holder may convert a portion of a Security if the Principal Amount of
such portion is $1,000 or an integral multiple of $1,000. No payment or
adjustment will be made for dividends on the Common Stock except as provided in
the Indenture.

         No fractional shares will be issued upon conversion; in lieu thereof,
an amount will be paid in cash based upon the closing price of the Common Stock
on the Trading Day immediately prior to the Conversion Date.

         To convert a Security, a Holder must (a) complete and manually sign the
conversion notice set forth below and deliver such notice to a Conversion Agent,
(b) surrender the Security to the Conversion Agent or, in the case of a Global
Security, deliver, or cause to be delivered, by book-entry delivery an interest
in such Security, (c) furnish appropriate endorsements and transfer documents if
required by a Registrar or a Conversion Agent, (d) in the case of a Global
Security, complete, or cause to be completed, the appropriate instruction form
for conversion pursuant to the Depositary's book-entry conversion program, (e)
pay any amount due in respect of interest, if required, and (f) pay any transfer
or similar tax, if required.

PURCHASE OF SECURITIES AT OPTION OF HOLDER UPON A FUNDAMENTAL CHANGE

         At the option of the Holder and subject to the terms and conditions of
the Indenture, if prior to the Stated Maturity there shall have occurred a
Fundamental Change, Securities shall be repurchased by the Company at the
Fundamental Change Repurchase Price, equal to 100% of the Principal Amount plus
accrued and unpaid interest to, but excluding, the Fundamental Change Repurchase
Date, on a date specified by the Company that is not less than 25 days nor more
than 35 days after the date of the mailing of a Fundamental Change Company
Notice. The Fundamental Change Repurchase Price may be paid, at the option of
the Company, in cash or by the issuance of Common Stock as provided in the
Indenture, or in any combination thereof. The Holder shall have the right to
withdraw any Fundamental Change Repurchase Notice (in whole or in a portion
thereof that is $1,000 Principal Amount or an integral multiple of $1,000 in
excess thereof) at any time prior to the close of business on the Business Day
prior to the Fundamental Change Repurchase Date by delivering a written notice
of withdrawal to the Paying Agent in accordance with the terms of the Indenture.

CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION

         Any Securities called for redemption, or as to which a Fundamental
Change Repurchase Notice has been given but not withdrawn, unless surrendered
for conversion before the close of business on the Redemption Date, may be
deemed to be purchased from the Holders of such Securities at an amount not less
than the Redemption Price, by one or more investment bankers or other purchasers
who may agree with the Company to purchase such Securities from the Holders, to
convert them into Common Stock of the Company and to make payment for such
Securities to the Paying Agent in trust for such Holders.

                                       43


TRANSFER

         As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration or transfer at the
office or agency in a Place of Payment for Securities of this series, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Registrar duly executed by, the Holder
hereof or his attorney duly authorized in writing, and thereupon one or more new
Securities of this series, of any authorized denominations and for the same
aggregate principal amount, executed by the Company and authenticated and
delivered by the Trustee, will be issued to the designated transferee or
transferees.

         The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations set forth therein
and on the face of this Security, Securities of this series are exchangeable for
a like aggregate principal amount of Securities of this series of a different
authorized denomination as requested by the Holder surrendering the same.

         No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.

         Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee or any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

INCREASE OR DECREASE IN GLOBAL SECURITY

         In the event of a deposit or withdrawal of an interest in this
Security, including a redemption, repurchase, conversion, transfer or exchange
of this Security in part only, the Trustee, as custodian for the Depositary,
shall make an adjustment on its records to reflect such deposit or withdrawal in
accordance with the rules and procedures of the Depositary.

AMENDMENT, SUPPLEMENT AND WAIVER

         The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security

                                       44


issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.

SUCCESSOR CORPORATION

         When a successor corporation assumes all the obligations of its
predecessor under the Securities and the Indenture in accordance with the terms
and conditions of the Indenture, the predecessor corporation will (except in
certain circumstances specified in the Indenture) be released from those
obligations.

DEFAULTS AND REMEDIES

         If an Event of Default with respect to any Security of this Series
shall occur and be continuing, then in accordance with Section 6.01 of the
Indenture, the Trustee or the Holders of not less than 25% in principal amount
of the Outstanding 2011 Notes may declare 100% of the Principal Amount plus
accrued and unpaid interest, if any, to the acceleration date, of all of the
2011 Notes to be due and payable immediately by a notice in writing to the
Company (and to the Trustee if given by Holders), and upon any such declaration
such specified amount shall become immediately due and payable.

         No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the Principal Amount, or Fundamental
Change Repurchase Price of or interest, on, this Security at the times, place
and rate, and in the coin or currency, herein prescribed.

         No Service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.

NO RECOURSE AGAINST OTHERS

         No recourse shall be had for the payment of the principal of or the
interest, if any, on this Security, for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture or any indenture
supplemental thereto, against any incorporator, shareholder, officer or
director, as such, past, present or future, of the Company or of any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment of penalty or otherwise, all such liability
being, by acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.

AUTHENTICATION

         This Security shall not be valid until the Trustee or an authenticating
agent manually signs the certificate of authentication on the other side of this
Security.

INDENTURE TO CONTROL; GOVERNING LAW

         In the case of any conflict between the provisions of this Security and
the Indenture, the provisions of the Indenture shall control.

                                       45


THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

ABBREVIATIONS AND DEFINITIONS

         Customary abbreviations may be used in the name of the Holder or an
assignee, such as:

TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (=
joint tenants with right of survivorship and not as tenants in common), CUST (=
Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).

         All terms defined in the Indenture and used in this Security but not
specifically defined herein are defined in the Indenture and are used herein as
so defined.

CONVERSION NOTICE

         To convert this Security into Common Stock of the Company, check the
box: [ ]

         To convert only part of this Security, state the Principal Amount to be
converted (must be $1,000 or a multiple of $1,000): $__________________

         If you want the stock certificate made out in another person's name,
fill in the form below:

________________________________________________________________________________
                (Insert other person's soc. sec. or tax I.D. no.)

________________________________________________________________________________
            (Print or type other person's name, address and zip code)

Your Signature: _____________________________ Date: ____________________________

(Sign exactly as your name appears on the other side of this Security)

*Signature guaranteed by: ______________________________________________________

By: ______________________________

*The signature must be guaranteed by an institution which is a member of one of
the following recognized signature guaranty programs: (i) the Securities
Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange
Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or
(iv) such other guaranty program acceptable to the Trustee.

                                       46


                                    EXHIBIT A

                  Form of Fundamental Change Repurchase Notice

The Bank of New York
101 Barclay Street, Floor 8 West
New York, NY 10286
Attention: Corporate Trust Administration

                 Transkaryotic Therapies, Inc., (the "COMPANY")
                    1.25% Senior Convertible Notes Due 2011

         This is a Fundamental Change Repurchase Notice as defined in Section
15.01 of the Indenture dated as of May 4, 2004 (the "INDENTURE"), between the
Company and The Bank of New, as trustee (the "TRUSTEE"), as supplemented by the
First Supplemental Indenture dated as of May 4, 2004 between the Company and the
Trustee. Terms used but not defined herein shall have the meanings ascribed to
them in the Indenture.

Certificate No(s). of Securities: ____________________

         I intend to deliver the following aggregate Principal Amount of
Securities for repurchase by the Company pursuant to Section 15.01 of the
Indenture (in multiples of $1,000):

$________________

         I hereby agree that the Securities will be purchased as of the
Fundamental Change Repurchase Date pursuant to the terms and conditions thereof
and of the Indenture.

Signed:

_____________________________

                                       47

EX-5.1

                                                                     Exhibit 5.1


                               [HALE & DORR LOGO]
                                  HALEDORR.COM
                       60 STATE STREET O BOSTON, MA 02109
                         617-526-6000 O FAX 617-526-5000

                                                          April 29, 2004

Transkaryotic Therapies, Inc.
700 Main Street
Cambridge, MA  02139

         Re: Prospectus Supplement to Registration Statement on Form S-3


Ladies and Gentlemen:

         This opinion is furnished to you in connection with a Registration
Statement on Form S-3 (File No. 333-51772) (the "Registration Statement") filed
by Transkaryotic Therapies, Inc., a Delaware corporation (the "Company"), with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Securities Act"), for the registration of common
stock, preferred stock, debt securities and warrants, all of which may be issued
from time to time on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act at an aggregate initial offering price not to exceed
$500,000,000, and a supplement to the prospectus included in the Registration
Statement dated April 28, 2004 (the "Prospectus Supplement") relating to the
issue and sale of up to $100 million principal amount of 1.25% senior
convertible notes due 2011 (the "Notes") of the Company and underlying shares of
common stock of the Company issuable upon conversion of the Notes (the
"Underlying Securities").

         The Notes are to be issued and sold by the Company pursuant to (i) an
underwriting agreement (the "Underwriting Agreement") dated as of April 28, 2004
by and among the Company and JP Morgan Securities Inc., as representative of the
several underwriters named in the Underwriting Agreement, and (ii) an Indenture
(the "Base Indenture") to be dated as of May 4, 2004 between the Company and The
Bank of New York (the "Trustee") and a Supplemental Indenture (the "Supplemental
Indenture" and together with the Base Indenture, the "Indenture") to be dated as
of May 4, 2004 between the Company and the Trustee.

         We are acting as counsel for the Company in connection with the issue
and sale by the Company of the Notes. We have examined signed copies of the
Registration Statement as filed with the Commission. We have also examined and
relied upon the Underwriting Agreement, the Indenture, the Prospectus
Supplement, minutes of meetings of the stockholders and the Board of Directors
of the Company as provided to us by the Company, stock record books of the
Company as provided to us by the Company, the Certificate of Incorporation and
By-Laws of the Company, each as restated and/or amended to date, and such other
documents as we have deemed necessary for purposes of rendering the opinions
hereinafter set forth.

         In our examination of the foregoing documents, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to



BOSTON  LONDON  MUNICH  NEW YORK  OXFORD  PRINCETON  RESTON  WALTHAM  WASHINGTON
- --------------------------------------------------------------------------------
 Hale and Dorr LLP is a Massachusetts limited liability partnership. Our London
and Oxford offices are operated under a Delaware limited liability partnership.


Transkaryotic Therapies, Inc.
April 29, 2004
Page 2

original documents of all documents submitted to us as copies, the authenticity
of the originals of such latter documents and the legal competence of all
signatories to such documents.

         In delivering our opinion below, we have assumed the due execution and
delivery, pursuant to due authorization, of the Indenture by the Trustee, that
the Trustee has all requisite power and authority to effect the transactions
contemplated by the Indenture, and that the Trustee or an authenticating agent
for the Trustee will duly authenticate the Notes pursuant to the Indenture.

         Our opinions below are qualified to the extent that they may be subject
to or affected by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, usury, fraudulent conveyance or similar laws affecting the rights of
creditors generally, (ii) duties and standards imposed on creditors and parties
to contracts, including, without limitation, requirements of good faith,
reasonableness and fair dealing, (iii) statutory or decisional law concerning
recourse of creditors to security in the absence of notice or hearing, or (iv)
general equitable principles. Furthermore, we express no opinion as to the
availability of any equitable or specific remedy, or as to the successful
assertion of any equitable defense, upon any breach of any agreements or
documents or obligations referred to therein, or any other matters, inasmuch as
the availability of such remedies or defenses may be subject to the discretion
of a court. In addition, we express no opinion with respect to the
enforceability of any provision of the Notes requiring the payment of interest
on overdue interest.

         We also express no opinion herein as to any provision of any agreement
(a) which may be deemed to or construed to waive any right of the Company, (b)
to the effect that rights and remedies are not exclusive, that every right or
remedy is cumulative and may be exercised in addition to or with any other right
or remedy and does not preclude recourse to one or more other rights or
remedies, (c) relating to the effect of invalidity or unenforceability of any
provision of the Indenture on the validity or enforceability of any other
provision thereof, (d) requiring the payment of penalties, consequential damages
or liquidated damages, (e) which is in violation of public policy, including,
without limitation, any provision relating to indemnification and contribution
with respect to securities law matters, (f) purporting to indemnify any person
against his, her or its own negligence or intentional misconduct, (g) which
provides that the terms of the Indenture may not be waived or modified except in
writing, or (h) relating to choice of law or consent to jurisdiction.

         We express no opinion herein as to the laws of any state or
jurisdiction other than the state laws of the State of New York, the General
Corporation Law of the State of Delaware and the federal laws of the United
States of America.



Transkaryotic Therapies, Inc.
April 29, 2004
Page 3


         Based upon and subject to the foregoing, we are of the opinion that:

         1.       The Notes have been duly authorized for issuance and, when the
                  Notes have been duly established, completed, executed,
                  authenticated and delivered in accordance with the Indenture
                  and sold as described in the Registration Statement and the
                  prospectus included therein and the Prospectus Supplement, the
                  Notes will be legal, valid and binding obligations of the
                  Company entitled to the benefits of the Indenture; and

         2.       The Underlying Shares have been duly authorized by the Company
                  and, when issued upon conversion of the Notes in accordance
                  with the terms of the Indenture, will be validly issued, fully
                  paid and nonassessable.

         Please note that we are opining only as to the matters expressly set
forth herein, and no opinion should be inferred as to any other matters. This
opinion is based upon currently existing statutes, rules, regulations and
judicial decisions, and we disclaim any obligation to advise you of any change
in any of these sources of law or subsequent legal or factual developments which
might affect any matters or opinions set forth herein.

         We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Company's Current Report on Form 8-K to be filed on the date
hereof in accordance with the requirements of Item 601(b)(5) of Regulation S-K
under the Securities Act and to the use of our name therein and in the
Prospectus Supplement under the caption "Legal Matters." In giving such consent,
we do not hereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act or the rules and regulations of
the Commission.

                                                          Very truly yours,

                                                          /s/ HALE AND DORR LLP

                                                          HALE AND DORR LLP

EX-99.1

                                                                    EXHIBIT 99.1


CONTACTS:

Justine E. Koenigsberg                       Daniella M. Lutz
Director, Corporate Communications           Corporate Communications Specialist
(617) 349-0271                               (617) 349-0205

FOR IMMEDIATE RELEASE

                  TKT ANNOUNCES $90 MILLION PUBLIC OFFERING OF
                     1.25% SENIOR CONVERTIBLE NOTES DUE 2011

CAMBRIDGE, MA, APRIL 28, 2004 -- Transkaryotic Therapies, Inc. (Nasdaq: TKTX)
today announced that it has agreed to sell $90 million principal amount of 1.25%
senior convertible notes due 2011. The company has granted to the underwriters
an overallotment option to purchase an additional $10 million principal amount
of the notes within 30 days of the offering.

The notes are currently convertible into shares of the Company's common stock at
an initial conversion price of approximately $18.49 per share, representing a
premium of approximately 22.5% over today's closing price.

JP Morgan Securities Inc. is the sole book running manager for the offering, SG
Cowen & Co., LLC is the joint lead manager for the offering and Pacific Growth
Equities, LLC and RBC Capital Markets are co-managers.

The company estimates that the net proceeds of the offering will be
approximately $87 million after deducting estimated underwriting discounts and
commissions and estimated expenses of the offering. The company expects to use
these net proceeds to fund its research and product development activities,
including its ongoing clinical trials and other clinical and preclinical
development programs, and for other general corporate purposes, including the
Company's expected purchase of the holdings of the minority stockholders of its
majority-owned subsidiary in Europe.

A shelf registration statement relating to the notes has previously been filed
with, and declared effective by, the Securities and Exchange Commission. Any
offer will be made only by means of a prospectus and a prospectus supplement. A
copy of the prospectus and the prospectus supplement related to the offering can
be obtained when available from the Prospectus Department of JP Morgan
Securities Inc., One Chase Manhattan Plaza, Floor 5b, New York, NY 10081.

This press release shall not constitute an offer to sell or the solicitation of
an offer to buy, nor shall there be any sale of these securities in any state in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of such state.

                                    - more -

Transkaryotic Therapies, Inc.
TKT Announces $90 Million Offering
April 28, 2004

ABOUT TKT

Transkaryotic Therapies, Inc. is a biopharmaceutical company primarily focused
on researching, developing and commercializing treatments for rare diseases
caused by protein deficiencies. Within this focus, the company markets
Replagal(TM), an enzyme replacement therapy for Fabry disease, and is developing
treatments for Hunter syndrome and Gaucher disease. Outside its focus on rare
diseases, TKT intends to commercialize Dynepo(TM), a Gene-Activated(R)
erythropoietin product for anemia related to kidney disease, in the European
Union. TKT was founded in 1988 and is headquartered in Cambridge, Massachusetts,
with additional operations in Europe, Canada and Latin America.

Gene-Activated(R) is a registered trademark and Replagal(TM) is a trademark of
Transkaryotic Therapies, Inc. Dynepo(TM) is a trademark of Aventis.
                                       ###