0001104659-03-010399.txt : 20030515 0001104659-03-010399.hdr.sgml : 20030515 20030515165714 ACCESSION NUMBER: 0001104659-03-010399 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSKARYOTIC THERAPIES INC CENTRAL INDEX KEY: 0000885259 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 043027191 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21481 FILM NUMBER: 03705910 BUSINESS ADDRESS: STREET 1: 195 ALBANY ST CITY: CAMBRIDGE STATE: MA ZIP: 02139 BUSINESS PHONE: 6173490200 10-Q 1 j9805_10q.htm 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

		For the Quarter Ended March 31, 2003

		Commission File Number 0-21481

TRANSKARYOTIC THERAPIES, INC.

(Exact name of registrant as specified in its charter)

Delaware		04-3027191
(State or other jurisdiction of incorporation or organization)		(I.R.S. 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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý

No o

Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended.

Yes ý

No o

At April 30, 2003, there were 34,903,654 shares of Common Stock, $.01 par value, outstanding.

Transkaryotic Therapies, Inc.

INDEX

PART I.	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2003 and 2002

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002

	Notes to Condensed Consolidated Financial Statements

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Item 4.	Controls and Procedures

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings

Item 6.	Exhibits and Reports on Form 8-K

SIGNATURES

CERTIFICATIONS

PART I FINANCIAL INFORMATION

Transkaryotic Therapies, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

	March 31, 2003			December 31, 2002
(in thousands, except par values)	March 31, 2003			December 31, 2002

Assets
Current assets:
Cash and cash equivalents	$	156,307		$	154,604
Marketable securities	55,772			102,104
Accounts receivable	16,591			15,684
Inventories	21,521			21,650
Prepaid expenses and other current assets	4,952			4,450
Total current assets	255,143			298,492
Property and equipment, net	61,807			59,372
Other assets	1,863			1,942
Total assets	$	318,813		$	359,806

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	6,776		$	11,804
Accrued expenses	11,933			12,767
Accrued restructuring expenses	3,553			—
Accrued intellectual property license expense	—			11,368
Total current liabilities	22,262			35,939

Minority interest	303			—

Stockholders’ equity:
Series A convertible preferred stock, $.01 par value, 10 shares authorized; no shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively	—			—
Series B preferred stock, $.01 par value, 1,000 shares authorized; no shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively	—			—
Common stock, $.01 par value; 100,000 shares authorized; 34,490 and 34,845 shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively	348			348
Additional paid-in capital	685,566			685,566
Accumulated deficit	(391,380		)	(365,434		)
Accumulated other comprehensive income	3,996			3,387
	298,530			323,867

Less treasury stock, at cost 367 shares at March 31, 2003	(2,282		)	—
Total stockholders’ equity	296,248			323,867

Total liabilities and stockholders’ equity	$	318,813		$	359,806

See accompanying Notes to Condensed Consolidated Financial Statements.

Part 1 - Item 1 - Condensed Consolidated Financial Statements

Transkaryotic Therapies, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

	Three Months Ended March 31,
(in thousands, except per share amounts)	2003			2002

Revenues:
Product sales	$	12,183		$	6,058
License and research revenues	—			552
	12,183			6,610
Operating expenses:
Cost of goods sold	3,501			548
Research and development	20,982			20,409
Intellectual property license expense	1,350			—
Selling, general and administrative	9,166			6,423
Restructuring charge	3,602			—
	38,601			27,380

Loss from operations	(26,418		)	(20,770		)

Other income:

Interest income	776			2,303

Minority interest	(303		)	—
	473			2,303

Net loss	$	(25,945	)	$	(18,467	)

Basic and diluted net loss per share	$	(0.75	)	$	(0.54	)

Shares used to compute basic and diluted net loss per share	34,550			34,331

See accompanying Notes to Condensed Consolidated Financial Statements.

Transkaryotic Therapies, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Three Months Ended March 31,

(in thousands)	2003			2002

Operating activities:
Net loss	$	(25,945	)	$	(18,467	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	3,013			1,640
Compensation expense related to equity issuances	—			65
Change in accrued intellectual property license expense	(11,368		)	—
Changes in other operating assets and liabilities	(3,142		)	(1,735		)

Net cash used for operating activities	(37,442		)	(18,497		)

Investing activities:
Proceeds from sales and maturities of marketable securities	54,288			50,776
Purchases of marketable securities	(7,956		)	(163,175		)
Purchases of property and equipment	(5,448		)	(6,329		)
Changes in other assets and liabilities	223			(769		)

Net cash provided by (used for) investing activities	41,107			(119,497		)

Financing Activities:
Issuance of common stock, net	—			910
Repurchase of treasury stock	(2,282		)	—
Net cash provided by (used for) financing activities	(2,282		)	910

Effect of exchange rate changes on cash and cash equivalents	320			(107		)

Net decrease in cash and cash equivalents	1,703			(137,191		)

Cash and cash equivalents at January 1	154,604			323,877

Cash and cash equivalents at March 31	$	156,307		$	186,686

See accompanying Notes to Condensed Consolidated Financial Statements.

Transkaryotic Therapies, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

March 31, 2003 and 2002

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. In the opinion of management, the accompanying financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. The results of operations for the interim period ended March 31, 2003 are not necessarily indicative of the results to be expected for the year ending December 31, 2003.

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2002 included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission.

Niche Protein®, Gene-Activated®, and TKT® are registered trademarks and Replagal™ and Transkaryotic Therapy™ are trademarks of Transkaryotic Therapies, Inc. Dynepo™ is a trademark of Aventis Pharmaceuticals, Inc. (“Aventis”). All other trademarks, service marks or trade names referenced in this quarterly report are the property of their respective owners.

2. NET LOSS PER SHARE

The Company calculates net loss per share in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 128, “Earnings Per Share,” and related interpretations. Basic earnings per share is computed using the weighted average shares outstanding.

Basic net loss per share was equivalent to diluted net loss per share for the three months ended March 31, 2003 and 2002 because common equivalent shares from convertible preferred stock and stock options have been excluded, as their effect is antidilutive.

3. COMPREHENSIVE LOSS

Comprehensive loss comprises net loss, unrealized gains and losses on marketable securities designated as available-for-sale, and foreign currency translation adjustments. The Company had a total comprehensive loss of $25,336,000 and $19,703,000 for the three months ended March 31, 2003 and 2002, respectively.

4. INVENTORIES

Inventories consist of the following:

	March 31, 2003		December 31, 2002
(in thousands)	March 31, 2003		December 31, 2002
Raw materials	$	610	$	947
Work in process	16,092		14,689
Finished goods	4,819		6,014
	$	21,521	$	21,650

Inventories are stated at the lower of cost or market, with cost determined under a first-in, first-out method. Inventories are reviewed periodically for slow-moving or obsolete status based on sales activity, both projected and historical.

5. INTELLECTUAL PROPERTY LICENSE FEE EXPENSE

In June 2002, the Company obtained an exclusive license to certain patents and patent applications from Cell Genesys, Inc. (“Cell Genesys”) related to Cell Genesys’ approach to gene activation. In consideration for the license, the Company initially paid Cell Genesys $11,000,000 in cash and issued to Cell Genesys shares of the Company’s common stock worth $15,000,000 as of the date of the Agreement.

Under the agreement, the Company agreed that the number of shares of common stock initially issued to Cell Genesys would be adjusted at the time the Company registered such shares for resale under the Securities Act of 1933, if the market value of such shares at that time was greater or less than $15,000,000, as calculated in accordance with a predetermined formula. Pursuant to the agreed upon formula, at December 31, 2002 with the closing price of the Company’s common stock at $9.90 per share, the Company would have been required to issue to Cell Genesys an additional 1,148,000 shares of common stock. As a result, the Company recorded an additional non-cash license fee expense of $8,660,000 in the fourth quarter of 2002.

In January 2003, the Company and Cell Genesys renegotiated the consideration paid for the license, and the Company repurchased the shares of stock issued to Cell Genesys for $15,000,000 in cash. The Company incurred an additional license expense in the first quarter of 2003 of $1,350,000, which represents the further decline in the market value of the Company’s common stock from December 31, 2002 to January 15, 2003. The repurchased shares have been recorded as treasury stock.

Under the agreement, Cell Genesys also has the potential to receive certain milestone payments from the Company contingent upon the outcome of related patent matters under the license agreement. If all of the milestones were achieved, the Company will be obligated to pay Cell Genesys an aggregate of $17,000,000 payable in part in cash and in part in stock. The Company is not required to make royalty payments to Cell Genesys.

6. RESTRUCTURING CHARGE

In February 2003, TKT announced a major reorganization in an effort to reduce costs and narrow the scope of the Company’s research initiatives. Under this reorganization, TKT plans to focus its research, development, and commercialization efforts primarily on therapeutics for the treatment of rare genetic diseases caused by protein deficiencies. The Company is seeking collaborative partners for its Gene-Activated protein products, which are versions of proteins that would compete with proteins currently being marketed by third parties, and for its gene therapy development programs.

As part of this restructuring, during the first quarter of 2003, TKT reduced its U.S. headcount by approximately 100 positions. TKT intends to continue to reduce headcount through attrition, with the goal of having approximately 300 to 315 full-time U.S. employees by the end of 2003. As of March 31, 2003, TKT had 345 full-time U.S. employees. TKT is also consolidating its facilities as part of the restructuring.

As a result of the restructuring, the Company recorded a charge of $3,602,000 during the first quarter of 2003 in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 146, Accounting for Costs Associated with Exit or Disposal Activities. Included in the charge is $1,332,000 of employee severance and outplacement services costs for 74 employees, primarily in research and development, and $2,270,000, representing the remaining lease obligation for one of four facilities that the Company no longer occupies. The Company expects that its employee-related and facility consolidation restructuring actions will be substantially completed in 2003 and expects to continue to record restructuring charges in connection with the reorganization during the remainder of 2003 and beyond.

The following table outlines the components of the Company's restructuring charge and accrual:

(in thousands)	Charges		Payments		Other		Balance at 3/31/03

Employee severance
and outplacement	$	1,332	(28	)	—		$	1,304
Lease obligations	2,270		—		(21	)	2,249
Total restructuring reserve	$	3,602	(28	)	(21	)	$	3,553

7. STOCK BASED COMPENSATION

The Company accounts for qualified stock option grants in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”) and Financial Accounting Standards Board (“FASB”) Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, an Interpretation of APB No. 25, and related interpretation, and, accordingly, recognizes no compensation expense for the issue thereof. For certain non-qualified stock options granted, the Company recognizes as compensation expense the excess of the fair value of the common stock issuable upon exercise

over the aggregate exercise price of such options. The compensation is amortized over the vesting period of each option or the recipient’s term of employment, if shorter. The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standard (“SFAS”) No. 123, Accounting for Stock-Based Compensation as amended by SFAS No. 148 Accounting for Stock-Based Compensation-Transition and Disclosure.

The table below presents the combined net loss and basic and diluted net loss per common share if compensation cost for the Company’s stock option plans had been determined based on the estimated fair value of awards under those plans on the grant or purchase date:

For the three months ended March 31, (in thousands, except per share prices)	2003			2002
Net loss	$	(25,945	)	$	(18,467	)
Add: Stock-based compensation included in net loss as reported	—			65
Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards	(7,066		)	(5,370		)
Pro forma net loss	$	(33,011	)	$	(23,772	)
Basic and diluted net loss per share - as reported	$	(0.75	)	$	(0.54	)
Basic and diluted net loss per share - proforma	$	(0.96	)	$	(0.69	)

Fair values of awards granted under the stock option plans were estimated at grant or purchase dates using a Black-Scholes option pricing model. The Company uses the multiple option approach and the following assumptions:

For the three months ended March 31,	2003		2002

Expected life (years)	1.5-7.5		1.5-7.5
Interest rate	1.2%-3.7	%	1.5%-4.0	%
Expected volatility	0.95		1.00

The Company has never declared or paid dividends on any of its capital stock and does not expect to do so in the foreseeable future.

The pro forma effects of the three months ended March 31, 2003 and 2002, respectively net loss and net loss per share of expensing the estimated fair value of stock options issued are not necessarily representative of the effects on reporting the results of operations for future years as the periods presented include only seven years, six years and five years, respectively, of option grants.

8. LEGAL PROCEEDINGS

The Company is a party to a number of legal proceedings. The Company can provide no assurance as to the outcome of any of these proceedings. A decision by a court in the United States or in any other jurisdiction in a manner adverse to the Company could have a material adverse effect on the Company’s business, financial condition, and results of operations.

Replagal Patent Litigation

In July 2000, Genzyme Corporation (“Genzyme”) and Mount Sinai School of Medicine of New York University (“Mount Sinai”) filed a patent infringement action against the Company in the U.S. District Court of Delaware. The complaint alleges that activities relating to Replagal infringe a patent licensed by Genzyme from Mount Sinai. In January 2002, the U.S. District Court of Delaware dismissed this patent litigation granting TKT’s motion for summary judgment of non-infringement and denying Genzyme’s motion for summary judgment of infringement. Genzyme sought monetary damages and injunctive relief.

In March 2002, Genzyme appealed the U.S. District Court of Delaware’s ruling to the U.S. Court of Appeals for the Federal Circuit, and in January 2003 the U.S. Court of Appeals for the Federal Circuit heard oral arguments on the appeal. If Genzyme is successful in its appeal, the case will be remanded to the U.S. District Court of Delaware for further proceedings on non-infringement and invalidity issues. As of March 31, 2003, the Company had incurred $4,667,000 in litigation expenses associated with the Replagal litigation.

Dynepo Patent Litigation

In April 1997, Amgen Inc. (“Amgen”) commenced a patent infringement action against the Company and Aventis in the U.S. District Court of Massachusetts. In January 2001, the U.S. 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.

On January 6, 2003, the U.S. Court of Appeals for the Federal Circuit issued a decision affirming in part and reversing in part the decision of the U.S. District Court of Massachusetts and remanded the action to the U.S. District Court of Massachusetts for further proceedings. In particular, the U.S. Court of Appeals for the Federal Circuit:

• upheld the U.S. District Court of Massachusetts’ determination of invalidity of one of Amgen’s patents;

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

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

As part of the U.S. Court of Appeal for the Federal Circuit’s ruling, it instructed the U.S. District Court of Massachusetts to reconsider the validity of Amgen’s patents in light of potentially invalidating prior art.

In addition, in July 1999, Aventis and the Company commenced legal proceedings in the United Kingdom against Kirin-Amgen, Inc. (“Kirin-Amgen”), seeking a declaration that a European patent held by Kirin-Amgen will not be infringed by the Company’s 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. In February 2003, the House of Lords agreed to hear this appeal.

The Company is required to reimburse Aventis, which is paying the expenses of the Amgen and Kirin-Amgen litigations relating to Dynepo, for 50% of the expenses. Aventis is also entitled to deduct up to 50% of any royalties due to the Company from the sale of Dynepo until Aventis has recouped the full amount of TKT’s share of litigation expenses. The Company currently estimates that its share of the expenses associated with the litigation will total between approximately $15,000,000 and $20,000,000 by the time the matter is finally adjudicated.

Serono Patent Litigation

In January 2003, Applied Research Systems ARS Holdings, N.V., a wholly owned subsidiary of Serono International S.A. (“Serono”), commenced an action against TKT in the District Court at The Hague in the Netherlands claiming that Replagal infringes one of Serono’s European patents.

The Serono patent relates to Serono’s approach to gene activation. In January 2002, the European Patent Office revoked the Serono patent on grounds of invalidity due to non-enablement. Serono has appealed the revocation to the Technical Board of Appeal at the European Patent Office.

The Company expects that expenses related to this litigation will be significant.

Shareholder Lawsuits

In the first quarter of 2003, at least nine purported class action suits were brought in the U.S. District Court of Massachusetts against the Company, its former Chief Executive Officer, Richard F Selden, and in some cases, its Chairman of the Board of Directors, Rodman W. Moorhead, III. The complaints generally allege that, during the period from January 2001 through January 2003, TKT made false and misleading statements and failed to disclose material information concerning the status and progress for obtaining U.S. marketing approval of Replagal and seek equitable and monetary relief, an unspecified amount of damages, with interest, and attorney's fees and costs. On April 9, 2003, the Court consolidated the various actions under one matter entitled In re Transkaryotic Therapies, Inc., Securities Litigation, C.A. No. 03-10165RW2. The Company expects that expenses related to this litigation will be significant.

On April 14, 2003, a shareholder derivative suit was filed against individual members of the Company’s Board of Directors, the Company's former Chief Executive Officer, and the Company in Middlesex Superior Court in the Commonwealth of Massachusetts entitled South Shore Gastrointerology UA 6/6/1980 FBO Harold Jacobs, Nancy R. Jacob TTee v. Richard F Selden, Jonathan S. Leff, Walter Gilbert, Wayne P. Yetter, Rodman W. Moorhead, III, James E. Thomas, William R. Miller and Transkaryotic Therapies, Inc., Civil Action No. 03-1669. The complaint generally alleges that the individual defendants breached fiduciary duties owed to the Company and its stockholders by disseminating false and misleading statements to the market concerning the status and progress for obtaining U.S. marketing approval of Replagal and causing or allowing the Company to conduct its business improperly. The complaint seeks declaratory, equitable and monetary relief, an unspecified amount of damages, with interest, and attorney's fees and costs. The Company expects that expenses related to this litigation will be significant.

SEC Investigation

On May 14, 2003, the Company received a copy of a formal order of investigation by the Securities and Exchange Commission. The order of investigation relates to TKT's disclosures and public filings with regard to Replagal and the status of the FDA's approval process for Replagal, as well as transactions in the Company's securities. The Company will fully cooperate with the SEC in the investigation.

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

Overview

TKT is a biopharmaceutical company developing therapeutics for the treatment of rare genetic diseases caused by protein deficiencies. TKT has received approval to market and sell Replagal (agalsidase alfa), an enzyme replacement therapy for the long-term treatment of patients with Fabry disease, in 26 countries, principally in Europe. TKT has not received approval to market and sell Replagal in the United States. TKT recorded $34,682,000 in Replagal product sales in 2002 and $12,183,000 in Replagal product sales for the first quarter of 2003.

With the exception of 1995, the Company has incurred substantial annual operating losses since inception. The Company expects to incur significant operating losses until substantial product sales are generated. Until such time, the Company is dependent upon product sales, existing cash resources, interest income, external financing from equity offerings, debt financings, and collaborative research and development alliances to finance its operations. At March 31, 2003, the Company’s accumulated deficit was $391,380,000.

The Company’s results of operations may vary significantly from period to period depending on, among other factors:

• the timing, receipt, and amount of Replagal product sales;

• continued progress in our research and development programs, particularly iduronate-2-sulfatase (“I2S”), as well as the magnitude of these programs;

• the scope and results of our clinical trials;

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

• the cost of manufacturing activities;

• 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; and

• TKT’s ability to establish and maintain collaborative arrangements.

Corporate Reorganization

In February 2003, TKT’s Board of Directors appointed Michael J. Astrue as President and Chief Executive Officer of the Company and a member of the Board of Directors. Mr. Astrue replaced Richard F Selden, M.D., Ph.D., who resigned from TKT and TKT’s Board of Directors. The Board also named David D. Pendergast to the newly-created position of

Executive Vice President, Operations. Dr. Pendergast was previously Senior Vice President, Technical Operations.

Upon the appointment of Mr. Astrue, TKT announced a major reorganization in an effort to reduce costs and narrow the scope of the Company’s research initiatives. Under this reorganization, TKT plans to focus its research, development, and commercialization efforts primarily on therapeutics for the treatment of rare genetic diseases caused by protein deficiencies. The Company is seeking collaborative partners for its Gene-Activated protein products, which are versions of proteins that would compete with proteins currently being marketed by third parties, and for its gene therapy development programs.

As part of the restructuring, during the first quarter of 2003, TKT reduced its U.S. headcount by approximately 100 positions. TKT intends to continue to reduce headcount through attrition, with the goal of having approximately 300 to 315 full-time U.S. employees by the end of 2003. As of March 31, 2003, TKT had 345 full-time U.S. employees. TKT is also consolidating its facilities as part of the restructuring.

As a result of the restructuring, the Company recorded a charge of $3,602,000 during the first quarter of 2003 in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. Included in the charge is $1,332,000 of employee severance and outplacement services costs for 74 employees, primarily in research and development, and $2,270,000, representing the remaining lease obligation for one of four facilities that the Company no longer occupies. The Company expects that its employee-related and facility consolidation restructuring actions will be substantially completed in 2003 and expects to continue to record restructuring charges in connection with the reorganization during the remainder of 2003 and beyond.

Regulatory Status of Replagal in the United States

On April 24, 2003, Genzyme received marketing authorization in the United States for Fabrazyme, its enzyme replacement therapy product for the treatment of Fabry disease. Because Fabrazyme had received orphan drug designation in the United States, upon its marketing approval, Fabrazyme received orphan drug exclusivity. Once a product receives orphan drug exclusivity, the United States Food and Drug Administration (the “FDA”) may not approve another application to market the same drug for the same indication for a period of seven years, except in limited circumstances set forth under the United States Food, Drug and Cosmetic Act (the “FDA Statute”) and implementing regulations. 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 U.S. market for seven years unless TKT can demonstrate that Replagal satisfies the limited criteria for exceptions set forth in the FDA Statute and implementing regulations.

Since the Company submitted a Biologics License Application (“BLA”) for Replagal to the FDA in June 2000, the Company has received two Complete Response Letters from the

FDA. In the second Complete Response Letter, which the Company received in November 2002, the FDA indicated that the data relating to Replagal which TKT had previously submitted were not adequate for approval, primarily because of questions concerning efficacy, but that the data would be discussed at a meeting of the FDA’s Endocrinologic & Metabolic Drugs Advisory Committee (the “Endocrinologic & Metabolic Drugs Advisory Committee”).

On January 14, 2003, the Endocrinologic & Metabolic Drugs Advisory Committee convened to discuss TKT’s BLA for Replagal and concluded by a unanimous vote that TKT’s clinical data did not provide substantial evidence of efficacy. The Endocrinologic & Metabolic Drugs Advisory Committee also concluded by a vote of 8 to 7 that the renal pathology data presented by TKT were not adequate to serve as the basis for accelerated approval. Some members of the Endocrinologic & Metabolic Drugs Advisory Committee indicated that TKT could re-examine the pathology slides showing the effect of Replagal on the kidney using a different analytical method, and, if successful, the data from that re-examination might be sufficient to serve as the basis for accelerated approval. As part of its consideration of an application for marketing authorization, the FDA often requests a review of all or parts of an application for marketing authorization by an advisory committee of outside experts. The FDA is free to accept or reject the advisory committee’s recommendations.

The Company is in the process of examining possible options to break Fabrazyme’s orphan drug exclusivity, and is preparing to talk to the FDA in more detail about its options. The Company expects to take at least three to four months before making any strategic decisions on these issues.

Application of Critical Accounting Policies and Estimates

The discussion and analysis of TKT’s financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires TKT to make estimates and judgments that affect its reported assets and liabilities, revenues and expenses, and other financial information. Actual results may differ significantly from these estimates under different assumptions and conditions. In addition, TKT’s reported financial condition and results of operations could vary due to a change in the application of a particular accounting standard.

The Company regards an accounting estimate underlying its financial statements as a “critical accounting estimate” if the accounting estimate requires the Company to make assumptions about matters that are highly uncertain at the time of estimation and if different estimates that reasonably could have been used in the current period, or changes in the estimate that are reasonably likely to occur from period to period, would have had a material effect on the presentation of financial condition, changes in financial condition, or results of operations.

The Company’s significant accounting policies are described in the Notes to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. The Company regards its policies with respect to revenue recognition, inventories and asset impairment as "critical accounting estimates." These policies are described under the caption “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K.

Results of Operations

Revenues

Product sales for the quarters ended March 31, 2003 and 2002 totaled $12,183,000 and $6,058,000, respectively. Substantially all Replagal product sales were in Europe. The increase of $6,125,000, or 101%, in sales is due to additional patients beginning Replagal therapy, the pricing and reimbursement arrangements being established and formalized in additional countries in Europe, and the receipt of marketing authorizations in additional countries.

There were no license and research revenues in the first quarter of 2003. License and research revenues totaled $552,000 for the three months ended March 31, 2002. License and research revenues in the three months ended March 31, 2002 were earned from collaborative agreements with Sumitomo Pharmaceutical Co. Ltd. (“Sumitomo”) and Wyeth, which succeeded Genetics Institute, Inc.(“Wyeth”). The decrease in license and research revenues from period to period was due to the timing of completion of obligations related to each collaborative agreement. In addition, at Wyeth’s request, the Company and Wyeth were negotiating a termination of their collaboration. However, those negotiations have terminated and TKT is considering its legal and regulatory options.

Cost of Goods Sold

For the three months ended March 31, 2003 and 2002, cost of goods sold was $3,501,000 and $548,000, or 29% and 9% of product sales, respectively. Cost of goods sold consists of expenses in connection with the manufacture of Replagal.

Prior to receiving marketing approval of Replagal in Europe in August 2001, the Company expensed all of the cost of manufacturing Replagal as research and development costs. Following marketing approval, the Company began recording the costs of manufacturing Replagal as inventory rather than as a research and development expense. The Company sold Replagal that had been manufactured prior to marketing approval in 2001 and in the first half of 2002. As of June 30, 2002, this inventory had been fully utilized. As a result, unlike the three months ended March 31, 2002, the cost of goods sold for the three months ended March 31, 2003 reflects the Company’s current full production costs. In addition, during the first quarter of 2003, the Company incurred a charge of $832,000, or 7% of 2003 product sales, related to excess capacity at the terminated contract manufacturer of the bulk drug substance of Replagal. As production concludes at this contract manufacturer, the Company expects that cost of goods sold will include further excess capacity charges that will be incurred during the second and third quarters of 2003. The Company expects that its cost of goods sold for 2003 will be approximately 23% to 27% of total 2003 product sales.

To date, the Company has relied on contract manufacturing arrangements with third parties for the production of Replagal for commercial sale. These third parties manufacture Replagal bulk drug substance and perform fill and finish services. In February 2003, the Company filed with European regulatory authorities for approval to manufacture the bulk drug

substance of Replagal at the Company’s manufacturing facility in Cambridge, Massachusetts. In January 2003, the Company terminated its agreement with a third party manufacturer of the bulk drug substance of Replagal, to be effective in July 2003. The Company plans to use its existing inventory and additional inventory manufactured under the third party contract manufacturing arrangement to supply customer orders for Replagal at least until such time as the Company receives approval to manufacture Replagal at its Cambridge, Massachusetts facility, if at all, or such time as the Company is able to make other manufacturing arrangements.

Research and Development Expenses

Research and development expenses increased by $573,000, or 3%, to $20,982,000 in the first quarter of 2003, compared to $20,409,000 during the same period in 2002. The increase was primarily due to increases in research and development staffing and research and development occupancy costs. In November 2002, the Company occupied a new combined corporate headquarters and research and development facility, which increased the Company’s research and development occupancy costs in the first quarter of 2003 by $1,987,000 and will increase the Company's occupancy costs for the balance of 2003. Offsetting these increases in the first quarter of 2003 were non-recurring expenditures totaling $4,300,000 related to set-up and technology transfer fees paid to the contract manufacturer of the bulk substance of Replagal in the first quarter of 2002.

Except with respect to its product for the treatment of Gaucher disease, the Company does not intend to engage in any further product development activities related to its Gene-Activated protein products which are versions of proteins that would compete with proteins currently being marketed by third parties, and its gene therapy programs, unless those activities are funded under a collaboration agreement with a third party. As a result of this, and the Company’s restructuring efforts, the Company expects its research and development expenses to decrease in 2003.

The Company’s two largest research and development programs, Replagal, enzyme replacement therapy for the treatment of Fabry disease, and I2S, enzyme replacement therapy for the treatment of Hunter syndrome, represent the majority of the Company’s research and development spending. The expenses associated with these programs totaled approximately 70% of total research and development expenses for the quarter ended March 31, 2003 and 79% of total research and development expenses for the corresponding period in 2002, respectively. Expenses associated with the Company’s preclinical and clinical programs related to the Company’s products for the treatment of other rare genetic diseases, and other Gene-Activated protein products, accounted for the balance of the Company’s research and development expenses for both quarterly periods.

Research and development expenses for the Replagal program totaled $6,723,000 in the first quarter of 2003, a decrease of $5,127,000, or 43% from the $11,850,000 in research and development expenses in the corresponding period of 2002. In the first quarter of 2002, the Company incurred a one-time set up fee and technology transfer fees totaling $4,300,000 paid to the contract manufacturer referred to above. Costs for the Replagal program include basic research, the costs of clinical trials, manufacturing costs of clinical supplies and regulatory costs associated with preparation of worldwide product marketing applications.

The amount of future research and development expenses associated with the Replagal program is not reasonably certain because these costs are dependent principally upon the regulatory process and information required by regulatory agencies, additional clinical trial expenditures required by regulatory agencies, and the timing of obtaining marketing authorization in other countries, if granted, particularly with respect to Replagal in the United States where Fabrazyme has received orphan drug exclusivity and the Company is contemplating its strategic options. The amount of future research and development expenses are also dependent upon the extent of development efforts to build internal manufacturing infrastructure.

For the three months ended March 31, 2003 and 2002, research and development expenses for the I2S program were $7,879,000 and $4,179,000, respectively, an increase of $3,700,000, or 89%. The increase in the 2003 period was due to increases in expenditures for the manufacture of I2S for use in the Phase I/II clinical study recently completed by TKT. Based on results of this Phase I/II trial the Company intends to begin a pivotal clinical trial of I2S in the second half of 2003.

Future research and development costs for the I2S program are not reasonably certain because such costs are dependent on a number of variables, including the cost and design of the pivotal clinical trial and any additional clinical trials, uncertainties in the timing of the regulatory process, and the costs associated with large-scale manufacture of I2S. The Company expects that these costs will be significant in 2004 in order to support applications for approval in early 2005.

Intellectual Property License Fee Expense

In June 2002, the Company obtained an exclusive license to certain patents and patent applications from Cell Genesys related to Cell Genesys’ approach to gene activation. In consideration for the license, the Company initially paid Cell Genesys $11,000,000 in cash and issued to Cell Genesys shares of the Company’s common stock worth $15,000,000 as of the date of the Agreement.

Under the agreement, Cell Genesys also has the potential to receive certain milestone payments from the Company contingent upon the outcome of related patent matters under the

license agreement. If all of the milestones were achieved, the Company will be obligated to pay Cell Genesys an aggregate of $17,000,000 payable in part in cash and in part in stock. The Company is not required to make royalty payments to Cell Genesys.

Selling, General and Administrative Expenses

For the three months ended March 31, 2003, selling, general and administrative expenses were $9,166,000, compared with $6,423,000 for the three months ended March 31, 2002. The increase of $2,743,000, or 43%, over the comparable period in 2002 reflects costs incurred for ongoing Replagal sales and marketing initiatives in Europe and other countries, executive severance charges and occupancy costs related to the Company’s new corporate headquarters. Selling, general and administrative expenses related to sales and marketing activities for Replagal amounted to $4,006,000 and $2,976,000 for the three months ended March 31, 2003 and 2002, respectively. The Company anticipates expenses related to the expansion of U.S. commercial operations will be significantly reduced during the remainder of 2003, given the uncertain U.S. regulatory status of Replagal and the orphan drug exclusivity of Fabrazyme. In addition, in the first quarter of 2003, selling, general and administrative expenses related to the Company’s new corporate headquarters increased by $408,000 over the comparable period in 2002. The Company anticipates that selling, general and administrative expenses related to this new facility will increase in 2003, primarily as a result of a full year of occupancy costs related to it.

Restructuring Charge

restructuring charges in connection with the reorganization during the remainder of 2003 and beyond.

Minority Interest

The Company recorded a minority interest charge in the net income of TKT Europe - 5S AB, the Company’s majority owned, consolidated subsidiary (“TKT Europe”) of $303,000 during the first quarter of 2003.

Interest Income

Interest income was $776,000 and $2,303,000 for the three months ended March 31, 2003 and 2002, respectively. During the first quarter of 2003, average cash, cash equivalents, and marketable securities balances were $231,400,000 as compared to $385,426,000 for the same period of 2002. Interest income decreased by $1,527,000 in the three months ended March 31, 2003 compared with the comparable period in 2002 due to lower cash, cash equivalents and marketable securities balances as well as significantly lower rates of return in 2003.

Net Loss

The Company had a net loss of $25,945,000 and $18,467,000 for the first quarter ended March 31, 2003 and 2002, respectively. Basic and diluted net loss per share was $0.75 and $0.54 for the three months ended March 31, 2003 and 2002, respectively. Included in the loss for the quarter ended March 31, 2003 is an intellectual property license fee expense of $1,350,000 and a restructuring charge of $3,602,000, which contributed $0.04 and $0.10, respectively, to basic and diluted net loss per share.

For the three months ended March 31, 2003 and 2002, weighted average shares outstanding were 34,550,000 and 34,331,000, respectively. The increase in weighted average shares outstanding reflects the issuance of common stock upon the exercise of employee stock options.

Liquidity And Sources Of Capital

Since its inception, TKT has financed its operations through:

• the sale of common and preferred stock,

• borrowings under debt agreements,

• revenues from collaborative agreements,

• interest income and,

• more recently, with proceeds from product sales.

In the near term, TKT expects to finance its operations principally from existing cash, cash equivalents, and marketable securities, and from continued sales of Replagal.

Cash Flows

The Company had cash, cash equivalents and marketable securities totaling $212,079,000 at March 31, 2003, including restricted marketable securities collateralizing letters of credit totaling $7,967,000. Cash equivalents and marketable securities are invested in United States government and agency obligations and money market funds.

The Company’s cash requirements for operating activities, financing activities and investment activities have significantly exceeded its internally generated funds. The Company expects that its cash requirements for such activities will continue to significantly exceed its internally generated funds until it is able to generate substantial product sales.

The Company used net cash of $37,442,000 in operating activities in the first quarter of 2003. This consisted of a net loss of $25,945,000, combined with a net use of $11,497,000 related primarily to the payment made to Cell Genesys in January 2003.

The Company used net cash of $5,448,000 during the first quarter of 2003 for property and equipment, primarily related to leasehold improvements and equipment for the Company’s manufacturing and research and development facilities. The Company expects to spend up to approximately $20,000,000 for purchases of property and equipment for 2003, principally for expanding its internal manufacturing capabilities.

The Company will require substantial additional funds to support its research and development programs, acquisition of technologies, preclinical and clinical testing of its products, pursuit of regulatory approvals, acquisition of capital equipment, expansion of internal manufacturing capabilities, selling, general and administrative expenses, and the buyout of the minority interests in TKT Europe, if applicable, as discussed below. The Company expects that its existing capital resources, together with anticipated proceeds from product sales and interest income, will be sufficient to fund its operations into 2005.

The Company may pursue opportunities to obtain additional external financing in the future through equity financings, debt financings, lease arrangements related to facilities and capital equipment, and collaborative research agreements. The source, timing and availability of any future financing will depend principally upon equity and debt market conditions, interest rates and, more specifically, on the Company’s continued progress in its preclinical and clinical development programs, and the extent of its commercial success. There can be no assurance that external funds will be available on favorable terms, if at all.

Contractual Obligations

In connection with the termination of the Company's manufacturing arrangements with the contract manufacturer of Replagal bulk drug substance, the Company committed to pay approximately $3,240,000 to the

contract manufacturer for the purchase of additional inventory of Replagal through July 2003, of which $300,000 was accrued as of March 31, 2003.

In April 2000, the Company established TKT Europe for the purpose of marketing, selling and distributing Replagal in Europe. Under the stockholders’ agreement for TKT Europe, the Company is entitled to purchase the European stockholders’ 20% ownership interest in TKT Europe in August 2004, for a price determined in accordance with a formula. Should the Company not exercise that right, the European stockholders of TKT Europe can require the Company to purchase the European stockholders’ ownership interest sixty days thereafter. The buyout price is equal to (a) 20% of the operating profits, as defined in the stockholders’ agreement, for the period from September 1, 2003 to August 31, 2004, multiplied by a buyout factor of four, subject to adjustment, plus (b) 20% of the accumulated positive earnings of TKT Europe. As a result, the amount of the buyout price is dependent on the profits of TKT Europe and the commercial success of Replagal in Europe. These profits cannot be estimated at this time. However, the Company expects the buyout price to be substantial.

In June 2002, the Company obtained an exclusive license to certain patent and patent applications from Cell Genesys related to Cell Genesys’ approach to gene activation. In consideration for the license, the Company paid $11,000,000 cash in June 2002 and an additional $15,000,000 in January 2003. If Cell Genesys achieves all the milestone related to patent matters under the license agreement, the Company will be obligated to pay Cell Genesys an aggregate of $17,000,000 payable in part in cash and in part in stock. The Company is not required to make royalty payments to Cell Genesys.

Net Operating Loss Carryforwards

At December 31, 2002 , the Company had net operating loss carryforwards of approximately $266,075,000, which expire at various times through 2022. Due to the degree of uncertainty related to the ultimate use of loss carryforwards and tax credits, the Company has fully reserved against any potential tax benefit. The future utilization of net operating loss carryforwards and tax credits may be subject to limitation under the changes in stock ownership rules of the Internal Revenue Code. Because of this limitation, it is possible that taxable income in future years, which would otherwise be offset by net operating losses, will not be offset and, therefore, will be subject to tax.

Litigation

In the first quarter of 2003, at least nine purported class action suits were brought in the U.S. District Court of Massachusetts against the Company, its former Chief Executive Officer, and in some cases, its Chairman of the Board of Directors. The complaints generally allege that, during the period from January 2001 through January 2003, TKT made false and misleading statements and failed to disclose material information concerning the status and progress for obtaining U.S. marketing approval of Replagal. On April 9, 2003, the Court consolidated the various actions under one matter. The Company expects that expenses related to this litigation will be significant.

On April 14, 2003, a shareholder derivative suit was filed against individual members of the Company’s Board of Directors, the Company's former Chief Executive Officer, and the Company in Middlesex Superior Court in the Commonwealth of Massachusetts. The complaint generally alleges that the individual defendants breached fiduciary duties owed to the Company and its stockholders by disseminating false and misleading statements to the market concerning the status and progress for obtaining U.S. marketing approval of Replagal and causing or allowing the Company to conduct its business improperly. The Company expects that expenses related to this litigation will be significant.

The Company has been engaged in patent litigation with Genzyme and Mount Sinai with respect to Replagal. Through March 31, 2003, the Company had incurred approximately $4,667,000 in litigation expenses associated with the Replagal litigation.

The Company and Aventis have been involved in patent infringement actions with Amgen and Kirin-Amgen with respect to Dynepo (epoietin delta), a fully human erythropoietin for the treatment of anemia related to chronic renal failure. The litigation is costly and the Company is required to reimburse Aventis, which is paying the litigation expenses, for 50% of the expenses. Aventis is entitled to deduct up to 50% of any royalties due to the Company from the sale of Dynepo until Aventis has recouped the full amount of TKT’s share of litigation expenses. The Company currently estimates that its share of the expenses associated with the litigation will total between approximately $15,000,000 and $20,000,000 by the time the matter is finally adjudicated.

The Company has been engaged in patent litigation with Serono with respect to Replagal. The Company expects that expenses relating to this litigation will be significant.

The Company can provide no assurance as to the outcome of these proceedings. A decision by a court in any jurisdiction in a manner adverse to the Company could have a material adverse effect on the Company’s liquidity and capital resources.

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, that involve risks and uncertainties. The Company may, in some cases, use words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “will,” or “may,” or other words that convey uncertainty of future events or outcomes to identify these forward–looking statements. There are a number of important factors that could cause actual results to differ materially from the results anticipated by these forward–looking statements. These important factors include those set forth below under “Certain Factors That May Affect Future Results.” These factors and the other cautionary statements made in this quarterly report should be read as being applicable to all related forward–looking statements wherever they appear in this quarterly report. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, the Company’s actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward–looking statements. In addition, any forward-looking statements represent the Company’s estimates only as of the date this quarterly report was filed with the Securities and Exchange Commission and should not be relied upon as representing the Company’s estimates as of any subsequent date. While the Company may elect to update forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so, even if its estimates change.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

The following important factors could cause actual results to differ from those indicated by forward-looking statements made by the Company from time to time.

Clinical and Regulatory Risks

Unless we are able to break Fabrazyme's orphan drug exclusivity, we will not be able to obtain marketing approval for Replagal in the United States for seven (7) years.

On April 24, 2003, Genzyme received marketing authorization in the United States for Fabrazyme, its enzyme replacement therapy product for the treatment of Fabry disease. Because Fabrazyme had received orphan drug designation in the United States, upon its marketing approval, Fabrazyme received orphan drug exclusivity. Once a product receives orphan drug exclusivity, the FDA may not approve another application to market the same drug for the same indication for a period of seven years, except in limited circumstances set forth under the FDA Statute and implementing regulations. 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 U.S. market for seven years unless TKT can demonstrate that Replagal satisfies the limited criteria for exceptions set forth in the FDA Statute and implementing regulations.

We may not be able to obtain marketing approvals for our products, whether or not we receive orphan drug exclusivity for our products.

We are not able to market any of our products in Europe, the United States or in any other jurisdiction without marketing approval from the European Agency for the Evaluation of Medicinal Products, or EMEA, the FDA, or any equivalent foreign regulatory agency. The regulatory process to obtain market approval for a new drug or biologic takes many years and requires the expenditure of substantial resources. We have had only limited experience in preparing applications and obtaining regulatory approvals.

In August 2001, the EMEA granted marketing authorization of Replagal in the European Union, approximately one year after we submitted our Marketing Authorization Application, or MAA, to the EMEA, and approximately five years after we filed our Investigational New Drug Application, or IND, with the FDA. We have also received approval to market Replagal in a number of other countries.

We have not received approval to market and sell Replagal in the United States. As noted above, because Fabrazyme has received orphan drug exclusivity, we cannot receive approval in the United States for seven years unless we are able to break Fabrazyme's orphan drug exclusivity.

Since we submitted a BLA for Replagal to the FDA in June 2000, we have received two Complete Response Letters from the FDA. In the second Complete Response Letter, which we received in November 2002, the FDA indicated that the data relating to Replagal which we had previously submitted were not adequate for approval, primarily because of questions concerning efficacy, but that the data would be discussed at a meeting of the Endocrinologic & Metabolic Drugs Advisory Committee.

On January 14, 2003, the Endocrinologic & Metabolic Drugs Advisory Committee convened to discuss our BLA for Replagal and concluded by a unanimous vote that our clinical data did not provide substantial evidence of efficacy. The Endocrinologic & Metabolic Drugs Advisory Committee also concluded by an 8 to 7 vote that the renal pathology data presented by us were not adequate to serve as the basis for accelerated approval. Some members of the Endocrinologic & Metabolic Drugs Advisory Committee indicated that we could re-examine the pathology slides showing the effect of Replagal on the kidney using a different analytical method, and if successful, the data from that re-examination might be sufficient to serve as the basis for accelerated approval. As part of its consideration of an application for marketing authorization, the FDA often requests a review of an application for marketing authorization or parts of an application for marketing authorization by an advisory committee of outside experts. The FDA is free to accept or reject the advisory committee’s recommendations.

We decided not to commence the re-examination of the pathology slides until we have further discussion with the FDA regarding potential avenues for approval of Replagal in the United States.

Although the EMEA has granted marketing approval of Dynepo in the European Union, Dynepo has not been approved in the United States. In 2000, Aventis 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. In addition, Aventis has not launched Dynepo in Europe.

There can be no assurance as to whether or when any of these applications for marketing authorization relating to Replagal 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. 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.

We may not be able to obtain orphan drug exclusivity for our products for the treatment of rare genetic diseases.

Some jurisdictions, including Europe 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 certain tax credits in the United States. Generally, if a product which has 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, except in limited circumstances set forth in the FDA Statute and implementing regulations, for a period of up to ten years in Europe and for a period of seven years in the United States. 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 did with Fabrazyme in the United States. 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 EMEA granted marketing authorization of Replagal in the European Union. Genzyme’s Fabrazyme was also granted marketing authorization in the European Union in August 2001. Replagal and Fabrazyme were granted co-exclusive orphan drug status in the European Union for up to 10 years.

If we fail to comply with the extensive regulatory requirements to which our products are subject, we could be subject to adverse consequences and penalties.

The testing, manufacturing, labeling, advertising, promotion, export, and marketing, among other things, of our products are subject to extensive regulation by governmental authorities in Europe, the United States, and elsewhere throughout the world.

If the FDA approves one of our products, we and any third party manufacturers we use will be required to comply with a number of post-approval requirements. For example, we will be required to report certain adverse events to the FDA and to comply with certain requirements concerning advertising and promotional labeling of the products. Also, quality control and manufacturing procedures must continue to conform to GMP regulations after approval, and the FDA periodically inspects manufacturing facilities to assess compliance with GMP. Accordingly, manufacturers must continue to expend time, monies, and effort in the area of production and quality control to maintain GMP compliance. In addition, discovery of problems may result in financial penalties, suspension or withdrawal or an approved product from the market, operating restrictions, and the imposition of criminal penalties.

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

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. We may not be able to commence or complete these clinical trials, either because the FDA or other regulatory agencies object, or for other reasons.

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 subjects or patients participating in such trials are being exposed to unacceptable health risks, or for other reasons.

The rate 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. In particular, the patient populations for some of our products for rare genetic diseases are small. For instance, we believe there are up to 5,000 patients worldwide afflicted with Fabry disease and up to 3,000 patients worldwide afflicted with Hunter syndrome. We are currently conducting clinical trials of I2S for the treatment of Hunter syndrome and additional trials of Replagal. Delays in planned patient enrollment may result in increased costs and prolonged clinical development.

We and our collaborators may not be able to successfully complete any clinical trial of a potential product within any specified time period. In some cases, we may not be able to complete the trial at all. Moreover, clinical trials may not show our potential product to be both safe and efficacious. Thus, the EMEA, the FDA and other regulatory authorities may not approve any of our potential products for any indication.

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 efficacious in treating disease or that reveal safety concerns. 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 efficacy of the potential product, allocation of resources or unavailability of qualified research and development personnel.

Recent adverse events in the field of gene therapy may impair our ability to obtain collaborative partners for our gene therapy programs.

We have terminated internal development of our gene therapy programs and are seeking collaborative partners with which to continue to develop these programs. Recent adverse events

in the field of gene therapy, although not occurring in our clinical trials, may impair our ability 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 Genzyme and Mount Sinai involving Replagal which could preclude us from manufacturing or selling Replagal.

In July 2000, Genzyme and Mount Sinai filed a patent infringement action against us in the U.S. District Court of Delaware. The complaint alleges that activities relating to Replagal infringe a patent licensed by Genzyme from Mount Sinai. In January 2002, the U.S. District Court of Delaware dismissed this patent litigation. In March 2002, Genzyme appealed the U.S. District Court of Delaware’s ruling to the U.S. Court of Appeals for the Federal Circuit, and in January 2003 the U.S. Court of Appeals for the Federal Circuit heard oral arguments on the appeal. If Genzyme is successful in its appeal, the case will be remanded to the U.S. District Court of Delaware for further proceedings on non-infringement and invalidity issues. If we were to ultimately lose this case after trial and appeal, we would be precluded from making, using and selling Replagal. We can provide no assurance as to the outcome of this litigation. As of March 31, 2003, we have incurred approximately $4.7 million in litigation expenses associated with the Replagal litigation.

We are a party to litigation with Amgen and Kirin-Amgen involving Dynepo which could preclude us from manufacturing or selling Dynepo.

In April 1997, Amgen commenced a patent infringement action against us and Aventis in the District Court of Massachusetts. In January 2001, the District Court of Massachusetts concluded that Dynepo infringed 8 of the 18 claims of patents asserted by Amgen. Subsequent to the decision, we and Aventis, as well as Amgen, filed an appeal of the decision with the Court of Appeals for the Federal Circuit. On January 6, 2003, the Court of Appeals for the Federal Circuit issued a decision affirming in part and reversing in part the decision of the District Court of Massachusetts and remanded the action to the District Court of Massachusetts for further proceedings.

In addition, in July 1999, we and Aventis commenced legal proceedings in the United Kingdom against Kirin-Amgen, seeking a declaration that a European patent held by Kirin-Amgen will not be infringed by our activities related to Dynepo. In April 2001, the High Court of Justice in the United Kingdom ruled that Dynepo infringed one of four claims of a 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. In February 2003, the House of Lords agreed to hear an appeal of the decision of the Court of Appeals.

We can provide no assurance as to the outcome of either litigation. If we and our collaborator, 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. We are required to reimburse Aventis, which is paying the litigation expenses, for 50% of the expenses. Aventis is entitled to deduct up to 50% of any royalties due to us from it with respect to the sale of Dynepo until Aventis has recouped the full amount of our share of litigation expenses. We currently estimate that our share of the expenses associated with the litigation will total between approximately $15.0 million and $20.0 million by the time the matter is finally adjudicated.

We are a party to litigation with Serono and would be prohibited from selling products using gene activation technology in some jurisdictions in Europe if we are not successful in the litigation.

In January 2003, Applied Research Systems ARS Holdings, N.V., a wholly owned subsidiary of Serono, commenced an action against us in the District Court at The Hague in the Netherlands claiming that Replagal infringes one of Serono’s European patents. The Serono patent relates to Serono’s approach to gene activation. In January 2002, the European Patent Office revoked the Serono patent on grounds of invalidity due to non-enablement. Serono has appealed the revocation to the Technical Board of Appeal at the European Patent Office. The Company expects that expenses related to this litigation will be significant. We can provide no assurance as to the outcome of this litigation. If we lose this litigation, we may prohibited from selling products using gene activation technology, including Replagal, in some jurisdictions in Europe.

We are a party to several shareholder lawsuits and a derivative action regarding the adequacy of our public disclosure which could have a material adverse affect on our financial condition.

In the first quarter of 2003, at least nine purported class action suits were brought in the U.S. District Court of Massachusetts against the Company, its former Chief Executive Officer, and in some cases, its Chairman of the Board of Directors. The complaints generally allege that, during the period from January 2001 through January 2003, TKT made false and misleading statements and failed to disclose material information concerning the status and progress for obtaining U.S. marketing approval of Replagal and seek equitable and monetary relief, an unspecified amount of damages, with interest, and attorney's fees and costs. On April 9, 2003, the Court consolidated the various actions under one matter.

On April 14, 2003, a shareholder derivative suit was filed against individual members of the Company’s Board of Directors, the Company's former Chief Executive Officer, and the Company in Middlesex Superior Court in the Commonwealth of Massachusetts. The complaint generally alleges that the individual defendants breached fiduciary duties owed to the Company and its stockholders by disseminating false and misleading statements to the market concerning the status and progress for obtaining U.S. marketing approval of Replagal and causing or allowing the Company to conduct its business improperly. The complaint seeks declaratory, equitable and monetary relief, an unspecified amount of damages, with interest, and attorney's fees and costs.

The Company expects that expenses 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 adversely affected.

The SEC is investigating us regarding our public disclosures and filings, as well as transactions in our securities, which could have material adverse affect on our financial condition.

We can provide no assurance as to the outcome of this matter. At a minimum, 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.

The biotechnology industry has been characterized by significant litigation, and interference and other proceedings regarding patents, patent applications, and other intellectual property rights. We may become a party to additional patent litigation and other proceedings

with respect to our proteins or other technologies. Such litigation could result in liability for damages, prevent our development and commercialization efforts, and divert management’s attention and resources.

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. 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 strategic alliances, and compete in the marketplace.

If we are unable to obtain 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 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. Even if issued, patents may be challenged, invalidated, or circumvented. Our patents also may not afford us protection against competitors with similar technology. Because patent applications in the United States are maintained in secrecy until patents issue, 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.

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. As a result, we may be required to obtain licenses under third party patents to market certain of our potential products. If licenses are not available to us on acceptable terms, we may not be able to market these products.

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 a license to patents related to I2S, 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 into at least 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 depend in part upon Replagal receiving marketing approval in the United States, Japan and other countries. As noted above, because Fabrazyme received orphan drug exclusivity in the United States, approval for Replagal in the United States will be difficult to obtain.

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, including litigation with Amgen, Genzyme and Serono, 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.

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 BioMarin Pharmaceutical Inc., Genzyme, Osiris Therapeutics, Inc., and Oxford GlycoSciences plc. 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.

We believe that 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 in the United States and orphan drug exclusivity.

We believe Genzyme’s product Cerezyme is our primary competition with respect to our enzyme replacement therapy for the treatment of Gaucher disease.

Gene-Activated Versions of Proteins That Would Compete With Currently-Marketed Proteins

In our Gene-Activated protein program, we are developing 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.

Many of the products against which our Gene-Activated proteins 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 proteins 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 and pharmaceutical companies, such as Amgen and Serono, are actively involved in this field.

The market may not be receptive to our products upon their introduction.

The commercial success of any of our products for which we obtain marketing approval from the EMEA, 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

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

We have limited experience and resources in manufacturing and will incur significant costs to develop this experience or rely on third parties to manufacture our products on our behalf.

We have limited manufacturing experience and 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 currently use, and expect to continue to use in the future, internal manufacturing and contract manufacturing by third parties to meet our production requirements for preclinical testing, clinical trials, and commercial supply.

To date, we have relied on contract manufacturing arrangements with third parties for the production of Replagal for commercial sale. These third parties manufacture Replagal bulk drug substance and perform fill and finish services. In February 2003, we filed with European regulatory authorities for approval to manufacture the bulk drug substance of Replagal at our manufacturing facility in Cambridge, Massachusetts. In January 2003, we terminated our agreement with the third party manufacturer of the bulk drug substance of Replagal, to be effective in July 2003. We plan to use our existing inventory and additional inventory manufactured under the third party contract manufacturing arrangement to supply customer orders for Replagal at least until we receive approval to manufacture Replagal at our Cambridge, Massachusetts facility or such time as we make other manufacturing arrangements. We are unsure when or if our facility will be approved for the manufacture of Replagal bulk drug substance or if we will be able to make other manufacturing arrangements. Failure to obtain approval for our manufacturing facilities or to make other manufacturing arrangements before our inventory of Replagal is exhausted could cause us to be unable to supply Replagal to commercial customers in Europe and elsewhere, which could have a material adverse effect on sales and on our ability to attract new patients.

We are investing, and may need to invest in the future, substantial additional funds to build our own manufacturing facilities and need to recruit qualified personnel in order to operate any manufacturing facilities. There can be no assurance that we will be able to successfully build or operate our own facilities, that our facilities will comply with applicable regulations or that our facilities will enable us to manufacture our products at a commercially reasonable cost.

To the extent that we are a party to manufacturing arrangements with third parties, we will be dependent upon these third parties to perform their obligations in a timely manner and in accordance with applicable government regulations. For instance, we are parties to several arrangements with respect to various aspects of the manufacture of Replagal. Each of these manufacturing arrangements relates to only certain 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 and adversely affects our Replagal inventory levels, our sales of Replagal could be adversely affected.

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 these products, or to do so on commercially reasonable terms, we may not be able to complete development of these products or market them.

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 or 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.

If we fail to obtain reimbursement, or an adequate level of reimbursement, by third party payors for our products, 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 the United States, 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. If we are not able to obtain pricing and reimbursement for our products that receive marketing approval at satisfactory levels, 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, have established pricing and reimbursement for substantially all patients receiving Replagal in Europe. Pricing was initially established as the local currency equivalent of an average of approximately $165,000 per patient per year. The price remains fixed in the local currencies and varies in U.S. 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.

The Centers for Medicare and Medicaid Services of the United States Department of Health and Human Services has considered proposals from time to time to reduce the reimbursement rate with respect to erythropoietin. If Dynepo is approved and commercialized, adoption by the Centers for Medicare and Medicaid Services of any such proposal might have an adverse effect on the pricing of Dynepo.

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 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.

We have limited sales and marketing experience and capabilities. In order to market our products, including Replagal, we will need to develop this experience and these capabilities or rely upon third parties, such as our collaborators, 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, we may not be able to recruit and maintain an effective sales force.

Currently, TKT Europe, our 80% owned subsidiary, markets Replagal in Europe. As a result, our ability to successfully market and sell Replagal in Europe is dependent on the marketing personnel of TKT Europe. We have an 80% equity interest in TKT Europe; the European stockholders own the remaining 20% equity interest in TKT Europe. Although our consent is required for various significant matters relating to the operation of TKT Europe, most day-to-day operations of TKT Europe are directed by the European stockholders. If we should determine to buy out TKT Europe or if the European stockholders exercise their contractual right to require us to buy them out, our ability to successfully market and sell Replagal in Europe would be dependent on our ability to attract and retain experienced marketing and sales personnel.

We depend on our collaborators to develop, conduct clinical trials, obtain regulatory approvals for, and manufacture, market and sell certain 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 Aventis to develop, conduct clinical trials, obtain regulatory approvals for, and manufacture, market, and sell Dynepo in the United States and Europe; and Sumitomo to develop and commercialize Replagal for Fabry disease in Japan, Korea, and China. 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 without cause on short notice under specified circumstances.

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:

• 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 which could affect our collaborative partners’ commitment to the collaboration with us;

• reductions in marketing or sales efforts or a discontinuation of marketing or sales of our products by our collaborators would reduce our revenues, which will be based on a percentage of net sales by the collaborator;

• our collaborators may terminate their collaborations with us, as Aventis has done with respect to GA-GCSF, 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.

We may be exposed to product liability claims and may not be able to obtain adequate product liability insurance.

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.

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, 2003, our accumulated deficit was $391.4 million. We had net losses of $129.8 million, $70.2 million and $51.0 million in 2002, 2001 and 2000, respectively.

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 $34.7 million in product sales in 2002 and $12.2 million in product sales in the first quarter of 2003. 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 financial condition will be adversely affected.

We expect that our existing capital resources, together with anticipated proceeds from product sales, anticipated cash payments under collaborative agreements, and interest income, will be sufficient to fund our operations into 2005. Our cash requirements for operating activities, financing activities and investment activities have 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. Our future capital requirements will depend on many factors, including the following:

• the timing, receipt, and amount of Replagal product sales;

• continued progress in our research and development programs, particularly I2S, as well as the magnitude of these programs;

• the scope and results of our clinical trials;

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

• the cost of manufacturing activities;

• 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;

• our ability to establish and maintain collaborative arrangements; and

• the cost of buying out the minority interest in TKT Europe, if applicable.

If we determine to seek additional funding, we may do so through collaborative arrangements and public or private 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 will be adversely affected.

If we raise additional funds by issuing equity securities, further dilution to our then existing stockholders will result. In addition, the terms of the financing may adversely affect the holdings or the rights of such 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. 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.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company maintains its investment portfolio consistent with its Investment Policy, which has been approved by the Board of Directors. The Company’s investment portfolio consists of investments only in U.S. government and agency obligations. The Company’s investments are also subject to interest rate risk and will decrease in value if market interest rates increase. However, due to the relatively short duration of the Company’s investments, interest rate risk is mitigated. The Company does not own derivative financial instruments in its investment portfolio.

Accordingly, the Company does not believe that there is any material market risk

exposure with respect to derivative or other financial instruments which would require disclosure under this item.

As of March 31, 2003, the Company did not have any off-balance sheet arrangements.

The Company has exposure to currency risk for Replagal sales in Europe. Pricing was initially established as the local currency equivalent of an average annual per patient price of approximately $165,000. The price remains fixed in the local currencies and varies in U.S. dollars with exchange rate fluctuations. Foreign currency fluctuations were immaterial for sales and gross margins for the period ended March 31, 2003.

ITEM 4 CONTROLS AND PROCEDURES.

(a) Evaluation of disclosure controls and procedures. Based on their evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) as of a date within 90 days of the filing date of this Quarterly Report on Form 10-Q, the Company’s chief executive officer and the Company’s controller (as principal financial officer) have concluded that, except as described below, the Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and are operating in an effective manner.

In 2002, sales of the Company’s Replagal product became material to the Company’s consolidated financial statements. Sales totaled approximately $35 million for 2002 and approximately $12.2 million for the first quarter of 2003. The sales are transacted through and recorded by the Company’s 80% owned subsidiary, TKT Europe. During 2002, with respect to TKT Europe, the Company did not have a timely flow of critical accounting and related financial information and experienced difficulties and delays in verifying that product sales were being properly recognized as revenue in accordance with United States generally accepted accounting principles. The Company’s independent auditors, in connection with their audit of the Company’s consolidated financial statements for the year ended December 31, 2002, informed management and the Company’s audit committee that, in their judgment, a material weakness in the Company’s internal control system existed as a result of these issues. Members of the Company’s United States accounting and finance group have been discussing implementing procedures to address these issues with the accounting personnel of TKT Europe.

Notwithstanding these issues, in light of the processes involved in the preparation by the Company of its consolidated financial statements for the year ended December 31, 2002, management of the Company believes that those financial statements fairly presented the Company’s consolidated financial position as of, and the consolidated results of its operations for, the year ended on that date. Moreover, as part of these processes, management concluded that no material adjustments were needed to such financial statements or with respect to amounts reported for interim periods in the year ended December 31, 2002. The Company’s independent auditors rendered an unqualified opinion with respect to the Company’s consolidated financial statements for the year ended December 31, 2002.

In connection with the preparation by the Company of its consolidated financial statements for the three months ended March 31, 2003, the Company did not experience any difficulties or delays in obtaining critical accounting and related financial information or conducting its internal review processes with respect to TKT Europe. Management of the Company believes that the consolidated financial statements for the three months ended March 31, 2003 fairly present the Company’s consolidated financial position as of, and the consolidated results of its operations for, the three months ended March 31, 2003.

(b) Changes in internal controls. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their most recent evaluation.

Other Information

ITEM 1. LEGAL PROCEEDINGS

The description of legal proceedings set forth under note 8 of the notes to the Company's consolidated financial statements contained in this Quarterly Report of Form 10-Q is incorporated herein by reference.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) The Exhibits listed in the Exhibit index immediately preceding such Exhibits are filed as part of this Quarterly Report on Form 10-Q, and such Exhibit Index is incorporated herein by reference.

(b) Reports on Form 8-K

Current Report on Form 8-K, filed February 14, 2003, regarding the appointment of Michael J. Astrue as President and Chief Executive Officer of the Company and election of Mr. Astrue to the Company’s Board of Directors.

Current Report on Form 8-K, filed March 3, 2003, regarding a scheduled speech by Mr. Astrue at the Lehman Brothers 2003 Global Health Care Conference.

Current Report on Form 8-K, furnished on March 31, 2003 under Item 9, containing a copy of its earnings release for the quarter and year ended December 31, 2002 (including financial statements) pursuant to Item 12 (Results of Operations and Financial Condition).

SIGNATURES

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

	TRANSKARYOTIC THERAPIES, INC.

Date: May 15, 2003	By:	/s/ Michael J. Astrue
		Michael J. Astrue
		President and Chief Executive Officer

Date: May 15, 2003	By:	/s/ Paul M. Schneider
		Paul M. Schneider
		Controller (Principal
		Financial and Accounting Officer)

CERTIFICATIONS

I, Michael J. Astrue, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Transkaryotic Therapies, Inc.;

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

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

4. The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

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

b) evaluated the effectiveness of the Registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant’s ability to record, process, summarize and report financial data and have identified for the Registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls; and

6. The Registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

			/s/ Michael J. Astrue
	Dated: May 15, 2003		Michael J. Astrue
			President and Chief Executive Officer

I, Paul M. Schneider, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Transkaryotic Therapies, Inc.;

b) evaluated the effectiveness of the Registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls; and

		/s/ Paul M. Schneider
Dated: May 15, 2003		Paul M. Schneider
		Controller

EXHIBIT INDEX

Exhibit No.		Description

3.1		Amended and Restated Certificate of Incorporation of the Registrant, as amended to date.

3.2		Amended and Restated By-Laws of the Registrant, as amended to date.

10.34		Indemnification Agreement, dated March 13, 2003, by and between Mr. Daniel E. Geffken and the Registrant.

10.35		Retention Agreement, dated March 13, 2003, by and between Mr. Daniel E. Geffken and the Registrant.

10.36		2002 Stock Incentive Plan and Amendment No. 1 thereto.

10.37		Indemnification Agreement, dated April 30, 2003, by and between Mr. Michael J. Astrue and the Registrant.

10.38		Employment Agreement, dated April 30, 2003, by and between Mr. Michael J. Astrue and the Registrant.

10.39#		License Agreement, dated February 28, 2003, by and between Women’s and Children’s Hospital and the Registrant.

99.1		Certification by the Registrant’s President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2		Certification by the Registrant’s Controller pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

# Confidential treatment requested as to certain portions pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended, which portions have been omitted and filed separately with the Securities and Exchange Commission.

EX-3.1 3 j9805_ex3d1.htm EX-3.1

Exhibit 3.1

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

TRANSKARYOTIC THERAPIES, INC.

Transkaryotic Therapies, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows:

1. The Corporation filed its original Certificate of Incorporation with the Secretary of State of the State of Delaware on July 7, 1988. A Restated Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on February 14, 1992, which was subsequently amended on April 16, 1993 and July 1, 1993. A Restated Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on November 5, 1993, which was subsequently amended on May 18, 1994, March 1, 1995, October 26, 1995 and July 9, 1996.

2. At a meeting of the Board of Directors, a resolution was duly adopted, pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, setting forth an Amended and Restated Certificate of Incorporation of the Corporation and declaring said Amended and Restated Certificate of Incorporation advisable. The stockholders of the Corporation duly approved said proposed Amended and Restated Certificate of Incorporation by written consent in accordance with Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware, and written notice of such consent has been given to all stockholders who have not consented to said restatement. The resolution setting forth the Amended and Restated Certificate of Incorporation is as follows:

RESOLVED:

That the Certificate of Incorporation of the Corporation be, and hereby is, amended and restated in its entirety so that the same shall read as follows:

ARTICLE I.

The name of the Corporation is Transkaryotic Therapies, Inc.

ARTICLE II.

The address of the Corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle 19801. The name of its registered agent at such address is The Corporation Trust Company.

ARTICLE III.

The nature of the business of the Corporation and the purposes for which it is organized are:

1. To engage in research and development in the field of gene therapy and to pursue various commercial applications of such research;

2. To engage in any other lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware; and

3. In general, to possess and exercise all the powers and privileges granted by the General Corporation Law of the State of Delaware or by any other law of the State of Delaware or by this Certificate of Incorporation, together with any powers incidental thereto, so far as such powers and privileges are necessary or convenient to the conduct, promotion or attainment of the business or purposes of the Corporation.

ARTICLE IV.

The total number of shares of all classes of stock which the Corporation shall have authority to issue is 40,000,000 shares, consisting of (i) 30,000,000 shares of Common Stock, $.01 par value per share (the “Common Stock”) and (ii) 10,000,000 shares of Preferred Stock, $.01 par value per share (the “Preferred Stock”).

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

A. COMMON STOCK.

1. General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights of the holders of the Preferred Stock of any series as may be designated by the Board of Directors upon any issuance of the Preferred Stock of any series.

2. Voting. The holders of the Common Stock are entitled to one vote for each share held at all meetings of stockholders (and written actions in lieu of meetings). There shall be no cumulative voting.

The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of Delaware.

3. Dividends. Dividends may be declared and paid on the Common Stock from funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend rights of any then outstanding Preferred Stock.

4. Liquidation. Upon the dissolution or liquidation of the Corporation, whether voluntary or involuntary, holders of Common Stock will be entitled to receive all assets of the Corporation available for distribution to its stockholders, subject to any preferential rights of any then outstanding Preferred Stock.

B. PREFERRED STOCK.

Preferred Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation as hereinafter provided. Any shares of Preferred Stock which may be redeemed, purchased or acquired by the Corporation may be reissued except as otherwise provided by law. Different series of Preferred Stock shall not be construed to constitute different classes of shares for the purposes of voting by classes unless expressly provided.

Authority is hereby expressly granted to the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of any such series, by resolution or resolutions providing for the issue of the shares thereof, to determine and fix such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, special voting rights, conversion rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the full extent now or hereafter permitted by the General Corporation Law of Delaware. Without limiting the generality of the foregoing, the resolutions providing for issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to the Preferred Stock of any other series to the extent permitted by law. Except as otherwise specifically provided in this Certificate of Incorporation, no vote of the holders of the Preferred Stock or Common Stock shall be a prerequisite to the issuance of any shares of any series of the Preferred Stock authorized by and complying with the conditions of this Certificate of Incorporation, the right to have such vote being expressly waived by all present and future holders of the capital stock of the Corporation.

ARTICLE V.

Except as otherwise provided in Section 3.2 of Article IV, the number of directors of the Corporation shall be fixed from time to time in the manner provided in the By-laws of the Corporation and may be increased or decreased from time to time in the manner provided in such By-laws. Election of directors need not be by written ballot except and to the extent provided in the By-laws of the Corporation.

ARTICLE VI.

The Board of Directors of the Corporation is expressly authorized to make, alter, or repeal the By-laws of the Corporation, but such authorization shall not divest the stockholders of the power, nor limit their power, to adopt, amend, or repeal such By-laws.

ARTICLE VII.

Except to the extent that the General Corporation Law of the State of Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law

imposing such liability. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment.

ARTICLE VIII.

1. Actions, Suits and Proceedings Other than by or in the Right of the Corporation. The Corporation shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) (all such persons being referred to hereafter as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Notwithstanding anything to the contrary in this Article, except as set forth in Section 6 below, the Corporation shall not indemnify an Indemnitee seeking indemnification in connection with a proceeding (or part thereof) initiated by the Indemnitee unless the initiation thereof was approved by the Board of Directors of the Corporation.

2. Actions or Suits by or in the Right of the Corporation. The Corporation shall indemnify any Indemnitee who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees) and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is

fairly and reasonably entitled to indemnity for such expenses (including attorneys’ fees) which the Court of Chancery of Delaware or such other court shall deem proper.

3. Indemnification for Expenses of Successful Party. Notwithstanding the other provisions of this Article, to the extent that an Indemnitee has been successful, on the merits or otherwise, in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, or on appeal from any such action, suit or proceeding, he shall be indemnified against all expenses (including attorneys’ fees) actually and reasonably incurred by him or on his behalf in connection therewith. Without limiting the foregoing, if any action, suit or proceeding is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the Indemnitee did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and (v) with respect to any criminal proceeding, an adjudication that the Indemnitee had reasonable cause to believe his conduct was unlawful, the Indemnitee shall be considered for the purposes hereof to have been wholly successful with respect thereto.

4. Notification and Defense of Claim. As a condition precedent to his right to be indemnified, the Indemnitee must notify the Corporation in writing as soon as practicable of any action, suit, proceeding or investigation involving him for which indemnity will or could be sought. With respect to any action, suit, proceeding or investigation of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to the Indemnitee. After notice from the Corporation to the Indemnitee of its election so to assume such defense, the Corporation shall not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with such claim, other than as provided below in this Section 4. The Indemnitee shall have the right to employ his own counsel in connection with such claim, but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of the Indemnitee unless (i) the employment of counsel by the Indemnitee has been authorized by the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the Corporation and the Indemnitee in the conduct of the defense of such action or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel for the Indemnitee shall be at the expense of the Corporation, except as otherwise expressly provided by this Article. The Corporation shall not be entitled, without the consent of the Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation or as to which counsel for the Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above.

5. Advance of Expenses. Subject to the provisions of Section 6 below, in the event that the Corporation does not assume the defense pursuant to Section 4 of this Article of any action, suit, proceeding or investigation of which the Corporation receives notice under this Article, any expenses (including attorneys’ fees) incurred by an Indemnitee in defending a civil or criminal action, suit, proceeding or investigation or any appeal therefrom shall be paid by the Corporation in advance of the final disposition of such matter, provided, however, that the

payment of such expenses incurred by an Indemnitee in advance of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the Corporation as authorized in this Article. Such undertaking may be accepted without reference to the financial ability of such person to make such repayment.

6. Procedure for Indemnification. In order to obtain indemnification or advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the Indemnitee shall submit to the Corporation a written request, including in such request such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification or advancement of expenses. Any such indemnification or advancement of expenses shall be made promptly, and in any event within 60 days after receipt by the Corporation of the written request of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the Corporation determines, by clear and convincing evidence, within such 60-day period that the Indemnitee did not meet the applicable standard of conduct set forth in Section 1 or 2, as the case may be. Such determination shall be made in each instance by (a) a majority vote of a quorum of the directors of the Corporation consisting of persons who are not at that time parties to the action, suit or proceeding in question (“disinterested directors”), (b) if no such quorum is obtainable, a majority vote of a committee of two or more disinterested directors, (c) a majority vote of a quorum of the outstanding shares of stock of all classes entitled to vote for directors, voting as a single class, which quorum shall consist of stockholders who are not at that time parties to the action, suit or proceeding in question, (d) independent legal counsel (who may be regular legal counsel to the Corporation), or (e) a court of competent jurisdiction.

7. Remedies. The right to indemnification or advances as granted by this Article shall be enforceable by the Indemnitee in any court of competent jurisdiction if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within the 60-day period referred to above in Section 6. Unless otherwise provided by law, the burden of proving that the Indemnitee is not entitled to indemnification or advancement of expenses under this Article shall be on the Corporation. Neither the failure of the Corporation to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances because the Indemnitee has met the applicable standard of conduct, nor an actual determination by the Corporation pursuant to Section 6 that the Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. The Indemnitee’s expenses (including attorneys’ fees) incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such proceeding shall also be indemnified by the Corporation.

8. Subsequent Amendment. No amendment, termination or repeal of this Article or of the relevant provisions of the General Corporation Law of Delaware or any other applicable laws shall affect or diminish in any way the rights of any Indemnitee to indemnification under the provisions hereof with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal.

9. Other Rights. The indemnification and advancement of expenses provided by this Article shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), agreement or vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in any other capacity while holding office for the Corporation, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of the Indemnitee. Nothing contained in this Article shall be deemed to prohibit, and the Corporation is specifically authorized to enter into, agreements with officers and directors providing indemnification rights and procedures different from those set forth in this Article. In addition, the Corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article.

10. Partial Indemnification. If an Indemnitee is entitled under any provision of this Article to indemnification by the Corporation for some or a portion of the expenses (including attorneys’ fees), judgments, fines or amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with any action, suit, proceeding or investigation and any appeal therefrom but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify the Indemnitee for the portion of such expenses (including attorneys’ fees), judgments, fines or amounts paid in settlement to which the Indemnitee is entitled.

11. Insurance. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) against any expense, liability or loss incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of Delaware.

12. Merger or Consolidation. If the Corporation is merged into or consolidated with another corporation and the Corporation is not the surviving corporation, the surviving corporation shall assume the obligations of the Corporation under this Article with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the date of such merger or consolidation.

13. Savings Clause. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law.

14. Definitions. Terms used herein and defined in Section 145(h) and Section 145(i) of the General Corporation Law of Delaware shall have the respective meanings assigned to such terms in such Section 145(h) and Section 145(i).

15. Subsequent Legislation. If the General Corporation Law of Delaware is amended after adoption of this Article to expand further the indemnification permitted to Indemnitees, then the Corporation shall indemnify such persons to the fullest extent permitted by the General Corporation Law of Delaware, as so amended.

ARTICLE IX.

1. Meetings of the stockholders of the Corporation may be held within or without the State of Delaware, as the By-laws may provide. The books and records of the Corporation may be kept within or without the State of Delaware at such place or places as may be designated from time to time by the By-laws and/or the Board of Directors of the Corporation.

2. Stockholders of the Corporation may not take any action by written consent in lieu of a meeting. Notwithstanding any other provisions of law, the Certificate of Incorporation or the By-Laws of the Corporation, each as amended, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the shares of capital stock of the Corporation issued and outstanding and entitled to vote shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article IX.

ARTICLE X.

Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in manner as the said court directs. If a majority in number representing three-fourths in value of the stockholders or class of stockholders of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case maybe, and also on this Corporation.

ARTICLE XI.

The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation in any manner now or hereafter prescribed by law, and all rights conferred upon stockholders herein are granted subject to such reservation.

ARTICLE XII.

Special meetings of stockholders may be called at any time by only the Chairman of the Board of Directors, the Chief Executive Officer (or if there is no Chief Executive Officer, the President), the Board of Directors or the holders of a majority of the outstanding capital stock of the Corporation entitled to vote. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting. Notwithstanding any other provision of law, this Certificate of Incorporation or the By-Laws of the Corporation, each as amended, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the shares of capital stock of the Corporation issued and outstanding and entitled to vote shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article XII.

ARTICLE XIII.

Section 203 of the General Corporation Law of Delaware, as it may be amended from time to time, shall apply to the Corporation.

IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed hereto and this Amended and Restated Certificate of Incorporation to be signed by its President this 22nd day of October, 1996.

	TRANSKARYOTIC THERAPIES, INC.

	By:	/s/ Richard F. Selden
		Richard F. Selden, M.D., Ph.D.
		President

CERTIFICATE OF DESIGNATION, NUMBER, VOTING POWERS,

PREFERENCES AND RIGHTS OF SERIES A CONVERTIBLE

PREFERRED STOCK

TRANSKARYOTIC THERAPIES, INC.

Pursuant to Section 151 of the

General Corporation Law of the State of Delaware

The undersigned DOES HEREBY CERTIFY that the following resolution was duly adopted by the Board of Directors of Transkaryotic Therapies, Inc., a Delaware corporation (hereinafter called the “Corporation”), with the preferences and rights set forth therein relating to dividends, conversion, redemption, dissolution and distribution of assets of the Corporation having been fixed by the Board of Directors pursuant to authority granted to it under Article IV of the Corporation’s Certificate of Incorporation and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware:

RESOLVED: That, pursuant to authority conferred upon the Board of Directors by the Certificate of Incorporation of the Corporation, the Board of Directors hereby authorizes the issuance of 10,000 shares of Series A Convertible Preferred Stock of the Corporation, and hereby fixes the designations, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of such shares, in addition to those set forth in the Certificate of Incorporation of the Corporation, as follows:

1. DESIGNATION AND AMOUNT. The shares of such series shall be designated “Series A Convertible Preferred Stock” (the “Series A Preferred Stock”), par value $0.01 per share, and the number of shares constituting such series shall be 10,000.

2. DIVIDENDS. The holders of Series A Preferred Stock shall be entitled to receive, when, as and if dividends are declared on shares of Common Stock by the Board of Directors of the Corporation (the “Board of Directors”), dividends per share of Series A Preferred Stock in such an amount as the holders of the Series A Preferred Stock would have received had such holders converted Series A Preferred Stock into Common Stock immediately prior to the record date for such distribution. All dividends declared upon Series A Preferred Stock shall be declared pro rata per share.

3. LIQUIDATION, DISSOLUTION OR WINDING UP.

(a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any other Preferred Stock of the Corporation ranking on liquidation prior and in preference to the Series A Preferred Stock (such Preferred Stock being referred to hereinafter as “Senior Preferred Stock”) upon such liquidation, dissolution or winding up, but before any payment shall be made to the holders of Common Stock, an amount in cash equal to Ten Thousand Dollars ($10,000) per share, subject to appropriate adjustment in the event of any stock dividend, stock split, stock distribution or combination with respect to the Series A Preferred Stock (the “Stated Value”) plus any dividends thereon declared but unpaid (such amount being referred to hereinafter as the “Series A Liquidation Value”). If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets of the Corporation available for the distribution to its stockholders after payment in full of amounts required to be paid or distributed to holders of Senior Preferred Stock shall be insufficient to pay the holders of shares of Series A Preferred Stock the full amount to which they shall be entitled, the holders of shares of Series A Preferred Stock, and any class of stock ranking on liquidation on a parity with the Series A Preferred Stock, shall share ratably in any distribution of the remaining assets and funds of the

Corporation in proportion to the respective amounts which would otherwise be payable in respect to the shares held by them upon such distribution if all amounts payable on or with respect to said shares were paid in full.

(b) After the payment of all preferential amounts required to be paid to the holders of Senior Preferred Stock and Series A Preferred Stock and any other series of Preferred Stock upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of Common Stock then outstanding shall be entitled to receive the remaining assets and funds of the Corporation available for distribution to its stockholders.

(c) The merger or consolidation of the Corporation into or with another corporation, the merger or consolidation of any other corporation into or with the Corporation, or the sale, conveyance, mortgage, pledge or lease of all or substantially all the assets of the Corporation to a person shall not be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Section 3.

4. VOTING.

(a) Each issued and outstanding share of Series A Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which each such share of Series A Preferred Stock is convertible (as adjusted from time to time pursuant to Section 6 hereof), at each meeting of stockholders of the Corporation (or pursuant to any action by written consent) with respect to any and all matters presented to the stockholders of the Corporation for their action or consideration. Except as provided by law, by the provisions of Sections 4(b) and 4(c) below or by the provisions establishing any other series of Preferred Stock, holders of Series A Preferred Stock shall vote together with the holders of Common Stock as a single class.

(b) For so long as at least 9,000 shares of the Series A Preferred Stock remain outstanding, the holders of Series A Preferred Stock shall have the exclusive right, voting separately as a class, to elect one director (herein referred to as the “Series A Director”). A Series A Director shall be elected by the affirmative vote of the holders of record of a majority of the outstanding shares of Series A Preferred Stock either at meetings of stockholders at which directors are elected or a special meeting of holders of Series A Preferred Stock. A Series A Director so elected shall serve for a term of one year and until his successor is elected and qualified. Any vacancy in the position of a Series A Director may be filled only by the holders of the Series A Preferred Stock. A Series A Director may, during his or her term of office, be removed at any time, with or without cause, by and only by the affirmative vote, at a special meeting of holders of Series A Preferred Stock called for such purpose, or the written consent, of the holders of record of a majority of the outstanding shares of Series A Preferred Stock. Any vacancy created by such removal may also be filled at such meeting or by such consent.

(c) In addition to any other rights provided by law, the Corporation shall not, without first obtaining the affirmative vote or written consent of the holders of a majority of the outstanding shares of Series A Preferred Stock, authorize any additional shares of Series A Preferred Stock or amend, alter or repeal the preferences, special rights or other powers of the Series A Preferred Stock so as to affect adversely the Series A Preferred Stock. For purposes of this Section 4(c), the authorization or issuance of any series of Senior Preferred Stock shall be deemed to affect materially and adversely the Series A Preferred Stock.

5. OPTIONAL CONVERSION. Each share of Series A Preferred Stock may be converted at any time, at the option of the holder thereof, into the number of fully-paid and nonassessable shares of Common Stock obtained by dividing the Stated Value by the Conversion Price then in effect (the “Conversion Rate”), PROVIDED, HOWEVER, that on any redemption of any Series A Preferred Stock or any liquidation of the Corporation, the right of conversion shall terminate at the close of business on the full business day next preceding the date fixed for such redemption or for the payment of any amounts distributable on liquidation to the holders of Series A Preferred Stock.

(a) The initial conversion price, subject to adjustment as provided herein, is equal to $28.00 (the “Conversion Price”). The initial Conversion Rate for the Series A Preferred Stock shall be 357.142857 shares of Common Stock for each one share of Series A Preferred Stock surrendered for conversion. The applicable Conversion Rate and Conversion Price from time to time in effect is subject to adjustment as hereinafter provided.

(b) The Corporation shall not issue fractions of shares of Common Stock upon conversion of Series A Preferred Stock or scrip in lieu thereof. If any fraction of a share of Common Stock would, except for the provisions of this Section 5(b), be issuable upon conversion of any Series A Preferred Stock, the Corporation shall in lieu thereof pay to the person entitled thereto an amount in cash equal to the current value of such fraction, calculated to the nearest one-hundredth (1/100) of a share, to be computed (i) if the Common Stock is listed on any national securities exchange, on the basis of the last sales price of the Common Stock on such exchange (or the quoted closing bid price if there shall have been no sales) on the date of conversion, or (ii) if the Common Stock shall not be listed, on the basis of the mean between the closing bid and asked prices for the Common Stock on the date of conversion as reported by NASDAQ, or its successor, and if there are not such closing bid and asked prices, on the basis of the fair market value per share as determined by the Board of Directors.

(c) Whenever the Conversion Rate and Conversion Price shall be adjusted as provided in Section 6 hereof, the Corporation shall forthwith file at each office designated for the conversion of Series A Preferred Stock, a statement, signed by the Chairman of the Board, the President, any Vice President or Treasurer of the Corporation, showing in reasonable detail the facts requiring such adjustment and the Conversion Rate that will be effective after such adjustment. The Corporation shall also cause a notice setting forth any such adjustments to be sent by mail, first class, postage prepaid, to each record holder of Series A Preferred Stock at his or its address appearing on the stock register. If such notice relates to an adjustment resulting from an event referred to in Section 6(d) hereof, such notice shall be included as part of the notice required to be mailed and published under the provisions of Section 6(d) hereof.

(d) In order to exercise the conversion privilege, the holder of any Series A Preferred Stock to be converted shall surrender his or its certificate or certificates therefore to the principal office of the transfer agent for the Series A Preferred Stock (or if no transfer agent be at the time appointed, then the Corporation at its principal office), and shall give written notice to the Corporation at such office that the holder elects to convert the Series A Preferred Stock represented by such certificates, or any number thereof. Such notice shall also state the name or names (with address) in which the certificate or certificates for shares of Common Stock which shall be issuable on such conversion shall be issued, subject to any restrictions on transfer relating to shares of the Series A Preferred Stock or shares of Common Stock upon conversion thereof. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly authorized in writing. The date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of the certificates and notice shall be the conversion date. As soon as practicable after receipt of such notice and the surrender of the certificate or certificates for Series A Preferred Stock as aforesaid, the Corporation shall cause to be issued and delivered at such office to such holder, or on his or its written order, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, cash as provided in Section 5(b) hereof in respect of any fraction of a share of Common Stock otherwise issuable upon such conversion and, if less than all shares of Series A Preferred Stock represented by the certificate or certificates so surrendered are being converted, a residual certificate or certificates representing the shares of Series A Preferred Stock not converted.

(e) The Corporation shall at all times when the Series A Preferred Stock shall be outstanding reserve and keep available out of its authorized but unissued stock, for the purposes of effecting the conversion of the Series A Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series A Preferred Stock. Before taking any action that would cause an adjustment reducing the Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of the Series A Preferred Stock, the Corporation will take any corporate action that may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully-paid and nonassessable shares of such Common Stock at such adjusted conversion price.

(f) All shares of Series A Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall forthwith cease and terminate except only the right of the holder thereof to receive shares of Common Stock in exchange therefor and payment of any declared and unpaid dividends thereon. Any shares of Series A Preferred Stock so converted shall be retired and canceled and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Series A Preferred Stock accordingly.

6. CONVERSION PRICE ADJUSTMENTS.

(a) In case the Corporation shall at any time (i) subdivide the outstanding Common Stock or (ii) issue a dividend on its outstanding Common Stock payable in shares of Common Stock, the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock shall be proportionately increased by the same ratio as the subdivision or dividend (with appropriate adjustments to the Conversion Price in effect immediately prior to such subdivision or dividend). In case the Corporation shall at any time combine its outstanding Common Stock, the number of shares issuable upon conversion of the Series A Preferred Stock immediately prior to such combination shall be proportionately decreased by the same ratio as the combination (with appropriate adjustments to the Conversion Price in effect immediately prior to such combination).

(b) In the event the Corporation shall declare a dividend upon the Common Stock (other than a dividend payable in Common Stock) payable otherwise than out of earnings or earned surplus, determined in accordance with generally accepted accounting principles, including the making of appropriate deductions for minority interests, if any, in subsidiaries (herein referred to as “Liquidating Dividends”), then, as soon as possible after the conversion of any shares of Series A Preferred Stock, the Corporation shall pay to the person converting such shares of Series A Preferred Stock an amount equal to the aggregate value of all Liquidating Dividends that such person would have received had the person converted such shares of Series A Preferred Stock immediately prior to the record date for such Liquidating Dividend. For the purposes of this Section 6(b), a dividend other than in cash shall be considered payable out of earnings or earned surplus only to the extent that such earnings or earned surplus are charged an amount equal to the fair value of such dividend as determined in good faith by the Board of Directors.

(c) If any capital reorganization or reclassification of the capital stock of the Corporation, or consolidation or merger of the Corporation with another corporation in which the holders of Common Stock and Series A Preferred Stock prior to such consolidation or merger hold at least 51% of the combined voting power of the surviving person in such merger or consolidation immediately following its effective date, shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, cash or other property with respect to or in exchange for Common Stock, then, as a condition of such reorganization, reclassification, consolidation or merger, lawful and adequate provision shall be made whereby the holders of the Series A Preferred Stock shall have the right to acquire and receive upon conversion of the Series A Preferred Stock such shares of stock, securities, cash or other property issuable or payable (as part of such reorganization, reclassification, consolidation or merger) with respect to or in exchange for such number of outstanding shares of Common Stock as would have been received upon conversion of the Series A Preferred Stock at the Conversion Price then in effect. Any other consolidation or merger of the Corporation with another corporation or the sale of all or substantially all of its assets to another corporation shall be effected in such a way that the holders of the Series A Preferred Stock shall be entitled to receive, in exchange for their shares of Series A Preferred Stock, the stock, securities, cash or other property payable to holders of Common Stock as if the holders of Series A Preferred Stock had converted the Series A Preferred Stock in to Common Stock immediately prior to the effective date of such consolidation, merger or sale. The Corporation will not effect any such consolidation, merger or sale, unless prior to the consummation thereof the successor corporation (if other than the Corporation) resulting from such consolidation or merger or the corporation purchasing such assets shall assume by written instrument mailed or delivered to the holders of the Series A Preferred Stock at the last address of each such holder appearing on the books of the Corporation, the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to receive.

(d) In the event that:

(1) the Corporation shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights, or

(2) there shall be any capital reorganization or reclassification of the capital stock of the Corporation, including any subdivision or combination of its outstanding shares of Common Stock, or consolidation or merger of the Corporation with, or sale of all or substantially all of its assets to, another corporation, or

(3) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Corporation;

then, in connection with such event, the Corporation shall give to the holders of the Series A Preferred Stock:

(i) at least twenty (20) days prior written notice of the date on which the books of the Corporation shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up; and

(ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, at least twenty (20) days prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (ii) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be. Each such written notice shall be given by first class mail, postage prepaid, addressed to the holders of the Series A Preferred Stock at the address of each such holder as shown on the books of the Corporation.

(e) If at any time or from time to time on or after the date on which shares of Series A Preferred Stock are initially issued, the Corporation shall grant, issue or sell any options, convertible securities or rights to purchase property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock and such Purchase Rights are not issued to the holders of Series A Preferred Stock and such grants, issuances or sales do not result in an adjustment of the Conversion Price under this Section 6, then each holder of Series A Preferred Stock shall be entitled to acquire (within thirty (30) days after the later to occur of the initial exercise date of such Purchase Rights or receipt by such holder of the notice concerning Purchase Rights to which such holder shall be entitled under Section 6(d)) and upon the terms applicable to such Purchase Rights either:

(i) the aggregate Purchase Rights which such holder could have acquired if it had held the number of shares of Common Stock acquirable upon conversion of the Series A Preferred Stock immediately before the grant, issuance or sale of such Purchase Rights; provided that if any Purchase Rights were distributed to holders of Common Stock without the payment of additional consideration by such holders, corresponding Purchase Rights shall be distributed to the holders of the Series A Preferred Stock as soon as possible and it shall not be necessary for the holder of the Series A Preferred Stock specifically to request delivery of such rights; or

(ii) in the event that any such Purchase Rights shall have expired or shall expire prior to the end of said thirty (30) day period, the right to acquire the number of shares of Common Stock or the amount of property which such holder could have acquired upon such exercise at the time or times at which the Corporation granted, issued or sold such expired Purchase Rights on the terms of the Purchase Rights so granted.

7. REDEMPTION.

(a) The Corporation, at its option, may redeem (to the extent that such redemption shall not violate any applicable provisions of the General Corporation Law of the State of Delaware) all, but not less than all, of the shares of Series A Preferred Stock at a price equal to the then Series A Liquidation Value (subject to adjustment in the event of any stock dividend, stock split, stock distribution or combination with respect to such shares) (such price is hereinafter referred to as the “Redemption Price”), at any time after December 15, 2000 (any such date of redemption is hereafter referred to as an “Redemption Date”), PROVIDED that no shares of Series A

Preferred Stock may be so called for redemption unless the average of the closing prices per share of Common Stock for any twenty (20) consecutive trading days ending within twenty (20) business days of the date on which notice of such redemption is given to the holders of the Series A Preferred Stock, shall have been at least $35.00 (subject to appropriate adjustment in the event of any stock dividend, stock split, stock distribution or combination). For purposes of the foregoing calculation, “closing price” shall mean for any given date: (i) if the Common Stock is listed on any national securities exchange or quoted on Nasdaq, on the basis of the last sales price of the Common Stock on such exchange or Nasdaq (or the quoted closing bid price if there shall have been no sales) on such date, or (ii) if no last sales prices are then being quoted for the Common Stock, on the basis of the mean between the closing bid and asked prices for the Common Stock on such date as reported by Nasdaq, or its successor, or (iii) if there are no such closing bid and asked prices, on the basis of the fair market value per share as determined by the Board of Directors of the Corporation.

(b) At least thirty (30) days prior to each Redemption Date, written notice shall be mailed, postage prepaid, to each holder of record of Series A Preferred Stock to be redeemed, at his or its post office address last shown on the records of the Corporation, notifying such holder of the number of shares so to be redeemed, specifying the Redemption Date and the date on which such holder’s conversion rights (pursuant to Section 5 hereof) as to such shares terminate and calling upon such holder to surrender to the Corporation, in the manner and at the place designated, his or its certificate or certificates representing the shares to be redeemed (such notice is hereinafter referred to as the “Redemption Notice”). On or prior to the Redemption Date, each holder of Series A Preferred Stock to be redeemed shall surrender his or its certificate or certificates representing such shares to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. From and after the Redemption Date, unless there shall have been a default in payment of the Redemption Price, all rights of the holders of the Series A Preferred Stock designated for redemption in the Redemption Notice as holders of Series A Preferred Stock of the Corporation (except the right to receive the Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever.

(c) Except as provided in paragraph (a) above, the Corporation shall have no right to redeem the shares of Series A Preferred Stock other than with the consent of the holders of 66 2/3% of the then outstanding shares of Series A Preferred Stock. Any shares of Series A Preferred Stock so redeemed shall be permanently retired, shall no longer be deemed outstanding and shall not under any circumstances be reissued, and the Corporation may from time to time take such appropriate corporate action as may be necessary to reduce the authorized Series A Preferred Stock accordingly. Nothing herein contained shall prevent or restrict the purchase by the Corporation, from time to time either at public or private sale, of the whole or any part of the Series A Preferred Stock at such price or prices as the Corporation may determine, subject to the provisions of applicable law.

IN WITNESS WHEREOF, Transkaryotic Therapies, Inc. has caused this Certificate of Designation, Number, Voting Powers, Preferences and Rights of Series A Convertible Preferred Stock to be duly executed by its VP of Finance and CFO this 9th day of June, 2000.

	TRANSKARYOTIC THERAPIES, INC.

	By /s/ DANIEL E. GEFFKEN
	[Name:] Daniel E. Geffken
	[Title:] VP of Finance and CFO

CERTIFICATE OF AMENDMENT

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

TRANSKARYOTIC THERAPIES, INC.

Pursuant to Section 242

of the General Corporation Law of

the State of Delaware

Transkaryotic Therapies, Inc. (hereinafter called the “Corporation”), organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows:

At a meeting of the Board of Directors of the Corporation a resolution was duly adopted, pursuant to Section 242 of the General Corporation Law of the State of Delaware, setting forth an amendment to the Certificate of Incorporation of the Corporation and declaring said amendment to be advisable. The stockholders of the Corporation duly approved said proposed amendment at a meeting in accordance with Section 242 of the General Corporation Law of the State of Delaware. The resolution setting forth the amendment is as follows:

RESOLVED:

That the first paragraph of Article FOURTH of the Certificate of Incorporation of the Corporation be and hereby is deleted in its entirety and the following paragraph is inserted in lieu thereof:

FOURTH: The total number of all classes of stock which the Corporation shall have authority to issue is 110,000,000 shares, consisting of (i) 100,000,000 shares of Common Stock, $.01 par value per share (“Common Stock”), and (ii) 10,000,000 shares of Preferred Stock, $.01 par value per share (“Preferred Stock”).

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its President this 15th day of June, 2000.

 
  Transkaryotic Therapies, Inc.

  By: /s/ RICHARD F SELDEN

  Richard F Selden, M.D.,
  Ph.D., President

CERTIFICATE OF DESIGNATIONS

SERIES B JUNIOR PARTICIPATING PREFERRED STOCK

TRANSKARYOTIC THERAPIES, INC.

Transkaryotic Therapies, Inc., a corporation organized and existing under the laws of the State of Delaware (hereinafter called the “Corporation”), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation at a meeting duly called and held on December 13, 2000:

RESOLVED: That pursuant to the authority granted to and vested in the Board of Directors of the Corporation (hereinafter called the “Board”) in accordance with the provisions of the Certificate of Incorporation, as amended, the Board hereby creates a series of Preferred Stock, $0.01 par value per share (the “Preferred Stock”), of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences and limitations thereof as follows:

SERIES B JUNIOR PARTICIPATING PREFERRED STOCK:

Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be designated as “Series B Junior Participating Preferred Stock” (the “Series B Preferred Stock”) and the number of shares constituting the Series B Preferred Stock shall be one million (1,000,000). Such number of shares may be increased or decreased by resolution of the Board prior to issuance; PROVIDED, that no decrease shall reduce the number of shares of Series B Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series B Preferred Stock.

Section 2. DIVIDENDS AND DISTRIBUTIONS.

(A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series B Preferred Stock with respect to dividends, the holders of shares of Series B Preferred Stock, in preference to the holders of Common Stock, par value $0.01 per share (the “Common Stock”), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board out of funds of the Corporation legally available for the payment of dividends, quarterly dividends payable in cash on the last day of each fiscal quarter of the Corporation in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series B Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the

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aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series B Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. In the event the Corporation shall at any time declare or pay any dividend on the Series B Preferred Stock payable in shares of Series B Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series B Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series B Preferred Stock) into a greater or lesser number of shares of Series B Preferred Stock, then in each such case the amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under clause (b) of the first sentence of this Section 2(A) shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Series B Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Series B Preferred Stock outstanding immediately after such event.

(B) The Corporation shall declare a dividend or distribution on the Series B Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock) and the Corporation shall pay such dividend or distribution on the Series B Preferred Stock before the dividend or distribution declared on the Common Stock is paid or set apart; provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the Series B Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

(C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series B Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series B Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series B Preferred Stock in an amount less than the

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total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board may fix a record date for the determination of holders of shares of Series B Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.

Section 3. VOTING RIGHTS. The holders of shares of Series B Preferred Stock shall have the following voting rights:

(A) Subject to the provision for adjustment hereinafter set forth, each share of Series B Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. In the event the Corporation shall at any time declare or pay any dividend on the Series B Preferred Stock payable in shares of Series B Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series B Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series B Preferred Stock) into a greater or lesser number of shares of Series B Preferred Stock, then in each such case the number of votes per share to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Series B Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Series B Preferred Stock outstanding immediately after such event.

(B) Except as otherwise provided herein, in the Certificate of Incorporation or by law, the holders of shares of Series B Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.

(C) (i) If at any time dividends on any Series B Preferred Stock shall be in arrears in an amount equal to six quarterly dividends thereon, the holders of the Series B Preferred Stock, voting as a separate series from all other series of Preferred Stock and classes of capital stock, shall be entitled to elect two members of the Board in addition to any Directors elected by any other series, class or classes of securities and the authorized number of Directors will automatically be increased by two. Promptly thereafter, the Board of the Corporation shall, as soon as may be practicable, call a special meeting of holders of Series B Preferred Stock for the purpose of electing such members of the Board. Such special meeting shall in any event be held within 45 days of the occurrence of such arrearage.

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(ii) During any period when the holders of Series B Preferred Stock, voting as a separate series, shall be entitled and shall have exercised their right to elect two Directors, then, and during such time as such right continues, (a) the then authorized number of Directors shall be increased by two, and the holders of Series B Preferred Stock, voting as a separate series, shall be entitled to elect the additional Directors so provided for, and (b) each such additional Director shall not be a member of any existing class of the Board, but shall serve until the next annual meeting of stockholders for the election of Directors, or until his successor shall be elected and shall qualify, or until his right to hold such office terminates pursuant to the provisions of this Section 3(C).

(iii) A Director elected pursuant to the terms hereof may be removed with or without cause by the holders of Series B Preferred Stock entitled to vote in an election of such Director.

(iv) If, during any interval between annual meetings of stockholders for the election of Directors and while the holders of Series B Preferred Stock shall be entitled to elect two Directors, there is no such Director in office by reason of resignation, death or removal, then, promptly thereafter, the Board shall call a special meeting of the holders of Series B Preferred Stock for the purpose of filling such vacancy and such vacancy shall be filled at such special meeting. Such special meeting shall in any event be held within 45 days of the occurrence of such vacancy.

(v) At such time as the arrearage is fully cured, and all dividends accumulated and unpaid on any shares of Series B Preferred Stock outstanding are paid, and, in addition thereto, at least one regular dividend has been paid subsequent to curing such arrearage, the term of office of any Director elected pursuant to this Section 3(C), or his successor, shall automatically terminate, and the authorized number of Directors shall automatically decrease by two, the rights of the holders of the shares of the Series B Preferred Stock to vote as provided in this Section 3(C) shall cease, subject to renewal from time to time upon the same terms and conditions, and the holders of shares of the Series B Preferred Stock shall have only the limited voting rights elsewhere herein set forth.

(D) Except as set forth herein, or as otherwise provided by law, holders of Series B Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

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Section 4. CERTAIN RESTRICTIONS.

(A) Whenever quarterly dividends or other dividends or distributions payable on the Series B Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series B Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

(i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock;

(ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except dividends paid ratably on the Series B Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series B Preferred Stock; or

(iv) redeem or purchase or otherwise acquire for consideration any shares of Series B Preferred Stock, or any shares of stock ranking on a parity with the Series B Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board) to all holders of such shares upon such terms as the Board, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

Section 5. REACQUIRED SHARES. Any shares of Series B Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law.

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Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP.

(A) Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock unless, prior thereto, the holders of shares of Series B Preferred Stock shall have received $1000 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series B Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except distributions made ratably on the Series B Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up.

(B) Neither the consolidation, merger or other business combination of the Corporation with or into any other corporation nor the sale, lease, exchange or conveyance of all or any part of the property, assets or business of the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Section 6.

(C) In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of paragraph (A) of this Section 6 shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. In the event the Corporation shall at any time declare or pay any dividend on the Series B Preferred Stock payable in shares of Series B Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series B Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series B Preferred Stock) into a greater or lesser number of shares of Series B Preferred Stock, then in each such case the aggregate amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of paragraph (A) of this Section 6 shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Series B Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Series B Preferred Stock outstanding immediately after such event.

Section 7. CONSOLIDATION, MERGER, ETC. Notwithstanding anything to the contrary contained herein, in case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series B Preferred Stock shall at the same time be similarly exchanged or changed into an

A-6

amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series B Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. In the event the Corporation shall at any time declare or pay any dividend on the Series B Preferred Stock payable in shares of Series B Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series B Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series B Preferred Stock) into a greater or lesser number of shares of Series B Preferred Stock, then in each such case the amount set forth in the first sentence of this Section 7 with respect to the exchange or change of shares of Series B Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Series B Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Series B Preferred Stock outstanding immediately after such event.

Section 8. NO REDEMPTION. The shares of Series B Preferred Stock shall not be redeemable.

Section 9. RANK. The Series B Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Preferred Stock issued either before or after the issuance of the Series B Preferred Stock, including, without limitation, the Series A Convertible Preferred Stock, unless the terms of any such series shall provide otherwise.

Section 10. AMENDMENT. At such time as any shares of Series B Preferred Stock are outstanding, the Certificate of Incorporation, as amended, of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series B Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series B Preferred Stock, voting together as a single class.

Section 11. FRACTIONAL SHARES. Series B Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and have the benefit of all other rights of holders of Series B Preferred Stock.

A-7

IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its Vice President, Finance and Chief Financial Officer this 13th day of December, 2000.

	TRANSKARYOTIC THERAPIES, INC.

	By: /s/ DANIEL E. GEFFKEN
	Name: Daniel E. Geffken
	Title: Vice President, Finance and
	Chief Financial Officer

A-8

CERTIFICATE OF ELIMINATION

TRANSKARYOTIC THERAPIES, INC.

SERIES A CONVERTIBLE PREFERRED STOCK

Transkaryotic Therapies, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the “Corporation”), does hereby certify that at a meeting of the Board of Directors of the Corporation, the following resolution was duly adopted setting forth the proposed elimination of the Corporation’s Series A Convertible Preferred Stock as set forth herein:

RESOLVED: That no shares of the Corporation’s Series A Convertible Preferred Stock (“Series A Preferred Stock”) are outstanding and no shares of Series A Preferred Stock will be issued subject to the Certificate of Designation, Number, Voting Powers, Preferences and Rights filed by the Corporation with the Secretary of State of the State of Delaware on June 9, 2000 with respect to such series (the “Series A Certificate of Designation”); and that the proper officers of the Corporation be and hereby are authorized and directed in the name and on behalf of the Corporation to execute and file a Certificate of Elimination with the Secretary of State of the State of Delaware pursuant to Section 151(g) of the Delaware General Corporation Law setting forth the text of this resolution, upon the filing and effectiveness of which all matters set forth in the Series A Certificate of Designation shall be deemed to have been eliminated from the Corporation’s Certificate of Incorporation, as amended, and the 10,000 shares of preferred stock previously designated as Series A Preferred Stock shall resume their status as undesignated shares of preferred stock available for future issuance in accordance with the Corporation’s Certificate of Incorporation, as amended.

IN WITNESS WHEREOF, Transkaryotic Therapies, Inc. has caused this certificate to be signed by its Senior Vice President, Finance and Chief Financial Officer on April 7, 2003.

TRANSKARYOTIC THERAPIES, INC.

By:	/s/ David E. Geffken
	Daniel E. Geffken
	Senior Vice President, Finance and
	Chief Financial Officer

CERTIFICATE OF CORRECTION FILED TO CORRECT

A CERTAIN ERROR IN THE

CERTIFICATE OF ELIMINATION

OF TRANSKARYOTIC THERAPIES, INC.

FILED IN THE OFFICE OF THE SECRETARY OF STATE

OF DELAWARE ON APRIL 7, 2003

Transkaryotic Therapies, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify as follows:

1. The name of the corporation is Transkaryotic Therapies, Inc.

2. A Certificate of Elimination of Transkaryotic Therapies, Inc. Series A Convertible Preferred Stock was filed with the Secretary of State of Delaware on April 7, 2003, and said Certificate requires correction as permitted by Section 103 of the General Corporation Law of the State of Delaware.

3. The inaccuracy or defect of said Certificate to be corrected is as follows: The conformed signature incorrectly states the name of the signatory as David E. Geffken.

4. The execution, sealing or acknowledgment of the Certificate is corrected as follows: The correct name of the signatory is Daniel E. Geffken.

IN WITNESS WHEREOF, Transkaryotic Therapies, Inc. has caused this Certificate of Correction to be signed by Daniel E. Geffken, its Senior Vice President, Finance and Chief Financial Officer, this 9th day of April, 2003.

Transkaryotic Therapies, Inc.

By: /s/ Philip T. Chase
Philip T. Chase
Secretary

EX-3.2 4 j9805_ex3d2.htm EX-3.2

Exhibit 3.2

TRANSKARYOTIC THERAPIES, INC.

AMENDED AND RESTATED BY-LAWS

ARTICLE I

OFFICERS

Transkaryotic Therapies, Inc. (the “Corporation”) shall maintain a registered office in the State of Delaware. The Corporation may also have other offices at such other places either within or without the State of Delaware, as the Board of Directors may from time to time designate or the business of the Corporation may require.

ARTICLE II

STOCKHOLDERS

Section 1. Annual Meeting: The annual meeting of Stockholders for the election of Directors and the transaction of any other business as may properly come before such meeting shall be held on the first Monday in June of each year, or as soon after such date as may be practicable, in such City and State and at such time and place as may be designated by the Board of Directors, and set forth in the notice of such meeting. If said day be a legal holiday, said meeting shall be held on the next succeeding business day. At the annual meeting any business may be transacted and any corporate action may be taken, whether stated in the notice of meeting or not, except as otherwise expressly provided by statute or the Certificate of Incorporation.

Section 2. Special Meetings: Special meetings of the Stockholders for any purpose may be called at any time by the Board of Directors, the Chairman of the Board, or if no Chairman has been elected, by the President and Chief Executive Officer, and shall be called by the Chairman of the Board or, if none, by the President and Chief Executive Officer at the request of the holders of a majority of the outstanding shares of capital stock entitled to vote. Special meetings shall be held at such place or places within or without the State of Delaware as shall from time to time be designated by the Board of Directors and stated in the notice of such meeting. At a special meeting no business shall be transacted and no corporate action shall be taken other than that stated in the notice of the meeting.

Section 3. Notice of Meetings: Written notice of the date, time and place of any Stockholders’ meeting, whether annual or special, shall be given to each Stockholder entitled to vote thereat, by mailing the same to him at his address as the same appears upon the records or the Corporation not less than ten (10) nor more than sixty (60) days prior to the date of such meeting. Notice of any adjourned meeting need not be given other than by announcement at the meeting so adjourned, unless otherwise ordered in connection with such adjournment. Such further notice, if any, shall be given as may be required by law.

Section 4. Waiver of Notice: Notice of meeting need not be given to any Stockholder who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of any Stockholder at a meeting, in person or by proxy, without

protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by him.

Section 5. Quorum: Any number of Stockholders, together holding at least a majority of the capital stock of the Corporation issued and outstanding and entitled to vote, who shall be present in person or by proxy at any meeting duly called, shall constitute a quorum for all purposes except as may otherwise be provided by law.

Section 6. Adjournment of Meetings: If less than a quorum shall attend at the time for which a meeting shall have been called, the meeting may be adjourned from time to time by a majority vote of the Stockholders present or by proxy and entitled to vote thereat, without notice other than by announcement at the meeting until a quorum shall attend. Any meeting at which a quorum is present may also be adjourned in like manner and for such time or upon such call as may be determined by a majority vote of the Stockholders present in person or by proxy and entitled to vote thereat. At any adjourned meeting at which a quorum shall be present, any business may be transacted and any corporate action may be taken which might have been transacted at the meeting as originally called.

Section 7. Voting: Each Stockholder entitled to vote at any meeting may vote either in person or by proxy, duly appointed by instrument in writing subscribed by such Stockholder and bearing a date not more than eleven months prior to said meeting, unless said proxy provides for a longer period. The holders of Common Stock shall be entitled to one vote in respect of each share held on all matters submitted to a vote of shareholders. When a quorum is present at any meeting, the holders of a majority of the stock present or represented and voting on a matter (or if there are two or more classes of stock entitled to vote as separate classes, then in the case of each such class, the holders of a majority of the stock of that class present or represented and voting on a matter) shall decide any matter to be voted upon by the Stockholders at such meeting, except when a different vote is required by express provision of law, the Certificate of Incorporation or these By-laws. Any election by Stockholders shall be determined by a plurality of the votes cast by the Stockholders entitled to vote at the election.

Section 8. Nomination of Directors: Only persons who are nominated in accordance with the following procedures shall be eligible for election as Directors. Nomination for election to the Board of Directors of the Corporation at a meeting of Stockholders may be made by the Board of Directors or by any Stockholder of the Corporation entitled to vote for the election of Directors at such meeting who complies with the notice procedures set forth in this Section 8. Such nominations, other than those made by or on behalf of the Board of Directors, shall be made by notice in writing delivered to mailed by first class United States mail, postage prepaid, to the Secretary, and received not less than 60 days nor more than 90 days prior to such meeting; provided, however, that if less than 70 days’ notice or prior public disclosure of the date of the meeting is given to Stockholders, such nomination shall have been mailed or delivered to the Secretary not later than the close of business of the 10th day following the date on which the notice of the meeting was mailed or such public disclosure was made, whichever occurs first. Such notice shall set forth (a) as to each proposed nominee (i) the name, age, business address and, if known, residence address of each such nominee, (ii) the principal occupation or employment of each such nominee, (iii) the number of shares of stock of the Corporation which are beneficially owned by each such nominee, and (iv) any other information concerning the

2 nominee that must be disclosed as to nominees in proxy solicitations pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person’s written consent to be named as a nominee and to serve as a Director if elected); and (b) as to the Stockholder giving the notice (i) the name and address, as they appear on the Corporation’s books, of such Stockholder and (ii) the class and number of shares of the Corporation which are beneficially owned by such Stockholder. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a Director of the Corporation.

The chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded.

Section 9. Notice of Business at Annual Meetings: At an annual meeting of the Stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before an annual meeting by a Stockholder. For business to be properly brought before an annual meeting by a Stockholder, if such business relates to the election of Directors of the Corporation, the procedures in Section 8 must be complied with. If such business relates to any other matter, the Stockholder must have given timely notice thereof in writing to the Secretary. To be timely, a Stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days’ notice or prior public disclosure of the date of the meeting is given or made to Stockholders, notice by the Stockholder to be timely must be so received not later than the close of business on the 10th day following the date on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever occurs first. A Stockholder’s notice to the Secretary shall set forth as to each matter the Stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Corporation’s books, of the Stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the Stockholder, and (d) any material interest of the Stockholder in such business. Notwithstanding anything in these By-laws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 9 and except that any Stockholder proposal which complies with Rule 14a-8 of the proxy rules (or any successor provision) promulgated under the Securities Exchange Act of 1934, as amended, and is to be included in the Corporation’s proxy statement for an annual meeting of Stockholders shall be deemed to comply with the requirements of this Section 9.

The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 9, and if he should so determine, the chairman shall so declare to the meeting that any such business not properly brought before the meeting shall not be transacted.

Section 10. Action Without Meeting: Unless otherwise provided in the Certificate of Incorporation, any action required or permitted to be taken by Stockholders for or in connection with any corporate action may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware by hand or certified or registered mail, return receipt requested, to its principal place of business or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Each such written consent shall bear the date of signature of each Stockholder who signs the consent. No written consent shall be effective to take the corporate action referred to therein unless written consents signed by a number of Stockholders sufficient to take such action are delivered to the Corporation in the manner specified in this paragraph within sixty days of the earliest dated consent so delivered.

If action is taken by consent of Stockholders and in accordance with the foregoing, there shall be filed with the records of the meetings of stockholders the writing or writings comprising such consent.

If action is taken by less than unanimous consent of Stockholders, prompt notice of the taking of such action without a meeting shall be given to those who have not consented in writing and a certificate signed and attested to by the Secretary of the Corporation that such notice was given shall be filed with the records of the meetings of stockholders.

In the event that the action which is consented to is such as would have required the filing of a certificate under any provision of the General Corporation Law of the State of Delaware, if such action had been voted upon by the Stockholders at a meeting thereof, the certificate filed under such provision shall state, in lieu of any statement required by such provision concerning a vote of Stockholders, that written consent has been given under Section 228 of said General Corporation Law and that written notice has been given as provided in such Section 228.

Notwithstanding the foregoing, if at any time the Corporation shall have a class of stock registered pursuant to the provisions of the Securities Exchange Act of 1934, as amended, for so long as such class is registered, any action by the Stockholders of such class must be taken at an annual or special meeting of Stockholders and may not be taken by written consent.

Section 11. Organization. The Chairman of the Board, or in his absence the Vice Chairman of the Board designated by the Chairman of the Board, or the President, in the order named, shall call meetings of the Stockholder to order, and shall act as chairman of such meeting; provided, however, that the Board of Directors may appoint any Stockholder to act as chairman of any meeting in the absence of the Chairman of the Board. The Secretary of the Corporation shall act as secretary at all meetings of the Stockholders; but in the absence of the Secretary at any meeting of the Stockholders, the presiding officer may appoint any person to act as secretary of the meeting.

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ARTICLE III

DIRECTORS

Section 1. Number and Qualifications: The Board of Directors shall consist of not less than three (3) nor more than seven (7) Directors. The Directors need not be Stockholders.

Section 2. Responsibilities: The general management of the affairs of the Corporation shall be vested in the Board of Directors, which may delegate to Officers, employees and to committees of Directors such powers and duties as it may from time to time see fit, subject to the limitations hereinafter set forth, and except as may otherwise be provided by law.

Section 3. Election and Term of Office: The Directors shall be elected by the Stockholders at the annual meeting of Stockholders. If the election of Directors shall not be held on the day designated by the By-laws, the Directors shall cause the same to be held as soon thereafter as may be convenient. The Directors chosen at any annual meeting shall hold office except as hereinafter provided, until the next annual election and until the election and qualification of their successors.

Section 4. Removal and Resignation of Directors: Any Director may be removed from the Board of Directors, only for cause, by the holders of two-thirds of the shares of outstanding stock entitled to vote at any special meeting of the Stockholders called for that purpose, and the office of such Director shall forthwith become vacant. Any Director may resign at any time. Such resignation shall take effect at the time specified therein, and if no time be specified at the time of its receipt by the Chairman of the Board or if no Chairman has been elected, by the President and Chief Executive Officer, or by the Secretary. The acceptance of a resignation shall not be necessary to make it effective, unless so specified therein.

Section 5. Filling of Vacancies: Any vacancy among the Directors, occurring from any cause whatsoever, may be filled by a majority of the remaining Directors, though less than a quorum, provided, however, that the Stockholders removing any Director may at the same meeting fill the vacancy caused by such removal, and provided further, that if the Directors fail to fill any such vacancy, the Stockholders may at any special meeting called for that purpose fill such vacancy. In case of any increase in the number of Directors, the additional Directors may be elected by the Directors in office prior to such increase. Any person elected to fill a vacancy shall hold office, subject to the right of removal as hereinbefore provided, until the next annual election and until the election and qualification of his successor.

Section 6. Regular Meetings: The Board of Directors shall hold an annual meeting for the purpose of organization and the transaction of any business immediately after the annual meeting of the Stockholders, provided a quorum is present. Other regular meetings may be held at such times as may be determined from time to time by resolution of the Board of Directors.

Section 7. Special Meetings: Special meetings of the Board of Directors may be called at any time by the Chairman of the Board of Directors, if any, or by the President and Chief Executive Officer.

5 Section 8. Notice and Place of Meetings: Regular meetings of the Board of Directors may be held without notice at such time and place as shall be designated by resolution of the Board of Directors. Notice shall be required, however, for special meetings. Notice of any special meeting shall be sufficiently given if mailed to each Director at his residence or usual place of business at least two (2) days before the day on which the meeting is to be held, or if sent to him at such place by telegraph or cable, or delivered personally or by telephone not later than 24 hours prior to the time at which the meeting is to be held. No notice of the annual meeting shall be required if held immediately after the annual meeting or the Stockholders and if a quorum is present. Notice of a meeting need not be given to any Director who submits a signed waiver of notice before or after the meeting, nor to any Director who attends the meeting without protesting the lack of notice prior thereto or at its commencement.

Section 9. Business Transacted at Meetings: Any business may be transacted and any corporate action may be taken at any regular or special meeting of the Board of Directors at which a quorum shall be present, whether such business or proposed action be stated in the notice of such meeting or not, unless special notice of such business or proposed action shall be required by law.

Section 10. Quorum: A majority of the entire Board of Directors shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the Directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors, unless otherwise provided by law, the Certificate of Incorporation or these By-laws. If a quorum is not present at a meeting of the Board of Directors, a majority of the Directors present may adjourn the meeting to such time and place as they may determine without notice other than announcement at the meeting until enough Directors to constitute a quorum shall attend. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any Directors.

Section 11. Action Without a Meeting: Any action required or permitted to be taken by the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents thereto by the members of the Board or committee shall be filed with the minutes of the proceedings of the Board or committee.

Section 12. Participation by Telephone: Any one or more members of the Board or any committee thereof may participate in a meeting of the Board or such committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.

Section 13. Compensation: The Board of Directors may establish by resolution reasonable compensation of all Directors for services to the Corporation as Directors, including a fixed fee, if any, incurred in attending each meeting. Nothing herein contained shall preclude any Director from serving the Corporation in any other capacity, as an Officer, agent or otherwise, and receiving compensation therefor.

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ARTICLE IV

COMMITTEES

Section 1. Executive Committee: The Board of Directors, by resolution passed by a majority of the entire Board, may designate three (3) or more Directors to constitute an Executive Committee to hold office at the pleasure of the Board, which Committee shall, during the intervals between meetings of the Board of Directors, have and exercise all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, subject only to such restrictions or limitations as the Board of Directors may from time to time specify, or as limited by the Delaware General Corporation Law, and shall have power to authorize the seal of the Corporation to be affixed to all instruments which may require it. Any member of the Executive Committee may be removed at any time, with or without cause, by a resolution of a majority of the entire Board of Directors. Any person ceasing to be a Director shall ipso facto cease to be a member of the Executive Committee. Any vacancy in the Executive Committee occurring from any cause whatsoever may be filled from among the Directors by a resolution of a majority of the entire Board of Directors.

Section 2. Other Committees: Other committees whose members are to be Directors, may be appointed by the Board of Directors, which committees shall hold office for such time and have such powers and perform such duties as may from time to time be assigned to them by the Board of Directors or the committee appointing them. Any member of such a committee may be removed at any time, with or without cause, by the Board of Directors or the committee appointing such committee. Any vacancy in a committee occurring from any cause whatsoever may be filled by the Board of Directors or the committee appointing such committee.

Section 3. Resignation: Any member of a committee may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or, if no time be specified, at the time of its receipt by the Chairman of the Board, if any, the President and Chief Executive Officer or the Secretary. The acceptance of a resignation shall not be necessary to make it effective unless so specified therein.

Section 4. Quorum: A majority of the members of a committee shall constitute a quorum. The act of a majority of the members of a committee present at any meeting at which a quorum is present shall be the act of such committee. The members of a committee shall act only as a committee, and the individual members thereof shall have no powers as such.

Section 5. Record of Proceedings: Each committee shall keep a record of its acts and proceedings, and shall report the same to the Board of Directors when and as required by the Board of Directors.

Section 6. Organization, Meetings, Notices: A committee may hold its meetings at the principal office of the Corporation, or at any other place upon which a majority of the committee may at any time agree. Each committee may make such rules as it may deem expedient for the regulation and carrying on of its meetings and proceedings, unless otherwise ordered by the Executive Committees any notice of a meeting of such committee may be given by the Secretary or by the chairman of the committee and shall be sufficiently given if mailed to each member at

7 his residence or usual place of business at least five (5) days before the day on which the meeting is to be held, or if sent to him at such place by telecopy, telegraph or cable, or delivered personally or by telephone not later than 24 hours prior to the time at which the meeting is to be held.

Section 7. Compensation: The members of any committee shall be entitled to such compensation as may be established by resolution of the Board of Directors.

ARTICLE V

OFFICERS

Section 1. Number: The Officers of the Corporation shall be a President and Chief Executive Officer, a Secretary and a Treasurer, and such Vice Presidents and other Officers as may be appointed in accordance with the provisions of Section 3 of this Article V. The Board of Directors, in its discretion, may also elect a Chairman of the Board of Directors.

Section 2. Election, Term of Office and Qualifications: The Officers, except as provided in Section 3 of this Article V, shall be chosen annually by the Board of Directors. Each such Officer shall, except as herein otherwise provided, hold office until the selection and qualification of his successor. Any two or more offices may be held by the same person, except the offices of President and Chief Executive Officer and Secretary.

Section 3. Other Officers: Other Officers, including, without limitation, one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers, may from time to time be appointed by the Board of Directors, which other Officers shall have such powers and perform such duties as may be assigned to them by the Board of Directors or the Officer or committee appointing them. All such Officers shall be corporate officers of the Corporation with the power to hind the Corporation by acts within the scope or their authority.

Section 4. Removal of Officers: Any Officer of the Corporation may be removed from office, with or without cause, by a vote of a majority of the Board of Directors.

Section 5. Resignation: Any Officer of the Corporation may resign at any time. Such resignation shall be in writing and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the Chairman of the Board, if any, the President and Chief Executive Officer or the Secretary. The acceptance of a resignation shall not be necessary in order to make it effective, unless so specified therein.

Section 6. Filling of Vacancies: A vacancy in any office shall be filled by the Board of Directors.

Section 7. Compensation: The compensation of the Officers shall be fixed by the Board of Directors, or by any committee upon whom such power may be conferred by the Board of Directors.

Section 8. Chairman of the Board of Directors: The Chairman of the Board of Directors, if one is elected, shall be a Director and shall preside at all meetings of the Board of Directors

8 and of the Stockholders at which he shall be present. He shall have power to call special meetings of the Stockholders or of the Board of Directors or of the Executive Committee at any time and shall have such power and perform such other duties as may from time to time be assigned to him by the Board of Directors.

Section 9. President and Chief Executive Officer: The President and Chief Executive Officer shall have responsibility for the general direction of the business affairs and property of the Corporation, and of its several Officers, and shall have and exercise all such powers and discharge such duties as usually pertain to the office of President and Chief Executive Officer. He shall have responsibility for the day-to-day affairs of the Corporation, subject to the control of the Board of Directors. He shall perform such duties as may be assigned to him from time to time by the Board of Directors and shall, in the absence of the Chairman of the Board, perform and carry out the functions of the Chairman of the Board.

Section 10. Secretary: The Secretary shall attend all meetings of the Board of Directors and of the Stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose, and shall perform like duties for any Committee appointed by the Board. He shall give or cause to be given notice of all meetings of Stockholders and special meetings of the Board of Directors and shall perform such other duties as may be prescribed by the Board of Directors. He shall keep in safe custody the seal of the Corporation and affix it to any instrument when so authorized by the Board of Directors.

Section 11. Treasurer: The Treasurer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositaries as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may he ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and Chief Executive Officer and Directors at the regular meetings of the Board, or whenever they may require, an account of all his transactions as Treasurer and of the financial condition of the Corporation. He may be required to give bond for the faithful discharge of his duties.

ARTICLE VI

CAPITAL STOCK

Section 1. Issue of Certificates of Stock: Certificates of capital stock shall be in such form as shall be approved by the Board of Directors. They shall be numbered in the order of their issue, and shall be signed by the Chairman of the Board of Directors, the President and Chief Executive Officer or any Vice President, and by the Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary, and the seal of the Corporation or a facsimile thereof shall be impressed, affixed or reproduced thereon. In case any Officer or Officers who shall have signed any such certificate or certificates shall cease to be such Officer or Officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or

9 persons who signed such certificate or certificates have not ceased to be such Officer or Officers of the Corporation.

Section 2. Registration and Transfer of Shares: The name of each person owning a share of the capital stock or the Corporation shall be entered on the books of the Corporation together with the number of shares held by him, the numbers of the certificates covering such shares and the dates of issue of such certificates. The shares of stock of the Corporation shall be transferable on the books of the Corporation by the holders thereof in person, or by their duly authorized attorneys or legal representatives, on surrender and cancellation of certificates for a like number of shares, accompanied by an assignment of power of transfer endorsed thereon or attached thereto, duly executed, and with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require. A record shall be made of each transfer. The Board of Directors may make other and further rules and regulations concerning the transfer and registration of certificates for stock.

Section 3. Lost, Destroyed and Mutilated Certificates: The holder of any stock of the Corporation shall immediately notify the Corporation of any loss, theft, destruction or mutilation of the Certificates therefor. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it and alleged to have been lost, stolen or destroyed. The Board of Directors may, in its discretion, require the owner of the lost, stolen or destroyed certificate, or his legal representatives, to give the Corporation a bond, in such sum not exceeding trouble the value of the stock and with such surety or sureties as they may require, to indemnify it against any claim that may be made against it by reason of the issue of such new certificate and against all other liability in the premises, or may remit such owner to such remedy or remedies as he may have under the laws of the State of Delaware.

ARTICLE VII

DIVIDENDS AND SURPLUS

Section 1. General Discretion of Directors: The Board of Directors shall have power to fix and vary the amount to be set aside or reserved as working capital of the Corporation, or as reserves, or for other proper purposes of the Corporation, and, subject to the requirements of the Certificate of Incorporation, to determine whether any part of the surplus or net profits of the Corporation shall be declared in dividends and paid to the Stockholders, and to fix the date or dates for the payment of dividends.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

Section 1. Fiscal Year: The fiscal year of the Corporation shall commence on the first day of January and end on the last day of December.

Section 2. Corporate Seal: The corporate seal shall be in such form as approved by the Board of Directors and may be altered at its pleasure. The corporate seal may be used by

10 causing it or a facsimile thereof to be impressed, affixed or reproduced by the Secretary or Assistant Secretary of the Corporation.

Section 3. Notices: Except as otherwise expressly provided, any notice required by these By-laws to be given shall be sufficient if given by depositing the same in a post office or letter box in a sealed wrapper with first class postage prepaid thereon and addresses to the person entitled thereto at his address, as the same appears upon the books of the Corporation, or by telecopying, telegraphing or cabling the same to such person at such address; and such notice shall be deemed to be given at the time it was mailed, telecopied, telegraphed or cabled.

Section 4. Waiver it Notice: Any Stockholder or Director may at any time, by writing or by telecopy, telegraph or cable, waive any notice required to be given under these By-laws, and if any Stockholder or Director shall be present at any meeting his presence shall constitute a waiver of such notice.

Section 5. Contracts, Checks, Drafts: The Board of Directors, except as may otherwise be required by law, may authorize any Officer or Officers, agent or agents, in the name of and on behalf of the Corporation to enter into any contract or execute or deliver any instrument. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation, shall be signed by such Officer or Officers, agent or agents of the Corporation, and in such manner, as shall be designated from time to time by resolution of the Board of Directors.

Section 6. Deposits: All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such bank or banks, trust companies or other depositaries as the Board of Directors may select, and, for the purpose of such deposit, checks, drafts, warrants and other orders for the payment of money which are payable to the order of the Corporation, may be endorsed for deposit, assigned and delivered by any Officer of the Corporation, or by such agents of the Corporation as the Board of Directors, the Chairman of the Board, if any, or the President and a Chief Executive Officer may authorize for that purpose.

Section 7. Voting Stock of Other Corporations: Except as otherwise ordered by the Board of Directors or the Executive Committee, the Chairman of the Board, if any, or the President and Chief Executive Officer shall have full power and authority on behalf of the Corporation to attend and to act and to vote at any meeting of the stockholders of any corporation of which the Corporation is a stockholder and to execute a proxy to any other person to represent the Corporation at any such meeting, and at any such meeting the Chairman of the Board, if any, or the President and Chief Executive Officer or the holder of any such proxy, as the case may be, shall possess and may exercise any and all rights and powers incident to ownership of such stock and which, as owner thereof, the Corporation might have possessed and exercised if present. The Board of Directors or the Executive Committee may from time to time confer like powers upon any other person or persons.

Section 8. Indemnification of Officers and Directors: The Corporation shall indemnify any and all of its Directors or Officers, who shall serve as an Officer or Director of this Corporation or of any other corporation at the request of this Corporation, to the fullest extent permitted under and in accordance with the laws of the State of Delaware.

11

ARTICLE IX

AMENDMENTS

Section 1. By the Board of Directors: These By-laws may be altered, amended or repealed or new by-laws may be adopted by the affirmative vote of a majority of the Directors present at any regular or special meeting of the Board of Directors at which a quorum is present.

Section 2. By the Stockholders: Except as otherwise provided in Section 3, these By-laws may be altered, amended or repealed or new by-laws may be adopted by the affirmative vote of the holders of a majority of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote at any regular or special meeting of Stockholders, provided notice of such alteration, amendment, repeal or adoption of new by-laws shall have been stated in the notice of such regular or special meeting.

Section 3. Certain Provisions: Notwithstanding any other provision of law, the Certificate of Incorporation or these By-laws, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote shall be required to amend or repeal, or to adopt any provision inconsistent with Sections 2, 7, 8, 9, 10 and 11 of Article II, Article III or Article IX of these By-laws.

Dated: September 25, 1996.

AMENDMENT NO. 1 TO

TRANSKARYOTIC THERAPIES, INC.’S AMENDED AND RESTATED BY-LAWS

Section 1 of Article III of Transkaryotic Therapies, Inc.’s Amended and Restated By-Laws be and hereby is deleted in its entirety and the following is inserted in lieu thereof:

“Section 1. Number and Qualifications: The number of directors which shall constitute the whole Board of Directors shall be determined by resolution of the Board of Directors, but in no event shall be less than three (3) or more than seven (7). The number of directors may be increased at any time and from time to time by a majority of the directors then in office. The number of directors may bedecreased at any time and from time to time by a majority of the directors then in office, but only to eliminate vacancies existing by reason of death, resignation, removal or expiration of the term of one or more directors. Directors need not be stockholders of the Corporation.”

Approved by Board of Directors on January 22, 1998.

TRANSKARYOTIC THERAPIES, INC.

AMENDMENT NO. 2 TO AMENDED AND RESTATED BY-LAWS

Pursuant to Section 109 of the Delaware Corporate Law, Article II, Section 2 of the Corporation’s Amended and Restated By-Laws is hereby amended and restated in its entirety as follows:

“SPECIAL MEETINGS. Special meetings of the Stockholders for any purpose may be called at any time by the Board of Directors, the Chairman of the Board, or if no Chairman has been elected, by the President and Chief Executive Officer, and shall be called by the Chairman of the Board or, if none, by the President and Chief Executive Officer at the request of the holders of a majority of the outstanding shares of capital stock entitled to vote. Following receipt of a request by any stockholder or stockholders entitled to call a special meeting pursuant to this Section 2, the Chairman of the Board or, if none, the President and Chief Executive Officer shall determine a date and time for the requested meeting, which date shall not be less than 60 days nor more than 90 days after receipt of such request, and the Board of Directors shall establish a record date for the determination of stockholders entitled to vote at such meeting. Following such determination and establishment, it shall be the duty of the Secretary, or if the Secretary be unable or unwilling, an Assistant Secretary, to cause notice of the special meeting to be given in accordance with Section 3 of this Article II. Special meetings shall be held at such place or places within or without the State of Delaware as shall from time to time be designated by the Board of Directors and stated in the notice of such meeting. At a special meeting no business shall be transacted and no corporate action shall be taken other than that stated in the notice of the meeting.”

EX-10.34 5 j9805_ex10d34.htm EX-10.34

Exhibit 10.34

INDEMNIFICATION AGREEMENT

This Agreement is made as of the 13th day of March 2003, by and between Transkaryotic Therapies, Inc., a Delaware corporation (the “Corporation”), and Daniel E. Geffken (the “Indemnitee”), an officer of the Corporation.

WHEREAS, it is essential to the Corporation to retain and attract as directors and officers the most capable persons available, and

WHEREAS, the substantial increase in corporate litigation subjects directors and officers to expensive litigation risks at the same time that the availability of directors’ and officers’ liability insurance has been severely limited, and

WHEREAS, it is now and has always been the express policy of the Corporation to indemnify its directors and officers, and

WHEREAS, the Indemnitee does not regard the protection available under the Corporation’s Certificate of Incorporation, as amended to date, and insurance as adequate in the present circumstances, and may not be willing to serve or continue to serve as an officer without adequate protection, and

WHEREAS, the Corporation desires the Indemnitee to serve, or continue to serve, as an officer of the Corporation.

NOW THEREFORE, the Corporation and the Indemnitee do hereby agree as follows:

1. Agreement to Serve. The Indemnitee agrees to serve or continue to serve as an officer of the Corporation for so long as the Indemnitee is duly elected or appointed or until such time as the Indemnitee tenders a resignation in writing.

2. Indemnification and Advancement. Indemnitee shall be, and is entitled to all the benefits of indemnification set forth in Article VIII of the Certificate of Incorporation of the Corporation, including without limitation provisions concerning advancement of attorneys fees and related expenses, in effect at the time this Indemnification Agreement is executed.

3. Selection of Counsel for Certain Matters. With regard to proceedings, inquiries or investigations, if any, involving government agencies and self-regulatory organizations, including but not limited to congressional committees, sub-committees or staff, the U.S. Securities and Exchange Commission, the U.S. Food and Drug Administration, the U.S. Department of Health and Human Services and the NASD, Indemnitee has selected Ropes & Gray as his counsel for all such matters and the execution of this Indemnification Agreement by the Corporation shall constitute ratification of Indemnitee’s selection of independent counsel for these purposes and an acknowledgement of the Corporation’s intent to advance payments for attorneys’ fees and expenses to the Indemnitee to the extent provided under all relevant authority including Article VIII of the Certificate of Incorporation and Delaware law.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

TRANSKARYOTIC THERAPIES, INC.

By:	/s/		Michael J. Astrue

Name:		Michael J. Astrue

Title:		President and Chief
		Executive Officer

INDEMNITEE:

		/s/		Daniel E. Geffken

Name:		Daniel E. Geffken
Title:		Senior Vice President, Finance and
		Chief Financial Officer

EX-10.35 6 j9805_ex10d35.htm EX-10.35

Exhibit 10.35

RETENTION AGREEMENT

This Retention Agreement is made as of March 13, 2003 by and between Transkaryotic Therapies, Inc., a Delaware company (the “Company”), and Daniel E. Geffken (the “Executive”).

RECITALS

WHEREAS, the Company and the Executive are parties to that certain Employment Agreement, dated as of February 20, 1997 (the “Original Agreement”);

WHEREAS, the Executive has the right pursuant to Section 6(d) of the Original Agreement to terminate his employment with the Company at any time upon 60 days prior written notice; and

WHEREAS, in order to induce the Executive to remain with the Company, the Company and the Executive desire to amend certain terms and provisions of the Original Agreement.

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Termination of Employment. Notwithstanding the terms and provisions of the Original Agreement, including without limitation, Section 6(d), the Executive may terminate his employment under the Original Agreement, as amended by this Agreement (the “Employment Arrangement”), for any reason upon at least one (1) day prior written notice at any time on or after April 1, 2003 (the date of termination of the Executive’s employment pursuant to this Section 1 or Section 6(a)(iii) of the Original Agreement being the “Termination Date”).

2. Severance Benefits. Upon the termination of the Executive’s employment pursuant to Section 1 hereof, the Company shall provide, and the Executive shall receive, the following benefits:

(a) The Company shall pay to the Executive the compensation and benefits otherwise payable to the Executive under Sections 3 and 5 of the Original Agreement and all accrued but unused vacation through the Termination Date in a manner consistent with the Company’s policies on the date hereof.

(b) The Company shall pay the Executive severance pay equal to $321,900. Such severance pay (less applicable federal and state taxes and withholdings) shall be paid in a single lump sum no later than five (5) business days after the Termination Date.

(c) The Executive may elect to continue group medical insurance pursuant to the federal “COBRA” law, 29 U.S.C. §1161 et seq. All premium costs for COBRA continuation shall be paid by the Executive.

(d) The Executive shall retain all home office equipment (including cellular telephone) currently located or primarily used at the Executive’s residence.

(e) The Company shall continue to provide cellular telephone service to the Executive for sixty (60) days following the Termination Date at the Company’s cost and consistent with the manner in which the Company provided cellular telephone service to the Executive prior to the Termination Date.

(f) The Executive hereby agrees that the Executive is not entitled to any airplane tickets under the Company airplane tickets benefit program.

(g) The Company shall provide the Executive, at the Company’s expense, with executive outplacement services through Essex Partners for the twelve (12) months from and after the Termination Date (the “Severance Period”); provided, however, that if the Executive does not engage Essex Partners, upon the request of the Executive at any time within 120 days following the Termination Date, the Company shall pay the Executive a single lump sum payment of $15,000.

(h) The Company shall provide the Executive all Company contributions for which he is eligible under his 401(k) plan and deferred compensation arrangement for 2003, through the Termination Date.

(i) Company shall forward BioWorld to the Executive’s home e-mail address on a daily basis and shall forward BioCentury to his home e-mail address each Monday, in each case from the Termination Date until the Company has received notice that the Executive has commenced new employment.

3. Unemployment Claims. The Company shall not contest any unemployment claims made by the Executive.

4. References. The Company shall direct any and all requests for references relating to the Executive by third parties to Mr. Jonathan Leff, a member of the Company’s Board of Directors, or such other officer or director of the Company as the Executive shall request. No one other than Mr. Leff or the officer or director requested by the Executive shall provide a reference on behalf of the Company. All references for the Executive provided by Mr. Leff or such officer or director requested by the Executive shall be favorable.

5. Covenant Not to Compete or Interfere.

(a) Section 10(a) of the Original Agreement be and hereby is amended by deleting the first sentence of Section 10(a) in its entirety and inserting in lieu thereof the following sentence:

“(a) Subject to Section 10(b) below, during the term of this Agreement and the period ending twenty-four (24) months from and after the termination of the Executive’s employment hereunder, the Executive shall not engage in any business (whether as an officer, director, owner, employee, partner, consultant,

advisor or other direct or indirect participant) engaged in the research, development or sale of products for the treatment of lysosomal storage disorders (the “Restricted Business”). Without limiting the foregoing, the Executive and the Company agree for purposes of this Section 10(a) that BioMarin Pharmaceutical Inc., Amgen Inc. or Genzyme Corporation and any subsidiary of the foregoing named corporations which were such on the effective date of this Agreement are engaged in the Restricted Business. For purposes of this Section 10(a), a “subsidiary” means only a corporation which is more than 50% owned by one of the corporations named in the preceding sentence.”

(b) Section 6(a)(ii) of the Original Agreement is hereby amended by deleting clause (b) thereof regarding the Executive’s death and providing that termination for “Cause” may be effected in accordance with current clause (a), (c) or (e) thereof only if there is a failure to cure after 30 days’ written notice from the Company specifying in reasonable detail the nature of the “Cause.”

(c) Section 10(b) of the Original Agreement is hereby amended to provide that, if the Employment Arrangement is terminated for any reason other than a termination by the Company for “Cause” in accordance with Section 6(a)(ii) of the Employment Arrangement, the provisions of Section 10(a) of the Original Agreement, as amended hereby, shall apply only until the expiration of the Severance Period.

6. Consulting Services. The Executive may provide such consulting services to the Company as the parties shall from time to time agree. The Executive shall be compensated for all such services at the rate of $250 per hour, provided that in-person meetings shall be compensated at the greater of such hourly rate or $1000 per day, and for all reasonable out-of-pocket expenses.

7. Indemnification. In connection with the execution of this Agreement, the Company and the Executive shall enter into an indemnification agreement in the form attached hereto as Exhibit A.

8. Notices. Any notice required or permitted to be given under this Agreement to the Executive shall be sufficient if in writing and if hand delivered or consigned for overnight delivery to a national courier service or sent by certified or registered mail to his residence, or in the case of the Company, to Transkaryotic Therapies, Inc., 700 Main Street, Cambridge, MA 02139, Attention: Board of Directors, or to such other offices or addresses as the Company or the Executive shall designate from time to time by notice to the other party. Any notice given hereunder shall be effective on the earliest of (a) the date on which it is hand delivered or (b) the next business day after it is consigned to a national courier service or (c) three (3) days after it is deposited in the United States mails, postage prepaid.

9. Waiver of Breach. A waiver by the Company or the Executive of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by the other party.

10. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the Commonwealth of Massachusetts.

11. Expenses. The Company shall reimburse the Executive for the reasonable fees and expenses of his counsel, not to exceed $18,000 in the aggregate, in connection with the negotiation of this Agreement and all related agreements.

12. No Other Modification. Except as set forth herein, the terms and provisions of the Original Agreement remain in full force and effect.

13. Entire Agreement. This Agreement, together with the Original Agreement and the Indemnification Agreement, contain the entire agreement of the parties and supersede any prior understandings or agreements between the Executive and the Company, excluding only the Executive’s rights under his deferred compensation arrangement with the Company and under the Company’s group health and welfare and retirement plans and the Executive’s rights with respect to any stock options granted him by the Company, each as in existence on the effective date hereof, all of which shall remain in full force and effect in accordance with their terms. This Agreement may be changed only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

TRANSKARYOTIC THERAPIES, INC.

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


EXECUTIVE


/s/ Daniel E. Geffken
Daniel E. Geffken

EX-10.36 7 j9805_ex10d36.htm EX-10.36

Exhibit 10.36

FINAL

TRANSKARYOTIC THERAPIES, INC.

2002 STOCK INCENTIVE PLAN

1. Purpose

The purpose of this 2002 Stock Incentive Plan (the “Plan”) of Transkaryotic Therapies, Inc., a Delaware corporation (the “Company”), is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing such persons with equity ownership opportunities and performance-based incentives and thereby better aligning the interests of such persons with those of the Company’s stockholders. Except where the context otherwise requires, the term “Company” shall include any of the Company’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”) and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a controlling interest, as determined by the Board of Directors of the Company (the “Board”).

2. Eligibility

All of the Company’s employees, officers, directors, consultants and advisors are eligible to be granted options or restricted stock awards (each, an “Award”) under the Plan. Each person who has been granted an Award under the Plan shall be deemed a “Participant”.

3. Administration and Delegation

(a) Administration by Board of Directors. The Plan will be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith. Subject to the provisions of the Plan, the Board shall have complete authority, in its sole discretion, to make or to select the manner of making any and all determinations required for the operation of the Plan, and without limiting the generality of the foregoing, shall have the authority to:

(1) grant Awards to eligible individuals pursuant to the terms of the Plan;

(2) determine whether and to what extent Awards are to be granted hereunder;

(3) determine the number of shares of Common Stock to be covered by each Award granted hereunder;

(4) determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award (which need not be identical in every case), including, but not limited to, the price of the restricted stock or the exercise price of the option and any restriction or limitation, or any vesting acceleration or forfeiture waiver regarding any Award and the shares of Common Stock relating thereto, based on such factors as the Board shall determine;

(5) determine whether and under what circumstances an Award may be settled, as provided in Section 5(f);

(6) determine whether and under what circumstances an Award may be exercised without a payment of cash as provided in Section 5(f); and

(7) determine whether, to what extent and under what circumstances Common Stock and other amounts payable with respect to an Award under this Plan shall be deferred either automatically or at the election of the Participant.

In making such determinations, the Board may take into account the nature of the services rendered by the respective individuals, their present and potential contributions to the success of the Company, and such other factors as the Board in its discretion shall deem relevant. Subject to the provisions of the Plan, the Board shall also have complete authority, in its sole discretion, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of any Award issued under the Plan (and any agreements relating thereto), to resolve all disputes arising under the Plan, and to make all other determinations necessary or advisable for the administration of the Plan.

(b) Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”). All references in the Plan to the “Board” shall mean the Board or a Committee of the Board or the executive officers referred to in Section 3(c) to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee.

(c) Delegation to Executive Officers. To the extent permitted by applicable law, the Board may delegate to one or more executive officers of the Company the power to grant Awards to employees or officers of the Company or any of its present or future subsidiary corporations and to exercise such other powers under the Plan as the Board may determine, provided that the Board shall fix the terms of the Awards to be granted by such executive officers (including the exercise of such Awards, which may include a formula by which the exercise price will be determined) and the maximum number of shares subject to Awards that the executive officers may grant; provided, further, however, that no executive officer shall be

authorized to grant Awards to any “executive officer” of the Company (as defined in Rule 3b-7 under the Securities Act of 1934, as amended (the “Exchange Act”)) or to any “officer” of the Company (as defined by Rule 16a-1 under the Exchange Act).

4. Stock Available for Awards

(a) Number of Shares. Subject to adjustment under Section 7, Awards may be made under the Plan for up to 2,500,000 shares of common stock, 0.01 par value per share, of the Company (the “Common Stock”). If any Award expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right) or results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for the grant of Awards under the Plan, subject, however, in the case of Incentive Stock Options (as hereinafter defined), to any limitations under the Code. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.

(b) Per-Participant Limit. Subject to adjustment under Section 7, the maximum number of shares of Common Stock with respect to which Awards may be granted to any Participant under the Plan shall be 500,000 per calendar year. The per-Participant limit described in this Section 4(b) shall be construed and applied consistently with Section 162(m) of the Code (“Section 162(m)”).

5. Stock Options

(a) General. The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. An Option which is not intended to be an Incentive Stock Option (as hereinafter defined) shall be designated a “Nonstatutory Stock Option”.

(b) Incentive Stock Options. An Option that the Board intends to be an “incentive stock option” as defined in Section 422 of the Code (an “Incentive Stock Option”) shall only be granted to employees of the Company and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) which is intended to be an Incentive Stock Option is not an Incentive Stock Option.

(c) Exercise Price. The Board shall establish the exercise price at the time each Option is granted and specify it in the applicable option agreement; provided, however, that the exercise price shall be not less than 100% of the fair market value of the Common Stock, as determined by the Board at the time the Option is granted.

3 (d) Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement provided, however, that no Option will be granted for a term in excess of 10 years.

(e) Exercise of Option. Options may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board together with payment in full as specified in Section 5(f) for the number of shares for which the Option is exercised.

(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows:

(1) in cash or by check, payable to the order of the Company;

(2) except as the Board may, in its sole discretion, otherwise provide in an option agreement, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;

(3) for so long as the Common Stock is registered under the Securities Exchange Act of 1934 (the “Exchange Act”), by delivery of shares of Common Stock owned by the Participant valued at their fair market value as determined by (or in a manner approved by) the Board in good faith (“Fair Market Value”), provided (i) such method of payment is then permitted under applicable law and (ii) such Common Stock, if acquired directly from the Company was owned by the Participant at least six months prior to such delivery;

(4) to the extent permitted by the Board and provided for in an option agreement or certificate, in its sole discretion by (i) delivery of a promissory note of the Participant to the Company on terms determined by the Board, or (ii) payment of such other lawful consideration as the Board may determine; or

(5) by any combination of the above permitted forms of payment.

(g) Substitute Options. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Options in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Options may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Options contained in the other sections of this Section 5 or in Section 2.

6. Restricted Stock.

(a) Grants. The Board may grant Awards entitling recipients to acquire shares of Common Stock, subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award (each, a “Restricted Stock Award”).

(b) Terms and Conditions. The Board shall determine the terms and conditions of any such Restricted Stock Award, including the conditions for repurchase (or forfeiture) and the issue price, if any.

(c) Stock Certificates. Any stock certificates issued in respect of a Restricted Stock Award shall be registered in the name of the Participant and, unless otherwise determined by the Board, deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s death (the “Designated Beneficiary”). In the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participant’s estate.

7. Adjustments for Changes in Common Stock and Certain Other Events

(a) Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a normal cash dividend, (i) the number and class of securities available under this Plan, (ii) the per-Participant limit set forth in Section 4(b), (iii) the number and class of securities and exercise price per share subject to each outstanding Option, and (iv) the repurchase price per share subject to each outstanding Restricted Stock Award shall be appropriately adjusted by the Company (or substituted Awards may be made, if applicable) to the extent the Board shall determine, in good faith, that such an adjustment (or substitution) is necessary and appropriate. If this Section 7(a) applies and Section 7(c) also applies to any event, Section 7(c) shall be applicable to such event, and this Section 7(a) shall not be applicable.

(b) Liquidation or Dissolution. In the event of a proposed liquidation or dissolution of the Company, the Board shall upon written notice to the Participants provide that all then unexercised Options will (i) become exercisable in full as of a specified time at least 10 business days prior to the effective date of such liquidation or dissolution and (ii) terminate effective upon such liquidation or dissolution, except to the extent exercised before such effective date. The Board may specify the effect of a liquidation or dissolution on any Restricted Stock Award granted under the Plan at the time of the grant.

(c) Reorganization Events

(1) Definition. A “Reorganization Event” shall mean: (a) any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or (b) any exchange of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange transaction.

(2) Consequences of a Reorganization Event on Options. Upon the occurrence of a Reorganization Event, or the execution by the Company of any agreement with respect to a Reorganization Event, the Board shall provide that all outstanding Options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof). For purposes hereof, an Option shall be considered to be assumed if, following consummation of the Reorganization Event, the Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in fair market value to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Reorganization Event.

Notwithstanding the foregoing, if the acquiring or succeeding corporation (or an affiliate thereof) does not agree to assume, or substitute for, such Options, then the Board shall, upon written notice to the Participants, provide that all then unexercised Options will become exercisable in full as of a specified time prior to the Reorganization Event and will terminate immediately prior to the consummation of such Reorganization Event, except to the extent exercised by the Participants before the consummation of such Reorganization Event; provided, however, that in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share of Common Stock surrendered pursuant to such Reorganization Event (the “Acquisition Price”), then the Board may instead provide that all outstanding Options shall terminate upon consummation of such Reorganization Event and that each Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (A) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Options (whether or not then exercisable), exceeds (B) the aggregate exercise price of such Options. To the extent all or any portion of an Option becomes exercisable solely as a result of the first sentence of this paragraph, upon exercise of such Option the Participant shall receive shares subject to a right of repurchase by the Company or its successor at the Option exercise price.

Such repurchase right (1) shall lapse at the same rate as the Option would have become exercisable under its terms and (2) shall not apply to any shares subject to the Option that were exercisable under its terms without regard to the first sentence of this paragraph.

(3) Consequences of a Reorganization Event on Restricted Stock Awards. Upon the occurrence of a Reorganization Event, the repurchase and other rights of the Company under each outstanding Restricted Stock Award shall inure to the benefit of the Company’s successor and shall apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Reorganization Event in the same manner and to the same extent as they applied to the Common Stock subject to such Restricted Stock Award.

8. General Provisions Applicable to Awards

(a) Transferability of Awards. Except as the Board may otherwise determine or provide in an option agreement or certificate, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.

(b) Documentation. Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine. Each Award may contain terms and conditions in addition to those set forth in the Plan.

(c) Board Discretion. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.

(d) Termination of Status. The Board shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, the Participant’s legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award.

(e) Withholding. Each Participant shall pay to the Company, or make provision satisfactory to the Board for payment of, any taxes required by law to be withheld in connection with Awards to such Participant no later than the date of the event creating the tax liability. Except as the Board may otherwise provide in an Award, when the Common Stock is registered under the Exchange Act, Participants may satisfy such tax obligations in whole or in part by delivery of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable

7

income). The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a Participant.

(f) Amendment of Award. The Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant’s consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant.

(g) Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.

(h) Acceleration. The Board may at any time provide that any Award shall become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be.

9. Miscellaneous

(a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award.

(b) No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares. Notwithstanding the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to such Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.

8 (c) Effective Date and Term of Plan. The Plan shall become effective on the date on which it is adopted by the Board, but no Award granted to a Participant that is intended to comply with Section 162(m) shall become exercisable, vested or realizable, as applicable to such Award, unless and until the Plan has been approved by the Company’s stockholders to the extent stockholder approval is required by Section 162(m) in the manner required under Section 162(m) (including the vote required under Section 162(m)). No Awards shall be granted under the Plan after the completion of ten years from the earlier of (i) the date on which the Plan was adopted by the Board or (ii) the date the Plan was approved by the Company’s stockholders, but Awards previously granted may extend beyond that date.

(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that to the extent required by Section 162(m), no Award granted to a Participant that is intended to comply with Section 162(m) after the date of such amendment shall become exercisable, realizable or vested, as applicable to such Award, unless and until such amendment shall have been approved by the Company’s stockholders if required by Section 162(m) (including the vote required under Section 162(m)).

(e) Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without regard to any applicable conflicts of law.

Board Approved Plan on March 6, 2002

Stockholders Approved Plan on June 6, 2002

AMENDMENT NO. 1

TRANSKARYOTIC THERAPIES, INC.

2002 STOCK INCENTIVE PLAN

1. The following subsection is hereby inserted immediately following section 6(c) of the Transkaryotic Therapies, Inc. 2002 Stock Incentive Plan (the “2002 Plan”):

“(d) Vesting of Restricted Stock Awards. Any Restricted Stock Award, to the extent such Award vests other than on the basis of the passage of time, will not vest in full until at least one year from the date of the Award unless such Award vests in full as a result of a change in control of the Company or from the death or disability of the Participant. Any Restricted Stock Award, to the extent such Award vests on the basis of the passage of time, will not vest in full until at least three years from the date of the Award unless such Award vests in full as a result of a change in control of the Company or from the death or disability of the Participant.”

2. Section 8(d) of the Plan is hereby deleted in its entirety and the following is inserted in lieu thereof:

“(d) Termination of Status. Upon the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant in the Plan, the Participant, the Participant’s legal representative, conservator, guardian or designated beneficiary may exercise rights under an Award for ninety (90) days following the date of such event.”

3. Section 8(f) (“Amendment of Award”) of the Plan is hereby deleted in its entirety.

4. Section 9(d) of the Plan is hereby deleted in its entirety and the following is inserted in lieu thereof:

“(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that to the extent required by Section 162(m), no Award granted to a Participant that is intended to comply with Section 162(m) after the date of such amendment shall become exercisable, realizable or vested, as applicable to such Award, unless and until such amendment shall have been approved by the Company’s stockholders if required by Section 162(m) (including the vote required under Section 162(m)). The Board may not amend, suspend or terminate the Plan or any portion thereof at any time without stockholder approval if such approval is required by law, or the rules of the Securities and Exchange Commission, the Internal Revenue Service or (other than Section 162(m)), or The Nasdaq National Market.”

Amendment Approved by Board on September 19, 2002

EX-10.37 8 j9805_ex10d37.htm EX-10.37

Exhibit 10.37

INDEMNIFICATION AGREEMENT

This Agreement is made as of the 30th day of April 2003, by and between Transkaryotic Therapies, Inc., a Delaware corporation (the “Corporation”), and Michael J. Astrue (the “Indemnitee”), a director and an officer of the Corporation.

WHEREAS, it is essential to the Corporation to retain and attract as directors and officers the most capable persons available, and

WHEREAS, it is now and has always been the express policy of the Corporation to indemnify its directors and officers, and

WHEREAS, the Corporation desires the Indemnitee to serve, or continue to serve, as a director and an officer of the Corporation.

NOW THEREFORE, the Corporation and the Indemnitee do hereby agree as follows:

1. Agreement to Serve. The Indemnitee agrees to serve or continue to serve as a director and an officer of the Corporation for so long as the Indemnitee is duly elected or appointed or until such time as the Indemnitee tenders a resignation in writing.

2. Definitions. As used in this Agreement:

(a) The term “Proceeding” shall include any threatened, pending or completed action, suit, arbitration, alternative dispute resolution proceeding, administrative hearing or other proceeding, whether brought by or in the right of the Corporation or otherwise and whether of a civil, criminal, administrative or investigative nature, and any appeal therefrom.

(b) The term “Corporate Status” shall mean the status of a person who is or was a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer, partner, trustee, member, employee or agent of another corporation, partnership, joint venture, trust, limited liability company or other enterprise.

(c) The term “Expenses” shall include, without limitation, reasonable attorneys’ fees, retainers, court costs, transcript costs, fees and expenses of experts, travel

expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and other disbursements or expenses of the types customarily incurred in connection with investigations and judicial or administrative proceedings or appeals, but shall not include the amount of judgments, fines or penalties against Indemnitee or amounts paid in settlement in connection with such matters.

(d) References to “other enterprise” shall include employee benefit plans; references to “fines” shall include any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Agreement.

3. Indemnification in Third-Party Proceedings. The Corporation shall indemnify the Indemnitee in accordance with the provisions of this Paragraph 3 if the Indemnitee was or is a party to or threatened to be made a party to or otherwise involved in any Proceeding (other than a Proceeding by or in the right of the Corporation to procure a judgment in its favor) by reason of the Indemnitee’s Corporate Status or by reason of any action alleged to have been taken or omitted in connection therewith, against all Expenses, judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by or on behalf of the Indemnitee in connection with such Proceeding, if the Indemnitee acted in good faith and in a manner which the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation and, with respect to any criminal Proceeding, had no reasonable cause to believe that his conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Indemnitee did not act in good faith and in a manner which the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal Proceeding, had reasonable cause to believe that his conduct was unlawful.

4. Indemnification in Proceedings by or in the Right of the Corporation. The Corporation shall indemnify the Indemnitee in accordance with the provisions of this Paragraph 4 if the Indemnitee was or is a party to or threatened to be made a party to or otherwise involved in any Proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of the Indemnitee’s Corporate Status or by reason of any action alleged to have been taken or omitted in connection therewith, against all Expenses and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred by or on behalf of the Indemnitee in connection with such Proceeding, if the Indemnitee acted in good faith and in a manner which the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made under this Paragraph 4 in respect of any claim, issue, or matter as to which the Indemnitee shall have been adjudged to be liable to the Corporation, unless, and only to the extent, that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, the

Indemnitee is fairly and reasonably entitled to indemnity for such Expenses as the Court of Chancery or such other court shall deem proper.

5. Exceptions to Right of Indemnification. Notwithstanding anything to the contrary in this Agreement, except as set forth in Paragraph 10, the Corporation shall not indemnify the Indemnitee in connection with a Proceeding (or part thereof) initiated by the Indemnitee unless the initiation thereof was approved by the Board of Directors of the Corporation. Notwithstanding anything to the contrary in this Agreement, the Corporation shall not indemnify the Indemnitee to the extent the Indemnitee has actually been reimbursed from the proceeds of insurance, and in the event the Corporation makes any indemnification payments to the Indemnitee and the Indemnitee is subsequently reimbursed from the proceeds of insurance, the Indemnitee shall promptly refund such indemnification payments to the Corporation to the extent of such insurance reimbursement.

6. Indemnification of Expenses of Successful Party. Notwithstanding any other provision of this Agreement, to the extent that the Indemnitee has been successful, on the merits or otherwise, in defense of any Proceeding or in defense of any claim, issue or matter therein, the Indemnitee shall be indemnified against all Expenses incurred by or on behalf of the Indemnitee in connection therewith. Without limiting the foregoing, if any Proceeding or any claim, issue or matter therein is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the Indemnitee did not act in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and (v) with respect to any criminal proceeding, an adjudication that the Indemnitee had reasonable cause to believe his conduct was unlawful, the Indemnitee shall be considered for the purposes hereof to have been wholly successful with respect thereto.

7. Notification and Defense of Claim. As a condition precedent to the Indemnitee’s right to be indemnified, the Indemnitee must notify the Corporation in writing as soon as practicable of any Proceeding for which indemnity will or could be sought. With respect to any Proceeding of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to the Indemnitee. After notice from the Corporation to the Indemnitee of its election so to assume such defense, the Corporation shall not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with such Proceeding, other than as provided below in this Paragraph 7. The Indemnitee shall have the right to employ his own counsel in connection with such Proceeding, but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of the Indemnitee unless (i) the employment of counsel by the Indemnitee has been authorized by the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the Corporation and the Indemnitee in the conduct of the defense of such Proceeding or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such Proceeding, in each of which cases the reasonable fees and expenses of counsel for the Indemnitee shall be at the expense of the Corporation, except as otherwise expressly provided by this Agreement. The Corporation shall not be entitled, without the

consent of the Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation or as to which counsel for the Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above. The Corporation shall not be required to indemnify the Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected without its written consent. The Corporation shall not settle any Proceeding in any manner which would impose any penalty or limitation on the Indemnitee without the Indemnitee’s written consent. Neither the Corporation nor the Indemnitee will unreasonably withhold or delay their consent to any proposed settlement.

8. Advancement of Expenses. Subject to the provisions of Paragraph 9 of this Agreement, in the event that the Corporation does not assume the defense pursuant to Paragraph 7 of this Agreement of any Proceeding of which the Corporation receives notice under this Agreement, any Expenses incurred by or on behalf of the Indemnitee in defending such Proceeding shall be paid by the Corporation in advance of the final disposition of such Proceeding; provided, however, that the payment of such Expenses incurred by or on behalf of the Indemnitee in advance of the final disposition of such Proceeding shall be made only upon receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the Corporation as authorized in this Agreement. Such undertaking shall be accepted without reference to the financial ability of the Indemnitee to make repayment.

9. Procedure for Indemnification. In order to obtain indemnification or advancement of Expenses pursuant to Paragraphs 3, 4, 6 or 8 of this Agreement, the Indemnitee shall submit to the Corporation a written request. Any such indemnification or advancement of Expenses shall be made promptly, and in any event within 30 days after receipt by the Corporation of the written request of the Indemnitee, unless with respect to requests under Paragraphs 3, 4 or 8, by clear and convincing evidence, the Corporation determines within such 30-day period that the Indemnitee did not meet the applicable standard of conduct set forth in Paragraph 3 or 4, as the case may be. Such determination, and any determination that advanced Expenses must be repaid to the Corporation, shall be made in each instance (a) by a majority vote of the directors of the Corporation consisting of persons who are not at that time parties to the Proceeding (“disinterested directors”), whether or not a quorum, (b) by a committee of disinterested directors designated by a majority vote of disinterested directors, whether or not a quorum, (c) if there are no disinterested directors, or if the disinterested directors so direct, by independent legal counsel (who may, to the extent permitted by applicable law, be regular legal counsel to the Corporation) in a written opinion, or (d) by the stockholders of the Corporation.

10. Remedies. The right to indemnification or advancement of Expenses as provided by this Agreement shall be enforceable by the Indemnitee in any court of competent jurisdiction. Unless otherwise required by law, the burden of proving that indemnification is not appropriate shall be on the Corporation. Neither the failure of the Corporation to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances because the Indemnitee has met the applicable standard of conduct, nor an actual determination by the Corporation pursuant to Paragraph 9 that the Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. The Indemnitee’s expenses (of the type described in the definition of “Expenses” in Paragraph 2(c)) reasonably incurred in connection

with successfully establishing the Indemnitee’s right to indemnification, in whole or in part, in any such Proceeding shall also be indemnified by the Corporation.

11. Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Corporation for some or a portion of the Expenses, judgments, fines, penalties or amounts paid in settlement actually and reasonably incurred by or on behalf of the Indemnitee in connection with any Proceeding but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify the Indemnitee for the portion of such Expenses, judgments, fines, penalties or amounts paid in settlement to which the Indemnitee is entitled.

12. Subrogation. In the event of any payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Corporation to bring suit to enforce such rights.

13. Term of Agreement. This Agreement shall continue until and terminate upon the later of (a) six years after the date that the Indemnitee shall have ceased to serve as a director or an officer of the Corporation or, at the request of the Corporation, as a director, officer, partner, trustee, member, employee or agent of another corporation, partnership, joint venture, trust, limited liability company or other enterprise or (b) the final termination of all Proceedings pending on the date set forth in clause (a) in respect of which the Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by the Indemnitee pursuant to Paragraph 10 of this Agreement relating thereto.

14. Indemnification Hereunder Not Exclusive. The indemnification and advancement of Expenses provided by this Agreement shall not be deemed exclusive of any other rights to which the Indemnitee may be entitled under the Certificate of Incorporation, as amended to date, the By-Laws, as amended to date, any other agreement, any vote of stockholders or disinterested directors, the General Corporation Law of Delaware, any other law (common or statutory), or otherwise, both as to action in the Indemnitee’s official capacity and as to action in another capacity while holding office for the Corporation. Nothing contained in this Agreement shall be deemed to prohibit the Corporation from purchasing and maintaining insurance, at its expense, to protect itself or the Indemnitee against any expense, liability or loss incurred by it or the Indemnitee in any such capacity, or arising out of the Indemnitee’s status as such, whether or not the Indemnitee would be indemnified against such expense, liability or loss under this Agreement; provided that the Corporation shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that the Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

15. No Special Rights. Nothing herein shall confer upon the Indemnitee any right to continue to serve as a director or an officer of the Corporation for any period of time or at any particular rate of compensation.

16. Savings Clause. If this Agreement or any portion thereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify the Indemnitee as to Expenses, judgments, fines, penalties and amounts paid in settlement with respect to any Proceeding to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated and to the fullest extent permitted by applicable law.

17. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute the original.

18. Successors and Assigns. This Agreement shall be binding upon the Corporation and its successors and assigns and shall inure to the benefit of the estate, heirs, executors, administrators and personal representatives of the Indemnitee.

19. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

20. Modification and Waiver. This Agreement may be amended from time to time to reflect changes in Delaware law or for other reasons. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof nor shall any such waiver constitute a continuing waiver.

21. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been given (i) when delivered by hand or (ii) if mailed by certified or registered mail with postage prepaid, on the third day after the date on which it is so mailed:

(a) if to the Indemnitee, to:

Michael J. Astrue

47 Benton Road

Belmont, MA 02478

(b) if to the Corporation, to:

Transkaryotic Therapies, Inc.

700 Main Street

Cambridge, MA 02139

Attn: Board of Directors

or to such other address as may have been furnished to the Indemnitee by the Corporation or to the Corporation by the Indemnitee, as the case may be.

22. Applicable Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware. The Indemnitee may elect to

have the right to indemnification or reimbursement or advancement of Expenses interpreted on the basis of the applicable law in effect at the time of the occurrence of the event or events giving rise to the applicable Proceeding, to the extent permitted by law, or on the basis of the applicable law in effect at the time such indemnification or reimbursement or advancement of Expenses is sought. Such election shall be made, by a notice in writing to the Corporation, at the time indemnification or reimbursement or advancement of Expenses is sought; provided, however, that if no such notice is given, and if the General Corporation Law of Delaware is amended, or other Delaware law is enacted, to permit further indemnification of the directors and officers, then the Indemnitee shall be indemnified to the fullest extent permitted under the General Corporation Law, as so amended, or by such other Delaware law, as so enacted.

23. Enforcement. The Corporation expressly confirms and agrees that it has entered into this Agreement in order to induce the Indemnitee to continue to serve as a director or an officer of the Corporation, and acknowledges that the Indemnitee is relying upon this Agreement in continuing in such capacity.

24. Entire Agreement. This Agreement, together with the employment agreement between the parties and any directors and officers liability insurance coverage that may be provided by the Corporation to the Indemnitee, sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supercedes all prior agreements, whether oral or written, by any officer, employee or representative of any party hereto in respect of the subject matter contained herein; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and cancelled. For avoidance of doubt, the parties confirm that the foregoing does not apply to or limit the Indemnitee’s rights under Delaware law or the Corporation’s Certificate of Incorporation or By-Laws, each as amended to date.

25. Consent to Suit. In the case of any dispute under or in connection with this Agreement, the Indemnitee may only bring suit against the Corporation in the Court of Chancery of the State of Delaware. The Indemnitee hereby consents to the exclusive jurisdiction and venue of the courts of the State of Delaware, and the Indemnitee hereby waives any claim the Indemnitee may have at any time as to forum non conveniens with respect to such venue. The Corporation shall have the right to institute any legal action arising out of or relating to this Agreement in any court of competent jurisdiction. Any judgment entered against either of the parties in any proceeding hereunder may be entered and enforced by any court of competent jurisdiction.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

	TRANSKARYOTIC THERAPIES, INC.

	By:	/s/ Rodman W. Moorhead III

	Name:	Rodman W. Moorhead III

	Title:	Chairman of the Board of Directors


	INDEMNITEE:


	/s/ Michael J. Astrue

EX-10.38 9 j9805_ex10d38.htm EX-10.38

Exhibit 10.38

Execution Copy

EMPLOYMENT AGREEMENT

AGREEMENT, dated as of April 30, 2003, between Transkaryotic Therapies, Inc., a Delaware corporation (the “Company”), and Michael J. Astrue (the “Executive”).

1. EMPLOYMENT. The Company hereby employs the Executive and the Executive hereby accepts employment with the Company upon the terms and conditions herein set forth.

2. DUTIES. The Executive shall be engaged as a full-time employee to act as the Company’s President and Chief Executive Officer, and shall report to the Company’s Board of Directors (the “Board”). The Executive shall perform the duties consistent with such positions as the Board shall from time to time reasonably provide. The Executive shall devote his entire time, attention and energies to the business of the Company and shall not engage in any other business activity or activities, whether or not such business activity is pursued for gain, profit or other pecuniary advantage that, in the judgment of the Board, may conflict with the proper performance of the Executive’s duties under this Agreement. Notwithstanding the foregoing, (a) with respect to businesses which do not compete with the Company, the Executive may invest his personal or family assets in such form or manner as will not require any services on the part of the Executive in the operation of the affairs of the companies in which such investments are made and in which his participation is solely that of an investor, and (b) the Executive may purchase securities in any corporation whose securities are regularly traded in recognized securities markets, provided that such investments shall not result in his collectively owning beneficially at any time one percent (1%) or more of the equity securities of any corporation engaged in a business competitive to that of the Company.

3. COMPENSATION.

(a) BASE SALARY. For services rendered under this Agreement, the Company shall pay the Executive an annual salary of $400,000 (the “Base Salary”), payable (after deduction of applicable withholding for Federal and state income and payroll taxes) in equal semi-monthly installments. As requested by the Executive, the Company shall not pay the Executive, and the Executive shall forego, any compensation under this Section 3(a) until the ninetieth (90^th) day following the Commencement Date (as defined below), except to the extent that such compensation or a portion of such compensation is required to be paid by law. Notwithstanding the previous sentence, for all other purposes of this Agreement, the Executive shall be treated, and the benefits provided to the Executive shall be determined, as if the Executive was not foregoing any compensation under this Section 3(a). The Compensation Committee of the Board (the “Committee”) may review the Executive’s compensation annually and make such increases to the Base Salary as the Committee determines are merited, based upon the Executive’s performance and consistent with the Company’s compensation policies as established by the Committee. Any such increase in annual Base Salary shall be communicated to the Executive shortly after the January meeting of the Board of Directors and shall be made effective on the first day of January each year. The Executive’s Base Salary may not be reduced to an amount that is less than $400,000 without the written consent of the Executive.

(b) BONUS. The Committee and the Executive shall establish objective performance goals for the Executive for each calendar year. Upon the attainment of such performance goals, but subject to the overall performance of the Company during such year, the Executive may be entitled to a bonus targeted at fifty percent (50%) of the Base Salary, as determined by the Committee. Within thirty (30) days after the close of each such calendar year, the Committee shall evaluate the attainment of the performance goals for such calendar year and determine the amount of any performance bonus payable hereunder. Any such performance bonus shall be payable within ninety (90) days after the calendar year to which it relates.

(c) FRINGE BENEFITS. In addition to Base Salary and Bonus payments under Sections 3(a) and (b) above, the Executive shall be eligible for and participate in such fringe benefits, in accordance with the terms of each such benefit, as shall be generally provided to executives of the Company, including incentive compensation, the Company’s 401(k) Plan, health and dental insurance, and any retirement programs, stock options plans or employee stock purchase plans which may be adopted from time to time during the term hereof by the Company. Nothing herein contained shall be deemed to preclude the Company from granting such additional compensation or benefits to the Executive as it shall in its sole discretion determine.

(d) STOCK OPTIONS. Upon authorization by the Board and the Committee, on February 11, 2003, the Company granted the Executive under the Company’s 1993 Long Term Incentive Plan, as amended (the “Plan”), stock options to purchase an aggregate of three hundred fifty thousand (350,000) shares of Common Stock of the Company, par value $.01 per share, at a purchase price of Three Dollars and Eighty Cents ($3.80) per share (the “Stock Options”). The Stock Options will vest and become exercisable in four equal annual installments commencing on the first anniversary of the Commencement Date (as defined below); provided, however, that upon the termination of the Executive’s employment pursuant to Section 7(a)(iii) or 7(c), 50% of the Stock Options that have not vested as of the date of such termination shall automatically vest. The Stock Options shall be subject to all the terms and conditions of the Plan and the Company’s standard form of Stock Option Agreement, copies of which have been delivered to the Executive separately.

4. VACATION. During the term of this Agreement, the Executive shall be entitled to annual vacation consistent with the Company’s vacation policy; provided, however, that notwithstanding the foregoing, the Executive shall be entitled to at least fifteen (15) annual vacation days accrued at the rate of 1.25 days per month.

5. SICK LEAVE AND DISABILITY. During the term of this Agreement, the Executive shall be entitled to sick leave consistent with the Company’s customary sick leave and disability policies.

6. EXPENSES. During the term of this Agreement, the Company shall reimburse the Executive in accordance with the Company’s customary policies for all reasonable out-of-pocket expenses incurred by the Executive in connection with the business of the Company and in performance of his duties under this Agreement upon the Executive’s presentation to the Company of an itemized accounting of such expenses with reasonable supporting data.

7. TERM.

(a) The Executive’s employment under this Agreement commenced on February 11, 2003 (the “Commencement Date”) and shall continue until terminated by the Company as provided in this Section 7(a) or by the Executive as provided in Sections 7(c) or (d) below. For all purposes of this Agreement, this Agreement shall be deemed to have become effective on the Commencement Date and all references to the term of this Agreement shall mean the term beginning on the Commencement Date. The Company may, at its election, terminate the obligations of the Company under this Agreement as follows:

(i) upon at least sixty (60) days prior written notice if the Executive becomes physically or mentally incapacitated or is injured so that he is unable to perform the services required of him hereunder and such inability to perform continues for a period in excess of six (6) months and is continuing at the time of such notice;

(ii) for “Cause” immediately upon prior written notice of such termination to the Executive. For purposes of this Agreement, the Company shall have “Cause” to terminate the Executive’s employment hereunder upon

(A) the Board’s determination that the Executive has ceased or failed to substantially perform his assigned duties (other than as a result of his incapacity due to physical or mental illness or injury), and has failed to remedy such failure within at least thirty (30) days of written notice from the Company to the Executive notifying him of such failure, it being agreed by the parties that the failure to achieve performance objectives is not sufficient by itself to constitute “Cause” hereunder,

(B) the Executive’s death,

(C) the Board’s determination that the Executive has engaged or is about to engage in conduct materially injurious to the Company, provided that any actions or any failures to act by the Executive which are taken or fail to be taken in good faith and in a manner which the Executive reasonably believed to be in, or not opposed to, the best interests of the Company shall not be Cause for termination under this Section 7(a)(ii)(C),

(D) the Executive’s having been convicted of a felony, or

(E) a material breach by the Executive of any covenants set forth in this Agreement, including without limitation, the covenants set forth in Sections 2, 9, or 11 hereof; or

(iii) without Cause upon at least sixty (60) days prior written notice of such termination to the Executive.

(b) If, subsequent to the date six (6) months after the Commencement Date, this Agreement is terminated pursuant to Section 7(a)(i) above, the Executive shall receive severance pay until the fourth anniversary of the Commencement Date at a rate equal to the Executive’s Base Salary in effect immediately prior to such termination, reduced by the amount received by the Executive during such period under any Company maintained disability insurance policy or plan or under Social Security or similar laws. If this Agreement is terminated at any time pursuant to Section 7(a)(ii) above, the Executive shall receive no severance pay. If this Agreement is terminated pursuant to Section 7(a)(iii) above, the Executive shall receive severance pay, for a period of eighteen (18) months from and after such termination, at a rate equal to the Executive’s Base Salary in effect immediately prior to such termination. Such severance payments (less applicable withholding and payroll taxes) shall be paid periodically to the Executive as provided in Section 3(a) for the payment of Base Salary.

(c) If (i) the Executive provides written notice to the Company of the occurrence of Good Reason (as defined below) within a reasonable time (not to exceed 30 days) after the Executive has knowledge of the circumstances constituting Good Reason, which notice specifically identifies the circumstances which the Executive believes constitute Good Reason and (ii) the Company fails to notify the Executive of the Company’s intended method of correction of these circumstances within a reasonable period of time (not to exceed 30 days) after the Company receives the notice from the Executive, or the Company fails to correct the circumstances within a reasonable period of time (not to exceed 60 days) after the Company receives the notice from the Executive (except that no such opportunity to correct shall be applicable if the circumstances constituting Good Reason are those described in paragraph (C) below, relating to relocation), then within a reasonable period of time thereafter (not to exceed 30 days) the Executive may terminate his employment under this Agreement for Good Reason upon at least sixty (60) days written notice to the Company. If this Agreement is terminated pursuant to this Section 7(c), the Executive shall receive severance pay, for a period of eighteen (18) months from and after such termination, at a rate equal to the Executive’s Base Salary in effect immediately prior to such termination. Such severance payments (less applicable withholding and payroll taxes) shall be paid periodically to the Executive as provided in Section 3(a) for the payment of Base Salary.

For purposes of this Agreement, “Good Reason” shall mean, without the Executive’s express written consent, the occurrence of any of the following circumstances:

(A) a material diminution in the responsibilities, duties, and powers of the Executive including, without limitation, (I) the Executive ceasing to be the President or Chief Executive Officer (provided that the Executive is willing to serve as such), (II) the failure to be accorded the responsibilities, duties and powers of such positions, (III) the assignment to the Executive of any duties inconsistent with such positions, (IV) a change in Executive’s reporting relationship such that he no longer reports directly to the Board, or (V) the failure of the Executive to remain a member of the Board (provided that the Executive is willing to serve as such).

(B) a reduction by the Company in the Executive’s Base Salary to an amount that is less than $400,000, unless agreed to by the Executive;

(C) the relocation of the Executive’s base office to an office that is more than 100 miles from the metropolitan Boston area;

(D) upon the sale of substantially all of the stock, assets or business of the Company, by merger, sale of assets or otherwise if the acquiror, purchaser or other successor to the Company in such transaction does not agree to assume and perform the Company’s obligations under this Agreement;

(E) any purported termination of the Executive’s employment by the Company which is not effected in accordance with the requirements of 7(a), and for purposes of this Agreement, no such purported termination shall be effective; or

(F) any material breach of this Agreement by the Company not described in paragraphs (A) through (E) above.

(d) The Executive may terminate his employment under this Agreement for any reason upon at least sixty (60) days prior written notice. In the event of any such termination of employment pursuant to this paragraph (d), the Executive shall not be entitled to any severance payments.

(e) The provisions of Sections 7, 9, 10 and 11 shall survive the termination of this Agreement.

8. REPRESENTATIONS. The Executive hereby represents to the Company that (a) he is legally entitled to enter into this Agreement and to perform the services and other obligations contemplated herein; (b) he has, and throughout the term of this Agreement will continue to have, the full right, power and authority, subject to no rights of third parties, to grant to the Company the rights contemplated by Section 10 hereof; and (c) he is not subject to any agreement, rule, regulation or policy of any university, research institution or other third party inconsistent with the foregoing representations.

9. DISCLOSURE OF INFORMATION.

(a) The Executive recognizes and acknowledges that the Company’s trade secrets, know-how and proprietary processes as they may exist from time to time (including, without limitation, information regarding methods, cultures, vectors, plasmids, synthesis techniques, nucleic acid sequences, purification techniques and assay procedures) as well as the Company’s confidential business plans and financial data are valuable, special and unique assets of the Company’s business, access to and knowledge of which are essential to the performance of the Executive’s duties hereunder. The Executive shall not, during or after the term of his employment by the Company, in whole or in part, disclose such secrets, know-how, processes, business plans or financial data to any person, firm, corporation, association

or other entity for any reason or purpose whatsoever, nor shall the Executive make use of any such property for his own purposes or for the benefit of any person, firm, corporation or other entity (except the Company) under any circumstances during or after the term of his employment, provided that after the term of his employment, these restrictions shall not apply to such secrets, know-how, and processes which the Executive can establish by competent proof:

(i) were known, other than under binder of secrecy, to the Executive prior to his initial employment by the Company which commenced on May 18, 2000;

(ii) were passed into the public domain prior to or after their development by or for the Company, other than through acts or omissions attributable to the Executive; or

(iii) were subsequently obtained, other than under binder of secrecy, from a third party not acquiring the information under an obligation of confidentiality from the disclosing party.

(b) Upon termination of his employment hereunder, the Executive shall promptly turn over to the Company all originals and copies which he may have of any of the Company’s confidential information described in this Section 9.

(c) Nothing in the foregoing provisions of this Section 9 shall be construed so as to prevent the Executive from using, in connection with his employment for himself or an employer other than the Company, non-confidential information which was acquired by him during the course of his employment with the Company, and which is generally known to persons of his experience in other companies in the same industry.

10. INTELLECTUAL PROPERTY. The Executive hereby sells, transfers, and assigns to the Company, or to any person or entity designated by the Company, the entire right, title, and interest of the Executive in and to all inventions, ideas, discoveries, and improvements (including, without limitation, all microorganisms, strains or cultures) whether patented or unpatented, and copyrightable material made, conceived or reduced to practice by the Executive, solely or jointly, during the term hereof, which arise out of research or other activities conducted by, for or under the direction of the Company, whether or not conducted at the Company’s facilities, or which relate to methods, apparatus, designs, products, processes or devices, sold, leased, used or under consideration or development by the Company. The Executive acknowledges that all copyrightable materials developed or produced by the Executive within the scope of his employment constitute works made for hire. The Executive shall communicate promptly and disclose to the Company, in such form as the Company may reasonably request, all information, details, and data pertaining to any such inventions, ideas, discoveries, and improvements; and the Executive shall execute and deliver to the Company such formal transfers and assignments and such other papers and documents and shall give such testimony as may be necessary or required of the Executive to permit the Company or any person or entity designated by the Company to file and prosecute patent applications and, as to copyrightable material, to obtain copyrights thereof. Any such invention, idea, discovery or improvement disclosed by the

Executive within one (1) year following the termination of this Agreement shall be deemed to fall within the provisions of this Section 10 unless proved to have been first conceived and made following such termination.

11. COVENANTS NOT TO COMPETE OR INTERFERE.

(a) Subject to Section 11(b) below, during the term of this Agreement and the period ending twenty-four (24) months from and after the termination of the Executive’s employment hereunder, the Executive shall not engage in any business (whether as an officer, director, owner, employee, partner, consultant, advisor or other direct or indirect participant) engaged in the development or sale of products for the treatment of lysosomal storage disorders. The Company and the Executive hereby agree as of the date hereof that this Section 11(a) shall only apply to BioMarin Pharmaceutical Inc., Amgen Inc. and Genzyme Corporation and any subsidiary or affiliate of such companies. This Agreement shall not be construed to restrict the Executive’s right to be employed as a faculty member of any university or employee of any nonprofit agency or foundation after any termination of this Agreement where this covenant not to compete shall continue to be in effect. During the period in which this covenant not to compete is in effect the Executive also shall not interfere with, disrupt or attempt to disrupt the relationship, contractual or otherwise, between the Company and any customer, supplier, lessor, lessee, employee, consultant, research partner or investor of the Company.

(b) If this Agreement is terminated by the Company pursuant to Section 7(a)(iii) above or Section 7(c) above, the provisions of the first sentence of Section 11(a) shall apply until twelve (12) months from and after such termination.

(c) It is the desire and intent of the parties that the provisions of this Section 11 shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular Subsection or portion of this Section 11 shall be adjudicated to be invalid or unenforceable, this Section 11 shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of this Section in the particular jurisdiction in which such adjudication is made.

(d) In the event of any breach of the provisions of this Section 11 by the Executive, any and all rights of the Executive to receive severance payments under Section 7(b) and (c) above shall automatically terminate.

12. INJUNCTIVE RELIEF. If there is a breach or threatened breach of the provisions of Section 9, 10, or 11 of this Agreement, the Company shall be entitled to an injunction, without bond, restraining the Executive from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach.

13. INSURANCE. The Company may, at its election and for its benefit, insure the Executive against accidental loss or death, and the Executive shall submit to such physical examinations and supply such information as may be required in connection therewith.

14. INDEMNIFICATION. The Company and the Executive have entered into that certain Indemnification Agreement, dated as of the date hereof, providing for indemnification of the Executive by the Company on the terms and conditions set forth therein.

15. EXPENSES. The Company shall reimburse the Executive for the reasonable fees and expenses of his counsel, not to exceed $10,000 in the aggregate, in connection with the negotiation of this Agreement and all related agreements.

16. NOTICES. Any notice required or permitted to be given under this Agreement to the Executive shall be sufficient if in writing and if sent by certified or registered mail to his residence, or in the case of the Company, to Transkaryotic Therapies, Inc., 700 Main Street, Cambridge, MA 02139, Attention: Board of Directors, or to such other offices or addresses as the company shall designate from time to time in writing to the Executive. Any such notice shall be effective on the earlier of (a) the date on which it is personally delivered or (b) three (3) days after it is deposited in the United States mails, postage prepaid.

17. WAIVER OF BREACH. A waiver by the Company or the Executive of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by the other party.

18. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the Commonwealth of Massachusetts.

19. ASSIGNMENT. This Agreement may be assigned, without the consent of the Executive, by the Company to any person, partnership, corporation or other entity which succeeds to the business of the Company or which has purchased substantially all the assets of the Company, provided such assignee assumes all the liabilities of the Company hereunder.

20. ENTIRE AGREEMENT. This Agreement, together with the Indemnification Agreement and the Stock Options, contains the entire agreement of the parties and supersedes any prior understandings or agreements between the Executive and the Company. This Agreement may be changed only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

[Remainder of the Page Intentionally Left Blank]

IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the date first above written.

TRANSKARYOTIC THERAPIES, INC.

By:	/s/ Rodman W. Moorhead III
	Rodman W. Moorhead III
	Chairman of the Board of Directors

EXECUTIVE

/s/ Michael J. Astrue
Michael J. Astrue

EX-10.39 10 j9805_ex10d39.htm EX-10.39

Exhibit 10.39

Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.

LICENSE AGREEMENT made the 28 day of February, 2003

BETWEEN:

WOMEN’S AND CHILDREN’S HOSPITAL, a non-profit institution incorporated in South Australia and of 72 King William Road, North Adelaide, South Australia (“Licensor”);

AND:

TRANSKARYOTIC THERAPIES, INC. 700 Main Street, Cambridge, Massachusetts (“Licensee”).

WHEREAS:

A. Licensor has power to grant rights in respect of certain technology.

B. The parties desire that Licensor shall grant to Licensee a License to make, use, distribute and sell the technology upon the terms hereinafter appearing.

WHEREBY IT IS AGREED as follows:

1. RECITALS

The matters referred to in the recitals are true and correct in every material particular and shall form part of this Agreement.

2. INTERPRETATION

In this Agreement:

2.1. “Affiliate” means:

2.1.1 A company that is the parent company of Licensee;

2.1.2 A company that is a subsidiary of the parent company of Licensee;

2.1.3 A company that is a subsidiary of Licensee;

2.1.4 A director of Licensee;

2.2. “Commencement Date” means February 28, 2003.

2.3. “Field” is the treatment of certain mucopolysaccharidosis (“MPS”) namely MPS I, II, IIIA and IIIB by means of gene therapy and/or protein replacement therapy, [**].

2.4. “Know How” means all specifications, and quality control procedures and other technical or commercial knowledge or information whether patentable or not of the Unit in relation to the Field in existence on the date of this Agreement or which come into existence as a result of the funded research under the Research Agreement during the continuance of this Agreement.

2.5. “License” means the authorities in this Agreement granted to Licensee under Clauses 3 through 5 inclusive of this Agreement.

2.6. “Licensor” means Women’s and Children’s Hospital and includes its successors and permitted assigns.

2.7. “Licensee” means Transkaryotic Therapies, Inc. and includes its successors and permitted assigns.

2.8. “Net Sales Value” shall mean the invoiced amount billed on sales of Products in final packaging form made by Licensee, its Affiliates, or its sublicensees to an unrelated third party, less the following:

a) amounts refunded or credited for Products which were rejected, damaged, or returned;

b) import, export, excise, and sales taxes; and

c) credits, rebates and quantity or cash discounts.

The transfer of Products by Licensee or any of its Affiliates to another Affiliate of Licensee or a sublicensee should not be considered a sale; in such cases Net Sales shall be determined based on the invoiced sales price by the Affiliate or sublicensee to the customer less the above deductions.

If any Product is sold as a combination of functional elements, the Net Sales Value shall be calculated by multiplying the net sales price of the combination product by the fraction A over A+B, in which “A” is the standard fully absorbed cost of the product portion of the combination, and “B” is the standard fully-absorbed cost of the other functional elements of the combination, with such costs being determined in accordance with generally accepted accounting practices. An example of a combination product is a medical device consisting of genetically modified cells held immobile by a permeable matrix composed of polymeric molecules, where the matrix is the product portion and the cells are the other functional element of the combination product.

2.9. “Past Funded IP” means all intellectual property rights developed as a result of the conduct of all research by the Unit prior to the Commencement Date pursuant to the 1996 Research Agreement [**].

2.10. “Past Non-Funded IP” means all intellectual property rights developed as a result of any research conducted by the Unit prior to the Commencement Date, other than pursuant to the 1996 Research Agreement, [**].

2.11. “Patents” means any and all patents and patent applications in the Field in Australia and throughout the world which Licensor presently owns or controls or under which Licensor has the right to grant sub-licenses or that hereafter result from the funded research under the Research Agreement (or in respect of which the Research Agreement otherwise obliges Licensor to grant a license to Licensee), including patents comprised in the Past Funded IP and the Past Non-Funded IP. Patents as of the date of this Agreement are listed in Exhibit A attached hereto. The expression “patents and patent applications” shall, without limitation, extend to and include petty patents, inventors’ certificates, utility patents, patents of importation, patents of confirmation, patents of improvements, patents of addition, utility models and substitutions, extensions, re-issues, renewals, divisions, continuations or continuations-in-part thereof or therefor. References to “patents” and to “patent applications” shall extend to include, mutatis mutandis, any other intellectual property rights which may be of relevance including any registered designs, copyrights or trademarks.

2.12. “Processes” means the processes, methods of manufacture and procedures covered by Valid Claims of Patents or which utilize Technical Information.

2.13. “Products” means products whose manufacture, use or sale is covered by Valid Claims of Patents or which utilize Technical Information, Past Funded IP or Past Non-Funded IP.

2.14. “Research” has the same meaning specified for such term in the Research Agreement.

2.15. “Research Agreement” means the written Research Agreement between the parties entered into on or about the date of this agreement relating to mucopolysaccharidosis research.

2.16. “Settlement Agreement” means the written Settlement Agreement between the parties entered into on or about the date of this agreement relating to the 1996 Research Agreement and the 1996 License Agreement.

2.17. “Technical Information” means processes, methods of manufacture and procedures of Licensor relating to the Field and in respect of which Licensor is obliged, pursuant to the Research Agreement, to grant Licensee a license.

2.18. “Term” means the period from the date of this Agreement to the day of expiry of the last surviving Patent, subject to early termination as provided in this Agreement.

2.19. “Territory” means [**].

2.20. “Therapy” excludes testing, screening and diagnosis.

2.21. [**].

2.22. “Valid Claim” means a claim of an issued Patent which has not been declared invalid or unenforceable by a court of competent jurisdiction or an administrative agency from which no appeal can be or is taken.

2.23. “1996 Research Agreement” means the written Research Agreement between the parties dated 1 July 1996 relating to mucopolysaccharidosis research.

2.24. “1996 Licence Agreement” means the written Licence Agreement between the parties dated 1 July 1996, as amended on 1 July 1998.

3. LICENSE GRANT

3.1. In relation to Patents, Technical Information, Processes and Products arising from the Research, in consideration of the timely performance of all warranties and agreements in this Agreement given or made by Licensee, Licensor hereby grants to Licensee and Licensee hereby accepts an exclusive, worldwide license to such Patents and Technical Information, with the right to grant sublicenses, to make and have made, to use and have used, to sell and have sold such Products, and to practise and otherwise use such Processes for the duration of the Term subject to and upon the terms in this Agreement.

3.2 In relation to patents, technical information, processes and products [**] within the Field during the term of the Research Agreement, which would be Patents, Technical Information, Processes and Products if they arose from the Research, in consideration of the timely performance of all warranties and agreements in this Agreement given or made by Licensee, Licensor hereby grants to Licensee and Licensee hereby accepts an exclusive, worldwide license within the Field to such patents and technical information, with the right to grant sublicenses, to make and have made, to use and have used, to sell and have sold such products, and to practise and otherwise use such processes for the duration of the Term subject to and upon the terms in this Agreement.

In the event that any third party shall propose to:

(i) sponsor research at Licensor in the Field; or

(ii) enter into an academic research collaboration with Licensor

during the term of the Research Agreement, then Licensor shall promptly give notice of such proposal to Licensee. Licensee shall review the proposed research, cognizant of the mutual goal of Licensor and Licensee to advance research in the Field and commercialize Products. Licensee shall notify Licensor within thirty (30) days whether it is willing to enter into negotiations with such third party regarding the disposition of any patents, technical information, processes and products arising from such third party-funded research or academic research collaboration. In the event that Licensee agrees to enter into negotiations with such third party, Licensee shall negotiate in good faith, but nothing contained herein shall require Licensee to come to agreement with such third party.

Alternatively, Licensor may enter into an academic research collaboration during the term of the Research Agreement with any third party (such as a university or other non-profit research institution) provided that it:

(a) notifies Licensee of the identity of the third party and obtains Licensee’s consent to enter into the collaboration with that third party (such consent not to be unreasonably withheld, and provided that a failure by Licensee to respond to the request for consent within 30 days of the date of the request shall constitute consent);

and

(b) obtains a written undertaking from the third party that Licensee will obtain an exclusive, worldwide license within the Field to any patents, technical information, processes and products arising from such collaboration during the term of the Research Agreement.

3.3 In relation to Patents, Technical Information, Processes and Products comprising or arising from the Past Funded IP, Licensor hereby grants to Licensee and Licensee hereby accepts an exclusive, worldwide license to such Patents and Technical Information, with the right to grant sublicenses, to make and have made, to use and have used, to sell and have sold such Products, and to practise and otherwise use such Processes for the duration of the Term subject to and upon the terms in this Agreement.

3.4 In relation to Patents, Technical Information, Processes and Products comprising or arising from the Past Non-Funded IP, Licensor hereby grants to Licensee and Licensee hereby accepts an exclusive, worldwide license within the Field to such Patents and Technical Information, with the right to grant sublicenses, to make and have made, to use and have used, to sell and have sold such Products, and to practise and otherwise use such Processes for the duration of the Term subject to and upon the terms in this Agreement.

4. NATURE OF LICENSE

4.1. The rights granted to Licensee are an exclusive right within the Territory (and, in the case of the rights granted to Licensee pursuant to clauses 3.2 and 3.4, within the Field only) to manufacture, use, sell and supply or procure the manufacture, use, sale and supply under sub-License of Products.

4.2. The rights hereby granted shall commence on the date of this Agreement and shall terminate on the expiration of the Term, subject to early termination as herein provided.

4.3. Subject to the Licensor’s rights to use the Patents and Technical Information for research purposes, Licensor shall not itself exercise or grant the same or equivalent rights to any other third party, except in the case of the License being converted to non-exclusive status pursuant to Clause 6.4, without the consent in writing of Licensee first had and obtained, which consent Licensee may in its absolute discretion refuse.

5. PATENTS, TRADEMARKS AND KNOW HOW

For the purposes of the License, Licensor hereby grants to Licensee:

5.1. An exclusive right (in the case of the rights granted to Licensee pursuant to clauses 3.2 and 3.4, within the Field only) to use the intellectual or industrial property the subject of the Patents and Technical Information.

5.2. Exclusive access (in the case of the rights granted to Licensee pursuant to clauses 3.2 and 3.4, within the Field only) to instruction manuals and drawings and specifications or other written or machine-readable technical material clearly explaining the subject of the Patents and Technical Information.

5.3. Non-exclusive access (in the case of the rights granted to Licensee pursuant to clauses 3.2 and 3.4, within the Field only) to all other Know How of Licensor in relation to the subject of the Patents and Technical Information.

6. DUE DILIGENCE OBLIGATIONS

6.1 Licensee and Licensor acknowledge and agree that they both intend to bring high quality, safe and effective products to patients suffering from MPS disorders. The Parties acknowledge and agree that the Parties shall communicate regularly in order to identify ways of achieving the mutual goal of bringing these products to market as promptly as possible. Licensee agrees that when high quality, safe and effective products are ready for commercialization in Licensee’s reasonable discretion, Licensee shall use its reasonable commercial efforts, consistent with sound business practices, to commercialize, market and promote (by itself or by sub-licensees) Products covered by this Agreement within major markets within the Territory [**]. In the event that Licensee determines that it cannot or will not commercialize a Product within all or part of the Territory, it shall promptly notify Licensor at which point Licensee shall [**]. Licensee shall keep Licensor properly informed as to its development and commercialisation activities and give to Licensor such information as Licensor may reasonably request in relation to such activities. If Licensee is found (pursuant to clause 22 or by a Court) to have breached its obligations under this clause 6, Licensor's sole remedy shall be to notify Licensee of its intention to convert the license under clause 3 to a non-exclusive license, to the extent it relates to the MPS disorder in respect of which the breach was committed, unless within ninety (90) days of notification by Licensor, Licensee remedies its failure. If Licensor elects to convert the license into non-exclusive status, then the royalty rate set forth in clause 14 on Products for the applicable MPS disorder shall be reduced by [**] percent. The Parties agree that nothing in this clause 6 obliges Licensee to do anything that, at that time, it reasonably believes to be unethical.

6.2 As a sign of its good faith intentions in relation to the development of Products capable of commercialisation (“Development Process”), Licensee agrees that if research proposals submitted to the Licensee by the Licensor from time to time or the results of the Research indicate that further research would be beneficial to the Development Process, then Licensee will give due consideration to providing Licensor with additional funding for the purpose of undertaking that research.

7. RECORDS

7.1. Licensee shall keep complete records of all production and sales of Products and all orders and inquiries for orders received.

7.2. After Licensee makes its first commercial sale of a Product, Licensee shall within one month of the expiration of each March, June, September and December prepare and supply to Licensor a report of the conduct of the License during the preceding quarter. Such report shall include:

7.2.1 quantities of Products manufactured distinguishing between different types of Products;

7.2.2 quantities and sales values of Products sold distinguishing between different types of Products;

7.2.3 sub-licenses granted;

7.2.4 gross proceeds of the License (broken down into Net Sales Values of Products sold and royalties and license fees paid by sub-licensees); and

7.2.5 royalties payable by Licensee in respect of such period.

8. PRODUCT WARRANTIES

Licensee shall ensure that all Products supplied in carrying on the License by Licensee are constructed of suitable materials and are suitable for the purposes for which the Products are intended.

9. COMPLIANCE WITH LAWS AND TECHNICAL STANDARDS

At its own expense Licensee shall promptly identify and ensure compliance with all applicable laws and industry standards and shall forthwith obtain all necessary governmental or industry standards and approvals relevant to the production and supply of Products in the Territory.

10. INSPECTION AND ACCESS

The Licensee shall permit the Licensor to examine the Licensee’s books and records periodically during regular business hours upon reasonable notice for the purpose only and to the extent necessary to verify any sales provided pursuant to this Agreement. Any such examination will be made at the expense of the Licensor by an independent registered or company auditor who is reasonably acceptable to the Licensee and who shall report to the Licensor only the amount of royalties due and payable hereunder. The Licensor agrees that any report (and any payment made pursuant thereto) submitted more than one year preceding the date of any such examination shall be conclusively presumed to be correct. In the event that the auditor determines that an inaccuracy in the sales report resulted in more than a five percent (5 %) deficiency in royalty payments to Licensor, Licensee shall pay (i) the costs of the audit and (ii) such deficiency in royalties within thirty (30) days from the date Licensee receives the audit report.

11. REPORTS

The parties shall promptly exchange all technical reports respectively produced or procured by either of them in respect of the development of therapeutic products for MPS I, II, IIIA and IIIB. Licensee shall present a detailed, written progress report covering the development of therapeutic products for MPS I, II, IIIA and IIIB to Professor John Hopwood on the occasion of his annual visit to Licensee. Should any inaccuracies, inconsistencies, omissions, errors or faults be found in the specifications or use of the Processes, the party aware of same shall as soon as practicable notify the other party of same.

12. COOPERATION

Each party shall give such reasonable assistance, cooperation and information to the other as shall be required to assist that party to carry out its obligations under this Agreement.

13. INTELLECTUAL AND INDUSTRIAL PROPERTY

13.1. Licensor to the best of its knowledge warrants that it has the right to enter into this Agreement and no provision of this Agreement will violate, conflict or infringe upon any rights whatsoever of any person, firm or corporation.

13.2. Neither party shall during the continuance of this Agreement or thereafter use, divulge or communicate to any person whomsoever any confidential information concerning the other party or the practices, dealings, transactions or affairs of the other party which may have been acquired by the party pursuant to the performance of this Agreement, save as required by law.

13.3. Licensee shall imprint or cause to be imprinted on all relevant written materials supplied hereunder and all copies thereof a copyright notice to the effect that the said materials are subject to copyright and are confidential and are not to be disclosed to others or publicly disseminated.

13.4. Licensee shall imprint or cause to be imprinted on all Products the subject of a patent manufactured or supplied under this Agreement a patent notice to the effect that the same are subject to patent rights.

13.5. Licensee shall not do or commit any act or omission whereby patent or other rights of Licensor in respect of the subject matter of the Patents and Technical Information may become prejudiced, void or voidable.

13.6. Under the Research Agreement, Licensor has agreed to license any patents or patent applications invented, discovered or created in the course of the Research to Licensee, subject to the terms and conditions of this License Agreement. In such event, the parties will amend Exhibit A and any such additional patents or patent applications will be treated as Patents hereunder.

13.7. Each party may defend any action brought against it alleging that the Patents, the Technical Information or the License infringes patent or other rights belonging to a third party.

13.8. Licensee shall, at its reasonable discretion, notify Licensor of any infringement of the Patents and Technical Information in the Territory by third parties (“Infringement”). Licensor has the obligation to diligently prosecute any Infringement. If Licensor fails to meet such obligation, Licensee shall have the right, but not the obligation, upon five (5) days written notice, to take control of the prosecution of an Infringement and bear the costs of such proceedings. The Party that meets the obligation of prosecuting any Infringement (i) shall be entitled to all damages and costs (if any) awarded against third parties in favor of Licensee or Licensor, and (ii) shall have the control and conduct of all negotiations for settlement or compromise of such proceedings.

13.9. In relation to the filing, prosecution and maintenance of Patents:

(a) Licensee shall be responsible for the preparation, filing, prosecution and maintenance of all patent applications and Patents in Australia, the United States, and in those other countries selected by Licensee. Prosecution shall be conducted by attorneys selected and supervised by Licensee, to which Licensor has no reasonable objection. Licensee will keep Licensor apprised as to the status of each of the patent applications and Patents.

(b) Licensee shall be responsible for all costs associated with the prosecution and maintenance of the licensed Patents. These costs shall be billed directly to Licensee by associated attorneys.

(c) each party shall give such reasonable assistance, cooperation and information to the other as shall be required to assist that party to carry out its obligations under this Agreement.

14. PAYMENTS

14.1. Licensee in consideration of the use of the Patents and Technical Information shall pay to Licensor:

14.1.1 royalties in an amount equal to [**] percent ([**]%) of the Net Sales Value of Products sold or consumed by Licensee and its sub-licensees in countries within the Territory where such sale or consumption is covered by a Valid Claim of any Patent;

14.1.2 for a period commencing on the date of the first commercial sale of a Product, and ending upon expiration or termination of this Agreement, royalties in an amount equal to [**] percent ([**]%) of the Net Sales Value of Products sold or consumed by Licensee and its sub-licensees in countries within the Territory where such sale or consumption is not covered by a Valid Claim but utilizes Technical Information. In the event that a third party sells such a Product in a country within the Territory where such sale or consumption is not covered by a Valid Claim, then the royalty paid to Licensor will be an amount equal to [**] percent ([**] %) of the Net Sales Value of Products sold or consumed by Licensee and its sublicensees.

14.2. It is acknowledged that Products may be sold by the Licensee in combination with or incorporated into some other product incorporated into some other functional element. (Product when in combination with another functional element is herein called “combination products”). If a combination product is sold for a single price, any amount received by the Licensee from the sale thereof will be apportioned to the constituent part or parts thereof which constitute Product and to the constituent part or parts which constitute functional element. Only that part of any amount received by the Licensee which is apportioned to Product will represent Net Sales Value and attract royalty. The basis of any apportionment will be as described in Clause 2.8.

14.3. Royalties shall be calculated quarterly for each of the three (3) month periods ended March, June, September and December and shall be payable within one (1) month of the end of each three (3) month period and payment shall be accompanied by the Report referred to in Clause 7.3

14.4. If at any time during the Term the Licensee discovers that any product or process manufactured, sold, exercised or used by the Licensee or any of its sub-licensees or any method of manufacture of same or use thereof being the same subject of the License infringes claims of any unexpired patent, patent application or other intellectual property right owned by a third party, then the Licensee may negotiate with such third party for a License on such terms as the Licensee considers appropriate. If the terms of settlement with any such third party include a royalty bearing license, then the royalties otherwise payable under this Agreement shall be reduced by the royalty or other payment paid to such third party. The offset in royalty should not be more than fifty percent (50%) of the total royalty payable by Licensee to Licensor.

14.5. All royalties and signing fees shall when payable be converted into the currency of Australia on the basis of the weighted average exchange rate applicable on the first and last days of each quarter. All payments shall, subject to deduction of withholding or other taxes Licensee is required by law to withhold, be paid in Australian Dollars by telegraphic transfer in clear funds to Licensor’s account at Adelaide or to such other bank or place as Licensor may from time to time nominate in writing.

14.6. If Licensee shall default in the due and punctual payment of any amount payable herein to Licensor and that default is continuing for a period of thirty (30) days then and without limiting any other right or remedy, Licensee shall be liable to pay default interest at the current London Inter Bank Offer Rate plus three per centum (3 %), adjusted monthly, on the outstanding amount until paid.

15. INDEMNITY

Licensee shall defend, indemnify and hold harmless Licensor from and against any and all damages and liability, including reasonable legal fees, costs and disbursements it may incur as a result of product liability, trademark infringement, product recall or any other claims not specifically excluded elsewhere in this Agreement or events arising from manufacture, sale or distribution of the Products by Licensee or its sub-licensees. Commencing on the date of first use of a Product in humans, Licensee shall at all times maintain in full force and effect a general liability policy of insurance with product hazard coverage regarding the sale of the Products and the supply of Services by Licensee in a commercially standard amount and Licensee shall, on an annual basis, and at the written request of the Licensor furnish Licensor a certificate confirming such coverage.

16. LEGAL RELATIONSHIP

Nothing herein expressed or implied shall be deemed to create any partnership or agency between the parties for the production, marketing or exploitation of the Patents or Technical Information or otherwise. Neither party shall hold any of its agents, contractors, employees or servants to be the agent, contractor, employee or servant of the other party. Neither party shall pledge the credit of the other party nor enter into contracts on its behalf. Each party shall indemnify and hold harmless the other party and any company related to the other party from any claims, demands or liabilities with respect to damage to property or personal injury or death of employees, contractors or agents of the indemnity or its own related companies while in or about the premises, plant or site of operations of the other party or any company related to the other party.

17. THIRD PARTIES

17.1. This Agreement extends to and binds the parties and their respective successors and permitted assigns.

17.2. A party shall not assign or charge the benefits and obligations on that party’s part to be enjoyed or observed herein to any person, firm or corporation without the prior consent in writing of the other party (which consent shall not be unreasonably withheld) and the undertaking in writing by the assignee to be bound by this Agreement so far as applicable.

17.3. Licensee may appoint sub-licensees subject to Licensor ensuring that such sublicensee is not trading in a country for which Australia has trade or diplomatic sanctions in place. If no such sanctions exist, Licensee is not required to obtain approval for appointment of sublicensees. Licensee agrees to ensure that no potential sub-licensee is in litigation with Licensor at the time of the granting of a sublicense. Licensee agrees to provide Licensor with contact details for each sublicensee within 2 weeks of entering into a sublicense agreement with that sublicensee, and will promptly notify Licensor of any change in such contact details.

18. NO WAIVER

No failure or delay on the part of a party to exercise any right or remedy hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any such right or remedy preclude any other further exercise thereof or the exercise of any other right or remedy hereunder.

19. FORCE MAJEURE

The parties shall not be liable for any failure to perform or observe any term of this Agreement if performance or observance has been delayed, hindered, restricted or prevented by any circumstance not within the direct control of the parties including, without limiting the generality of the foregoing, Acts of God, strikes, lock-outs or other industrial disturbances, war hostilities or the threat or apprehension thereof or any interruption to the supply of materials or information or any accident or breakdown of machinery or the making of emergency or essential repairs thereto or compliance with any valid order of any governmental or public authority and the time or times for performances of the obligations on the respective parties’ parts to be performed herein shall be extended by a period equal to each such period of delay provided that such party shall forthwith give notice to the other party in accordance with the provisions of this Agreement and shall endeavor to remove or remedy the cause thereof with all due diligence and expedition.

20. TERMINATION

The License shall immediately terminate upon the occurrence of any of the following events:

20.1. Upon the expiration of the Term; or

20.2. If a party fails to perform or observe any of the obligations and undertakings on its part to be performed herein and that party fails to remedy such breach within sixty (60) days of notice from the other party requiring the alleged breach to be remedied, such notice giving adequate particulars of the alleged breach and of the intention of the party giving notice to terminate the License forthwith upon expiration of the required remedy period; or

20.3. If a party enters into liquidation (other than for the purposes of reconstruction) or if an order is made or a resolution is passed for the winding up of a party or placing a party under official management or if a receiver or receiver and manager of the undertaking or property of a party or any part thereof shall be appointed; or

20.4. If the Licensee shall have provided to the Licensor six months prior written notice of its intention to terminate the License with respect to any one or more (including all) countries or Products, such termination to be effective on and from the date of termination specified in that notice. Such termination shall relieve the Licensee from any obligations to pay royalties accruing from sales of Products the subject of such termination after such termination or accruing from sales of Products in the country or countries the subject of the termination after such termination (as the case may be) but shall not relieve the Licensee of any obligations to pay royalties due or accrued with respect to sales prior to the date of termination. Termination of this Agreement with respect to any one or more (including all) countries or Products shall not affect any other rights or obligations of a party which may have accrued prior to termination with respect to such country or countries or Product or Products.

20.5. Governmental diplomatic developments or actions by any country or state adversely influencing the substantial performance or observance of any of the material terms of this Agreement, without compensation to either party provided that any termination of the License pursuant to this Clause shall be without prejudice to the rights of either party against the other party which may have accrued up to and including the date of such termination.

20.6. Upon the happening of any other event specified in this Agreement as terminating the Agreement. Termination of this Agreement shall not affect any rights or obligations of a Party which may have accrued prior to termination, including the payment of royalties due or accrued with respect to sales made prior to or after the date of termination.

20.7. Any sublicenses granted by Licensee during the term of this Agreement shall survive termination, and Licensor will be entitled to receive any consideration, including royalties, due to Licensee thereunder, and shall have the right to terminate any such sublicenses upon sixty (60) days notice of a material breach of the sublicense which is not cured prior to expiration of such period, and further provided that Licensor will not assume, and will not be liable for, any representations, warranties or obligations of Licensee to any sublicensees.

21. SALE AND RETURN ON TERMINATION

Licensee shall immediately upon termination of the License:

21.1. Complete any orders for the sale of products that the Licensee has contracted to supply;

21.2. Offer for sale to Licensor at its value all and several of the Products that Licensee is not otherwise contracted to supply; and

21.3. Return to Licensor the specifications of the subject matter of the Patents or Technical Information in eye or machine-readable form and all copies thereof;

in the possession or control of Licensee.

22. ARBITRATION

If during the term of this Agreement or at any time thereafter any claim or dispute shall arise between the parties as to their respective rights or obligations under this Agreement, such matter shall be referred for final determination to an arbitrator in London, United Kingdom, to be appointed pursuant to the Rules of the London Court of International Arbitration. The arbitrator shall receive written and verbal submissions from the parties within the time appointed by the arbitrator and the arbitrator shall give reasonable consideration to such submissions before making a determination. The arbitrator shall determine the matter in dispute for reasons given in writing and shall dispatch a copy thereof to each party. Any determination made by the arbitrator pursuant to this Clause shall be final and binding on the parties and may be entered in and enforced by any court of competent jurisdiction. The costs and expenses of the arbitrator shall be borne equally between the parties. If this Clause shall be adjudicated as invalid, void or unenforceable by any Court of competent authority, then this Clause shall be severed and deleted from this Agreement without prejudicing or affecting the validity and enforceability of the remainder of this Agreement.

23. CONFIDENTIAL INFORMATION

In order to facilitate commercialization of the Products, the Parties shall disclose confidential information relevant to the Research and either Party may disclose other confidential information such as scientific engineering, economic, commercial or other technical data or information, biological materials, all methods, processes and procedures or know-how (hereinafter together “Confidential Information”) owned or controlled by it to the other (the disclosing party being referred to as the “Disclosing Party”, and the receiving party as the “Receiving Party”).

23.1. In consideration of such disclosure, the Receiving Party agrees to maintain as confidential any and all Information received from the Disclosing Party and to hold such Information in trust for the exclusive benefit of the Disclosing Party. Information disclosed by the Disclosing Party shall remain the exclusive property of the Disclosing Party and will be used by the Receiving Party solely for the purpose for which it was disclosed. The Receiving Party will protect Information received from the Disclosing Party with at least the same degree of care as it uses to protect the Receiving Party’s own Information. The Receiving Party will not use Information disclosed by the Disclosing Party for itself or others or copy or disclose such Information to anyone (except the Receiving Party’s employees, on a need-to-know basis).

The foregoing restrictions on use and disclosure shall not apply to any Information of the Disclosing Party that:

23.1.1 was known to the Receiving Party prior to its disclosure to the Receiving Party by the Disclosing Party as evidenced by written documents predating the Receiving Party’s receipt of such Information; or

23.1.2 is public knowledge at the time of its disclosure to the Receiving Party or became public knowledge after its disclosure to the Receiving Party through no act or omission or on its behalf; or

23.1.3 is lawfully disclosed or made available to the Receiving Party by a third party having no direct or indirect obligation to the Disclosing Party to maintain the confidentiality of such Information;

23.1.4 is independently developed by the Receiving Party without the aid or benefit of Information disclosed to the Receiving Party by the Disclosing Party; or

23.1.5 is disclosed by the Receiving Party pursuant to a subpoena lawfully issued by a court or governmental agency provided that the Receiving Party notifies the Disclosing Party immediately upon receipt of any such subpoena.

The Receiving Party will promptly return to the Disclosing Party upon request all Information of the Disclosing Party (and any copies, reproductions, digests, abstracts or the like of such Information) in its possession or under its control at the time of such request and destroy any computer entries relating thereto.

24. LIABILITY FOR AFFILIATES

Licensee shall be vicariously responsible for the obligations and undertakings herein to be observed or performed by Affiliates. Any act or omission by an Affiliate that would, if it had been an act or omission by Licensee, constitute a breach of this Agreement shall be deemed a breach of this Agreement by Licensee.

25. OTHER DOCUMENTS

The parties shall do all such acts, matters and things and shall sign or execute and deliver all such documents as may in the reasonable opinion of Licensor be necessary or expedient to further and more effectually carry into effect the provisions of this Agreement.

26. OTHER AGREEMENTS

This Agreement, the Research Agreement and the Settlement Agreement contain the entire agreement between the parties with respect to the subject matter hereof and the parties agree that this Agreement, the Research Agreement and the Settlement Agreement supersede and prevail over any prior agreement or understanding between the parties. The parties agree that, to the extent of any inconsistency between this Agreement and the Research Agreement, the Research Agreement will prevail.

27. AMENDMENT

No amendment of this Agreement shall bind the parties unless made in writing expressed to be supplemental to or in substitution for the whole or a part of this Agreement.

28. NOTICES

A notice to be given or made pursuant to this Agreement shall be in writing in English and may be signed by the authorized agent of the party giving same and may be served either:

28.1. Personally.

28.2. By posting the same by registered or certified mail to a party at its address hereinbefore appearing or at any other address of which prior notification shall have been given by the addressee prior to the dispatch of the said notice and any notice given by post shall be deemed to have been received by the addressee at the expiration of fourteen (14) days after the same has been properly posted.

28.3. By facsimile transmission:

To Licensor: Ms Sophie Lazenkas

Lysosomal Diseases Research Unit

Women’s and Children’s Hospital

72 King William Road

North Adelaide

South Australia

Tel: 61 8 8161 7101

Fax: 61 8 8161 7100

to Licensee: Dr Doug Treco

Senior Vice President, Research and Development

Transkaryotic Therapies Inc.

700 Main Street

Cambridge, MA 02139

Tel: 1-617-349-0218

Fax: 1-617-491-7903

or any other facsimile number of which prior notification shall have been given to the sender prior to the transmission of the facsimile and any facsimile transmission shall be deemed to have been served on the date of transmission by the sender provided that the sender shall receive confirmation of receipt from the recipient.

29. GOVERNING LAW

This Agreement shall be governed by the laws of the United Kingdom and in default of arbitration as hereinbefore referred to the parties agree by their execution hereof to submit to the non-exclusive jurisdiction of the courts of that nation in respect of all matters arising under this Agreement.

30. SEVERANCE

If any provision or part thereof of this Agreement is or shall be for any reason void, invalid or unenforceable then the remainder thereof shall in no way be affected thereby but shall continue in full force and effect.

31. COSTS

Each party shall bear its own costs of and incidental to the negotiation, preparation and execution of this Agreement.

32. COUNTERPARTS

This Agreement may be executed in two counterparts each of which shall together constitute but one original document.

IN WITNESS whereof the duly authorised representatives of the parties have signed this Agreement on the day and year first mentioned above.

SIGNED by	)
for and on behalf of WOMEN’S AND	)
CHILDREN’S HOSPITAL	) ............................................................
as its duly authorised representative	)
in the presence of:	)


.................................................................
Witness

SIGNED by	)
for and on behalf of TRANSKARYOTIC	)
THERAPIES INC	) ............................................................
as its duly authorised representative	)
in the presence of:	)


.................................................................
Witness

EX-99.1 11 j9805_ex99d1.htm EX-99.1

Exhibit 99.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Transkaryotic Therapies, Inc. (the “Company”) for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Michael J. Astrue, President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

		/s/ Michael J. Astrue
Dated:	May 15, 2003	Michael J. Astrue
		President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to Transkaryotic Therapies, Inc. and will be retained by Transkaryotic Therapies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.2 12 j9805_ex99d2.htm EX-99.2

Exhibit 99.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Transkaryotic Therapies, Inc. (the “Company”) for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Paul M. Schneider, Controller of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

		/s/ Paul M. Schneider
Dated:	May 15, 2003	Paul M. Schneider
		Controller

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	Transkaryotic Therapies, Inc.

		By: /s/ RICHARD F SELDEN
		Richard F Selden, M.D., Ph.D., President