**Exhibit10.38**

** **

**ExecutionCopy**

** **

 

**EMPLOYMENTAGREEMENT**

 

AGREEMENT, dated as of April 30, 2003, betweenTranskaryotic Therapies, Inc., a Delaware corporation (the “Company”), andMichael J. Astrue (the “Executive”).

 

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

 

2.               DUTIES.  The Executive shall be engaged as afull-time employee to act as the Company’s President and Chief ExecutiveOfficer, and shall report to the Company’s Board of Directors (the“Board”).  The Executive shall performthe duties consistent with such positions as the Board shall from time to timereasonably provide.  The Executive shalldevote his entire time, attention and energies to the business of the Companyand shall not engage in any other business activity or activities, whether ornot such business activity is pursued for gain, profit or other pecuniaryadvantage that, in the judgment of the Board, may conflict with the properperformance of the Executive’s duties under this Agreement.  Notwithstanding the foregoing, (a) withrespect to businesses which do not compete with the Company, the Executive mayinvest his personal or family assets in such form or manner as will not requireany services on the part of the Executive in the operation of the affairs ofthe companies in which such investments are made and in which his participationis solely that of an investor, and (b) the Executive may purchase securities inany corporation whose securities are regularly traded in recognized securitiesmarkets, provided that such investments shall not result in his collectivelyowning beneficially at any time one percent (1%) or more of the equitysecurities of any corporation engaged in a business competitive to that of theCompany.

 

3.               COMPENSATION.

 

(a)  BASE SALARY.  For services rendered under this Agreement, the Company shall paythe Executive an annual salary of $400,000 (the “Base Salary”), payable (afterdeduction of applicable withholding for Federal and state income and payrolltaxes) 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) untilthe ninetieth (90th) day following the Commencement Date (as definedbelow), except to the extent that such compensation or a portion of suchcompensation is required to be paid by law. Notwithstanding the previous sentence, for all other purposes of thisAgreement, the Executive shall be treated, and the benefits provided to theExecutive shall be determined, as if the Executive was not foregoing anycompensation under this Section 3(a). The Compensation Committee of the Board (the “Committee”) may review theExecutive’s compensation annually and make such increases to the Base Salary asthe Committee determines are merited, based upon the Executive’s performanceand consistent with the Company’s compensation policies as established by theCommittee.  Any such increase in annualBase Salary shall be communicated to the Executive shortly after the Januarymeeting of the Board of Directors and shall be made effective on the first dayof January each year.  The Executive’sBase Salary may not be reduced to an amount that is less than $400,000 withoutthe written consent of the Executive.

 

1

----

 

(b)  BONUS. The Committee and the Executive shall establish objective performancegoals for the Executive for each calendar year. Upon the attainment of suchperformance goals, but subject to the overall performance of the Company duringsuch 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 ofeach such calendar year, the Committee shall evaluate the attainment of theperformance goals for such calendar year and determine the amount of anyperformance bonus payable hereunder. Any such performance bonus shall bepayable 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 suchfringe benefits, in accordance with the terms of each such benefit, as shall begenerally provided to executives of the Company, including incentivecompensation, the Company’s 401(k) Plan, health and dental insurance, and anyretirement programs, stock options plans or employee stock purchase plans whichmay be adopted from time to time during the term hereof by the Company.  Nothing herein contained shall be deemed topreclude the Company from granting such additional compensation or benefits tothe Executive as it shall in its sole discretion determine.

 

(d)  STOCK OPTIONS.  Upon authorization by the Board and the Committee, on February11, 2003,  the Company granted theExecutive 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 apurchase price of Three Dollars and Eighty Cents ($3.80) per share (the “StockOptions”).  The Stock Options will vestand become exercisable in four equal annual installments commencing on thefirst anniversary of the Commencement Date (as defined below); provided,however, that upon the termination of the Executive’s employment pursuant toSection 7(a)(iii) or 7(c), 50% of the Stock Options that have not vested as ofthe date of such termination shall automatically vest.  The Stock Options shall be subject to allthe terms and conditions of the Plan and the Company’s standard form of StockOption Agreement, copies of which have been delivered to the Executiveseparately.

 

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

 

5.               SICK LEAVE ANDDISABILITY.  During the term of thisAgreement, the Executive shall be entitled to sick leave consistent with theCompany’s customary sick leave and disability policies.

 

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

 

2

----

 

7.               TERM.

 

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

 

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

 

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

 

(A)      the Board’s determinationthat the Executive has ceased or failed to substantially perform his assignedduties (other than as a result of his incapacity due to physical or mentalillness or injury), and has failed to remedy such failure within at leastthirty (30) days of written notice from the Company to the Executive notifyinghim of such failure, it being agreed by the parties that the failure to achieveperformance objectives is not sufficient by itself to constitute “Cause”hereunder,

 

(B)        the Executive’s death,

 

(C)        the Board’s determinationthat the Executive has engaged or is about to engage in conduct materiallyinjurious to the Company, provided that any actions or any failures to act bythe Executive which are taken or fail to be taken in good faith and in a mannerwhich the Executive reasonably believed to be in, or not opposed to, the bestinterests of the Company shall not be Cause for termination under this Section7(a)(ii)(C),

 

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

 

(E)         a material breach by theExecutive of any covenants set forth in this Agreement, including withoutlimitation, the covenants set forth in Sections 2, 9, or 11 hereof; or

 

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

 

3

----

 

(b)         If, subsequent to thedate six (6) months after the Commencement Date, this Agreement is terminatedpursuant to Section 7(a)(i) above, the Executive shall receive severance payuntil the fourth anniversary of the Commencement Date at a rate equal to theExecutive’s  Base Salary in effectimmediately prior to such termination, reduced by the amount received by theExecutive during such period under any Company maintained disability insurancepolicy or plan or under Social Security or similar laws.  If this Agreement is terminated at any timepursuant to Section 7(a)(ii) above, the Executive shall receive no severancepay.  If this Agreement is terminatedpursuant 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 rateequal to the Executive’s Base Salary in effect immediately prior to suchtermination.  Such severance payments(less applicable withholding and payroll taxes) shall be paid periodically tothe Executive as provided in Section 3(a) for the payment of Base Salary.

 

(c)          If (i) the Executiveprovides written notice to the Company of the occurrence of Good Reason (asdefined below) within a reasonable time (not to exceed 30 days) after theExecutive has knowledge of the circumstances constituting Good Reason, whichnotice specifically identifies the circumstances which the Executive believesconstitute Good Reason and (ii) the Company fails to notify the Executive ofthe Company’s intended method of correction of these circumstances within areasonable period of time (not to exceed 30 days) after the Company receivesthe notice from the Executive, or the Company fails to correct thecircumstances within a reasonable period of time (not to exceed 60 days) afterthe Company receives the notice from the Executive (except that no suchopportunity to correct shall be applicable if the circumstances constitutingGood Reason are those described in paragraph (C) below, relating torelocation), then within a reasonable period of time thereafter (not to exceed30 days) the Executive may terminate his employment under this Agreement forGood Reason upon at least sixty (60) days written notice to the Company.  If this Agreement is terminated pursuant tothis Section 7(c), the Executive shall receive severance pay, for a period ofeighteen (18) months from and after such termination, at a rate equal to theExecutive’s Base Salary in effect immediately prior to such termination.  Such severance payments (less applicablewithholding and payroll taxes) shall be paid periodically to the Executive asprovided in Section 3(a) for the payment of Base Salary.

 

Forpurposes of this Agreement, “Good Reason” shall mean, without the Executive’sexpress written consent, the occurrence of any of the following circumstances:

 

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

 

4

----

 

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

 

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

 

(D)                   upon the saleof substantially all of the stock, assets or business of the Company, bymerger, sale of assets or otherwise if the acquiror, purchaser or othersuccessor to the Company in such transaction does not agree to assume andperform the Company’s obligations under this Agreement;

 

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

 

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

 

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

 

(e)          The provisions ofSections 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 entitledto enter into this Agreement and to perform the services and other obligationscontemplated herein; (b) he has, and throughout the term of this Agreement willcontinue to have, the full right, power and authority, subject to no rights ofthird parties, to grant to the Company the rights contemplated by Section 10hereof; and (c) he is not subject to any agreement, rule, regulation or policyof any university, research institution or other third party inconsistent withthe foregoing representations.

 

9.               DISCLOSURE OFINFORMATION.

 

(a)          The Executive recognizesand acknowledges that the Company’s trade secrets, know-how and proprietaryprocesses as they may exist from time to time (including, without limitation,information regarding methods, cultures, vectors, plasmids, synthesistechniques, nucleic acid sequences, purification techniques and assayprocedures) as well as the Company’s confidential business plans and financialdata are valuable, special and unique assets of the Company’s business, accessto and knowledge of which are essential to the performance of the Executive’sduties hereunder.  The Executive shallnot, during or after the term of his employment by the Company, in whole or inpart, disclose such secrets, know-how, processes, business plans or financialdata to any person, firm, corporation, association

 

5

----

 

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

 

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

 

(ii)               were passed intothe 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 subsequentlyobtained, other than under binder of secrecy, from a third party not acquiringthe information under an obligation of confidentiality from the disclosingparty.

 

(b)         Upon termination of hisemployment hereunder, the Executive shall promptly turn over to the Company alloriginals and copies which he may have of any of the Company’s confidentialinformation described in this Section 9.

 

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

 

10.         INTELLECTUALPROPERTY.  The Executive hereby sells,transfers, and assigns to the Company, or to any person or entity designated bythe Company, the entire right, title, and interest of the Executive in and toall inventions, ideas, discoveries, and improvements (including, withoutlimitation, all microorganisms, strains or cultures) whether patented orunpatented, and copyrightable material made, conceived or reduced to practiceby the Executive, solely or jointly, during the term hereof, which arise out ofresearch or other activities conducted by, for or under the direction of theCompany, whether or not conducted at the Company’s facilities, or which relateto methods, apparatus, designs, products, processes or devices, sold, leased,used or under consideration or development by the Company.  The Executive acknowledges that allcopyrightable materials developed or produced by the Executive within the scopeof his employment constitute works made for hire.  The Executive shall communicate promptly and disclose to theCompany, in such form as the Company may reasonably request, all information,details, and data pertaining to any such inventions, ideas, discoveries, andimprovements; and the Executive shall execute and deliver to the Company suchformal transfers and assignments and such other papers and documents and shallgive such testimony as may be necessary or required of the Executive to permitthe Company or any person or entity designated by the Company to file andprosecute patent applications and, as to copyrightable material, to obtaincopyrights thereof.  Any such invention,idea, discovery or improvement disclosed by the

 

6

----

 

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

 

11.         COVENANTS NOT TO COMPETEOR 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 orindirect participant) engaged in the development or sale of products for thetreatment of lysosomal storage disorders. The Company and the Executive herebyagree as of the date hereof that this Section 11(a) shall only apply toBioMarin Pharmaceutical Inc., Amgen Inc. and Genzyme Corporation and anysubsidiary or affiliate of such companies. This Agreement shall not beconstrued to restrict the Executive’s right to be employed as a faculty memberof any university or employee of any nonprofit agency or foundation after anytermination of this Agreement where this covenant not to compete shall continueto be in effect.  During the period inwhich this covenant not to compete is in effect the Executive also shall notinterfere with, disrupt or attempt to disrupt the relationship, contractual orotherwise, between the Company and any customer, supplier, lessor, lessee,employee, consultant, research partner or investor of the Company.

 

(b)         If this Agreement isterminated 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 untiltwelve (12) months from and after such termination.

 

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

 

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

 

12.              INJUNCTIVERELIEF.  If there is a breach orthreatened breach of the provisions of Section 9, 10, or 11 of this Agreement,the Company shall be entitled to an injunction, without bond, restraining theExecutive from such breach.  Nothingherein shall be construed as prohibiting the Company from pursuing any otherremedies for such breach or threatened breach.

 

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

 

7

----

 

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

 

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

 

16.         NOTICES.  Any notice required or permitted to be givenunder this Agreement to the Executive shall be sufficient if in writing and ifsent by certified or registered mail to his residence, or in the case of theCompany, to Transkaryotic Therapies, Inc., 700 Main Street, Cambridge, MA02139, Attention: Board of Directors, or to such other offices or addresses asthe company shall designate from time to time in writing to the Executive.  Any such notice shall be effective on theearlier 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 ofa breach of any provision of this Agreement by the other party shall notoperate or be construed as a waiver of any subsequent breach by the otherparty.

 

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

 

19.         ASSIGNMENT.  This Agreement may be assigned, without theconsent of the Executive, by the Company to any person, partnership, corporationor other entity which succeeds to the business of the Company or which haspurchased substantially all the assets of the Company, provided such assigneeassumes all the liabilities of the Company hereunder.

 

20.         ENTIRE AGREEMENT.  This Agreement, together with theIndemnification Agreement and the Stock Options, contains the entire agreementof the parties and supersedes any prior understandings or agreements betweenthe Executive and the Company.  ThisAgreement may be changed only by an agreement in writing signed by the partyagainst whom enforcement of any waiver, change, modification, extension ordischarge is sought.

 

***[Remainder of the Page Intentionally Left Blank]***

 

8

----

 

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

 

 

**TRANSKARYOTICTHERAPIES, 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     |   |

 

9

----