Exhibit 10.4

 

September 8, 2005

 

 

Radcliffe SPC, Ltd. — Class A

Convertible Crossover Segregated Portfolio

c/o RG Capital Management, L.P.

3 Bala Plaza — East, Suite 501

Bala Cynwyd, PA  19004

Attention:  Gerald Stahlecker, Managing Director

 

                Re:  Exchange of 5% Convertible Subordinated Notes of Vertex
Pharmaceuticals, Incorporated.

 

Dear Steve:

 

                                                The purpose of this letter
agreement (this “Agreement”) is to confirm the agreement of Vertex
Pharmaceuticals Incorporated (“VRTX”) and Radcliffe SPC, Ltd. for and on behalf
of its Class A Convertible Crossover Segregated Portfolio (the “Fund”) as
follows:

 

                                               
1.                                       Exchange of 5% Convertible Subordinated
Notes.

 

                                                (A) EXCHANGE OF SECURITIES.  ON
THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH HEREIN, THE FUND AGREES TO
TRANSFER, OR CAUSE TO BE TRANSFERRED, TO VRTX ALL OF ITS RIGHT, TITLE AND
INTEREST IN AND TO THE 5% CONVERTIBLE SUBORDINATED NOTES DUE 2007 (THE “NOTES”)
DESCRIBED IN SECTION 2(L) (THE “EXCHANGE NOTES”) IN EXCHANGE FOR A NUMBER OF
SHARES (THE “EXCHANGED SHARES”) OF FREELY TRADABLE VRTX COMMON STOCK (THE
“COMMON STOCK”) EQUAL TO (I) 99% OF THE PRINCIPAL AMOUNT OF THE EXCHANGE NOTES
PLUS 100% OF THE ACCRUED AND UNPAID INTEREST ON THE EXCHANGE NOTES THROUGH AND
INCLUDING THE DATE HEREOF, DIVIDED BY (II) THE DETERMINATION PRICE.

                                                (b) Determination Price.  The
Determination Price shall be equal to 93% of the lesser of (i) the arithmetic
average of the closing bid prices of the Common Stock for the 10 consecutive
trading days ending on and including the date hereof, and (ii) the closing bid
price of the Common Stock on the date hereof. “Trading day” shall mean any day
on which the Common Stock is traded for any period on the Nasdaq National
Market.

 

                                                (C) FRACTIONAL SHARES.  IN LIEU
OF ISSUING FRACTIONAL SHARES, VRTX SHALL ISSUE THE HIGHEST WHOLE NUMBER OF
EXCHANGED SHARES ACCORDING TO THE FORMULA SET FORTH IN SECTION 1.1(A) PLUS CASH
IN AN AMOUNT EQUAL TO THE FRACTION OF AN EXCHANGED SHARE TO WHICH THE FUND WOULD
OTHERWISE BE ENTITLED MULTIPLIED BY THE DETERMINATION PRICE.

                                                (D) CLOSING.  THE COMPLETION OF
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (THE “CLOSING”) SHALL TAKE PLACE
AS SOON AS PRACTICAL AND, IN ANY EVENT, NO LATER THAN SEPTEMBER 9, 2005, OR SUCH
OTHER DATE AS IS AGREED UPON BY THE PARTIES (THE “CLOSING DATE”), AS FOLLOWS:

(i) The Fund shall deliver or cause to be delivered the Exchange Notes to VRTX
or VRTX’s agent in such manner as shall be acceptable to VRTX and effective to
convey all right, title and interest of the Fund in the Exchange Notes to VRTX
against delivery of

 

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the Exchanged Shares by VRTX through the Depositary Trust Company to: Morgan
Stanley & Co., DTC number: #050, FCC: RADCLIFFE SPC, LTD. for and on behalf of
The Class A Convertible Crossover Segregated Portfolio, account number 038C6240.

 

(II) VRTX SHALL PAY THE FUND BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS AN
AMOUNT EQUAL TO THE CASH VALUE OF ANY FRACTIONAL EXCHANGED SHARE, DETERMINED IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 1(C).

 

 

                                                                                               
2.                                       Representations.  As applicable, VRTX
and the Fund hereby represent, warrant and agree as follows:

 

                                                                                               
(a)                                Each of VRTX and the Fund acknowledges that
the transaction contemplated hereby is intended to be exempt from registration
by virtue of Section 3(a)(9) of the Securities Act of 1933, as amended (the
“Securities Act”).  Neither VRTX nor the Fund knows of any reason why such
exemption is not available.

 

                                                                                               
(b)                                 The Fund has had such opportunity as it has
deemed adequate to obtain from representatives of VRTX such information as is
necessary to permit the Fund to evaluate the merits and risks of the transaction
contemplated hereby.

 

                                                                                               
(c)                                  The Fund has sufficient experience in
business, financial and investment matters to be able to evaluate the risks
involved in the acquisition of the Common Stock issued in respect of the
Exchange Notes and to make an informed investment decision with respect to such
acquisition.

 

                                                                                               
(d)                                 The Fund is not in possession of any
material, non-public information regarding VRTX.  .

 

                                                                                               
(e)                                  The Fund has not acted on behalf of VRTX,
nor has the Fund received any commission or remuneration from VRTX, nor was the
Fund solicited by VRTX to effect this transaction, nor has the Fund solicited
any other holder of the Notes to participate in this transaction.

 

                                                                                               
(f)                                    Each of VRTX and the Fund has obtained
all regulatory approvals, if any, in connection with the transactions
contemplated hereby.

 

                                                                                               
(g)                                 The Exchanged Shares will not be “restricted
securities” within the meaning of Rule 144 under the Securities Act.  The
certificate(s) representing the shares of Common Stock will not bear a
restrictive legend under the Securities Act.

 

(H)                                 EACH OF VRTX AND THE FUND HAS FULL POWER AND
AUTHORITY TO ENTER INTO THIS AGREEMENT AND TO CONSUMMATE THE TRANSACTIONS
CONTEMPLATED HEREBY, AND THE PERSON WHO HAS EXECUTED THIS AGREEMENT IS DULY
AUTHORIZED TO DO SO AND THEREBY BIND THE PARTY ON WHOSE BEHALF HE OR SHE IS
PURPORTING TO SIGN.

(I)                                     THIS AGREEMENT IS ITS VALID AND BINDING
AGREEMENT, ENFORCEABLE AGAINST EACH OF VRTX AND THE FUND IN ACCORDANCE WITH ITS
TERMS, SUBJECT TO BANKRUPTCY AND SIMILAR LAWS AND TO EQUITABLE PRINCIPLES.

(J)                                     THE FUND IS THE SOLE LEGAL AND
BENEFICIAL OWNER OF THE EXCHANGE NOTES, AND, UPON THE CLOSING, VRTX WILL ACQUIRE
THE EXCHANGE NOTES FREE AND CLEAR OF ANY LIENS, ENCUMBRANCES, PLEDGES, SECURITY
INTERESTS OR OTHER RESTRICTIONS OR CLAIMS OF THIRD PARTIES.

 

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(K)                                  THE FUND IS NOT AN AFFILIATE OF VRTX.

(L)                                     THE FUND HOLDS THE FOLLOWING EXCHANGE
NOTES THAT IT IS EXCHANGING PURSUANT TO THIS AGREEMENT, WHICH EXCHANGING NOTES
WERE ACQUIRED BEFORE SEPTEMBER 1, 2005 IN THE PUBLIC MARKET AND ARE FREE OF
RESTRICTIVE LEGEND: $6,592,000 PRINCIPAL AMOUNT OF  NOTES (CUSIP: 92532F AD 2).

(M)                               ON SEPTEMBER 8, 2005 AND PRIOR TO THE
PUBLICATION OF THE PRESS RELEASE DESCRIBE IN (N) BELOW, IF ANY, THE FUND (A) DID
NOT AND WILL NOT, DIRECTLY OR INDIRECTLY, ISSUE, OFFER, SELL, AGREE TO ISSUE,
OFFER OR SELL, SOLICIT OFFERS TO PURCHASE, GRANT ANY CALL OPTION, WARRANT OR
OTHER RIGHT TO PURCHASE, PURCHASE ANY PUT OPTION OR OTHER RIGHT TO SELL, PLEDGE,
BORROW, ASSIGN OR OTHERWISE DISPOSE OF ANY RELEVANT SECURITY (AS DEFINED BELOW),
AND (B) DID NOT AND WILL NOT, DIRECTLY OR INDIRECTLY, ESTABLISH OR INCREASE ANY
“PUT EQUIVALENT POSITION” OR LIQUIDATE OR DECREASE ANY “CALL EQUIVALENT
POSITION” WITH RESPECT TO ANY RELEVANT SECURITY (IN EACH CASE WITHIN THE MEANING
OF SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE “EXCHANGE
ACT”), AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER) WITH RESPECT TO ANY
RELEVANT SECURITY, OR OTHERWISE ENTER INTO ANY SWAP, DERIVATIVE OR OTHER
TRANSACTION OR ARRANGEMENT THAT TRANSFERS TO ANOTHER, IN WHOLE OR IN PART, ANY
ECONOMIC CONSEQUENCE OF OWNERSHIP OF A RELEVANT SECURITY, WHETHER OR NOT SUCH
TRANSACTION IS TO BE SETTLED BY DELIVERY OF RELEVANT SECURITIES, OTHER
SECURITIES, CASH OR OTHER CONSIDERATION.    AS USED HEREIN, THE TERM “RELEVANT
SECURITY” MEANS THE COMMON STOCK, ANY OTHER EQUITY SECURITY OF VRTX AND ANY
SECURITY CONVERTIBLE INTO, OR EXERCISABLE OR EXCHANGEABLE FOR, THE COMMON STOCK
OR ANY OTHER SUCH EQUITY SECURITY.

(N)                                 TO THE EXTENT VRTX CONSIDERS THE EXECUTION
OF THIS AGREEMENT AND THE CONSUMMATION OF THE TRANSACTION CONTEMPLATED HEREBY
SHALL CONSTITUTE MATERIAL, NON-PUBLIC INFORMATION REGARDING VRTX, VRTX AGREES TO
DISSEMINATE A PRESS RELEASE TO INFORM THE PUBLIC OF THE MATERIAL ASPECTS OF THIS
TRANSACTION BY 9:30 AM EST OF THE CLOSING DATE.

                                                3.             Entire
Agreement.  This Agreement represents the entire understanding and agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior oral and written and all contemporaneous oral negotiations,
commitments and understandings between such parties.  The parties may amend or
modify this Agreement, in such manner as may be agreed upon, only by a written
instrument executed by the parties hereto.

 

                                                4.             Expenses.  Each
party shall pay its own expenses in connection with this Agreement and the
transactions contemplated hereby.

 

                                                5.             Governing  Law. 
This Agreement shall be governed by and construed  in accordance with the laws
of the State of New York.

 

                                                6.             Severability. 
The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement.

 

                                                7.             Counterparts. 
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original, but all of which shall be one and the same
document.

 

                                                8.             Further
Assurances.  Each party hereto shall properly execute and deliver such further
agreements and instruments, and take such further actions, as the other party
may reasonably request in order to carry out the purposes and intent of this
Agreement.

 

                                                9.             Confidentiality. 
The parties hereto agree to keep confidential and to not disclose the terms,
provisions, or existence of this Agreement, except as the parties reasonably
believe such disclosure is required by applicable law, provided, however, that
VRTX shall be entitled, without the prior approval of the Fund, to make any
press release or other public disclosure with respect to such transactions as is

 

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required by applicable law and regulations, including the Exchange Act and the
rules and regulations promulgated thereunder, including the public filing of
this Agreement (provided  the Fund shall be consulted by VRTX in connection with
any such press release or other public disclosure prior to its release and shall
be provided with a copy thereof and provided further that VRTX shall not
disclose the name of the Fund in any such press release without the prior
written consent of the Fund).

 

                                                10.           Assignability and
Parties in Interest. This Agreement shall not be assignable by any of the
parties hereto without the consent of the other party hereto.  This Agreement
shall inure to the benefit of and be binding upon the parties and their
respective permitted successors and assigns.

 

11.           NOTICES.  ALL NOTICES, REQUESTS, DEMANDS AND OTHER COMMUNICATIONS
HEREUNDER SHALL BE IN WRITING AND SHALL BE DEEMED GIVEN IF DELIVERED PERSONALLY,
BY FACSIMILE TRANSMISSION (WITH SUBSEQUENT LETTER CONFIRMATION BY MAIL), BY
OVERNIGHT COURIER OR TWO DAYS AFTER BEING MAILED BY CERTIFIED OR REGISTERED
MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO THE PARTIES, THEIR
SUCCESSORS IN INTEREST OR THEIR ASSIGNEES AT THE FOLLOWING ADDRESSES, OR AT SUCH
OTHER ADDRESSES AS THE PARTIES MAY DESIGNATE BY WRITTEN NOTICE IN THE MANNER
AFORESAID:

If to the Fund:

Radcliffe SPC, Ltd. — Class A

 

Convertible Crossover Segregated Portfolio

 

c/o RG Capital Management, L.P.

 

3 Bala Plaza — East, Suite 501

 

Bala Cynwyd, PA 19004

 

Attention: Gerald Stahlecker, Managing Director

 

 

 

Facsimile: 610-617-0580

 

 

If to VRTX:

Vertex Pharmaceuticals Incorporated

 

130 Waverly Street

 

Cambridge, Massachusetts 02139

 

Attention: The Office of General Counsel

 

Facsimile: 617-444-6483

 

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                Please confirm your agreement by signing in the space indicated
below.

 

 

 

Vertex Pharmaceuticas Incorporated

 

 

 

 

 

 

 

 

 

 

By:

/s/ JOSHUA S. BOGER

 

 

Name:

Joshua S. Boger

 

 

Title:

Chief Executive Officer

 

Accepted and Agreed as of this 8th day

of September, 2005:

 

RADCLIFFE SPC, LTD. for and on behalf of The Class A

Convertible Crossover Segregated Portfolio

 

By:          RG Capital Management, L.P., Investment Manager

                By:  RGC Management Company, LLC, its general partner

 

 

 

By:

/s/ GERALD STAHLECKER

 

Name:

Gerald Stahlecker

 

Title:

Managing Director

 

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