Exhibit
10.1


 


 


Dated February 10, 2004


 


 


VERTEX
PHARMACEUTICALS INCORPORATED

and

UBS SECURITIES LLC


 


 


DEALER
MANAGER AGREEMENT


 


 

















 


UBS Securities LLC

677 Washington Boulevard

Stamford, CT  06901


 


Ladies and Gentlemen:


 


1                                         Exempted Exchanges


 


Vertex Pharmaceuticals
Incorporated, a corporation organized under the laws of Massachusetts (the “Company”), proposes to exchange with
certain holders of its 5% Convertible Subordinated Notes due September 19, 2007
(the “Existing Notes”) its 53⁄4%
Convertible Senior Subordinated Notes due 2011 (the “New Notes”), to be issued pursuant to the terms of an
indenture to be entered into between the Company and US Bank National
Association (the “Trustee”), as trustee (the “New
Notes Indenture”) (such exchanges, including all related incidental
acts and transactions, are herein referred to collectively as “Exempted Exchanges”).  The New Notes will be issued in book-entry
form and will be issued to Cede & Co. as nominee of The Depository Trust
Company (“DTC”).  The New Notes will be convertible into
shares of common stock, par value $0.01 per share (the “Common Stock”), of the Company at the
conversion price set forth in the New Notes Indenture.  The Exempted Exchanges will be made on the
terms and subject to the conditions set forth in the Company’s Offering
Memorandum (including all documents incorporated therein by reference, the “Offering Memorandum”) and the related
letter of transmittal (the “Letter of
Transmittal”) attached hereto as Exhibit A-1 and Exhibit A-2,
respectively.


 


The Exempted Exchanges are
expected to be commenced by the Company on or about February 3, 2004 (the “Commencement Date”). In connection with the
Exempted exchanges, no more than six (6) holders of Existing Notes will be
approached and no more than $154.35 million principal amount of Existing Notes
will be exchanged for New Notes. 
Holders of the New Notes will be entitled to the benefits of a
Registration Rights Agreement (the “Registration
Rights Agreement”), to be dated as of the Closing Date, pursuant to
which the Company will agree to register the resale of the New Notes under the
U.S. Securities Act of 1933, as amended (the “Securities
Act”) subject to the terms and conditions therein specified.


 


The Exempted Exchanges will
be made without registration of the New Notes or the Common Stock issuable upon
conversion thereof under the Securities Act in reliance upon exemptions from
the registration requirements of the Securities Act.


 


2              Appointment
as Dealer Manager


 


The Company hereby engages
and appoints UBS Securities LLC as sole and exclusive dealer manager in
connection with the Exempted Exchanges (the “Dealer
Manager”) and authorizes the Dealer Manager to act as such, and you
hereby agree to act as Dealer Manager, in each case on the terms and conditions
set forth herein. On the basis of the representations, warranties, agreements
and covenants of the Company in, and subject to the terms and conditions of,
this Dealer Manager Agreement (this  “Agreement”), you agree, as Dealer Manager,
to use your commercially reasonable efforts to effect the Exempted Exchanges
and perform other services in connection with the Exempted


 

















 


Exchanges as are customarily
performed by investment banks of international standing acting in such roles in
connection with exchange transactions of like nature, including, but not
limited to, assisting the Company with respect to the timing, pricing and
structure of the Exempted Exchanges, assisting the Company in the preparation
of the Offering Memorandum, identifying and contacting certain holders of the
Existing Notes with respect to the Exempted Exchanges and participating in
negotiations with such holders of the Existing Notes and communicating
generally regarding the Exempted Exchanges with brokers, dealers, commercial
banks and trust companies and other nominees or holders of the Existing Notes,
both of record and beneficial. The duties or responsibilities of the Dealer
Manager will not include: (i) providing tax, legal, regulatory, accountancy or
other specialist or technical advice or services, (ii) providing general
financial and strategic advice, or (iii) assuming any responsibility for the
verification of the information in the Offering Memorandum or any ancillary
documents other than the UBS Information (as defined in Section 8.21). In
effecting Exempted Exchanges and generally in connection with the Exempted
Exchanges, you, as Dealer Manager, are acting as an independent contractor and
shall not be deemed to be acting as the agent of the Company, and the Company
shall not be deemed to act as your agent.


 


3              No
Liability for Acts of Dealers, Banks and Trust Companies


 


Neither you nor any of your
affiliates, directors, agents, employees or controlling persons shall have any
liability (in tort, contract or otherwise) to the Company or to any other
person for any losses, claims, damages, liabilities or expenses arising out of
any act or omission on the part of any broker, dealer (other than yourself to
the extent set forth below), depositary, commercial bank or trust company or any
other person, and neither you nor any of your affiliates, directors, agents,
employees or controlling persons shall have any liability (in tort, contract or
otherwise) to the Company or any other person asserting claims on behalf of or
in right of the Company for any losses, claims, damages, liabilities or
expenses arising from your own acts or omissions in performing your obligations
hereunder or otherwise in connection with the proposed Exempted Exchanges,
except for any such losses, claims, damages, liabilities or expenses which are
determined, in a final judgment by a court of competent jurisdiction, to have
resulted from (i) your gross negligence or willful misconduct in performing the
services that are the subject of this Agreement or (ii) a breach by the Dealer
Manager of Section 9.20(ii).


 


4              The
Offering Memorandum; Early Termination


 


4.1.                            The Company agrees to furnish you with as
many copies as you may reasonably request of the Offering Memorandum, any
amendments and supplements thereto and the related Letter of Transmittal
(collectively, as amended or supplemented from time to time, and in each and
every case including any and all information or documents incorporated therein
by reference, the “Exchange Materials”) to be used by the Company in connection
with the Exempted Exchanges. You are authorized to use copies of the Exchange
Materials in accordance with the terms and conditions of this Agreement. You
and your representatives may not forward written materials other than the
Exchange Materials or any publicly filed documents to the holders of the
Existing Notes in connection with the Exempted


 


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Exchange without the
Company’s consent. The Company agrees that, at a reasonable time prior to using
or filing with any federal or other governmental agency or instrumentality any
Exchange Materials, it will first submit copies of such materials to you and
will not use any such Exchange Materials without your prior approval, which
shall not be unreasonably withheld. During the period from the commencement of
the Exempted Exchanges and the Closing Date, the Company will inform you
promptly after it receives notice or becomes aware of the happening of any
event, or the discovery of any fact, which it believes would require the making
of any material change in any Exchange Materials then being used or would
affect the truth, accuracy or completeness of any representation or warranty
contained in this Agreement as if such representation or warranty were being
made immediately after the happening of such event or the discovery of such
fact.


 


4.2.                            In the event that (i) the Company uses or
permits the use of any document in connection with the Exempted Exchanges which
you shall not have approved or (ii) the Company shall have breached, in any
material respect, any of its representations, warranties, agreements or
covenants herein, then you shall be entitled to withdraw as Dealer Manager in
connection with the Exempted Exchanges without any liability or penalty to you
or any other party who may be indemnified pursuant to the terms of Section 10
hereof (it being agreed that such withdrawal shall not affect the indemnity
provisions contained in Section 10 hereof, which shall remain in full force and
effect) and without loss of any right to the payment of all expenses payable
hereunder which have been incurred to the date of such withdrawal.
Notwithstanding anything to the contrary contained herein, it is hereby agreed
that, in the event of any withdrawal by you pursuant to this Section 4.2, the
expenses, if any, payable hereunder which are reasonably incurred through the
date of such withdrawal shall be paid or reimbursed to you reasonably promptly
after the date of such withdrawal.


 


5              Consideration


 


As consideration for your
services as dealer manager hereunder, the Company shall pay to you in cash, by
wire transfer of immediately available funds to an account designated therefor
by you, a fee equal 1.50% of the principal amount of the Existing Notes
exchanged by the Company (the Dealer Manager’s fee shall be referred to in this
Agreement as the “Fee”).


 


The Fee shall be payable in
full on the date of the successful completion of the Exempted Exchanges.  The date of the successful completion of the
Exempted Exchanges is hereby referred to as the “Closing Date”.


 


6                                         Expenses of Dealer Manager
and Others


 


The Company shall pay all
fees and expenses relating to the preparation, printing, mailing and publishing
of the Exchange Materials.  The Company
will also reimburse you for all reasonable fees and expenses (including the
reasonable fees and expenses of


 


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your counsel) incurred by
you in connection with the performance of your services as Dealer Manager under
this Agreement.  The Company shall
perform its obligations set forth in this Section 6 and Section 10 hereof
whether or not the Exempted Exchanges are commenced, except in the event that
the Exempted Exchanges are withdrawn, terminated or cancelled, in which case
the Company’s obligations to pay such expenses shall extend only to expenses
accrued as of the date of such withdrawal, termination or cancellation. All
payments to be made by the Company pursuant to this Section 6 shall be made
reasonably promptly after the expiration, completion, termination, withdrawal
or cancellation of the Exempted Exchanges.


 


7                                         Noteholder Lists


 


The Company shall, to the
extent available to the Company after having made commercially reasonable
efforts to obtain, provide you with lists or other records in such form as you
may reasonably request in reasonable quantities or copies thereof showing the
names and addresses of, and principal amounts of Existing Notes held by, the
holders of Existing Notes, and will use its commercially reasonable efforts to
advise you or cause the Trustee and DTC to advise you from day to day during
the period between the Commencement Date and the Closing Date as to any
transfers of record of Existing Notes. You agree to use such information only
in connection with the Exempted Exchanges and, unless such information becomes
publicly available (other than by breach by the Dealer Manager of the following
undertaking), not to furnish such information to any other person except in
connection with the Exempted Exchanges or as required by law or upon request of
any governmental or regulatory agency or any securities exchange having
jurisdiction with respect to the Dealer Manager or the Exempted Exchanges.


 


8                                         Representations and
Warranties of the Company


 


The Company represents and
warrants to you, and agrees with you, where applicable, that:


 


8.1.                            the Company has been duly organized, is
validly existing as a corporation under the laws of Massachusetts and has the
corporate power and authority to own its property and to conduct its business
as described in the Exchange Materials and is duly qualified in or licensed by,
and is in good standing (or other similar concept that may exist in the
applicable jurisdiction) in, each jurisdiction in which the nature of its
business requires such qualification, except where the failure, individually or
in the aggregate, to be so licensed or qualified could not reasonably be
expected to have a material adverse effect on the business, operations,
prospects, properties or condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole (a “Material Adverse Effect”); each of the
subsidiaries of the Company has been duly organized or formed, is validly
existing as a corporation, limited liability company or limited partnership, as
the case may be, in good standing, if applicable, under the laws of the
jurisdiction in which it is chartered or 
organized, and is duly qualified in or licensed by, and is in good standing
(or, if applicable, other similar concept that may exist in the applicable
jurisdiction) in, each


 


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jurisdiction in which the
nature of its business requires such qualification, except where the failure,
individually or in the aggregate, to be so licensed or qualified could
reasonably be expected to have a Material Adverse Effect;


 


8.2.                            none of the Company, its affiliates, or any
person acting on its or their behalf (other than the Dealer Manager or persons
acting on its behalf, as to whom the Company makes no representation) has,
directly or indirectly, made offers or sales of any security, or solicited
offers to buy, any security under circumstances that would require the
registration of the New Notes or the Common Stock issuable upon conversion
thereof under the Securities Act;


 


8.3.                            none of the Company, its affiliates, or any
person acting on its or their behalf (other than the Dealer Manager or persons
acting on its behalf, as to whom the Company makes no representation) has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the Exempted Exchanges with respect
to the New Notes or the Common Stock issuable upon conversion thereof;


 


8.4.                            the New Notes satisfy the eligibility
requirements of Rule 144A(d)(3) under the Securities Act;


 


8.5.                            the Company has been advised by the NASD’s
PORTAL Market that the New Notes have been designated PORTAL-eligible
securities in accordance with the rules and regulations of the NASD;


 


8.6.                            subject to compliance by the Dealer Manager
with the representations and warranties sets forth in Section 9.20 hereof, no
registration under the Securities Act of the New Notes is required in
connection with the Exempted Exchanges in the manner contemplated herein and in
the Offering Memorandum;


 


8.7.                            [Intentionally omitted].


 


8.8.                            the Company has not paid or agreed to pay to
any person any compensation for soliciting another to purchase or sell any
securities of the Company (except as contemplated in this Agreement);


 


8.9.                            the Company has not taken, directly or
indirectly, any action designed to or that has constituted or that might
reasonably be expected to cause or result, under the U.S. Securities Exchange
Act of 1934, as amended (the “1934 Act”)
or otherwise, in stabilization or manipulation of the price of any security of
the Company to facilitate the Exempted Exchanges;


 


8.10.                     all the outstanding shares of capital stock
or other applicable ownership interests of each subsidiary have been duly authorized
and validly issued and are fully paid and nonassessable and, except as
otherwise set forth in the Offering Memorandum, all outstanding shares of
capital stock or other applicable ownership interests of the subsidiaries are
owned by the Company either directly or through wholly owned subsidiaries free
and clear of any security interest, claim, lien or encumbrance;


 


5

















 


8.11.                     the Company’s authorized equity
capitalization is as set forth in the Exchange Materials; the capital stock of
the Company conforms in all material respects to the description thereof
contained in the Offering Memorandum; the outstanding shares of Common Stock
have been duly authorized and validly issued and are fully paid and nonassessable;
the shares of Common Stock initially issuable upon conversion of the New Notes
have been duly authorized and, when issued upon conversion of the New Notes
against payment of the conversion price, will be validly issued, fully paid and
nonassessable; the Board of Directors of the Company has duly and validly
adopted resolutions reserving such shares of Common Stock for issuance upon
conversion of the New Notes; the holders of outstanding shares of capital stock
of the Company are not entitled to preemptive or other rights to subscribe for
the New Notes or the shares of Common Stock issuable upon conversion thereof;
and, except as set forth in or contemplated by the Offering Memorandum, no
options, warrants or other rights to purchase, agreements or other obligations
to issue, or rights to convert any obligations into or exchange any securities
for, shares of capital stock of or ownership interests in the Company are
outstanding;


 


8.12.                     the statements in the Offering Memorandum
under the headings “Certain U.S. Federal Income Tax Consequences”, “The
Exempted Exchanges”, “Description of the New Notes” and “Description of Common
Stock” fairly summarize the matters therein described;


 


8.13.                     all necessary action (corporate and other)
has been duly taken by the Company to authorize the execution, delivery and
performance of this Agreement, the Company has all requisite power and
authority to consummate the transactions contemplated hereby, and this
Agreement has been duly executed and delivered by the Company and is a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except, in each case, as rights to indemnification
and contribution hereunder may be limited by public policy considerations and
except as enforcement thereof may be limited by or subject to (x) any
bankruptcy, insolvency, reorganization, fraudulent conveyance, fraudulent
transfer, moratorium or other similar laws affecting the enforcement of
creditors’ rights generally, and (y) general equitable principles or the
availability of equitable remedies;


 


8.14.                     all necessary action (corporate and other)
has been duly taken by the Company to authorize the Exempted Exchanges, the
execution, delivery and performance of the New Notes Indenture and the
execution, delivery and performance of the Registration Rights Agreement, the
Company has all requisite power and authority to consummate the transactions
contemplated thereby, and each of the New Notes Indenture and Registration
Rights Agreement, when executed and delivered by the Company (and, in the case
of the New Notes Indenture, on the date that the Existing Notes are exchanged
for the New Notes), will be a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except,
in the case of the Registration Rights Agreement, as rights to indemnification
and contribution thereunder may be


 


6

















 


limited by public policy
considerations and  except, in each
case, as enforcement thereof may be limited by or subject to (x) any
bankruptcy, insolvency, reorganization, fraudulent conveyance, fraudulent
transfer, moratorium or other similar laws affecting the enforcement of
creditors’ rights generally, and (y) general equitable principles or the
availability of equitable remedies;


 


8.15.                     the New Notes have been duly authorized and,
when executed and authenticated and delivered in accordance with the provisions
of the New Notes Indenture, will be entitled to the benefits of the New Notes
Indenture, and will be valid and binding obligations of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by or subject to (x) any bankruptcy,
insolvency, reorganization, fraudulent conveyance, fraudulent transfer,
moratorium or other similar laws affecting the enforcement of creditors’ rights
generally, and (y) general equitable principles or the availability of
equitable remedies;


 


8.16.                     no
consent, approval, authorization, filing with or order of any court or
governmental agency or body is required in connection with the Exempted
Exchanges and the transactions contemplated herein, in the New Notes Indenture
or in the Registration Rights Agreement, except such as may be required under
the blue sky laws of any jurisdiction in which the Exempted Exchanges occurs
and, in the case of the Registration Rights Agreement, such as will be obtained
under the Securities Act, the U.S. Trust Indenture Act of 1939, as amended (the
“Trust Indenture Act”) and
pursuant to the rules of the Nasdaq National Market;


 


8.17.                     the
Exempted Exchanges and all other actions of the Company contemplated in the
Exchange Materials and the execution, delivery and performance of this
Agreement, the New Notes Indenture and the Registration Rights Agreement will
comply in all material respects with (i) all applicable requirements of law,
including, without limitation, applicable regulations of the U. S. Securities
and Exchange Commission (the “Commission”)
and (ii) all other governmental, regulatory, administrative, stock exchange or
similar authority having jurisdiction over the Company and its subsidiaries or
its respective businesses, operations or assets;


 


8.18.                     except
as disclosed in the Offering Memorandum (exclusive of any amendment or
supplement thereto), there are no actions, suits, stop orders, restraining
orders, claims, investigations or proceedings pending or, to the best knowledge
of the Company, threatened, before any court or governmental agency or other
regulatory or administrative authority or any arbitrator, to which the Company
or any of its subsidiaries is a party or to which the Company, any of its
subsidiaries or any of their licenses, concessions or other properties and
assets is subject, that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect; and no actions, suits, claims,
investigations or proceedings pending or, to the knowledge of the Company,
threatened, before any court or governmental agency or other regulatory or
administrative authority challenging or could otherwise be reasonably expected
to have a material adverse effect on the


 


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making
of the Exempted Exchanges or any other transactions contemplated herein;


 


8.19.                     neither
the Company, nor any of its subsidiaries, is in breach of, or in default under
(nor has any event occurred which with notice, lapse of time or both would
constitute a breach of, or default by the Company or any of its subsidiaries
under), (A) any provision of the charter or bylaws (or similar organizational
documents) of the Company or any of its subsidiaries or (B) except as could not
reasonably be expected to individually or in the aggregate have a Material Adverse
Effect, the terms of any indenture, contract, lease, mortgage, deed of trust,
note agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which the Company or any of its subsidiaries is a
party or bound or to which its or their property is subject, or under any
federal, state, local or foreign law, regulation or rule or any decree,
judgment or order applicable to the Company or any of its subsidiaries or any
of its or their property; the Exempted Exchanges, all other actions of the
Company contemplated in the Exchange Materials, the execution, delivery and
performance of this Agreement, the New Notes Indenture and the Registration
Rights Agreement will not conflict with, or result in any breach of or
constitute a default under (nor constitute any event which with notice, lapse
of time or both would constitute a breach of, or default by the Company or any
of its subsidiaries under), (X) any provision of the charter or bylaws of the
Company or any of its subsidiaries, (Y) any provision of the Existing Notes
Indenture pursuant to which the Existing Notes were issued (in each case, as
supplemented or amended from time to time) and any agreements entered into by
the Company for the benefit of the holders of the Existing Notes, or (Z)
without prejudice to the foregoing, and except as could not reasonably be
expected to individually or in the aggregate have a Material Adverse Effect,
the terms of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition, covenant
or instrument to which the Company or any of its subsidiaries is a party or
bound or to which its or their property is subject;


 


8.20.                     the
terms of the New Notes, the New Notes Indenture and the Registration Rights
Agreement will conform in all material respects to the descriptions thereof
contained in the Offering Memorandum;


 


8.21.                     the
Exchange Materials do not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they are
made, not misleading; provided, however,  that no representation is made with
respect to any statements contained in, or any matter omitted from, the
Exchange Materials in reliance upon and in conformity with information relating
to UBS Securities LLC furnished by you in writing to the Company expressly for
use therein, which information consists solely of the name of the entity listed
as the Dealer Manager on the cover of the Offering Memorandum and the third
sentence of the first 


 


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paragraph
under the heading “The exempted exchanges-New notes are a new issue of
securities” in the Offering Memorandum (the “UBS
Information”);


 


8.22.                     as
of the date hereof and at all times subsequent hereto up to the Closing Date,
the Company is subject to the reporting requirements of Section 13 or Section
15(d) of the 1934 Act and has complied and will continue to comply, in all
material respects, with the 1934 Act, and the rules and regulations thereunder,
the Trust Indenture Act, and the rules and regulations thereunder, and the various
state securities or “blue sky” laws and the applicable laws, rules and
regulations of each jurisdiction in which any of the Existing Notes are listed
and any authority therein, in connection with the Exempted Exchanges;


 


8.23.                     since
the respective dates as of which information is given in the Exchange
Materials, there has not been any material change in the business, operations,
prospects, properties or condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole, whether or
not arising in the ordinary course of business;


 


8.24.                     all
documents incorporated by reference into the Exchange Materials or from which
information is so incorporated by reference, when they were filed with or
submitted to the Commission, complied in all material respects with the
requirements of the 1934 Act and the rules and regulations promulgated
thereunder; and any documents so filed or submitted and incorporated by
reference subsequent to the date of this Agreement and prior to or on the
Closing Date, when they are filed with or submitted to the Commission, shall
conform in all material respects with the requirements of the 1934 Act and the
rules and regulations thereunder;


 


8.25.                     the
financial statements and related schedules and notes thereto of the Company set
forth or incorporated by reference in the Exchange Materials present fairly in
all material respects the consolidated financial position of the Company and
its consolidated subsidiaries as of the dates indicated and the results of
operations and cash flows of the Company and its consolidated subsidiaries for
the periods specified; such financial statements have been prepared in
conformity with generally accepted accounting principles in the United States;
all other financial data set forth in the Exchange Materials are fairly
presented in all material respects and prepared on a basis consistent with the
financial statements contained in the Exchange Materials or incorporated by
reference and the books and records of the Company and its subsidiaries; and
the assumptions used in preparing the pro forma financial information included
in the Exchange Materials provide a reasonable basis for presenting the
significant effects directly attributable to the transactions or events
described therein, the related pro forma adjustments give appropriate effect to
those assumptions, and the pro forma columns therein reflect the proper
application of those adjustments to the corresponding historical financial
statement amounts;


 


8.26.                     each
of PricewaterhouseCoopers LLP and Ernst & Young LLP, which has certified
the financial statements of the Company and its subsidiaries, are


 


9

















 


independent
accountants, within the meaning of the Securities Act and the rules and
regulations thereunder;


 


8.27.                     there
are no stamp or other issuance or transfer taxes or duties or other similar
fees or charges required to be paid in connection with the execution and
delivery of this Agreement or the consummation of the Exempted Exchanges or
upon the issuance of Common Stock upon the conversion of the New Notes;


 


8.28.                     the
Company has filed all non-U.S., U.S. federal, state and local tax returns that
are required to be filed or has requested extensions thereof (except in any
case in which the failure so to file could not reasonably be expected to have a
Material Adverse Effect and except as set forth in or contemplated in the
Offering Memorandum (exclusive of any amendment or supplement thereto)) and has
paid all taxes required to be paid by it and any other assessment, fine or
penalty levied against it, to the extent that any of the foregoing is due and
payable, except for any such tax, assessment, fine or penalty that is currently
being contested in good faith or as could not reasonably be expected to have a
Material Adverse Effect and except as set forth in or contemplated in the
Offering Memorandum (exclusive of any amendment or supplement thereto);


 


8.29.                     no
labor problem or dispute with the employees of the Company or any of its
subsidiaries exists or, to the Company’s knowledge, is threatened, imminent or
pending, except as set forth in or contemplated in the Offering Memorandum
(exclusive of any amendment or supplement thereto);


 


8.30.                     the
Company and each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which they are engaged; all
policies of insurance and fidelity or surety bonds insuring the Company or any
of its subsidiaries or their respective businesses, assets, employees, officers
and directors are in full force and effect; the Company and its subsidiaries
are in compliance with the terms of such policies and instruments; except with
respect to the pending securities class actions, there are no claims by the
Company or any of its subsidiaries under any such policy or instrument as to
which any insurance company is denying liability or defending under a
reservation of rights clause; neither the Company nor any of its subsidiaries
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at
a cost that could not reasonably be expected to have a Material Adverse Effect
except as set forth in or contemplated in the Offering Memorandum (exclusive of
any amendment or supplement thereto);


 


8.31.                     No
subsidiary of the Company is currently prohibited, directly or indirectly, from
paying any dividends to the Company, from making any other distribution on such
subsidiary’s capital stock, from repaying to the Company any loans or advances
to such subsidiary from the Company or from transferring any of such
subsidiary’s property or assets to the Company or any other subsidiary of the


 


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Company,
except as described in or contemplated in the Offering Memorandum (exclusive of
any amendment or supplement thereto;


 


8.32.                     the
Company and its subsidiaries possess all licenses, certificates, permits and
other authorizations issued by the appropriate U.S. federal, state or non-U.S.
regulatory authorities necessary to conduct their respective businesses, except
where the failure to possess such licenses, certificates, permits and
authorizations, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect and neither the Company nor any of
its subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, could reasonably be expected to have a Material Adverse
Effect, except as set forth in or contemplated in the Offering Memorandum
(exclusive of any amendment or supplement thereto);


 


8.33.                     except
for matters governed by Environmental Laws which are addressed in Sections 8.41
and 8.42, and except as disclosed in the Offering Memorandum (exclusive of any
amendment or supplement thereto), the Company and each of its subsidiaries is
in compliance with all applicable laws, statutes, ordinances, rules and
regulations of the Federal Food and Drug Administration (the “FDA”) and OSHA, and has filed all
applications and has obtained all licenses, permits and approvals or other
regulatory authorizations of the FDA and OSHA (including, without limitation,
all FDA approvals necessary for marketing the products the Company and each of
its subsidiaries currently markets), the enforcement of which, individually or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect;


 


8.34.                     except
for matters governed by Environmental Laws which are addressed in Sections 8.41
and 8.42, and except as disclosed in the Offering Memorandum (exclusive of any
amendment or supplement thereto), the FDA has not commenced, or, to the best of
the Company’s knowledge, threatened to initiate, any action to withdraw its
approval of any product of the Company or its subsidiaries or commenced or, to
the best of the Company’s knowledge, threatened to initiate any action to
withdraw its approval of any facility of the Company or its subsidiaries;


 


8.35.                     the
Company and each of its subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences;


 


11

















 


8.36.                     the
Company has not taken any action or omitted to take any action (such as issuing
any press release relating to any New Notes without an appropriate legend)
which may result in the loss by the Dealer Manager of the ability to rely on
any stabilization safe harbor provided by the Financial Services Authority
under the Financial Services and Markets Act 2000 (the “FSMA”). The Company has been informed of
the guidance relating to stabilization provided by the Financial Services
Authority, in particular in Section MAR 2 Annex 2G of the Financial Services
Handbook;


 


8.37.                     none
of the Company, its subsidiaries or, to the knowledge of the Company, any
director, officer, agent, employee or Affiliate of the Company or any of its
subsidiaries is aware of or has taken any action, directly or indirectly, that
would result in a violation by such Persons of Foreign Corrupt Practices Act of
1977, as amended, and the rules and regulations thereunder (the “FCPA”), including, without limitation,
making use of the mails or any means or instrumentality of interstate commerce
corruptly in furtherance of an offer, payment, promise to pay or authorization
of the payment of any money, or other property, gift, promise to give, or
authorization of the giving of anything of value to any “foreign official” (as
such term is defined in the FCPA) or any foreign political party or official
thereof or any candidate for foreign political office, in contravention of the
FCPA; and the Company, its subsidiaries and, to the knowledge of the Company,
its Affiliates have conducted their businesses in compliance with the FCPA and
have instituted and maintain policies and procedures designed to ensure, and
which are reasonably expected to continue to ensure, continued compliance
therewith;


 


8.38.                     subsequent
to the respective dates as of which information is given in the Offering
Memorandum (exclusive of any amendment or supplement thereto), neither the
Company nor any of its subsidiaries has sustained any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, in each case, that has had, or could
reasonably be expected to have, a Material Adverse Effect;


 


8.39.                     each
of the Company and its subsidiaries, owns or possesses, or can acquire on
reasonable terms, adequate patents, patent licenses, trademarks, service marks,
trade names, know-how and other intellectual property necessary to carry on its
businesses as presently conducted, and except as described in the Exchange
Materials, neither the Company nor any of its subsidiaries has received any
notice of infringement of or conflict with asserted rights of others with
respect to any patents, patent licenses, trademarks, service marks, trade
names, know-how or other intellectual property that in the aggregate could
reasonably be expected to have a Material Adverse Effect; the patent
applications filed by or on behalf of the Company described in the Exchange Materials
have been properly prepared and filed on behalf of the Company; each such
patent applications and patents described in the Exchange Materials is, except
as set forth or contemplated in the Exchange Materials, assigned or licensed to
the Company, and, except as set forth in the Exchange Materials, to the
Company’s knowledge, no other entity or


 


12

















 


individual
has any right or claim in any such patent, patent application or ay patent to
be issued therefrom; and to the knowledge of the Company, each such patent
application discloses potentially patentable subject matter;


 


8.40.                     to
the best of the Company’s knowledge, the human clinical trials conducted by the
Company, on behalf of the Company or in which the Company has participated that
are described in the Exchange Materials, or the results of which are referred
to in the Exchange Materials, were and, if still pending, are being, conducted
in accordance with applicable regulatory requirements; to the best of the
Company’s knowledge, the descriptions of the results of such studies, tests and
trials contained in the Exchange Materials are accurate in all material
respects; the Company has no knowledge of any other studies or tests conducted
by the Company, on behalf of the Company or in which the Company has
participated, the results of which discredit the results described in the
Exchange Materials; the Company has not received any notice or correspondence
from the FDA or any other governmental agency requiring the termination or
suspension of any clinical trials conducted by, or on behalf of, the Company or
in which the Company has participated that are described in the Exchange
Materials or the results of which are referred to in the Exchange Materials;


 


8.41.                     the
Company and its subsidiaries (i) are in compliance with any and all applicable
federal, state, local and foreign laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) are in compliance with all terms
and conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals could not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect;


 


8.42.                     there
are no pending or, to the best of the Company’s knowledge, threatened,
administrative, regulatory or judicial actions, suits, demand letters, claims,
liens, written notices of noncompliance or violation, investigations or
proceedings pursuant to any Environmental Laws against the Company or any of
its subsidiaries which would, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect; and, to the best of the Company’s
knowledge, there are no events or circumstances at the Company’s owned or
leased properties that could reasonably be expected to form the basis of a
governmental order for clean-up or remediation of hazardous or toxic
substances, wastes, pollutants or contaminants regulated under Environmental
Laws, or an action, suit or proceeding by any private party or governmental
body or agency, against the Company or any of its subsidiaries pursuant to
Environmental Laws; and


 


8.43.                     the
Company is not, and after giving effect to the Exempted Exchanges and the other
transactions contemplated hereby, will not be, an “investment company” as such
term is defined in the U.S. Investment Company Act of 1940, as amended.


 


13

















 


9                                         Covenants


 


9.1.                            Prior
to and during the period up to the Closing Date, the Company shall advise you
promptly of (i) the occurrence of any event or the discovery of any fact which
is likely to cause or which causes the Company to fail to commence, withdraw,
rescind or terminate the Exempted Exchanges or would reasonably be expected to
permit the Company to exercise any right not to accept the Existing Notes to be
exchanged thereunder, (ii) any proposal or requirement to modify, amend or
supplement any of the Exchange Materials, (iii) the commencement or threat in
writing of any lawsuit or government proceeding in connection with the Exempted
Exchanges and (iv) any other information relating to the Exempted Exchanges
which you may from time to time reasonably request.


 


9.2.                            The
Company and you each agree to keep the other reasonably informed as to the
progress of the Exempted Exchange during the period between the Commencement
Date and the Closing Date, including providing information as to the number and
amount of Existing Notes that have agreed to be exchanged.


 


9.3.                            The
Company covenants that the Exempted Exchanges and all other actions of the
Company contemplated in the Exchange Materials and this Agreement will comply
in all material respects with all applicable requirements of law, including,
without limitation, the 1934 Act and the rules and regulations thereunder
(other than broker-dealer regulations), and the various state securities or
“blue sky” laws and the applicable listing laws, rules and regulations of each
jurisdiction in which any of the Existing Notes are listed.


 


9.4.                            At
all times subsequent to the date hereof up to the Closing Date, the Exchange
Materials, including any information and documents incorporated by reference
therein, will comply in all material respects with all applicable requirements
of law, including, without limitation, the 1934 Act, and the Exchange Materials
(as amended or supplemented from time to time), including any information and
documents incorporated by reference therein, will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading; provided that this covenant shall not
extend to any statements contained in, or any matter omitted from, the Exchange
Offer Materials in reliance upon and conformity with the UBS Information; provided, further,
that  notwithstanding the
foregoing, if at any time during the period beginning the date hereof and the
Closing Date, any event shall occur or condition shall exist as a result of
which the Exchange Materials, including any information and documents incorporated
by reference therein, will not comply in all material respects with all
applicable requirements of law, or such Exchange Materials (as amended or
supplemented from time to time), including any information and documents
incorporated by reference therein, will contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading, then


 


14

















 


the
Company shall either (i) promptly prepare such amendment or supplement to the
Exchange Materials, or any filing with or submission to the Commission with
respect to any such information or document incorporated by reference therein,
as may be necessary in order to correct such false or misleading statement or
omission, and take such action to make the Exchange Materials, including any
information or document incorporated by reference therein, comply with the
requirements of law, and distribute such amendment or supplement to holders of
Existing Notes involved in the Exempted Exchanges if it shall be necessary or
desirable to so distribute such amendment or supplement to comply with the
requirements of law, and provide such number of copies of such amendment or
supplement as the Dealer Manager shall request, or (ii) withdraw from, cancel,
rescind or otherwise terminate the Exempted Exchanges.


 


9.5.                            The
Company agrees that a reasonable time prior to using or permitting the use of
the Exchange Materials in connection with the Exempted Exchanges and to filing
or submitting any document with the Commission incorporated by reference
therein, it shall submit copies of such documents to the Dealer Manager and shall
give reasonable consideration to the Dealer Manager’s comments and those of the
Dealer Manager’s counsel with respect thereto.


 


9.6.                            The
Company agrees that, except as required by applicable law, any reference to the
Dealer Manager in any Exchange Materials or any other document or communication
prepared, approved or authorized by the Company in connection with the Exempted
Exchanges is subject to the prior approval of the Dealer Manager, provided that
if such reference to the Dealer Manager is required by applicable law, the
Company agrees to notify the Dealer Manager within a reasonable time prior to
such use.


 


9.7.                            The
Company will pay the Fee to the Dealer Manager for soliciting, on the Company’s
behalf, holders to enter into the Exempted Exchanges and will provide each such
holder with copies of the Offering Memorandum, the Letter of Transmittal and
any other Exchange Materials.


 


9.8.                            Neither
the Company, nor any subsidiary or affiliate thereof shall publicly disclose or
refer to any advice rendered by the Dealer Manager to the Company without the
Dealer Manager’s prior written consent, except as may be required by law,
regulation, legal process or regulatory authority and in any action, suit or
proceeding to which the Company is a party involving the Exempted Exchanges;
provided, that, the Company shall provide the Dealer Manager with prompt
written notice, at the Dealer Manager’s address for notice set forth in Section
16 hereto, of any such requirement so that the Dealer Manager may seek a
protection order or any other appropriate remedy.


 


9.9.                            As
soon as practicable before the Commencement Date, the Company will make
appropriate arrangements, to the extent applicable, with DTC to allow for the
book-entry movement of the exchanged Existing Notes between DTC participants
and the Dealer Manager, and will use its reasonable best efforts to permit the
New Notes to be eligible for clearance and settlement through DTC.


 


15

















 


9.10.                     The
Company will not, and will not permit any of its affiliates to, resell any New
Notes or Shares of Common Stock issued upon conversion thereof that have been
acquired by any of them.


 


9.11.                     None
of the Company, its affiliates, or any person acting on its or their behalf
will, directly or indirectly, make offers or sales of any security, or solicit
offers to buy any security, under circumstances that would require the
registration of the New Notes or Common Stock issuable upon conversion thereof
under the Securities Act.


 


9.12.                     So
long as any of the New Notes or the Common Stock issuable upon the conversion
thereof are “restricted securities” within the meaning of Rule 144(a)(3) under
the Securities Act, the Company, or any successor thereto, will, during any
period in which it is not subject to and in compliance with Section 13 or 15(d)
of the 1934 Act,  provide to each
holder of such restricted securities and to each prospective purchaser (as
designated by such holder) of such restricted securities, upon the request of
such holder or prospective purchaser, any information required to be provided
by Rule 144A(d)(4) under the Securities Act. 
This covenant is intended to be for the benefit of the holders, and the
prospective purchasers designated by such holders, from time to time of such
restricted securities.


 


9.13.                     Any
information provided by the Company to publishers of publicly available
databases about the terms of the New Notes shall include a statement that the
New Notes have not been registered under the Securities Act and are subject to
restrictions under Rule 144A under the Securities Act.


 


9.14.                     [Intentionally
omitted].


 


9.15.                     The
Company will reserve and keep available at all times, free of pre-emptive
rights, the full number of shares of Common Stock issuable upon conversion of
the New Notes.


 


9.16.                     None
of the Company, its affiliates, or any person acting on its or their
behalf  will engage in any form of
general solicitation or general advertising (within the meaning of Regulation
D) in connection with the Exempted Exchanges.


 


9.17.                     Between
the date hereof and the Closing Date, the Company will not do or authorize any
act or thing that would result in an adjustment of the conversion price of the
Existing Notes or  New Notes.


 


9.18.                     The
Company will not take, directly or indirectly, any action designed to or which
has constituted or which might reasonably be expected to cause or result, under
the 1934 Act or otherwise, in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the New Notes.


 


9.19.                     The
Dealer Manager acknowledges that the New Notes and the Common Stock issuable
upon conversion thereof have not been and will not be registered under the
Securities Act and may not be offered or sold within the United States or to,
or for the account or benefit of, U.S. persons, except pursuant to an exemption
from,


 


16

















 


or
in a transaction not subject to, the registration requirements of the
Securities Act.


 


9.20.                     The
Dealer Manager represents and warrants to and agrees with the Company that:


 


(i)                                     it
has not solicited or made any Exempted Exchanges within the United States or
to, or for the account or benefit of, U.S. persons (x) as part of their
distribution at any time or (y) otherwise until one year after the later of the
commencement of the offering and the date of closing of the offering except to
those it reasonably believes to be “qualified institutional buyers” (as defined
in Rule 144A under the Securities Act);


 


(ii)                                  it
and any person acting on its behalf will not solicit more than six (6) holders
of Existing Notes in connection with the Exempted Exchanges and will not
exchange more than $154.35 million principal amount of Existing Notes;


 


(iii)                               neither
it nor any person acting on its behalf has solicited or will solicit any
Exempted Exchanges in the United States by means of any form of general
solicitation or general advertising (within the meaning of Regulation D) in the
United States;


 


(iv)                              in
connection with any solicitation of Exempted Exchanges, it has taken or will
take reasonable steps to ensure that the acquirer of such New Notes is aware
that such sale is being made in transactions exempt from the registration
requirements of the Securities Act;


 


(v)                                 it
has not offered or sold and  will not
offer or sell any New Notes to persons in the United Kingdom except to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or as agent) for the purposes of their businesses
or otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995.


 


10                                  Indemnification


 


Notwithstanding
any other provision of this Agreement, in the event that the Dealer Manager
becomes involved in any capacity other than as a noteholder in any action,
claim, suit, proceeding, investigation or inquiry (including without limitation
any shareholder, noteholder or derivative action or arbitration proceeding)
(collectively a “Proceeding”) in
connection with any matter in any way relating to, or referred to in this
Agreement or arising out of, or alleged to arise out of, the matters
contemplated by this Agreement, including, without limitation, matters which
arise out of, or are alleged to arise out of, or are based upon (i) a breach of
any of the representations, warranties and agreements made by the Company
herein or a failure by the Company to comply with the


 


17

















 


covenants
contained herein; (ii) any untrue statement or alleged untrue statement of a
material fact contained in any Exchange Materials (other than UBS Information)
or any other document used by the Company in connection with the Exempted
Exchanges; (iii) any omission or alleged omission to state any material fact
required to be stated in any Exchange Materials or any other document used by
the Company in connection with the Exempted Exchanges or necessary to make the
statements therein not misleading (other than UBS Information); (iv) any action
or failure to act by the Company, or any of its officers, directors or
affiliates in connection with the Exempted Exchanges; or (v) any services
rendered by the Dealer Manager pursuant to this Agreement, the Company will
indemnify and reimburse the Dealer Manager promptly upon request for its
reasonable legal and other expenses (including the reasonable cost of any
investigation and preparation) as they are reasonably incurred by the Dealer
Manager in connection therewith; provided, however, that with respect to any
untrue statement, or alleged untrue statement or omission of material fact or
alleged omission of material fact made in the Exchange Materials, the indemnity
agreement contained in this Section shall not inure to the benefit of the
Dealer Manager to the extent that any such legal and other expenses occur under
the circumstances where it shall have been determined by a court of competent
jurisdiction by final and nonappealable judgment that (w) the Company had
previously furnished to the Dealer Manager a reasonable amount of Exchange
Materials and in a sufficient quantity, (x) the untrue statement or alleged
untrue statement or omission of material fact or alleged omission of material
fact was corrected in such Exchange Materials and (z) there was not sent or
given to the party initiating the Proceeding the corrected Exchange Materials.  Notwithstanding
anything herein to the contrary, the Company shall not, however, as to any
person seeking indemnification or contribution hereunder, be responsible for
any losses, claims, damages, liabilities or expenses pursuant to this Section
10 which have been finally judicially determined to result from (i) willful
misconduct or gross negligence on the part of any such person, or (ii) a breach
by the Dealer Manager of Section 9.20(ii). 
The foregoing indemnity shall be in addition to any liability the
Company might otherwise have to the Dealer Manager at common law or
otherwise.  The Company agrees to notify
the Dealer Manager promptly of the assertion of any such Proceeding against the
Company, or any of its officers, directors, employees or agents or any person
who controls any of the foregoing within the meaning of Section 20(a) of the
1934 Act.  In the event that it is
judicially determined that the Dealer Manager was not entitled to receive
payments for such expenses or losses hereunder, the Dealer Manager shall
promptly return to the Company all sums that have been advanced pursuant
hereto.


 


If
such indemnification is unavailable or insufficient (other than as a result of
the failure to give notice required by the next paragraph), to contribute to
any such losses, claims, damages and liabilities involved in such proportion
that is appropriate to reflect the relative benefits of the Company and its
affiliates on the one hand, and the Dealer Manager on the other, in the matters
contemplated by this Agreement or (B) if the allocation provided by clause (A)
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (A) above but also
the relative fault of the Company, on the one hand and of the Dealer Manager on
the other hand in connection with the action, inaction, statements or omissions
which


 


18

















 


resulted
in such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations.  For
purposes of clauses (A) and (B) in the immediately foregoing sentence, the
relative benefits received by the Company, on the one hand, and the Dealer
Manager, on the other hand, in connection with the Exempted Exchanges shall be
deemed to be in the same proportion as the aggregate principal amount of Notes
exchanged pursuant to the Exempted Exchanges bears to the fees actually
received by the Dealer Manager hereunder, and the relative fault of the
Company, on the one hand, and the Dealer Manager, on the other hand, shall be
determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company, on the
one hand, or by the Dealer Manager, on the other hand, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Dealer Manager agree
that it would not be just and equitable if contribution pursuant to this
Section 10 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to above.


 


If
any litigation or proceeding is brought against the Dealer Manager in respect
of which indemnification may be sought against the Company pursuant to this
Section 10, the Dealer Manager shall promptly notify the Company in writing of
the commencement of such litigation or proceeding. Failure to so notify the
Company shall not, however, relieve the Company from any liability which it may
have on account of this indemnity or otherwise, unless such failure materially
prejudices the ability of the Company to exercise substantial rights and
defenses. In case any such litigation or proceeding shall be brought against
the Dealer Manager, the Company shall be entitled to participate in such
litigation or proceeding and, to the extent the Company may wish, after written
notice from the Company to the Dealer Manager, to assume the defense of such litigation
or proceeding with counsel of its choice at its expense; provided, however, that such counsel shall
be satisfactory to the Dealer Manager in the exercise of its reasonable
judgment. Notwithstanding the election of the Company to assume the defense of
such litigation or proceeding, the Dealer Manager shall have the right to
employ separate counsel and to participate in the defense of such litigation or
proceeding, and the Company shall bear the reasonable fees, costs and expenses
of such separate counsel and shall pay such fees, costs and expenses (provided that, with respect to any single
litigation or proceeding or with respect to several litigations or proceedings
involving substantially similar legal claims, the Company shall not be required
to bear the fees, costs and expenses of more than one such counsel other than
one local counsel) if (i) the Dealer Manager shall have been advised by its
counsel in writing (with a copy to the counsel appointed by the Company, so
long as such delivery could not reasonably be expected to result in the loss of
any privilege) that there may be legal defenses available to it that are
different from or additional to those available to the Company, such that it
would render representation by counsel to the Company inappropriate or
inadvisable for the Dealer Manager, (ii) the Company shall not have employed
counsel satisfactory to the Dealer Manager in the exercise of the Dealer
Manager’s reasonable judgment to represent the Dealer Manager within a
reasonable time after notice of the institution of such litigation or
proceeding or (iii) the Company shall authorize in writing the Dealer Manager
to employ separate


 


19

















 


counsel
at the expense of the Company.  After
notice from the Company to the Dealer Manager of the Company’s election so to
assume the defense thereof and approval by the Dealer Manager of the Company’s
counsel appointed to defend such action, the Company will not be liable to the
Dealer Manager under this Section 10 for (A) any legal or other expenses,
unless the Dealer Manager shall have employed separate counsel in accordance
with the immediately preceding sentence, and/or (B) the costs and expenses of
any settlement, compromise or consent to the entry of any judgment in respect
of any pending or threatened claim, action, suit or proceeding effected by the
Dealer Manager without the consent of the Company, which consent shall not be
unreasonably withheld or delayed. In any action or proceeding the defense of which
the Company so assumes, the Dealer Manager shall have the right to participate
in such litigation and retain its own counsel at the Dealer Manager’s own
expense. Without the prior written consent of the Dealer Manager, which shall
not be unreasonably withheld or delayed, the Company will not settle,
compromise or consent to the entry of any judgment in respect of any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification would reasonably likely be sought hereunder (whether or not the
Dealer Manager is a party to such claim, action, suit or proceeding), unless
such settlement, compromise or consent (x) includes an unconditional release of
the Dealer Manager from all liability arising out of such claim, action, suit or
proceeding and (y) does not impose any actual or potential liability upon the
Dealer Manager and does not contain any factual or legal admission by or with
respect to the Dealer Manager or any adverse statement with respect to the
character, professionalism, due care, loyalty, expertise or reputation of the
Dealer Manager or any action or inaction by the Dealer Manager. Pursuant to the
terms of this Section 10, the Company and the Dealer Manager agree to notify
each other promptly of the assertion of any claim against it, any of their
respective officers or directors or any entity or person who controls either
the Company or the Dealer Manager within the meaning of Section 20(a) of the
1934 Act in connection with the Exempted Exchanges. For purposes of this Section
10, the term Dealer Manager shall include UBS Securities LLC, its affiliates,
officers, directors, employees and agents, and any person controlling the
Dealer Manager or any of such affiliates (within the meaning of Section 20(a)
of the 1934 Act).  The foregoing
agreement shall be in addition to any rights that any indemnified party may
have at common law or otherwise.


 


11                                  Indemnification and Reimbursement; Representations and
Warranties to Remain Operative


 


The
indemnity, reimbursement and contribution agreements contained in Section 10
hereof and the representations and warranties of the Company set forth in this
Agreement shall remain operative and in full force and effect regardless of (a)
any failure to commence, or the withdrawal, rescission, termination or
consummation of, the Exempted Exchanges or the termination or assignment of
this Agreement, (b) any investigation made by or on behalf of any party
entitled to indemnification pursuant to the terms of Section 10 hereof and (c)
any withdrawal by you pursuant to Section 4.2 hereof.


 


20

















 


12                                  Conditions to Obligations of Dealer Manager


 


Your
obligations hereunder shall at all times be subject, in your reasonable
discretion, to the satisfaction of the following conditions:


 


12.1.                     all
representations, warranties and other statements of the Company contained
herein at all times during the period beginning and including the date hereof
and ending on, and including, the Closing Date, will be true and correct;


 


12.2.                     the
Company, at all times during the period between the date hereof and the Closing
Date, shall have performed all of its obligations hereunder and under the New
Notes Indenture and the Registration Rights Agreement  to be performed;


 


12.3.                     no
stop order, restraining order or denial of an application for approval shall
have been issued and no litigation shall have been commenced or threatened in
writing before any regulatory authority or other public body or court of any
jurisdiction with respect to the Exempted Exchanges which you, in good faith,
believe makes it inadvisable for you to continue to act hereunder;


 


12.4.                     the
Company shall have delivered to you opinions addressed to you dated as of the
Closing Date, of the Company’s counsel and internal intellectual property
counsel, substantially in the form of Exhibits B-1 and B-2, and a letter from
the Vice President of Regulatory Affairs of the Company in the form of Exhibit
B-3; and (B) Cleary, Gottlieb, Steen & Hamilton shall have delivered to you
opinions addressed to you dated as of the Closing Date in form and substance
satisfactory to you;


 


12.5.                     the
Company shall have delivered to you as of the Closing Date, a certificate,
dated the date of its delivery, signed by either its Chief Executive Officer or
its Chief Financial Officer, to the effect that (i) the signatory of such
certificate has carefully examined the Exchange Materials and no event has
occurred as a result of which it is necessary to amend or supplement the
Exchange Materials in order to make the statements therein not untrue or
misleading in any material respect and there has been no document required to
be filed or submitted under the 1934 Act and the rules and regulations
thereunder that upon such filing or submission would be deemed to be
incorporated by reference into the Exchange Materials that has not been so
filed; (ii) each of the representations and warranties of the Company (as
applicable with respect to the relevant certificate) contained in this
Agreement are, at the time such certificate is delivered, true and correct on
the Closing Date, with the same effect as if made on the Closing Date,
provided, however, that if any such representation or warranty is already
qualified as to materiality, such representation or warranty, as so qualified,
is true and correct in all respects on the Closing Date; and (iii) each of the
covenants required herein to be performed by the Company (as applicable with
respect to the relevant certificate) on or prior to the delivery of such certificate
has been duly, timely and fully performed and each condition herein required to
be complied with by the


 


21

















 


Company
(as applicable with respect to the relevant certificate) on or prior to the
date of such certificate has been duly, timely and fully complied with;


 


12.6.                     on
the date hereof and the Closing Date, the Company shall have furnished to you a
“comfort letter” of each of PricewaterhouseCoopers LLP and Ernst & Young
LLP, dated as of the date hereof or the Closing Date, as the case may be,
addressed to you, in form and substance satisfactory to you and your counsel,
containing statements and information of the type ordinarily included in
accountants’ “comfort letters” with respect to financial statements and certain
financial information contained in the Offering Memorandum; provided that the
letter delivered on the Closing Date shall use a “cut-off” date not earlier
than two days before the Closing Date;


 


12.7.                     The
New Notes shall have been designated as PORTAL-eligible securities in
accordance with the rules and regulations of the NASD and the New Notes shall
be eligible for clearance and settlement through DTC;


 


12.8.                     The
Company shall have caused the shares of Common Stock initially issuable upon
conversion of the New Notes to be approved for quotation, subject to issuance,
on the Nasdaq Stock Market.


 


12.9.                     The
Company shall have duly authorized, executed and delivered the Registration
Rights Agreement.


 


12.10.              subsequent
to the Commencement Date and prior to the Closing Date,


 


(i)                                     there
shall not have occurred any downgrading, nor shall any notice have been given
of any intended or potential downgrading or of any review for a possible change
that does not indicate the direction of the possible change, in the rating
accorded any of the Company’s securities by any “nationally recognized
statistical rating organization,” as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and


 


(ii)                                  there
shall not have occurred any change, or any development involving a prospective
change, in the condition, financial or otherwise, or in the earnings,
prospects, business or operations, of the Company and its subsidiaries, taken
as a whole, from that set forth in the Exchange Materials (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement),
that, in your judgment, is material and adverse and that makes it, in your
judgment, impracticable to proceed with the Exchange Transaction in the manner
contemplated in the Exchange Materials; and


 


12.11.              the
Company shall have furnished to you such certificates or other documents, in
addition to those specifically mentioned herein, as you or your counsel may
have reasonably requested.


 


12.12.              In
the event that at any time during the period between the date hereof and the
Closing Date any representation, warranty or other statement ceases to be true
and


 


22

















 


correct,
the Company shall promptly use its best efforts to seek to cause such
representation, warranty or other statement to be true and correct.


 


12.13.              You
shall have a reasonable period of time after discovering or being informed of a
breach in any of the foregoing conditions up to and including the Closing Date
to elect whether to continue to act as Dealer Manager. Your resignation as
Dealer Manager as a result of a breach of the foregoing conditions shall be
without prejudice to your entitlement to expenses under Section 4.2 hereof.


 


13                                  Publications


 


The
Company agrees that the Dealer Manager has the right to place advertisements in
financial and other newspapers and journals at its own expense describing its
services to the Company hereunder, provided such advertisements are provided to
and approved in writing by the Company prior to their use.


 


14                                  Confidentiality


 


Any
advice or opinions provided by you in connection with or related to this
Agreement will not be disclosed or referred to publicly or to any third party
(other than attorneys and accountants of the Company who agree to keep such
advice or opinions confidential) by the Company or any of its affiliates except
in accordance with your prior written consent, which shall not be unreasonably
withheld or delayed or as may be required by applicable laws or except as may
be required by law, regulation, legal process or regulatory authority or in any
action, suit or proceeding to which the Company is a party involving the
Exempted Exchanges; provided that the Company shall provide the Dealer Manager
with prompt written notice of any such requirement so that the Dealer Manager
may seek a protection order or other appropriate remedy.


 


15                                  Termination


 


This
Agreement shall terminate upon the expiration, termination or withdrawal of the
Exempted Exchanges or upon the withdrawal by you as Dealer Manager pursuant to
Section 4.2 hereof. In addition, your services as Dealer Manager may be
terminated by you or by the Company upon 10 days prior written notice to the
other party without liability or continuing obligation of the Company or the
Dealer Manager. In the event your services as Dealer Manager are terminated by
the Company, the Dealer Manager shall be entitled to any Fee payable pursuant
to Section 5 hereof in accordance with the terms thereof (but the Dealer Manager
shall not be entitled to any Fee hereunder if (a) the Company shall have
terminated such services with cause, including a breach by the Dealer Manager
of Section 9.20(ii) or (b) the Dealer Manager shall otherwise have acted in bad
faith or in a grossly negligent manner or (c) there has occurred any material
adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or
economic conditions, in each case the effect of which is such as to make it, in
the reasonable judgment of the Dealer Manager, impracticable to enforce
contracts for the sale of the New Notes, or (d) if trading in any securities of
the Company 


 


23

















 


has
been suspended or materially limited by the Commission or the Nasdaq National
Market, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the Nasdaq National Market has been suspended or
materially limited, or minimum or maximum prices for trading have been fixed,
or maximum ranges for prices have been required, by any of said exchanges or by
such system or by order of the Commission, the NASD or any other governmental
authority, in each case the effect of which is such as to make it, in the
reasonable judgment of the Dealer Manager, impracticable or inadvisable to
proceed with the Exempted Exchanges or (e) if a banking moratorium has been
declared by either Federal or New York authorities, the effect of which is such
as to make it, in the reasonable judgment of the Dealer Manager, impracticable
or inadvisable to proceed with the Exempted Exchanges), and further, all
reasonable expenses incurred by the Dealer Manager as a result of services
rendered prior to the date of the termination shall become immediately payable
in full. In the event you terminate your services as Dealer Manager hereunder,
the Dealer Manager shall be entitled to all reasonable expenses incurred by the
Dealer Manager as a result of services rendered prior to the date of
termination, which shall become immediately due and payable in full, but shall
not be entitled to any Fee hereunder unless the Dealer Manager shall have
terminated such services with cause or the Company shall otherwise have acted
in bad faith, in which case the Dealer Manager shall be entitled to any Fee
payable pursuant to Section 5 hereof in accordance with the terms thereof. The
provisions of Sections 3, 5, 6, 8, 9, 10, 11, 14, 15, 17, 18, 19, 20 and 22
hereof shall survive the termination of this Agreement for any reason
whatsoever. Unless this Agreement has been terminated pursuant to clause (a) or
(b) of this paragraph, the Dealer Manager shall be entitled to payment in full
of the Fee payable under Section 5 if at any time prior to the expiration of 6
months after the termination of this Agreement, the Company consummates, or
enters into a definitive agreement that subsequently results in the
consummation of, the Exempted Exchanges or any similar transaction. For the
avoidance of doubt, in the event that the Exempted Exchanges do not proceed,
the Dealer Manager shall be entitled only to all expenses as contemplated in
Section 6 hereof.


 


16                                  Notices


 


All
notices and other communications required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered personally to the parties hereto as follows:


 


If to you:


 


UBS Securities LLC

677 Washington Boulevard

Stamford, CT  06901

Attention: Liability Management Group

Facsimile: 1(203) 719-1620


 


With a copy to (which shall not
constitute notice):


 


24

















 


UBS Securities LLC

677 Washington Boulevard

Stamford, CT  06901

Attention: Legal and Compliance Department

Facsimile: 1 (203) 719-0680


 


If to the Company:


 


Vertex Pharmaceuticals Incorporated

130 Waverly Street

Cambridge, Massachusetts 02139-4242

Attention: Kenneth S. Boger

Facsimile: (617) 444-7117


 


With a copy to (which shall not
constitute notice):


 


Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.

One Financial Center

Boston, Massachusetts  02111

Attention:  Michael L. Fantozzi

Facsimile:  (617) 542-2241


 


17           Successors and Assigns


 


This
Agreement, including any right to indemnity or contribution hereunder, shall
inure to the benefit of and be binding upon the Company and you and such other
parties entitled to indemnification pursuant to the terms of Section 10 hereof,
and the respective successors and assigns of such parties. Except as provided
in Section 9.12, nothing in this Agreement is intended, or shall be construed,
to give to any other person or entity any right hereunder or by virtue hereof.


 


18                                  Governing Law


 


This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
principles thereof relating to conflict of laws.


 


19                                  Waiver of Jury Trial


 


EACH
OF THE COMPANY AND THE DEALER MANAGER HEREBY AGREES TO WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY PROCEEDINGS OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT,
TORT OR OTHERWISE) WITH RESPECT TO ANY CLAIM, COUNTER-CLAIM OR ACTION ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY (INCLUDING, WITHOUT LIMITATION, THE EXCHANGE OFFER AND THE CONSENT
SOLICITATION).


 


25

















 


20                                  Entire Agreement


 


This
Agreement constitutes the entire agreement among the parties hereto and
supersedes all prior agreements, understandings and arrangements, oral or
written, among the parties hereto with respect to the subject matter hereof and
thereof.


 


21                                  Counterparts; Severability


 


This
Agreement may be executed in two or more separate counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.


 


22                                  Amendment


 


This
Agreement may not be amended except in writing signed by each party to be bound
thereby.


 


26

















 


Please
indicate your willingness to act as Dealer Manager on the terms set forth
herein and your acceptance of the foregoing provisions by signing in the space
provided below for that purpose and returning to us a copy of this letter so
signed, whereupon this letter and your acceptance shall constitute a binding agreement
among us.


 


Very truly yours,


 


	
  VERTEX
  PHARMACEUTICALS INCORPORATED

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ian Smith

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
  Accepted as of the date

  	
   

  
	
  first set forth above:

  	
   

  
	
   

  	
   

  
	
  UBS
  SECURITIES LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Chris Hite

  	
   

  	
   

  
	
  Name: Chris Hite

  	
   

  
	
  Title: Managing Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Aradhana Sarin

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  



 


27

















 


Exhibit A-1

Offering Memorandum


 

















 


Exhibit
A-2

Letter of Transmittal


 


THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE
ATTENTION.  If you are
in any doubt as to the action to be taken, you should immediately consult your
broker, bank manager, lawyer, accountant, investment advisor or other
professional.


 


LETTER OF
TRANSMITTAL

relating to

the exempted exchanges described in

the Offering Memorandum

dated February 10, 2004

(the “Offering Memorandum”)


 


Each holder of the
5% Convertible Subordinated Notes due 2007 (the “Old Notes”) of Vertex
Pharmaceuticals Incorporated (“Vertex”) participating in the exempted exchanges
(as described in the Offering Memorandum) should complete, sign and submit this
Letter of Transmittal by fax to the trustee, US Bank National Association (the “Trustee”),
as soon as possible at fax no. (651) 495-8158, Attention: Specialized
Finance.  Delivery of this Letter of
Transmittal to the Trustee confirms your participation in the exempted
exchanges on the terms described in the Offering Memorandum.


 


Questions
regarding the exempted exchanges or the completion of this Letter of
Transmittal should be directed to the Trustee at the following telephone
number:  (651) 495-3513.


 


DELIVERY OF OLD NOTES


 


To effect a valid
delivery of Old Notes through the completion, execution and delivery of a
Letter of Transmittal, the undersigned must complete the tables below entitled
“Description of Old Notes Delivered” and sign the Letter of Transmittal where
indicated.


 


DESCRIPTION
OF OLD NOTES DELIVERED


 


NOTE:  SIGNATURES MUST BE PROVIDED BELOW.

PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.


 


 


	
  Name of DTC Participant and Participant’s Account Number in
  which

  Old Notes are held and/or the corresponding New Notes are

  to be delivered

  	
   

  	
  Aggregate
  Principal Amount of

  Old Notes*

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 












	
  *    The principal amount of Old Notes delivered must be in denominations of
  US$1,000 and whole multiples of US$1,000. 
  

  



 


 ̈            Please check this box
to confirm that the undersigned, or the Beneficial Owner (as defined below) on
behalf of which the undersigned is acting, is: a “qualified institutional
buyer” as defined under Rule 144A of the U.S. Securities Act of 1933, as
amended.


 

















 


Note:  Signatures must be provided below.

Please read the accompanying Instructions carefully.


 


Ladies and Gentlemen:


 


The undersigned
hereby delivers to Vertex the aggregate principal amount of Old Notes indicated
in the table above entitled “Description of Old Notes Delivered”.


 


The undersigned
understands that delivery of Old Notes pursuant to any of the procedures
described in the Offering Memorandum and in the instructions in this Letter of
Transmittal and acceptance of such Old Notes by Vertex will constitute a
binding agreement between the undersigned and Vertex.


 


All authority
conferred or agreed to be conferred by this Letter of Transmittal shall not be
affected by, and shall survive, the death or incapacity of the undersigned, and
any obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, trustees in bankruptcy, personal and legal
representatives, successors and assigns of the undersigned.


 


The undersigned
hereby represents, warrants and agrees to the representations, warranties and
agreements set forth under “The exempted exchanges – Effect of agreeing to the
exempted exchanges” in the Offering Memorandum.


 


If the “Special
Return Instructions” box (found below) is completed, please credit the DTC
account for any book-entry transfers of Old Notes not accepted for exchange
into the account so indicated.


 


The undersigned
recognizes that Vertex has no obligation under the “Special Return
Instructions” provision of this Letter of Transmittal to effect the transfer of
any Old Notes from the holder(s) of Old Notes if Vertex does not accept for
exchange any of the principal amount of the Old Notes delivered pursuant to
this Letter of Transmittal.


 


SPECIAL RETURN INSTRUCTIONS

(See Instructions 2 and 5)


 




	
  To be
  completed ONLY if Old Notes in the principal amount not accepted for exchange
  are to be returned in the name of someone other than the person or persons
  whose signature(s) appear(s) within this Letter of Transmittal and/or sent to
  a DTC participant account different from that indicated in the table entitled
  “Description of Old Notes Delivered.”

  
	
   

  
	
  Please issue
  Old Notes not accepted for exchange, to:

  
	
   

  
	
  Name of DTC
  Participant:

  
	
   

  
	
  DTC
  Participant Account Number:

  
	
   

  
	
  Contact at
  DTC Participant:

  






 


2

















 


SIGN HERE

(TO BE COMPLETED BY ALL CONSENTING HOLDERS DELIVERING OLD NOTES)


 


By completing,
executing and delivering this Letter of Transmittal, the undersigned hereby
delivers to Vertex the principal amount of the Old Notes listed in the table
labeled “Description of Old Notes Delivered.”


 


	
   

  	
   

  	
   

  
	
  Signature of Registered Holder(s) or Authorized
  Signatory

  	
   

  	
  Date

  
	
  (see guarantee requirement below)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature of Registered Holder(s) or Authorized
  Signatory

  	
   

  	
  Date

  
	
  (see guarantee requirement below)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature of Registered Holder(s) or Authorized
  Signatory

  	
   

  	
  Date

  
	
  (see guarantee requirement below)

  	
   

  	
   

  



 


	
  Area Code and
  Telephone Number:

  	
   

  



 


This Letter of
Transmittal must be signed by the Registered Holder(s) exactly as the name(s)
appear(s) on a securities position listing of DTC or by any person(s)
authorized to become the Registered Holder(s) by endorsements and documents
transmitted herewith.  If the signature
is by a trustee, executor, administrator, guardian, attorney-in-fact, officer
or other person, acting in a fiduciary or representative capacity, please set
forth at the line entitled “Capacity (full title)” and submit evidence
satisfactory to the Trustee and Vertex of such person’s authority to so
act.  See Instruction 3.


 


	
  Name(s):

  	
   

  
	
   

  
	
   

  
	
  (Please Type or Print)

  
	
   

  
	
  Capacity (full
  title):

  	
   

  
	
   

  
	
  Address:

  	
   

  
	
  (Including Zip Code)

  
				



 


MEDALLION SIGNATURE GUARANTEE

(If required—See Instruction 3)


 


	
  Signature(s)
  Guaranteed by

  
	
  an Eligible
  Institution:

  	
   

  
	
  (Authorized Signature)

  
	
   

  
	
   

  
	
  (Title)

  
	
   

  
	
   

  
	
  (Name of Firm)

  
	
   

  
	
   

  
	
  (Address)

  
	
   

  
	
  Dated:                              
       , 2004

  



 


3

















 


INSTRUCTIONS


 


1.  Delivery of Letter of Transmittal.  A holder of Old Notes that wishes to
participate in the exempted exchanges must submit to the Trustee a completed
Letter of Transmittal as soon as possible.


 


2.  Amount of Delivery.  Old Notes delivered will be accepted only in
denominations of US$1,000 and whole multiples of US$1,000.


 


3.  Signatures on Letter of Transmittal;
Instruments of Transfer; Guarantee of Signatures.  For purposes of this Letter of Transmittal,
the term “Registered
Holder” means an owner of record as well as any DTC participant that
has Old Notes credited to its DTC account. 
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by a recognized participant in the Securities
Transfer Agents Medallion Program, the NYSE Medallion Signature Program or the
Stock Exchange Medallion Program (each, a “Medallion Signature Guarantor”).  Signatures on the Letter of Transmittal need
not be guaranteed if:


 


•                  the
Letter of Transmittal is signed by a participant in DTC whose name appears on a
security position listing as the owner of the Old Notes and the holder(s) has
not completed either of the boxes entitled “Special Return Instructions” on the
Letter of Transmittal; or


 


•                  the
Old Notes are delivered for the account of an “eligible guarantor institution.”


 


An “eligible
guarantor institution” is one of the following firms or other entities
identified in Rule 17Ad-15 under the Securities Exchange Act of 1934 (as the
terms are defined in Rule 17Ad-15):


 


(a)          a
bank;


 


(b)         a
broker, dealer, municipal securities dealer, municipal securities broker,
government securities dealer or government securities broker;


 


(c)          a
credit union;


 


(d)         a
national securities exchange, registered securities association or clearing
agency; or


 


(e)          a
savings institution that is a participant in a Securities Transfer Association
recognized program.


 


If any of the Old
Notes delivered are held by two or more Registered Holders, all of the
Registered Holders must sign the Letter of Transmittal.


 


By executing the
Letter of Transmittal (or facsimile thereof), you waive any right to receive
any notice of the acceptance of your Old Notes for exchange.


 


If this Letter of
Transmittal or instruments of transfer are signed by trustees, executors,
administrators, guardians or attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should so
indicate when signing and, unless waived by Vertex, evidence satisfactory to
Vertex of their authority to so act must be submitted with this Letter of Transmittal.


 


Beneficial Owners
who deliver Old Notes that are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if they desire to participate
in the exempted exchanges.


 


4.  Special Return Instructions.  All Old Notes delivered hereby and not
accepted for exchange will be returned to the undersigned according to the information provided in the table entitled
“Description of


 


4

















 


the Old Notes Delivered” or, if
completed, according to the “Special Return Instructions” box in this Letter of
Transmittal.


 


5.  Requests for Assistance or Additional
Copies. 
Questions and requests for assistance and requests for additional copies
of the Offering Memorandum or this Letter of Transmittal may be directed to the
Trustee at the address and telephone number indicated herein.


 


In order to
participate in the exempted exchanges, a holder of Old Notes should send or
deliver a properly completed and signed Letter of Transmittal and any other
required documents to the Trustee to the fax number set forth below.


 


The Trustee for
the exempted exchanges is:


 


US Bank
National Association


 


60 Livingston Avenue


St. Paul, Minnesota 55107


Attention:
Specialized Finance


Tel:  (651) 495-3513

Fax:  (651) 495-8158


 


 


The Dealer Manager
for the exempted exchanges is:


 


UBS
Securities LLC


 


677 Washington Boulevard

Stamford, Connecticut 06901

Attention: William Schneider


Tel:  (203) 719-4210


 


5

















 


Exhibit
B

Opinion of Company Counsel


 


 


Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C.


 


One Financial Center


Boston, Massachusetts
02111


 


 


	
   

  	
  617 542 6000

  617 542 2241 fax

  



 


 


February 13,
2004


 


 


UBS Securities LLC


677 Washington Boulevard


Stamford, Connecticut 06901


 


 


Ladies and Gentlemen:


 


This opinion is being
furnished to you pursuant to Section 12.4 of the Dealer Manager Agreement,
dated February 9, 2004 (the “Dealer Manager Agreement”) by and between you (the
“Dealer Manager”) and Vertex Pharmaceuticals Incorporated, a Massachusetts
corporation (the “Company”), pursuant to which the Company will exchange (each,
an “Exempted Exchange” and, collectively, the “Exempted Exchanges”) certain of
its outstanding 5.00% Convertible Subordinated Notes due 2007 (the “Old Notes”)
for its 5 3/4% Convertible Senior Subordinated Notes due 2011 (the “New
Notes”), as more fully described in the offering memorandum dated February 9,
2004 (the “Offering Memorandum”) and the related letter of transmittal dated
February 9, 2004 (the “Letter of Transmittal” and, together with the Offering
Memorandum, the “Offering Documents”). 
The New Notes will be issued under an indenture dated as of February 13,
2004 (the “Indenture”) between the Company and US Bank National Association, as
trustee (the “Trustee”).  Holders of the
New Notes will have the registration rights set forth in the Registration
Rights Agreement dated as of February 13, 2004 (the “Registration Rights
Agreement”) by and among the Company and the Dealer Manager.  Capitalized terms defined in the Dealer
Manager Agreement and not otherwise defined herein are used herein with the
meanings so defined in the Dealer Manager Agreement.


 


We
have acted as outside counsel for the Company in connection with the
preparation, execution and delivery of the Dealer Manager Agreement and the
consummation of the transactions contemplated thereby.  In connection therewith, we have examined
executed originals or counterparts of the Dealer Manager Agreement, the
Registration Rights Agreement and the Indenture (collectively, the “Transaction
Documents”), the Offering Documents and such other documents as we have deemed
necessary for purposes of this opinion.


 


Insofar
as this opinion relates to factual matters, we have relied upon representations
and warranties of the Company set forth in the Transaction Documents,
certificates of officers of the Company and of public officials, and
certificates delivered


 


Boston New York Reston Washington


 

















 


to you in connection with the
Transaction Documents and the transactions contemplated thereby.


 


As
used herein, any reference to “our knowledge”, “best of our knowledge”, “of
which we have knowledge”, “known to us” or words of similar import, shall mean
the conscious awareness of the existence or absence of any facts or other
information by any lawyer in this firm who was involved in representing the
Company in connection with the transactions contemplated by the Transaction
Documents or is otherwise involved on an ongoing basis in providing legal
services to the Company.  Except as
expressly set forth in this opinion, we have not undertaken any independent
investigation, including, without limitation, any investigation of corporate,
court or other documents or records, to determine the existence or absence of
any such facts or other information, and no inference as to our knowledge of
the existence or absence of any facts or other information should be drawn from
the fact of our representation of the Company.


 


In
rendering the opinions set forth herein, we have assumed without independent
inquiry or investigation, (i) the genuineness of all signatures on all
documents and instruments examined by us, (ii) the authenticity of all
documents submitted to us as originals, and (iii) the conformity to originals
of all documents submitted to us as certified, photostatic or conformed copies,
and the authenticity of the originals of such documents.  We have also assumed that each of the
parties to the Transaction Documents (other than the Company) has all requisite
power and authority and has taken all necessary action (corporate or otherwise)
to execute and deliver the Transaction Documents to which it is a party and to
effect the transactions contemplated thereby and that the Transaction Documents
constitute the legal, valid and binding obligation of each of such other
parties enforceable in accordance with their respective terms.


 


Our
opinions contained in paragraphs (vi), (vii) and (viii) as to enforceability
are subject to the further qualification that such enforceability may be (1)
limited by bankruptcy, insolvency (including, without limitation, fraudulent
conveyances and fraudulent transfers), reorganization, moratorium and other
similar laws relating to or affecting creditors’ rights generally, (2) limited
by general equitable principles, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing (regardless of whether
such enforceability is considered in a proceeding in equity or at law), (3)
subject to the effect of any public policy considerations or court decisions
which may limit the rights of any person or entity to obtain indemnification,
and (4) subject to the effects of generally applicable rules of law that (A)
limit or affect the enforcement of provisions that purport to require waiver or
modification of the obligations of good faith, fair dealing, diligence,
reasonableness or due notice or to waive equitable rights, remedies, or
defenses, or to release or indemnify a party from or against liability for the
party’s own unlawful or willful misconduct, recklessness or gross negligence,
or to preclude modification of the Transaction Documents through custom or
course of conduct, (B) limit the enforceability of any liquidated damages
provisions to the extent


 


2

















 


that the damages assessed are
ascertainable, or (C) provide that forum selection clauses are not necessarily
binding on the court or courts in the forum selected.


 


We call your attention to the fact that members of
this firm are admitted to practice law in the Commonwealth of Massachusetts and
the State of New York.  Accordingly, no
opinion is expressed herein with respect to any matter, which is determined by
the law of any jurisdiction except the federal laws of the United States
of America, the laws of The Commonwealth of Massachusetts and the laws of the
State of New York.  Insofar as this
opinion addresses matters governed by laws of any other jurisdiction, this
opinion is delivered as though such matters were governed by and construed in
accordance with the domestic substantive laws of The Commonwealth of
Massachusetts (without regard to the application of any conflict of law rule
that would result in the application of the domestic substantive law of any
other jurisdiction). Moreover, we express no opinion and give no statement
herein related to any filing or other requirements under Section 14 of the 1934
Act and the rules and regulations promulgated by the Commission thereunder.


 


Based
upon and subject to the foregoing assumptions, limitations and qualifications,
and subject to the penultimate paragraph of this letter, we are of the opinion
that:


 


(i)            The Company has been duly
incorporated and validly exists as a corporation in good standing under the
laws of the Commonwealth of Massachusetts.


 


(ii)           The Company has corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Offering Memorandum and to enter into and perform its
obligations under the Dealer Manager Agreement, the Registration Rights
Agreement, the Indenture and the New Notes.


 


(iii)          The Company is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction within the United States in which such qualification is required,
whether by reason of the ownership or leasing of property or the maintenance of
an office, except where the failure so to qualify or to be in good standing could
not reasonably be expected to result
in a Material Adverse Effect.


 


(iv)          The authorized, issued and outstanding
capital stock of the Company is as set forth in the Offering Memorandum in the
column entitled “Actual” under the caption “Capitalization” (except for
subsequent issuances, if any, pursuant to the Dealer Manager Agreement or
pursuant to reservations, agreements, employee benefit plans or the exercise of
convertible securities or options referred to in the Offering Memorandum); the
shares of issued and outstanding capital stock of the Company issued since
September 30, 2003 have been duly authorized and validly issued and are fully
paid and non-assessable; and none of the outstanding shares of capital stock of
the Company was


 


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issued in violation of the
preemptive or other similar rights of any securityholder of the Company,
pursuant to any agreement disclosed to us after inquiry of the Company.


 


(v)           Vertex Securities Trust (“Vertex
Securities”) has been duly organized and is validly existing as a business
trust in good standing under the laws of the Commonwealth of Massachusetts, has
corporate power and authority to own, lease and operate its properties and is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the maintenance of an
office, except where the failure so to qualify or to be in good standing could
not reasonably be expected to result
in a Material Adverse Effect.  To the
best of our knowledge and information, the Company does not have any
subsidiaries other than Vertex Pharmaceuticals (San Diego) LLC, Aurora
Instruments Holding LLC, Aurora Instruments LLC, Vertex Holdings, Inc., Vertex
Securities Trust and Vertex Pharmaceuticals (Europe) Limited.


 


(vi)          The Dealer Manager Agreement has been
duly authorized, executed and delivered by the Company.  The Registration Rights Agreement has been
duly authorized, executed and delivered by the Company, and constitutes a valid
and legally binding obligation of the Company, enforceable against the Company
in accordance with its terms.


 


(vii)         The Indenture has been duly authorized,
executed and delivered by the Company and (assuming the due authorization,
execution and delivery thereof by the Trustee) constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with
its terms.


 


(viii)        The New Notes are in the form
contemplated by the Indenture and have been duly authorized by the Company; the
New Notes have been executed and authenticated in the manner provided in the
Indenture and when delivered in exchange for the Old Notes in accordance with
the Exempted Exchanges (assuming the due authorization, execution and delivery
of the Indenture by the Trustee) constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, and are entitled to the benefits of the Indenture.


 


(ix)           Upon issuance and delivery of the New
Notes in accordance with the Dealer Manager Agreement and the Indenture, the
New Notes shall be convertible at the option of the holder thereof for shares
of Common Stock in accordance with the terms of the New Notes and the
Indenture; the shares of Common Stock initially issuable upon conversion of the
New Notes have been duly authorized and reserved for issuance upon such
conversion by all necessary corporate action; such shares, when issued upon
such conversion against payment of the conversion price and in accordance with
the provisions of the New Notes and the Indenture, will be validly issued and
will be fully paid and non-assessable and free and clear of all liens,
encumbrances, equities or claims imposed by or


 


4

















 


arising from actions of the
Company and no holder of such Common Stock is or will be subject to personal
liability by reason of being such a holder.


 


(x)            The issuance of the shares of Common
Stock upon conversion of the New Notes is not subject to the preemptive or
other similar rights of any securityholder of the Company pursuant to any
agreement disclosed to us after inquiry of the Company.


 


(xi)           The Indenture conforms in all
material respects with the 1939 Act.


 


(xii)          To the best of our knowledge, except
as disclosed in the Offering Memorandum, there is no pending or threatened
action, suit, proceeding, inquiry or investigation, to which the Company or any
Subsidiary is a party, or to which the property of the Company or any
Subsidiary thereof is subject, before or brought by any court or governmental
agency or body, which could reasonably be
expected to result in a Material Adverse Effect, or which could
materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in the Dealer Manager Agreement,
the Indenture, the New Notes and the Registration Rights Agreement or the
performance by the Company of its obligations thereunder or the transactions
contemplated by the Offering Memorandum.


 


(xiii)         The information in the Offering
Memorandum under “The exempted exchanges,” “Description of new notes” and
“Certain U.S. federal income tax consequences,” and the information in the
description of the Company’s common stock and the description of the rights
under the Company’s Rights Agreement, contained on pages 78-79 and on page 84,
respectively, of the Company’s Amendment No. 1 to the Registration Statement on
Form S-4 (Reg. No. 333 - 61480), incorporated by reference in the Offering
Memorandum, to the extent that it constitutes matters of law, summaries of
legal matters or legal documents or instruments, the Company’s charter and
bylaws, or legal conclusions, has been reviewed by us and fairly summarizes the
matters referred to therein.  To the
best of our knowledge, there are no other statutes or regulations that are
required to be described in the Offering Memorandum that are not described as
required.


 


(xiv)        The New Notes conform in all material
respects to the description thereof contained in the Offering Memorandum


 


(xv)         To the best of our knowledge, there are
no franchises, contracts, indentures, mortgages, loan agreements, notes or
leases that would be required to be described in the Offering Memorandum that
are not described or referred to in the Offering Memorandum, and the
descriptions thereof or references thereto fairly summarize such arrangements.


 


(xvi)        To the best of our knowledge, neither
the Company nor Vertex Securities is in violation of its charter or by-laws
and, based solely on an inquiry of the Company, we know of no default by the
Company or Vertex Securities that exists in the due


 


5

















 


performance or observance of
any material obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other agreement
or instrument that is described or referred to in the Offering Memorandum.


 


(xvii)       No filing with, or authorization,
approval, consent, license, order, registration, qualification or decree of,
any court or governmental authority or agency, domestic or foreign (other than
such as may be required under the applicable securities laws of the various
jurisdictions in which the New Notes will be offered or sold, as to which we
need express no opinion) is necessary or required in connection with the due
authorization, execution and delivery of the Dealer Manager Agreement or the
Registration Rights Agreement or the due execution, delivery or performance of
the Indenture by the Company in connection with the Exempted Exchanges or for
the issuance of shares of Common Stock upon conversion of New Notes.


 


(xviii)      It is not necessary in connection with the
consummation of the Exempted Exchanges in the manner contemplated by the Dealer
Manager Agreement and the Offering Memorandum or in connection with the
conversion of the Notes into shares of the Common Stock in the manner
contemplated in the Indenture, to register the New Notes or the shares of
Common Stock issuable upon conversion of the Notes under the Securities Act or
to qualify the Indenture under the Trust Indenture Act.


 


(xix)         The execution, delivery and performance
of the Dealer Manager Agreement, the Indenture, the Registration Rights
Agreement and the New Notes and the consummation of the transactions
contemplated in the Dealer Manager Agreement, the Registration Rights
Agreement, the Indenture and in the Offering Memorandum (including the issuance
of the shares of Common Stock issuable upon conversion of the New Notes) and
compliance by the Company with its obligations under the Dealer Manager
Agreement, the Indenture, the Registration Rights Agreement and the New Notes
do not and will not, whether with or without the giving of notice or lapse of
time or both, conflict with or constitute a breach of, or default under or
result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or Vertex Securities pursuant to any
contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or any other agreement or instrument, referred to in the Offering
Memorandum, to which the Company or Vertex Securities is a party or by which
either of them may be bound, or to which any of the property or assets of the
Company or Vertex Securities is subject (except for conflicts, breaches or
defaults, liens charges or encumbrances that could not reasonably be expected
to have a Material Adverse effect), nor will such action result in any
violation of the provisions of the charter or by-laws of the Company or Vertex
Securities, or any applicable law, statute, rule, regulation (other than such
as may be required under the applicable securities laws of the various jurisdictions
in which New Notes will be offered or sold, as to which we offer no opinion),
and any judgment, order, writ or decree, known to us, of any government,
government instrumentality or court, domestic or foreign, having


 


6

















 


jurisdiction over the Company
or Vertex Securities or any of their respective properties, assets or
operations.


 


(xx)          The Company is not, and, upon the
consummation of the Exempted Exchanges as described in the Offering Memorandum,
will not be, an “investment company” or an entity “controlled” by an
“investment company,” as such terms are defined in the U.S. Investment Company
Act of 1940.


 


In the
course of the preparation of the Offering Memorandum, we participated in
conferences with officers, representatives and in-house attorneys of the
Company, representatives of the independent public accountants for the Company,
and with the Dealer Manager and its counsel during which the contents of the
Offering memorandum and related matters were discussed, and although we have
not verified and are not passing upon and do not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Offering Memorandum (except as set forth in opinions (xiii) and (xiv) hereto),
on the basis of the foregoing, no facts have come to our attention which have
caused us to believe that the Offering Memorandum as of the date of the
Offering Memorandum or at the Closing Date, contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that we
express no view or belief with respect to the financial statements (including
the notes thereto) and schedules and other financial and accounting data
included in the Offering Memorandum.


 


We express no
opinion as to any matter other than as expressly set forth above, and no other
opinion is intended to be implied nor may be inferred herefrom.  The opinions expressed herein are given as
of the date hereof, and we undertake no obligation hereby and disclaim any
obligation to advise you of any change after the date hereof pertaining to any
matter referred to herein.  This opinion
is rendered solely for your benefit and may not be circulated, quoted, relied
upon or otherwise referred to by any other person without our written consent,
except that US Bank National Association, in its capacity as Trustee under the
Indenture, may rely on this opinion as if addressed to it.


 


 


	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MINTZ,
  LEVIN, COHN, FERRIS,

  
	
   

  	
  GLOVSKY and
  POPEO, P.C.

  



 


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