Exhibit 10.2


EXCHANGE
AGREEMENT


 


This Exchange Agreement (this “Agreement”) is made as
of the later of the dates set forth opposite the parties’ signatures (the “Agreement
Date”) by and between Vertex Pharmaceuticals Incorporated, a Massachusetts
corporation (the “Company”), and Alexandra Global Master Fund
Ltd., a British Virgin Islands international business company (the “Investor”).


 


WHEREAS:  The Company originally issued
$345,000,000 in aggregate principal amount of 5% Convertible Subordinated Notes
due 2007 (the “Notes”);


 


WHEREAS:  The
Investor is the holder of the Notes described in Section 2(b) (the “Exchange
Notes”); and


 


WHEREAS:  The
Investor has indicated to the Company its desire to exchange the Exchange Notes
for Common Stock of the Company (the “Common Stock”) and, after negotiation
between the parties hereto, such parties have agreed to affect such exchange on
the terms and conditions hereinafter set forth.


 


NOW, THEREFORE, in
consideration of the premises, the mutual covenants and agreements herein
contained and other valuable consideration, the receipt and adequacy whereof is
hereby acknowledged, the parties hereto agree as follows:


Section 1.               Agreement
to Exchange Securities


(a)           Exchange
of Securities.  On the terms and
subject to the conditions set forth herein, the Investor agrees to transfer, or
cause to be transferred, to the Company all of its right, title and interest in
and to the Exchange Notes on the following basis: in exchange for the Exchange
Notes, a number of shares of freely tradable Common Stock (the “Exchanged
Shares”) equal to (i) 99% of the principal amount of the Exchange Notes plus
100% of the accrued and unpaid interest on the Exchange Notes, divided by
(ii) the Determination Price.


(b)           Determination
Price.  The Determination Price shall
be equal to 93% of the lesser of (i) the arithmetic average of the closing bid
prices of the Common Stock for the 10 consecutive trading days ending on and
including the Agreement Date, and (ii) the closing bid price of the Common
Stock on the Agreement Date.


(c)           Fractional
Shares.  In lieu of issuing
fractional shares, the Company shall issue the highest whole number of
Exchanged Shares according to the formula set forth in Section 1.1(a) plus cash
in an amount equal to the fraction of an Exchanged Share to which the Investor
would otherwise be entitled multiplied by the Determination Price.


(d)           Closing.  The completion of the transactions
contemplated by this Agreement (the “Closing”) shall take place as soon as
practical and, in any event, no later than September 9, 2005, or such other
date as is agreed upon by the parties (the “Closing Date”), as follows:


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


 





















 


to the Company against
delivery of the Exchanged Shares by the Company through the Depositary Trust
Company to Deutsche Bank Securities, DTC# 0573, FFC: Alexandra Global Master
Fund Ltd., Acct: 106-95455.


(ii) The Company shall pay the Investor by wire
transfer of immediately available funds an amount equal to the cash value of
any fractional Exchange Share, determined in accordance with the provisions of
Section 1(c).


Section 2.               Representations
and Warranties


(a)           Mutual
Representations and Warranties.  Each
party hereto hereby makes the following representations and warranties to the
other party hereto as follows:


(i)            It
is a corporation or other entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization.


(ii)           (x)
It has full power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby, and (y) the person who has executed this
Agreement is duly authorized to do so and thereby bind the party on whose
behalf he or she is purporting to sign.


(iii)          This
Agreement is its valid and binding agreement, enforceable against it in
accordance with its terms, subject to bankruptcy and similar laws and to
equitable principles.


(iv)          Neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will violate, result in a breach of any of
the terms or provisions of, constitute a default under, accelerate any
obligations under, or conflict with (x) its certificate of incorporation or
bylaws (or other organizational documents) or any agreement, indenture or other
instrument to which it is a party or by which it or its properties are bound,
(y) any judgment, decree, order or award of any court, governmental body or
arbitrator to which it is subject, or (z) any law, rule or regulation
applicable to it.


(v)           It
has not, directly or indirectly, paid any commission or other remuneration to
any person for soliciting the exchange of the Exchange Notes for Exchanged
Shares as contemplated by this Agreement.


 


(b)           Representations
and Warranties of the Investor.  The
Investor hereby represents and warrants to the Company that it


(i) is the sole legal and beneficial owner of the Exchange
Notes, and, upon the Closing, the Company will acquire the Exchange Notes free
and clear of any liens, encumbrances, pledges, security interests or other
restrictions or claims of third parties, other than any of the foregoing
created by the Company;


(ii) is not an affiliate of the Company;


(iii) holds the following
Exchange Notes that were acquired before September 1, 2005 in the public market
and are free of restrictive legend: $17,029,000 principal amount of  Notes (CUSIP: 92532F AD 2):


 


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(iv) has had such
opportunity as it has deemed adequate to obtain from representatives of  the Company such information as is necessary
to permit it to evaluate the merits and risks of an investment in the Exchanged
Shares; and


 


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


 


(vi) on September 8, 2005, it (a) did not and will not, directly or indirectly,
issue, offer, sell, agree to issue, offer or sell, solicit offers to
purchase, grant any call option, warrant or other right to purchase, purchase any put option or other right
to sell, pledge, borrow, assign or otherwise dispose of any Relevant Security (as defined below), and (b) did not and
will not, directly or indirectly, establish or increase any “put equivalent
position” or liquidate or decrease any “call equivalent position” with respect
to any Relevant Security (in each case within the meaning of Section 16 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules
and regulations promulgated thereunder) with respect to any Relevant
Security, or otherwise enter into any
swap, derivative or other transaction or arrangement that transfers to another,
in whole or in part, any economic consequence of ownership of a Relevant
Security, whether or not such transaction is to be settled by delivery of
Relevant Securities, other securities, cash or other consideration.    As
used herein, the term “Relevant Security” means the Common Stock, any other
equity security of the Company and any security convertible into, or
exercisable or exchangeable for, the Common Stock or any other such equity
security.


 


 


(c)           Representations
and Warranties of the Company.  The
Company hereby represents and warrants to the Investor that upon issuance, the
Exchanged Shares will be duly and validly authorized and issued, fully paid and
nonassessable, and that the Investor will acquire such Common Stock free and
clear of any liens, encumbrances, pledges, security interests or other
restrictions or claims of third parties, other than any of the foregoing
created by the Investor. The Company represents and warrants to the Investor
that the Exchanged Shares to be issued in exchange for the Exchange Notes shall
be issued pursuant to a valid exemption from registration under Section 3(a)(9)
of the Securities Act of 1933, as amended, in order to make them freely salable
into the public market in the hands of the Investor. If required by the rules
of Nasdaq, the Company will, prior to the Closing Date, file an application for
the listing of the Exchanged Shares on Nasdaq.


(d)           Survival
of Representations and Warranties. 
All representations, warranties and agreements of each party hereto
shall survive the Closing.


Section 3.               Miscellaneous


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


(b)           Exclusivity.  The Company hereby agrees that concurrently
with the Closing and for a 90 day period beginning on the Closing Date, the
Company will not engage in any transaction or transactions that would result in
the exchange of Notes with an aggregate principal amount in excess of
$40,050,000 (including the transactions contemplated by this Agreement, which
shall not exceed such amount).


(c)           Confidentiality.  The parties hereto agree to keep confidential
and to not disclose the terms, provisions, or existence of this Agreement,
except as the parties reasonably believe such disclosure


 


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is required by applicable law, provided, however, that the
Company shall be entitled, without the prior approval of the Investor, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations, including the Exchange Act
and the rules and regulations promulgated thereunder, including the public
filing of this Agreement (although the Investor shall be consulted by the
Company in connection with any such press release or other public disclosure
prior to its release and shall be provided with a copy thereof).  The restrictions contained in the foregoing
sentence shall expire upon the Company’s issuance of a press release describing
the transactions.


(d)           Notices.  All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally, by facsimile transmission (with subsequent letter
confirmation by mail), by overnight courier or two days after being mailed by
certified or registered mail, postage prepaid, return receipt requested, to the
parties, their successors in interest or their assignees at the following
addresses, or at such other addresses as the parties may designate by written
notice in the manner aforesaid:


	
  If to the Investor:

  	
  Alexandra Global Master
  Fund Ltd.

  
	
   

  	
  c/o Alexandra Investment
  Management, LLC

  
	
   

  	
  767 Third Avenue

  
	
   

  	
  39th Floor

  
	
   

  	
  New York, New York  10017

  
	
   

  	
  Facsimile:  (212) 301-1810

  
	
   

  	
   

  
	
  If to the Company:

  	
  Vertex Pharmaceuticals Incorporated

  
	
   

  	
  130 Waverly Street

  
	
   

  	
  Cambridge, Massachusetts 02139

  
	
   

  	
  Attention: The Office of General Counsel

  
	
   

  	
  Facsimile: 617-444-6483

  



 


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


(f)            Governing
Law. This Agreement shall be governed by and construed and enforced in
accordance with the internal substantive law, and not the law pertaining to
conflicts of law, of the State of New York.


(g)           Counterparts.  This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.


(h)           Complete
Agreement.  This Agreement is an
integrated agreement containing the entire agreement between the parties hereto
with respect to the subject matter hereof and shall supersede all previous and
all contemporaneous oral or written negotiations, commitments or
understandings.


(i)            Modifications,
Amendments and Waiver.  This
Agreement may be modified, amended otherwise supplemented or terminated only by
a writing signed by the party against whom it is sought to be enforced.  No waiver of any right or power hereunder
shall be deemed effective unless and until a writing waiving such right or
power is executed by the party waiving such right or power.


 


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(j)            No
Third Party Beneficiaries. There are no third party beneficiaries under
this Agreement or intended by any party hereto.


(k)           Expenses.  Each party hereto shall bear its own costs
and expenses, including, without limitation, attorneys’ fees, incurred in
connection with this Agreement and the transactions contemplated hereby.


(l)            Contract
Interpretation and Construction of Agreement.  This Agreement is the joint drafting product
of the Company and the Investor, and each provision has been subject to
negotiation and agreement with the advice of counsel and shall not be construed
for or against either party as the drafter thereof.


 


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                IN
WITNESS WHEREOF, each of the Company and the Investor have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first written above.


 


	
   

  	
  Vertex
  Pharmaceuticals Incorporated

  
	
   

  	
   

  	
   

  
	
  Date: September
  8, 2005

  	
  By:

  	
  /s/ JOSHUA S. BOGER

  
	
   

  	
   

  	
  Joshua S. Boger,
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ALEXANDRA GLOBAL MASTER FUND LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  ALEXANDRA INVESTMENT

  
	
   

  	
   

  	
  MANAGEMENT, LLC,

  
	
   

  	
   

  	
  as Investment Advisor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date: September 8, 2005

  	
  By:

  	
  /s/ MIKHAIL FILIMONOV

  
	
   

  	
   

  	
  Mikhail Filimonov

  
	
   

  	
   

  	
  Chairman and Chief Executive Officer

  



 


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