Exhibit 10.4


 


September
8, 2005


 


 


Radcliffe SPC, Ltd. — Class A


Convertible Crossover Segregated Portfolio


c/o RG Capital Management, L.P.


3 Bala Plaza — East, Suite 501


Bala Cynwyd, PA  19004


Attention: 
Gerald Stahlecker, Managing Director


 


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


 


Dear Steve:


 


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


 


                                                1.                                       Exchange of 5%
Convertible Subordinated Notes.


 


                                                (a) Exchange
of Securities.  On the terms and
subject to the conditions set forth herein, the Fund agrees to transfer, or
cause to be transferred, to VRTX all of its right, title and interest in and to
the 5% Convertible Subordinated Notes due 2007 (the “Notes”) described in
Section 2(l) (the “Exchange Notes”) in exchange for a number of shares (the “Exchanged
Shares”) of freely tradable VRTX Common Stock (the “Common Stock”) equal to (i)
99% of the principal amount of the Exchange Notes plus 100% of the
accrued and unpaid interest on the Exchange Notes through and including the
date hereof, divided by (ii) the Determination Price.


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


 


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


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


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


 





















 


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


 


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


 


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


(i)                                     This Agreement
is its valid and binding agreement, enforceable against each of VRTX and the
Fund in accordance with its terms, subject to bankruptcy and similar laws and
to equitable principles.


(j)                                     The Fund is the
sole legal and beneficial owner of the Exchange Notes, and, upon the Closing,
VRTX will acquire the Exchange Notes free and clear of any liens, encumbrances,
pledges, security interests or other restrictions or claims of third parties.


 


2





















 


(k)                                  The Fund is not
an affiliate of VRTX.


(l)                                     The Fund holds
the following Exchange Notes that it is exchanging pursuant to this Agreement,
which Exchanging Notes were acquired before September 1, 2005 in the public
market and are free of restrictive legend: $6,592,000 principal amount of  Notes (CUSIP: 92532F AD 2).


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


(n)                                 To the extent
VRTX considers the execution of this Agreement and the consummation of the
transaction contemplated hereby shall constitute material, non-public
information regarding VRTX, VRTX agrees to disseminate a press release to
inform the public of the material aspects of this transaction by 9:30 am EST of
the Closing Date.


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


 


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


 


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


 


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


 


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


 


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


 


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


 


3





















 


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


 


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


 


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


	
  If to the Fund:

  	
  Radcliffe SPC, Ltd. — Class A

  
	
   

  	
  Convertible Crossover Segregated Portfolio

  
	
   

  	
  c/o RG Capital Management, L.P.

  
	
   

  	
  3 Bala Plaza — East, Suite 501

  
	
   

  	
  Bala Cynwyd, PA 19004

  
	
   

  	
  Attention: Gerald Stahlecker, Managing Director

  
	
   

  	
   

  
	
   

  	
  Facsimile: 610-617-0580

  
	
   

  	
   

  
	
  If to VRTX:

  	
  Vertex Pharmaceuticals
  Incorporated

  
	
   

  	
  130 Waverly Street

  
	
   

  	
  Cambridge, Massachusetts
  02139

  
	
   

  	
  Attention: The Office of General Counsel

  
	
   

  	
  Facsimile: 617-444-6483

  



 


4





















 


 


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


 


	
   

  	
   

  	
  Vertex Pharmaceuticas
  Incorporated

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ JOSHUA S. BOGER

  
	
   

  	
   

  	
  Name:

  	
  Joshua S. Boger

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  



 


Accepted and Agreed as of this 8th day


of September, 2005:


 


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


Convertible Crossover Segregated Portfolio


 


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


                By:  RGC
Management Company, LLC, its general partner


 


 


	
   

  	
  By:

  	
  /s/ GERALD STAHLECKER

  
	
   

  	
  Name:

  	
  Gerald Stahlecker

  
	
   

  	
  Title:

  	
  Managing Director

  



 


5