Exhibit 10.4

 

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VERTEX PHARMACEUTICALS INCORPORATED

 

130 WAVERLY STREET · CAMBRIDGE, MA 02139-4242

 

TEL. 617.444.6100 · FAX 617.444.6483

 

http://www.vrtx.com

 

July 25, 2012

 

Megan Pace

33 Milford Street #3

Boston, MA 02118

 

RE:                           Second Amended and Restated Change of Control
Agreement

 

Dear Megan:

 

You are a key member of the senior management team of Vertex Pharmaceuticals
Incorporated (the “Company”).  As a result, the Company would like to provide
you with the following “change of control” benefits to help ensure that if the
Company becomes involved in a “change of control” transaction, there will be no
distraction from your attention to the needs of the Company.

 

I.                                        Definitions.  For the purposes of this
Amended and Restated Change of Control Agreement (this “Agreement”), capitalized
terms shall have the following meanings:

 

1.              “Cause” shall mean:

 

(a)                                 your conviction of a crime involving moral
turpitude;

 

(b)                                 your willful refusal or failure to follow a
lawful directive or instruction of the Company’s Board of Directors or the
individual(s) to whom you report, provided that you receive prior written notice
of the directive(s) or instruction(s) that you failed to follow, and provided
further that the Company, in good faith, gives you 30 days to correct such
failure and further provided that if you correct the failure(s), any termination
of your employment on account of such failure shall not be treated for purposes
of this Agreement as a termination of employment for “Cause”;

 

(c)                                  in carrying out your duties you commit
(i) willful gross negligence, or (ii) willful gross misconduct, resulting in
either case in material harm to the Company, unless such act, or failure to act,
was believed by you, in good faith, to be in the best interests of the Company;
or

 

(d)                                 your violation of the Company’s policies
made known to you regarding confidentiality, securities trading or inside
information.

 

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2.              “Change of Control” shall mean that:

 

(a)                                 any “person”  or “group” as such terms are
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the
“Act”), becomes a beneficial owner, as such term is used in Rule 13d-3
promulgated under the Act, of securities of the Company representing more than
50% of the combined voting power of the outstanding securities of the Company
having the right to vote in the election of directors; or

 

(b)                                 all or substantially all the business or
assets of the Company are sold or disposed of, or the Company or a subsidiary of
the Company combines with another company pursuant to a merger, consolidation,
or other similar transaction, other than (i) a transaction solely for the
purpose of reincorporating the Company or one of its subsidiaries in a different
jurisdiction or recapitalizing or reclassifying the Company’s stock; or (ii) a
merger or consolidation in which the shareholders of the Company immediately
prior to such merger or consolidation continue to own at least a majority of the
outstanding voting securities of the Company or the surviving entity immediately
after the merger or consolidation.

 

3.              “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

4.              “Disability” shall mean a disability as determined under the
Company’s long-term disability plan or program in effect at the time the
disability first occurs, or if no such plan or program exists at the time of
disability, then a “disability” as defined Section 22(e)(3) of the Code.

 

5.              “Good Reason” shall mean one of the following events has
occurred without your consent:

 

(a)                                 You suffer a material reduction in the
authorities, duties or job title and responsibilities associated with your
position as Senior Vice President, Corporate Communications for the Company as
of the date hereof;

 

(b)                                 your annual base salary is decreased;

 

(c)                                  the office to which you are assigned is
relocated to a place 35 or more miles away; or

 

(d)                                 following a Change of Control, the Company’s
successor fails to assume the Company’s rights and obligations under this
Agreement;

 

provided that Good Reason shall not exist unless and until within 30 days after
the event giving rise to Good Reason under (a), (b), (c) or (d) above has
occurred, you deliver a written termination notice to the Company stating that
an event giving rise to Good Reason has occurred and identifying with reasonable
detail the event that you assert constitutes Good Reason under (a), (b), (c) or
(d) above and the Company fails or refuses to cure or eliminate the event giving
rise to Good Reason on or within 30 days after receiving your notice.  To avoid
doubt, the termination of your employment would become effective at the close of
business on the thirtieth day after the Company receives your termination
notice, unless the Company cures or eliminates the event giving rise to Good
Reason prior to such time.

 

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6.              “Termination Date” shall mean the last day of your employment
with the Company.

 

II.                                   Severance Benefits upon Change of
Control.  If:

 

(A)                      your employment is terminated by the Company (except
for termination for Cause or due to a Disability) and the Termination Date is
within 90 days prior to a Change of Control or within 12 months after a Change
of Control; or

 

(B)                      you, of your own initiative, (i) terminate your
employment for Good Reason (in accordance with the notice and cure provisions
set forth in Section I.5 above) and (ii) the event giving rise to Good Reason
occurs within 90 days prior to a Change of Control or within 12 months after a
Change of Control;

 

then, you shall receive the following benefits:

 

1.                                 Severance Payment.  In exchange for your
execution within 60 days of the Termination Date of a general release, in a form
satisfactory to the Company, of all claims against the Company, its
subsidiaries, and its and their officers, directors and representatives, that
becomes enforceable and irrevocable within such 60-day period, the Company shall
make a cash payment (the “Severance Payment”) to you in an amount equal to:

 

(a)                                 (i) your annual base salary (provided,
however, that if you terminate your employment for Good Reason based on a
reduction in your annual base salary, then the annual base salary to be used in
calculating the Severance Payment shall be your annual base salary in effect
immediately prior to such reduction in annual base salary) plus your target
bonus under any bonus program applicable to you for the year in which the
Termination Date occurs; plus

 

(b)                                 A prorata portion of your target bonus for
the portion of the year in which the Termination Date occurs under any bonus
program applicable to you; plus

 

(c)                                  all cash incentive compensation awards
earned by you but not paid prior to the Termination Date; provided that, if a
fiscal year has been completed and the incentive award for such fiscal year has
not been determined, the incentive compensation for such completed fiscal year
shall equal the target bonus for such fiscal year.

 

Except with respect to any portion of the Severance Payment that is delayed as
set forth in this paragraph, the Severance Payment shall be made in cash within
ten days after the execution by you of the general release referred to above and
expiration without revocation of any applicable revocation periods under such
general release (or, if the Change of Control resulting in your becoming
entitled to such benefits occurs after such execution and expiration, within ten
days after the Change of Control), provided that, if the 60-day period during
which the general release is required to become effective and

 

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irrevocable begins in one calendar year and ends in another calendar year, the
Severance Payment shall not be made before the first day of the second calendar
year.  The Severance Payment shall be divided into two portions, consisting of a
portion that does not constitute “nonqualified deferred compensation” within the
meaning of Section 409A of the Code and a portion, if any, that does constitute
nonqualified deferred compensation. If you are a “specified employee” as defined
in Section 409A(a)(2)(B)(i) of the Code, the commencement of the delivery of any
such payments that constitute nonqualified deferred compensation payable upon a
“separation from service” under Section 409A(a)(2)(A)(i) of the Code will be
delayed until the first business day that is more than six months after your
Termination Date.  The determination of whether, and the extent to which, any of
the payments to be made to you hereunder are nonqualified deferred compensation
shall be made after the application of all applicable exclusions, including
those set forth under Treasury Reg. § 1.409A-1(b)(9). Any payments that are
intended to qualify for the exclusion for separation pay due to involuntary
separation from service set forth in Reg. §1.409A-1(b)(9)(iii) must be paid no
later than the last day of the second taxable year following the taxable year in
which the Termination Date occurs.  To the extent that the termination of your
employment does not constitute a separation of service under
Section 409A(a)(2)(A)(i) of the Code (as the result of further services that are
reasonably anticipated to be provided by you to the Company at the time your
employment is terminated), the payment of any non-qualified deferred
compensation will be further delayed until the first business day that is more
than six months after the date of a subsequent event constituting a separation
of service under Section 409A(a)(2)(A)(i) of the Code.

 

2.                                 Accelerated Vesting.

 

(a)                  On the Termination Date, stock options for the purchase of
the Company’s securities held by you as of the Termination Date and not then
exercisable shall immediately become exercisable in full.  The options to which
this accelerated vesting applies shall remain exercisable until the earlier of
(a) the end of the 90-day period immediately following the later of (i) the
Termination Date or (ii) the date of the Change of Control and (b) the date the
stock option(s) would otherwise expire; and

 

(b)                  On the Termination Date, the Company’s lapsing repurchase
right with respect to shares of restricted stock held by you shall lapse in full
(subject to your making satisfactory arrangements with the Company providing for
the payment to the Company of all required withholding taxes).

 

Notwithstanding anything to the contrary in this Agreement, the terms of any
option agreement or restricted stock agreement shall govern the acceleration, if
any, of vesting or lapsing of the Company’s repurchase rights and period of
exercisability of such awards, as applicable, except to the extent that the
terms of this Agreement are more favorable to you.

 

3.                                 Continued Insurance Coverage.  If COBRA
coverage is elected by you, the Company shall pay the cost of insurance
continuation premiums on your behalf (whether or not

 

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covered by COBRA) to continue standard medical, dental and life insurance
coverage for you (or the cash equivalent of same if you are ineligible for
continued coverage) until the earlier of (i) the date 12 months after the
Termination Date or (ii) the date you begin receiving substantially equivalent
coverage and benefits through a subsequent employer.

 

4.                                 No Mitigation.  You shall not be required to
mitigate the amount of the Severance Payment or any other benefit provided under
this Agreement by seeking other employment or otherwise, nor shall the amount of
any payment or benefit provided for in this Agreement be reduced (except as
provided in Article II Section 3(ii)) by any compensation earned by you as the
result of other employment, by retirement benefits, or be offset against any
amount claimed to be owed by you to the Company or otherwise (except for any
required withholding taxes); provided, that if the Company makes any other
severance payments to you under any other program or agreement, such amounts
shall be offset against the payments the Company is obligated to make pursuant
to this Agreement.

 

III.                              Miscellaneous.

 

1.                                 Employee’s Obligations.  Upon the termination
of employment, you shall promptly deliver to the Company all property of the
Company and all material documents, statistics, account records, programs and
other similar tangible items which may by in your possession or under your
control and which relate in a material way to the business or affairs of the
Company or its subsidiaries, and no copies of any such documents or any part
thereof shall be retained by you.

 

2.                                 Entire Agreement.  This Agreement and the
“Employee Non-Disclosure, Non-Competition & Inventions Agreement” previously
executed by you covers the entire understanding of the parties as to the subject
matter hereof, superseding all prior understandings and agreements related
hereto, including the previous Change of Control Agreement between you and the
Company.  No modification or amendment of the terms and conditions of this
Agreement shall be effective unless in writing and signed by the parties or
their respective duly authorized agents, provided, however, that the Company
may, without your consent, unilaterally adopt amendments that may be required so
that this Agreement continues to comply with applicable law or regulation,
including without limitation Section 409A of the Code, provided such amendments
do not adversely affect the benefits to be provided to you under Section II of
this Agreement.

 

3.                                 Governing Law.  This Agreement shall be
governed by the laws of The Commonwealth of Massachusetts, as applied to
contracts entered into and performed entirely in Massachusetts by Massachusetts
residents.

 

4.                                 Successors and Assigns.  This Agreement may
be assigned by the Company upon a sale, transfer or reorganization of the
Company.  Upon a Change of Control, the Company shall require the successor to
assume the Company’s rights and obligations under this Agreement.  The Company’s
failure to do so shall constitute a material breach of this Agreement.  This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their successors, permitted assigns, legal representatives and heirs.

 

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Kindly indicate your acceptance of the foregoing by signing and dating this
Agreement as noted below, and returning one fully executed original to my
attention.

 

 

Very truly yours,

 

 

 

Vertex Pharmaceuticals Incorporated

 

 

 

 

 

By:

/s/ Jeffrey M. Leiden

 

 

Jeffrey M. Leiden

 

 

President, Chairman and

 

 

Chief Executive Officer

 

 

ACCEPTED AND AGREED:

 

 

 

 

 

/s/ Megan Pace

 

 

Megan Pace

 

 

 

 

 

9 August 2012

 

 

Date

 

 

 

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