Exhibit 10.2

 

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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

 

February 5, 2010

 

Dr. Peter Mueller

45 Algonquian Drive

Natick, MA  01760

 

RE:

Amended and Restated Change of Control Agreement

 

Dear Peter:

 

Your expertise, reputation and position make you 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” benefit to help ensure that in the event the Company becomes involved
in a “change of control” transaction, there will be no distraction from your
attention to the needs of the Company.  This Amended and Restated Change of
Control Agreement (this “Agreement”) amends and restates, effective as of the
date written above, that certain Change of Control Agreement made and entered
into as of the 7th day of March, 2003, as amended by that certain Amendment to
Change of Control Agreement entered into as of the 8th day of November, 2004,
that certain Second Amendment to Change of Control Agreement entered into as of
the 11th day of February, 2008, and that certain Amendment to Change of Control
Agreement entered into as of the 27th day of December, 2008, by and between you
and the Company.

 

I.              Definitions.  For the purposes of this Agreement, capitalized
terms shall have the following meaning:

 

1.     “Base Salary” shall mean your annual base salary in effect immediately
prior to a Change of Control (as such term is defined in Section I.4 below).

 

2.     “Cause” shall mean:

 

(a)           your conviction of a felony crime of 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 thirty (30) days to correct any problems and
further provided if you correct the problem(s) you may not be terminated for
Cause in that instance;

 

(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

 

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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.

 

3.     “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 fifty percent (50%) of the
combined voting power of the outstanding securities of the Company, as the case
may be, 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.

 

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 under Internal Revenue Code Section 22(e)(3).

 

5.     “Good Reason” shall mean that within ninety (90) days prior to a Change
of Control, or within twelve (12) months after a Change of Control, one of the
following events occurs without your consent:

 

(a)           You are assigned to material duties or responsibilities that are
inconsistent, in any significant respect, with the scope of duties and
responsibilities associated with your position and office immediately prior to
the Change of Control (provided that such reassignment of duties or
responsibilities is not for Cause, due to your Disability or at your request);

 

(b)           You suffer a material reduction in the authorities, duties, or job
title and responsibilities associated with your position and office immediately
prior to the Change of Control, on the basis of which you make a good faith
determination that you can no longer carry out your position or office in the
manner contemplated before the Change of Control (provided that such reduction
in the authorities, duties,

 

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or job title and responsibilities is not for Cause, due to your Disability or at
your request);

 

(c)           your annual base salary is decreased below the Base Salary;

 

(d)           the principal offices of the Company, or the location of the
office to which you are assigned at the time this Agreement is entered into, is
relocated to a place thirty-five (35) or more miles away, without your
agreement; or

 

(e)           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 any of (a) through (e) 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 any of
(a) through (e) 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.

 

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, in exchange for a general release executed by you within 30 days of your
Termination Date of all claims against the Company, its subsidiaries, and its
and their officers, directors and representatives, in a form satisfactory to the
Company, you shall receive the following benefits:

 

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1.           Severance Payment.  The Company shall make a cash payment (the
“Severance Payment”) to you in an amount equal to:

 

(a)           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 pro rata 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).  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

 

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subsequent event constituting a separation of service under
Section 409A(a)(2)(A)(i) of the Code.

 

2.           Accelerated Vesting.

 

(a)      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)      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 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) for a period of 18 months from the Termination Date.

 

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 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;
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

 

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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.  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.

 

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.

 

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

 

 

 

Very truly yours,

 

 

 

 

 

Vertex Pharmaceuticals Incorporated

 

 

 

 

 

 

 

 

 

/s/Matthew Emmens

 

 

By:

Matthew Emmens

 

 

 

President, Chairman and

 

 

 

Chief Executive officer

 

 

 

 

 

 

 

 

ACCEPTED AND AGREED:

 

 

 

 

 

/s/Peter Mueller

 

 

Peter Mueller

 

 

 

 

 

2/5/10

 

 

Date

 

 

 

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