Exhibit 10.7


 


SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT


 


This
Second Amended and Restated Employment Agreement (the “Agreement”)
amends and restates, effective as of this 5th day of February, 2010, that certain Amended
and Restated Employment Agreement made and entered into as of the 8th day of November, 2004, as amended by that
certain Amendment No. 1 entered into as of the 11th day of February, 2008, and that certain
Amendment No. 2 entered into as of the 29th day of December, 2008 (collectively, the “Original
Agreement”) by and between Vertex Pharmaceuticals Incorporated, a
Massachusetts corporation (together with its successors and assigns, the “Company”),
and Kenneth S. Boger (the “Executive”).


 


W IT N E S S E T H


 


WHEREAS,
the Company has employed the Executive as the General Counsel and a Senior Vice
President of the Company since the date of the Original Agreement; and


 


WHEREAS,
the Company and the Executive desire to amend the Original Agreement.


 


NOW,
THEREFORE, in consideration of the promises and mutual covenants contained
herein and for other good and valuable consideration, the receipt of which is
mutually acknowledged, the Company and the Executive (each individually a “Party”,
and together the “Parties”) agree as follows:


 


1. DEFINITIONS.


 


(a) “Base
Salary” shall mean the Executive’s base salary in accordance with SECTION 4
below.


 


(b) “Board”
shall mean the Board of Directors of the Company.


 


(c) “Cause”
shall mean (i) the Executive is convicted of a crime involving moral
turpitude, or (ii) the Executive commits a material breach of any
provision of this Agreement, or (iii) the Executive, in carrying out his
duties, acts or fails to act in a manner which is determined, in the sole
discretion of the Board, to be (A) willful gross neglect or (B) willful
gross misconduct resulting, in either case, in material harm to the Company
unless such act, or failure to act, was believed by the Executive, in good
faith, to be in the best interests of the Company.


 


(d) “Change
of Control” shall be deemed to have occurred if:


 


(i) 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 (any such owner being herein referred to as an “Acquiring
Person”);


 


(ii) a majority of
the Company’s Board at any time during the Term of this Agreement consists of
individuals other than individuals nominated or approved by a majority of the
Disinterested Directors; or


 


(iii) 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 (1) a
transaction solely for the purpose of reincorporating the company in a
different jurisdiction or recapitalizing or reclassifying the Company’s stock,
or (2) 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.


 


(e) “Common
Stock” shall mean the common stock of the Company.


 


(f) “Competitive
Activity” shall mean engagement directly or indirectly, individually or
through any corporation, partnership, joint venture, trust, limited liability
company or person, as an officer, director, employee, agent, consultant,
partner, proprietor, shareholder or otherwise, in any business associated with
the biopharmaceutical or pharmaceutical industry(other than a business which is
an independent general practice law firm which is so “associated” only by
reason of the business of one or more of its clients), which, in the sole
discretion of the Company, is determined to compete with the business and/or
interests or future interests of the Company, or any of its affiliates, at any
place in which it, or any such affiliate, is then conducting its business, or
at any place where products manufactured or sold by it, or any such affiliate,
are offered for sale, or any place in the United States or any possessions or
protectorates thereof, provided, however, that ownership of five percent (5%)
or less of the outstanding voting securities or equity interests of any company
shall not in itself be deemed to be competition with the Company.


 


(g) “Disability”
or “Disabled” 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).  Notwithstanding the foregoing, to the extent
that any payments under this Agreement that are payable upon disability
constitute nonqualified deferred compensation subject to Section 409A of
the Code, “DISABILTY” or “DISABLED” shall mean, by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or can be expected to last for a continuous period of not less than 12
months, the Executive is either (a) unable to engage in any substantial
gainful activity or (b) receiving income replacement benefits for a period
of not less than three months under any disability plan covering employees of
the Company.  For purposes of the
immediately foregoing sentence, the existence of a disability will be
determined in all respects in accordance with the provisions of Section 409A(a)(2)(C) of
the Code.


 


(h) “Disinterested
Director” shall mean any member of the Company’s Board (i) who is not
an officer or employee of the Company or any of their subsidiaries, (ii) who
is not an Acquiring Person or an affiliate or associate of an Acquiring Person
or of any such affiliate or associate and (iii) who was a member of the
Company’s Board prior to the date of this Agreement or was recommended for
election or elected by a majority of the Disinterested Directors on the Company’s
Board at the time of such recommendation or election.


 


(i) “Effective
Date” shall mean the first date written above.


 


(j) “Good
Reason” shall mean that, without the Executive’s consent, one or more of
the following events occurs during the Term of this Agreement:


 


(i) The Executive
is assigned to any material duties or responsibilities that are inconsistent,
in any significant respect, with the scope of duties and responsibilities
customarily associated with the Executive’s position and office as described in
SECTION 3, provided that such reassignment of duties or responsibilities
is not for Cause, or due to Executive’s Disability, and is not at the Executive’s
request;


 


(ii) The Executive
suffers a reduction in the authorities, duties, and responsibilities
customarily associated with his position and office as described in SECTION 3
on the basis of which Executive makes a determination in good faith that
Executive can no longer carry out such position or office in the manner
contemplated at the time this Agreement was entered into, 


 

















 


provided that such reduction in
the authorities, duties or responsibilities is not for Cause, or due to
Executive’s Disability, and is not at the Executive’s request;


 


(iii) The Executive’s
Base Salary is decreased;


 


(iv) The principal
executive office of the Company, or the Executive’s own office location as assigned
to him by the Company at the Effective Date is relocated to a place thirty-five
(35) or more miles away, without the Executive’s agreement; or


 


(v) Failure of the
Company’s successor, in the event of a Change of Control, to assume all
obligations and liabilities of this Agreement; or


 


(vi) The Company
shall materially breach any of the terms of 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 (i) through (vi) above has occurred,
the Executive delivers 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 the Executive asserts constitutes Good Reason under
any of (i) through (vi) 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 such notice.  To avoid
doubt, the termination of the Executive’s employment would become effective at
the close of business on the thirtieth day after the Company receives the
Executive’s termination notice, unless the Company cures or eliminates the
event giving rise to Good Reason prior to such time.


 


(k) “Pro-Rata
Share of Restricted Stock” for any period shall mean, for any grant of
restricted stock as to which the Company’s repurchase right lapses ratably over
a specified period (e.g. in equal annual increments over four years), that
number of shares as to which the Company’s repurchase right with respect to
those shares would have lapsed if the Executive’s employment by the Company had
continued for such period.  For any other
shares of restricted stock, “Pro-Rata Share of Restricted Stock” shall mean, as
to any shares of restricted stock which were granted on the same date and as to
which the Company’s repurchase right lapses on the same date, that portion of
such shares calculated by multiplying the number of shares by a fraction, the
numerator of which is the number of days that have passed since the date of
grant, plus the number of days in the period in question, and the denominator
of which is the total number of days from the date of the grant until the date
(without regard to any provisions for earlier vesting upon achievement of a specified
goal) on which the Company’s repurchase right would lapse under the terms of
the grant.


 


(l) “Severance
Pay” shall mean an amount equal to the sum of the Base Salary in effect on
the date of termination of Executive’s employment, plus the amount of the
Target Bonus for the Executive for the year in which the Executive’s employment
is terminated, divided by twelve (12) (each of the 12 shares to constitute a “month’s”
Severance Pay); PROVIDED, HOWEVER, that in the event Executive terminates his
employment for Good Reason based on a reduction in Base Salary, then the Base
Salary to be used in calculating Severance Pay shall be the Base Salary in
effect immediately prior to such reduction in Base Salary.


 


(m) “Subsidiary”
shall mean a corporation of which the Company owns 50% or more of the combined
voting power of the outstanding securities having the right to vote in an
election of directors, or any other business entity in which the Company
directly or indirectly has an ownership interest of 50% or more.


 


(n) “Target
Bonus” shall mean a bonus for which the Executive is eligible on an annual
basis, at a level consistent with his title and responsibilities, under the
Company’s bonus program then in effect and 


 

















 


applicable
to the Company’s senior executives generally, in such amount as may be
determined in the sole discretion of the Board.


 


2. TERM OF EMPLOYMENT.


 


The
Company hereby employs the Executive, and the Executive hereby accepts such
employment, for the period commencing on the Effective Date and ending on the
fourth anniversary of the Effective Date, subject to earlier termination in
accordance with the terms of this Agreement. Thereafter, the Term of Employment
shall automatically renew on each anniversary of the Effective Date for
additional one-year period(s), UNLESS (i) the Company notifies the
Executive in writing in accordance with SECTION 23 below, at least 90 days
prior to the expiration of the then-current Term that it does not want the Term
of Employment to so renew, or (ii) the Executive has notified the Company
in writing in accordance with SECTION 23 below that Executive does not
want the Term of Employment to so renew. The initial four year Term of
Employment hereunder is referred to herein as the “Initial Term”, and
the Initial Term plus all additional one-year renewal periods (if any), are
collectively referred to herein as the “Term of Employment” or the “Term
of the Agreement”.


 


3. POSITION, DUTIES AND
RESPONSIBILITIES.


 


On
the Effective Date and continuing for the remainder of the Term of Employment,
the Executive shall be employed as the General Counsel and Senior Vice
President of the Company, and shall be responsible for duties customarily
associated with the position of chief legal officer of the Company. The
Executive shall represent and serve the Company faithfully, conscientiously and
to the best of the Executive’s ability and shall promote the interests,
reputation and current and long term plans, objectives and policies of the
Company. The Executive shall devote all of the Executive’s time, attention,
knowledge, energy and skills, during normal working hours, and at such other
times as the Executive’s duties may reasonably require, to the duties of the
Executive’s employment, provided, however, nothing set forth herein shall prohibit
the Executive from engaging in other activities to the extent such activities
do not impair the ability of the Executive to perform his duties and
obligations under this Agreement, nor are contrary to the interests,
reputation, current and long term plans, objectives and policies of the
Company. The Executive, in carrying out his duties under this Agreement, shall
report to the President of the Company.


 


4. BASE SALARY.


 


During
the Term of this Agreement, the Executive shall be paid an annualized Base
Salary of $320,000, payable in accordance with the regular payroll practices of
the Company. The Base Salary shall be reviewed no less frequently than
annually, and any increase thereto (which shall thereafter be deemed the
Executive’s Base Salary) shall be solely within the discretion of the Board.


 


5.
TARGET BONUS/INCENTIVE COMPENSATION PROGRAM.


 


a)
TARGET BONUS PROGRAM: The Executive shall participate in the Company’s Target
Bonus program (and other incentive compensation programs) applicable to the Company’s
senior executives, as any such programs are established and modified from time
to time by the Board in its sole discretion, and in accordance with the terms
of such program.


 


b)
SIGN-ON CASH BONUS: The Executive shall receive a sign-on cash bonus in the
amount of $70,000 payable to the Executive on the Effective Date. In the event
the Executive terminates this Agreement without “Good Reason” during the period
commencing on the Effective Date and ending on the first anniversary of the
Effective Date, then the Executive shall repay the sign-on cash bonus to the
Company within thirty (30) days of such termination.


 

















 


c)
SIGN-ON STOCK OPTION GRANT: An initial stock option grant shall be awarded to
the Executive pursuant to the terms of the Company’s stock option plan. The
initial stock option grant shall be for 120,000 shares of Company capital
stock, the option for which will vest and become exercisable in equal amounts
quarterly over the five (5) year period commencing on the Effective Date,
and as otherwise specified herein and in the Company’s stock option plan, and
shall be subject to the other terms and conditions specified in a separate
grant agreement.


 


6. LONG-TERM INCENTIVE
COMPENSATION PROGRAMS.


 


During
the Term of Employment, the Executive shall be eligible to participate in the
Company’s long-term incentive compensation programs applicable to the Company’s
senior executives, as such programs may be established and modified from time
to time by the Board in its sole discretion.


 


7. EMPLOYEE BENEFIT
PROGRAMS.


 


During
the Term of Employment, the Executive shall be entitled to participate in all
employee welfare and pension benefit plans, programs and/or arrangements
offered by the Company from time to time to its senior executives, to the same
extent and on the same terms applicable to other senior executives.


 


8. REIMBURSEMENT OF
BUSINESS EXPENSES.


 


During
the Term of Employment, the Executive is authorized to incur reasonable
business expenses in carrying out his duties and responsibilities under this
Agreement, and the Company shall reimburse him for all such reasonable business
expenses reasonably incurred in connection with carrying out the business of
the Company, subject to documentation in accordance with the Company’s
policy.  Any reimbursement in
one calendar year shall not affect the amount that may be reimbursed in
any other calendar year, and a reimbursement (or right thereto) may
not be exchanged or liquidated for another benefit or payment.  Any
expense reimbursements subject to Section 409A of the Code shall be made
no later than the end of the calendar year following the calendar year in which
such business expense is incurred by the Executive.


 


9. VACATION.


 


During
the Term of Employment, the Executive shall be entitled to paid vacation days
each calendar year in accordance with the Company’s vacation policy.


 


10. TERMINATION OF
EMPLOYMENT.


 


(a) TERMINATION
DUE TO DEATH OR DISABILITY. In the event Executive’s employment is terminated
due to Executive’s death or Disability, the Term of Employment shall end as of
the date of the Executive’s death or termination of employment due to
Disability, and Executive, his estate and/or beneficiaries, as the case may be,
shall be entitled to the following:


 


(i) Base Salary
earned by Executive but not paid through the date of termination under this SECTION 10(a);


 


(ii) all long-term
incentive compensation awards earned by Executive but not paid prior to the
date of termination under this SECTION 10(a);


 


(iii) a pro rata
Target Bonus award for the year in which termination under this SECTION 10(a) occurs,
as determined in its sole discretion by the Board of Directors;


 


(iv) all stock
options held by the Executive as of the date of the termination under this SECTION 10(a) that
are not exercisable as of that date shall be deemed to have been held by the


 














 


Executive for an additional 12
months, for purposes of vesting and exercise rights, and any unexercisable
stock options which are deemed exercisable as a result thereof shall remain
exercisable as provided in SECTION 10(a)(v) below;


 


(v) all exercisable
stock options held by the Executive as of the date of termination under this SECTION 10(a) shall
remain exercisable until the earlier of (1) the end of the 1-year period
following the date of termination, or (2) the date the option would
otherwise expire;


 


(vi) any amounts
earned, accrued or owing to the Executive but not yet paid under SECTIONS 6, 7,
8, or 9 above, and in the event of termination due to Disability, benefits due
to Executive under the Company’s then-current disability program;


 


(vii) six months of Severance Pay, payable in
accordance with the regular payroll practices of the Company, commencing on the
first day of the month following the month in which termination under this SECTION 10(a) occurred;
and


 


(viii) the Company’s lapsing repurchase right
with respect to shares of restricted stock held by the Executive shall lapse
with respect to the Pro-Rata Share of Restricted Stock.  The “period” referenced in the first sentence
of the definition of “Pro-Rata Share of Restricted Stock,” and the “period in
question” referenced in the second sentence of that definition shall be 12
months.


 


(b) TERMINATION
BY THE COMPANY FOR CAUSE; TERMINATION BY THE EXECUTIVE WITHOUT GOOD REASON; OR
NONRENEWAL OF THE AGREEMENT BY THE EXECUTIVE. In the event the Company
terminates the Executive’s employment for Cause, or if Executive terminates his
employment without Good Reason, or if the Executive gives notice of nonrenewal
of this Agreement, the Term of Employment shall end as of the date specified
below, and the Executive shall be entitled to the following:


 


(i) Base Salary
earned by Executive but not paid through the date of termination of Executive’s
employment under this SECTION 10(b);


 


(ii) any amounts
earned, accrued or owing to the Executive but not yet paid under SECTIONS 6, 7,
8, or 9 above; and


 


(iii) a pro rata
Target Bonus award for the year in which termination under this SECTION 10(b) occurs,
as determined in its sole discretion by the Board of Directors.


 


Termination
by Company for Cause shall be effective as of the date noticed by the Company.
Termination by Executive without Good Reason shall be effective upon 90 days’
prior written notice to the Company, and shall not be deemed a breach of this
Agreement. In the event that the Executive gives notice of non-renewal in
accordance with SECTION 2 above, the Term of Employment shall end on the
last day of the then-current Term.


 


(c) TERMINATION
BY THE COMPANY WITHOUT CAUSE; TERMINATION BY THE EXECUTIVE FOR GOOD REASON OR
NONRENEWAL OF THE AGREEMENT BY THE COMPANY. If the Executive’s employment is
terminated by the Company without Cause (other than due to death or
Disability), is terminated by the Executive for Good Reason (in accordance with
the notice and cure provisions set forth in the definition of “Good Reason”
above), or if the Company gives notice of nonrenewal of this Agreement, the
Executive shall be entitled to the following:


 


(i) Base Salary
earned by Executive but not paid through the date of termination of Executive’s
employment under this SECTION 10(c);


 

















 


(ii) all long-term
incentive compensation awards earned by Executive but not paid prior to the
date of termination of Executive’s employment under this SECTION 10(c);


 


(iii) Twelve months of Severance Pay, payable
in accordance with the regular payroll practices of the Company, commencing on
the first day of the month following the month during which the Executive’s
employment is terminated under this SECTION 10(c); PROVIDED, HOWEVER, that
if the Executive dies while receiving benefits under this Section, all payments
shall immediately cease, but in no event shall the Executive or his estate or
beneficiaries receive less than a total of six months of Severance Pay.


 


(iv) a pro rata
Target Bonus award for the year in which the termination of the Executive’s
employment occurs under this SECTION 10(c), as determined in its sole
discretion by the Board of Directors;


 


(v) all exercisable
stock options held by the Executive as of the date of the termination of his
employment under this SECTION 10(c) shall remain exercisable until
the earlier of (1) the end of the one-year period following the date of
the termination of his employment or (2) the date the stock option would
otherwise expire;


 


(vi) all stock
options held by the Executive as of the date of the termination under this SECTION 10(c) that
are not exercisable as of that date shall be deemed to have been held by the
Executive for an additional 18 months, for purposes of vesting and exercise
rights, and any stock options which become exercisable as a result thereof
shall remain exercisable as provided in SECTION 10(c)(v) above;


 


(vii) any amounts
earned, accrued or owing to the Executive but not yet paid under SECTIONS 6, 7,
8, or 9 above;


 


(viii) until the
earlier of (a) the expiration of the term of the Severance Pay paid under Section 10(c)(iii) above
or (b) the date the Executive receives equivalent coverage and benefits
under the plan of a subsequent employer, the Company shall provide the
Executive with medical and dental insurance benefits substantially similar to
those which the Executive was receiving immediately prior to the termination of
his employment, including any employer paid portion of the premium, subject to
the Executive’s election of benefits under the Consolidated Omnibus Budget Reconciliation
Act of 1985 (“COBRA”) in accordance with the applicable plan procedures.  During such time that the Executive is
receiving such continued medical and dental benefits from the Company, the
Company shall also provide Executive with life insurance benefits substantially
similar to those which the Executive was receiving immediately prior to the
termination of his employment;


 


(ix) the Company’s
lapsing repurchase right with respect to shares of restricted stock held  by the Executive shall lapse with respect to
the Pro-Rata Share of Restricted Stock . 
The “period” referenced in the first sentence of the definition of “Pro-Rata
Share of Restricted Stock,” and the “period in question” referenced in the
second sentence of that definition shall be 18 months; and


 


(x) if the termination of employment to which
this Section 10(c) applies occurs within 90 days prior to a Change of
Control or within 12 months after a Change of Control:


 


(a) all stock options that are not exercisable
upon the application of the provisions of Section 10(c)(vi) shall
immediately become exercisable in full and the options to which this provision
applies shall remain exercisable until the earlier of (1) the end of the
90-day period immediately following the later of the date of employment 


 

















 


termination
or the date of the Change of Control and (2) 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 the Executive shall lapse in full
(subject to the Executive making satisfactory arrangements with the Company
providing for payment to the Company of all required withholding taxes).


 


Notwithstanding
anything to the contrary in this Section 10, 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, as applicable, except to the extent that the terms
of this Employment Agreement are more favorable to the Executive.


 


If
the Company gives notice of nonrenewal in accordance with Section 2 above,
the Term of Employment shall end on the last day of the then current term.


 


11. MITIGATION.


 


In
the event of any termination of this Agreement, Company is hereby authorized to
offset against any Severance Pay due the Executive during the period for which
Severance Pay is due under SECTION 10 any remuneration earned by the
Executive during that period and attributable to any subsequent employment or
engagement that the Executive may obtain. Executive shall provide Company
written notice of subsequent employment or engagement no later than five (5) business
days after commencement by Executive of such employment or engagement.


 


12. CONFIDENTIALITY;
ASSIGNMENT OF RIGHTS.


 


(a) During
the Term of Employment and thereafter, the Executive shall not disclose to
anyone or make use of any trade secret or proprietary or confidential
information of the Company, including such trade secret or proprietary or
confidential information of any customer of the company or other entity that
has provided such information to the Company, which Executive acquires during
the Term of Employment, including but not limited to records kept in the
ordinary course of business, except (i) as such disclosure or use may be
required or appropriate in connection with his work as an employee of the
Company, (ii) when required to do so by a court of law, by any
governmental agency having supervisory authority over the business of the
Company or by any administrative or legislative body (including a committee
thereof) with apparent jurisdiction to order him to divulge, disclose or make
accessible such information, or (iii) as to such confidential information
that becomes generally known to the public or trade without violation of this SECTION 12(a).


 


(b) The
Executive hereby sells, assigns and transfers to the Company all of his right,
title and interest in and to all inventions, discoveries, improvements and
copyrightable subject matter (the “rights”) which during the Term of Employment
are made or conceived by him, alone or with others, and which are within or
arise out of any general field of the Company’s business or arise out of any
work Executive performs or information Executive receives regarding the
business of the Company while employed by the Company. The Executive shall
fully disclose to the Company as promptly as available all information known or
possessed by him concerning the rights referred to in the preceding sentence,
and upon request by the Company and without any further remuneration in any
form to him by the Company, but at the expense of the Company, execute all
applications for patents and for copyright registration, assignments thereof
and other instruments and do all things which the Company may deem necessary to
vest and maintain in it the entire right, title and interest in and to all such
rights.


 

















 


13. NONCOMPETITION;
NONSOLICITATION.


 


(a) Notwithstanding
any of the provisions herein to the contrary, in the event that the Executive’s
employment with the Company is terminated for any reason other than due to
Executive’s death or termination by Executive for Good Reason, the Executive
shall not engage in Competitive Activity for a period not to exceed the lesser
of 12 months from the date of termination under such applicable provision
listed above or the maximum length of time allowed under then current
Massachusetts State law. The Company may, at its election, waive its rights of
enforcement under this SECTION 13(a).


 


(b) The
Parties acknowledge that in the event of a breach or threatened breach of
SECTIONS 12 or 13(a), the Company shall not have an adequate remedy at law.
Accordingly, in the event of any breach or threatened breach of SECTIONS 12 OR
13(a), the Company shall be entitled to such equitable and injunctive relief as
may be available to restrain the Executive and any business, firm, partnership,
individual, corporation or entity participating in the breach or threatened
breach from the violation of the provisions of SECTIONS 12 or 13(a) above.
Nothing in this Agreement shall be construed as prohibiting the Company from
pursuing any other remedies available at law or in equity for breach or
threatened breach of SECTIONS 12 or 13(a) including the recovery of
damages.


 


14. ASSIGNABILITY;
BINDING NATURE.


 


This
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors, heirs (in the case of the Executive) and assigns.
No rights or obligations of the Company under this Agreement may be assigned or
transferred by the Company except that such rights or obligations may be
assigned or transferred pursuant to a merger or consolidation in which the
Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of the Company; PROVIDED, HOWEVER, that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law.


 


15.
REPRESENTATIONS.


 


The
Company represents and warrants that it is fully authorized and empowered to
enter into this Agreement and that the performance of its obligations under
this Agreement will not violate any agreement between it and any other person,
firm or organization. The Executive represents and warrants that no agreement
exists between him and any other person, firm or organization that would be
violated by the performance of his obligations under this Agreement.


 


16. ENTIRE AGREEMENT.


 


This
Agreement contains the entire understanding and agreement between the Parties
concerning the subject matter hereof and supersedes all prior agreements,
understandings, discussions, negotiations and undertakings, whether written or
oral, between the Parties with respect thereto.


 


17. AMENDMENT OR WAIVER.


 


No
provision in this Agreement may be amended unless such amendment is agreed to
in writing and signed by the Executive and an authorized officer of the
Company. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such
other Party shall be deemed a waiver of a similar or dissimilar condition or
provision at the same or any prior or subsequent time. Any waiver must be in
writing and signed by the Executive or an authorized officer of the Company, as
the case may be.


 

















 


18. SEVERABILITY.


 


In
the event that any provision or portion of this Agreement shall be determined
to be invalid or unenforceable for any reason, in whole or in part, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.


 


19. SURVIVORSHIP.


 


The
respective rights and obligations of the Parties hereunder shall survive any
termination of the Executive’s employment to the extent necessary to the
intended preservation of such rights and obligations.


 


20.
BENEFICIARIES/REFERENCES.


 


The
Executive shall be entitled, to the extent permitted under any applicable law,
to select and change a beneficiary or beneficiaries to receive any compensation
or benefit payable hereunder following the Executive’s death by giving the
Company written notice thereof. In the event of the Executive’s death or a judicial
determination of his incompetence, reference in this Agreement to the Executive
shall be deemed, where appropriate, to refer to his beneficiary, estate or
other legal representative.


 


21. GOVERNING
LAW/JURISDICTION.


 


This
Agreement shall be governed by and construed and interpreted in accordance with
the laws of The Commonwealth of Massachusetts without reference to principles
of conflict of laws.


 


22. RESOLUTION OF
DISPUTES.


 


Any
disputes arising under or in connection with this Agreement may, at the
election of the Executive or the Company, be resolved by binding arbitration,
to be held in Massachusetts in accordance with the Rules and Procedures of
the American Arbitration Association. If arbitration is elected, the Executive
and the Company shall mutually select the arbitrator. If the Executive and the
Company cannot agree on the selection of an arbitrator, each Party shall select
an arbitrator and the two arbitrators shall select a third arbitrator, and the
three arbitrators shall form an arbitration panel which shall resolve the
dispute by majority vote. Judgment upon the award rendered by the arbitrator or
arbitrators may be entered in any court having jurisdiction thereof. Costs of
the arbitrator or arbitrators and other similar costs in connection with an
arbitration shall be shared equally by the Parties; all other costs, such as
attorneys’ fees incurred by each Party, shall be borne by the Party incurring
such costs.


 


23. NOTICES.


 


All notices that are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight courier), sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, addressed as follows:
 


	
  If to the Company:

  	
  Vertex
  Pharmaceuticals Incorporated

  
	
   

  	
  130
  Waverly Street

  
	
   

  	
  Cambridge,
  MA 02139-4242

  
	
   

  	
  Attn:
  Chairman of the Board

  
	
   

  	
  with
  a copy to:

  
	
   

  	
  Vice
  President of HR

  
	
   

  	
   

  
	
  If to the Executive:

  	
  Kenneth
  S. Boger

  



 

















 


	
   

  	
  200
  Church Street Rear

  
	 
	Newton, MA 02458




 
Any such notice shall be deemed to have been given: (a) when delivered if personally delivered or sent by facsimile on a business day: (b) on the business day after dispatch if sent by nationally-recognized overnight courier; and/or (c) on the fifth business day following the date of mailing if sent by mail.
 


24. HEADINGS.


 


The
headings of the sections contained in this Agreement are for convenience only
and shall not be deemed to control or affect the meaning or construction of any
provision of this Agreement.


 


25. COUNTERPARTS.


 


This
Agreement may be executed in two or more counterparts.


 


26. CERTAIN ADDITIONAL
PAYMENTS BY THE COMPANY.


 


If
any payment or benefit received by Executive pursuant to this Agreement, but
determined without regard to any additional payments required under this
Agreement, would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the “Code”), or any interest or
penalties are incurred by the Executive with respect to such excise tax, the
Company will pay to Executive an additional amount in cash (the “Additional
Amount”) equal to the amount necessary to cause the aggregate payments and
benefits received by Executive, including such Additional Amount (net of all
federal, state, and local income and payroll taxes and all taxes payable as a
result of the application of Sections 280G and 4999 of the Code and including
any interest and penalties with respect to such taxes) to be equal to the
aggregate payments and benefits Executive would have received, excluding such
Additional Amount (net of all federal, state and local income and payroll
taxes) as if Sections 280G and 4999 of the Code (and any successor provisions
thereto) had not been enacted into law. 
The Company will pay to Executive the Additional Amount within 10 days
after the Executive delivers to the Company a calculation of the Additional
Amount, together with such supporting documentation as the Company may
reasonably require, provided that the Company does not object to such
calculation.


 


If
the Company and the Executive do not agree on the calculation of the amount of
any such Additional Amount, Executive may submit to the Company a written
opinion (the “Opinion”) of a nationally recognized accounting firm, employment
consulting firm, or law firm selected by Executive setting forth a statement
and a calculation of the Additional Amount. The determination of such firm
concerning the extent of the Additional Amount (which determination need not be
free from doubt), shall be final and binding on both Executive and the Company.
The Company will pay to Executive the Additional Amount not later than ten (10) business
days after such firm has rendered the Opinion. The Company agrees to pay the
reasonable fees and expenses of such firm in preparing and rendering the
Opinion.


 


If,
following the payment to Executive of the Additional Amount, Executive’s
liability for the excise tax imposed by Section 4999 of the Code on the
payments and benefits received by Executive is finally determined (at such time
as the Internal Revenue Service is unable to make any further adjustment to the
amount of such liability) to be less than the amount thereof set forth in the
Opinion, the Executive shall promptly file for a refund with respect thereof,
and the Executive shall promptly pay to the Company the amount of such refund
when received (together with any interest paid or credited thereon after taxes
applicable thereto). If, following the payment to Executive of the Additional
Amount, Executive’s liability for the excise tax imposed by Section 4999
of the Code on the payments and benefits received by Executive is finally
determined (at such time as the Internal Revenue Service is unable to 


 

















 


make any further
adjustment to the amount of such liability) to be more than the amount thereof
set forth in the Opinion and the Executive thereafter is required to make a
further payment of any such excise tax, the Company shall promptly pay to or
for the benefit of the Executive an additional Additional Amount in respect of
such underpayment.  Notwithstanding the
foregoing, no payments under this Section 26 from the Company to Executive
shall be made after the end of the calendar year immediately following the
calendar year in which the Executive remits the related taxes to the applicable
taxing authority.


 


27.  409A.


 


Any severance payment to the
Executive under this Agreement shall be bifurcated 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
the Executive is 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
later of (i) the first business day that is more than six months after the
employment termination date and (ii) the date such payments would
otherwise be payable hereunder. The determination of whether, and the extent to
which, any of the payments to be made to the Executive 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 employment termination date occurs.  To the extent that the termination of the
Executive’s 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 the Executive to the Company at the time the Executive’s
employment is terminated), the payment of any non-qualified deferred
compensation will be further delayed until the later of (i) date 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 and (ii) the date such payments would otherwise be payable
hereunder.  Any portion of a payment that
constitutes nonqualified deferred compensation under Section 409A of the
Code payable as a result of a termination of employment may only be paid upon a
“separation from service” under Section 409A(a)(2)(A)(i) of the
Code.  For purposes of clarification, the
foregoing sentence shall not cause any forfeiture of benefits on the part of
the Executive, but shall only act as a delay until such time as a “separation
from service” occurs.


 


IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.


 


	
   

  	
  Vertex Pharmaceuticals Incorporated

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/Matthew W. Emmens

  
	
   

  	
  Matthew
  W. Emmens, President, Chairman

  
	
   

  	
  and
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/Kenneth
  S. Boger

  
	 
	Kenneth S. Boger