Exhibit 10.1


 


AGREEMENT


 


AGREEMENT made and
entered into in Cambridge, Massachusetts, by and between Vertex Pharmaceuticals
Incorporated (the “Company”) and Matthew W. Emmens (the “Executive”),
effective as of the 5th day of February, 2009.


 


WHEREAS, the operations
of the Company and its Affiliates are a complex matter requiring direction and
leadership in a variety of arenas, including financial, strategic planning,
regulatory, community relations and others;


 


WHEREAS, the
Executive is possessed of certain experience and expertise in the Company’s
industry that qualify him to provide the direction and leadership required by
the Company and its Affiliates and also has knowledge of the Company, having
served as a member of its board of directors (the “Board”) since 2004;
and


 


WHEREAS, subject
to the terms and conditions hereinafter set forth, the Company therefore wishes
to employ the Executive as Chairman of the Board (“Chairman”) and
President and Chief Executive Officer of the Company and the Executive wishes
to accept such employment;


 


NOW, THEREFORE, in
consideration of the foregoing premises and the mutual promises, terms,
provisions and conditions set forth in this Agreement, the parties hereby
agree:


 


1.                                       Employment.  Subject to the terms and conditions set forth
in this Agreement, the Company hereby offers, and the Executive hereby accepts,
employment.


 


2.                                       Term.                  Subject to
earlier termination as hereinafter provided, the Executive’s employment under
this Agreement shall be for a term commencing on February 5, 2009 (the “Commencement
Date”) and expiring on May 22, 2012 (the “Expiration Date”).  The term of this Agreement may be extended or
renewed only by written agreement signed by the Executive and an expressly
authorized representative of the Board.


 


3.                                       Capacity and Performance.


 


(a)                                  During
the term of this Agreement, from and after the Commencement Date, the Executive
shall serve the Company as its President. 
On May 23, 2009, and continuing during the remainder of the term
hereof, the Executive shall be appointed to the position of Chief Executive
Officer of the Company and elected as Chairman. 
In addition, and without further compensation, the Executive shall serve
as a director and/or officer of one or more of the Company’s Immediate
Affiliates (as defined in Section 9 hereof) if so elected or appointed
from time to time.  At the request of the
Board, upon termination of his employment with the Company for any reason, the
Executive shall resign as a member of the Board and as Chairman 


 


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and his offices as
President and Chief Executive Officer of the Company and shall resign from any
other positions, offices and directorships he may have with the Company or any
of its Immediate Affiliates.


 


(b)                                 During
the term hereof, the Executive shall be employed by the Company on a full-time
basis and shall perform the duties and responsibilities of his positions and
offices and such other duties and responsibilities on behalf of the Company and
its Affiliates, reasonably related to one or more of his positions and offices,
as may be assigned to him from time to time by the Board or a designated
committee thereof.


 


(c)                                  During
the term hereof, the Executive shall devote his full business time, except as
otherwise provided in this Section 3(c), and his best efforts, business
judgment, skill and knowledge exclusively to the advancement of the business
and interests of the Company and its Affiliates and to the discharge of his
duties and responsibilities hereunder. 
The Executive may engage in the passive management of his personal and
family investments and in charitable and community activities; provided that
such activities, and any memberships on board of directors or other governing
boards other than those Company and its Immediate Affiliates authorized by the
Board, do not, individually or in the aggregate, give rise to a conflict of
interest or otherwise materially interfere with his performance of his duties
and responsibilities to the Company and its Affiliates under this Agreement or
the time required for their performance or breach his obligations set forth in
the agreement between the Company and the Executive entitled “Employee
Non-Disclosure, Non-Competition and Inventions Agreement” of even date with
this Agreement (the “Employee Agreement”).  The Executive represents and warrants that,
as of the effective date of this Agreement, first written above, he has no
existing obligations and has not undertaken any future obligations, except for
duties as member and chairman of the board of directors of Shire plc (the “Shire
Board”).  The Company acknowledges
that the Executive has disclosed to the Board the likely time required by the
Executive to fulfill his obligations to the Shire Board (the “Shire
Obligations”) and the Company agrees that on this basis the Shire
Obligations will not substantially interfere with the performance of the
Executive’s duties and responsibilities to the Company and its Affiliates or
the time required for their performance and further agrees that the Executive’s
membership on, and position as chairman of, the Shire Board do not in
themselves constitute a breach of the Employee Agreement.  It is agreed that, exclusive of his Shire
Obligations, the Executive shall not accept membership on any board of
directors or other governing board of any Person or engage in any other
business activity without the prior express written approval of the Board or a
designated committee thereof.


 


(d)                                 The
Company agrees to propose to the shareholders of the Company at each
appropriate Annual Meeting of such shareholders during the term hereof the
election or reelection of the Executive as a member of the Board.


 


4.                                       Compensation
and Benefits.  As compensation for
all services performed by the Executive under and during the term hereof and
subject to performance of the Executive’s duties and responsibilities and of
his obligations to the Company and its Affiliates, pursuant to this Agreement,
the Employee Agreement or otherwise:


 


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(a)                                  Base
Salary.  During the term hereof, the
Company shall pay the Executive a base salary at the rate of One Million, One
Hundred Thousand Dollars ($1,100,000) per year, payable in accordance with the
normal payroll practices of the Company for its executives and subject to
increase from time to time in the sole discretion of the Board or a designated
committee thereof.  Such base salary, as
from time to time increased, is hereafter referred to as the “Base Salary.”


 


(b)                                 Performance
Bonus Compensation.  For each fiscal
year completed during the term hereof, the Executive shall have the opportunity
to earn an annual bonus (“Annual Bonus”) under the executive performance
bonus plan then applicable to the Company’s executives generally, as in effect
from time to time, based on target objectives determined by the Board or a
designated committee thereof after consultation with the Executive.  The Executive’s target bonus opportunity (the
“Target Bonus”) under the executive performance bonus plan shall be One
Hundred and Fifteen Percent (115%) of the Base Salary, with the actual amount
of each Annual Bonus being determined in the reasonable discretion of the Board
or its designated committee based on the performance of the Executive and the
Company against the target objectives. Except as otherwise provided in
accordance with the applicable provision of Section 5 hereof in the event
of termination of the Executive’s employment hereunder, the Executive, in order
to be eligible to earn an Annual Bonus for any fiscal year occurring during the
term hereof, must be employed on the date payment of annual bonuses for that
fiscal year is made to Company executives generally, which shall generally
occur not later than two and one-half months following the close of the fiscal
year for which the Annual Bonus was earned.


 


(c)                                  Equity
Participation.  The Board shall grant
the Executive equity in accordance with the following:


 


(i)                                     On
the Commencement Date, the Board shall grant the Executive a non-qualified
option to purchase 549,000 shares of the common stock of the Company, with an
exercise price equal to the fair market value on the date of grant (the “Option”),
subject to the Executive’s signing of the agreement captioned Vertex
Pharmaceuticals Incorporated Amended and Restated 2006 Stock and Option Plan
Option Grant” (the “Option Agreement”) under which the Option is
granted.  The shares subject to the
Option shall vest quarterly during the four (4) year period following the
date of grant in accordance with the terms and conditions of the plan captioned
“Vertex Pharmaceuticals Incorporated Amended and Restated 2006 Stock and Option
Plan” (the “Stock and Option Plan”) and the Option Agreement, provided
that the Executive is employed by the Company on each vesting date.  Except as otherwise provided in this
Agreement, the Option shall be subject to all terms and conditions of the Stock
and Option Plan and the Option Agreement and to such Company securities trading
policies generally applicable to Company executives and the equity granted to
them, as in effect from time to time.


 


(ii)                                  On the Commencement Date, the Board shall
grant the Executive 134,129 shares of restricted stock (the “Restricted
Stock”), subject to the Executive’s signing of the agreement captioned “Vertex
Pharmaceuticals Incorporated 2006 Stock and Option Plan Restricted Stock Award”


 


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(the
“Award Agreement”)  under which
the Restricted Stock is granted.  The
Restricted Stock shall vest in its entirety on the third (3rd) anniversary of
the date of grant, provided that the Executive is employed by the Company
hereunder on the vesting date.  Except as
otherwise provided in this Agreement, the Restricted Stock shall be subject to
all terms and conditions of the Stock and Option Plan and the Award  Agreement and to such Company
securities trading policies generally applicable to Company executives and the
equity granted to them, as in effect from time to time.


 


(iii)                               The
Executive shall be eligible for additional grants of equity compensation (by
which is meant stock options, restricted stock and restricted stock units, if
any, granted by the Company to employees) during the term hereof only to the
extent expressly awarded to him individually in the discretion of the Board or
its delegates.


 


(iv)                              In
the event that (A) the Executive’s employment terminates on May 22,
2012 as a result of the expiration of the term hereof and without the Company
having made an offer to the Executive to extend or renew this Agreement at
least through February 5, 2013 or to otherwise continue his employment at
least through February 5, 2013 on terms that in the aggregate are not
materially less favorable to the Executive than those in effect on the May 22,
2012; or (B) the Executive’s employment with the Company terminates after May 22,
2012 but prior to February 5, 2013, (I) while he is employed by the
Company on an at-will basis, and such termination is not initiated by the
Company for “cause” as defined in section 12 of the Stock and Option Plan and
is not the result of a voluntary quit by the Executive or (II) while he is
employed under an extension or renewal of this Agreement or under another
contract of employment with the Company; and such termination is not by the
Company for cause or by the Executive without good reason (as “cause” and “good
reason” are defined in the applicable contract of employment) and does not
entitle the Executive to accelerated vesting of those shares subject to the
Option that are then unvested; and provided that the Executive signs and
returns the release of claims provided him by the Company within the time
limitations specified therein, which release of claims shall be in the form set
forth in Exhibit A hereto, mutatis mutandis, and continues to meet his obligations under
the Employee Agreement in accordance with its terms; then, that portion
of the Option that remains unvested on the Date of Termination shall vest and
become exercisable on the later of the effective date of the release of claims
and the date the release of claims, signed by the Executive, is received by the
Company and shall remain exercisable until the end of the three (3) month
period following the Date of Termination.  
Notwithstanding the foregoing, however, a release of claims shall not be
required in the event of termination resulting from the death of the Executive
and, in that event, the unvested shares subject to the Option shall vest on the
next business day following the date notice of the Executive’s death is
received by the Company and shall remain exercisable until the end of the three
(3) month period following the Date of Termination.  For the avoidance of doubt, the exercise
period provided under clause (y) is that period between the date on which
the Release of Claims has both been received by the Company and taken effect
and the date which is the last day of the three (3) month period
immediately following the 


 


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Date of Termination.  Notwithstanding this Section 4(c)(iv),
however, the terms of the Stock and Option Plan or the Option Agreement shall
govern the acceleration of vesting hereunder except to the extent that the
terms of this Agreement are more favorable to the Executive.


 


(d)                                 Vacations.  During the term hereof, the Executive shall
be entitled to earn vacation at the rate of 
four (4) weeks per year, to be taken at such times and intervals as
shall be determined by the Executive, subject to the reasonable business needs
of the Company and its Immediate Affiliates. 
Vacation shall otherwise be governed by the policies of the Company as
applicable to its executives generally, as in effect from time to time.


 


(e)                                  Other
Benefits.  During the term hereof,
the Executive shall be entitled to participate in any and all Employee Benefit
Plans from time to time in effect for executives of the Company generally,
except to the extent any such Employee Benefit Plan is in a category of benefit
provided to the Executive under this Agreement (e.g.,
a severance pay plan) or otherwise provided the Executive by the Company or any
of its Immediate Affiliates; provided, however, that, if a benefit provided the
Executive other than under this Agreement disqualifies the Executive from
participating in an Employee Benefit Plan for which he would otherwise be
eligible, the Company will provide the Executive notice of such
disqualification.  Such participation
shall be subject to the terms of the applicable plan documents and generally
applicable Company policies.  For
purposes of this Agreement, “Employee Benefit Plan” shall have the
meaning ascribed to such term in Section 3(3) of ERISA, as amended
from time to time.


 


(f)                                    Business
Expenses.


 


(i)                                     The
Company shall pay or reimburse the Executive for all reasonable and customary
business expenses incurred or paid by the Executive in the performance of his
duties and responsibilities hereunder, subject to any maximum annual limit and
other restrictions on such expenses set by the Board as applicable to
executives of the Company generally and to such reasonable substantiation and
documentation as may be specified by the Company from time to time.  If the Executive elects to pilot his own
airplane during business travel, he shall be entitled to reimbursement of
actual expenses not to exceed the cost of a first class flight and with the
understanding and agreement that no director or employee of the Company or any
of its Affiliates may accompany him on his personal airplane for business
purposes.


 


(ii)                                  Any reimbursement of expenses that would
constitute nonqualified deferred compensation subject to Section 409A
of the Internal Revenue Code and the regulations promulgated thereunder, each
as amended, (“Section 409A”) shall
be subject to the following additional rules: 
(A) no reimbursement of any such expense shall affect the Executive’s
right to reimbursement of any other such expense in any other taxable year; (B) reimbursement
of the expense shall be made, if at all, not later than the end of the calendar
year following the calendar year in which the expense was incurred; and (C) the
right to reimbursement shall not be subject to liquidation or exchange for any
other benefit.


 


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(g)                                 Relocation
Expenses.  The Company shall
reimburse the reasonable relocation expenses incurred by the Executive in
relocating to the greater Cambridge, Massachusetts area, in accordance with the
terms and conditions of the Vertex Pharmaceuticals Incorporated Relocation
Program, Level 3, as in effect at the time such expenses are incurred, except
that the Executive shall not be eligible for reimbursement of temporary housing
expenses and will not be eligible for benefits under the relocation policy that
are redundant or inconsistent with the benefits provided him under Section 4(h) hereof.


 


(h)                                 Assistance
with Sale of Residence.  In connection with the Executive’s relocation
to the greater Cambridge, Massachusetts area, the Company will engage Coldwell
Banker and pay its fees for the Coldwell Banker Residential Brokerage Relocation
Services Home Sale Programs (the “Programs”), as described herein, for
the sale of the Executive’s Pennsylvania
residence  under terms of those Programs, except as revised
herein  with respect to the length of time provided the Executive to make
his election to sell his Pennsylvania residence under the Programs as
provided herein.  On the Commencement Date, the Executive will
be eligible to concurrently participate in the following:  (1)  the
Programs’ “Appraised Value Program” and “Amended Value Sale”, provided,
however, the Executive shall have  up to six months to accept
the appraised offer, which shall be conducted as soon as administratively
practicable after the Executive starts participating in the Programs; and (2) the
Programs’ “Buyer Value Option” for a period of up to six months or, if
sooner, until the Executive either sells his Pennsylvania residence to a third
party for an offer that is higher than the appraised value,
provided, however that a guaranteed offer to purchase and appraisals will
be made pursuant to the “Appraised Value Program”.  The
Executive shall have six months to make his election to sell his Pennsylvania
residence  under the Appraised Value Program or the Amended Value
Sale Program, whichever is applicable.


 


(i)                                     Reimbursement
of Legal Fees.  The Company shall
reimburse the Executive’s legal fees and expenses incurred in the negotiation
of the terms and conditions of his employment with the Company under this
Agreement and the Employee Agreement, to a maximum total reimbursement not to
exceed Twenty Thousand Dollars ($20,000), subject to such reasonable
substantiation, documentation and submission deadlines as may be specified by
the Company.


 


5.                                       Termination of Employment and Severance Benefits. 
Notwithstanding the provisions of Section 2 hereof, the Executive’s
employment hereunder shall terminate prior to the expiration of the term hereof
under the following circumstances:


 


(a)                                  Death.  In the event of the Executive’s death during
the term hereof, the Executive’s employment hereunder shall immediately and
automatically terminate on that date. In such event, following the “Date of
Termination” (as defined in Section 9 hereof), the Company shall pay
to the Executive’s estate any “Final Compensation” (as also defined in Section 9)
that is due; shall pay the Executive’s estate any Annual Bonus earned for the
fiscal year immediately preceding that in which the Executive’s death occurs,
if unpaid on the Date of Termination, which Annual Bonus shall be paid to his
estate on the date annual bonuses for that immediately preceding fiscal year
are paid to Company executives generally; and shall pay to the 


 


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Executive’s estate
any “Final Pro-Rated Bonus” that is due (determined in accordance with
the definition set forth in Section 9 hereof), payable on the date annual
bonuses for that fiscal year are paid to Company executives generally.  Any equity granted the Executive pursuant to Section 4(c) hereof
shall be governed by that Section 4(c) and by the Stock and Option
Plan or any successor plan, any applicable agreements and any applicable
Company securities trading policies.  The
Company shall have no obligation or liability to the Executive or his estate
under this Agreement, other than as set forth expressly in this Section 5(a).


 


(b)                                 Disability.


 


(i)                                     The
Company may terminate the Executive’s employment hereunder, upon notice to the
Executive, in the event that the Executive becomes disabled during the term
hereof through any illness, injury, accident or condition of either a physical
or psychological nature and, as a result, is unable to perform all or
substantially all of his duties and responsibilities hereunder for one hundred
and eighty (180) days during any period of three hundred and sixty-five (365)
consecutive calendar days. In the event of such termination, the Company shall
provide the Executive any Final Compensation due; shall pay the Executive any
Annual Bonus earned for the fiscal year immediately preceding that in which termination
of the Executive’s employment occurs, if unpaid on the Date of Termination,
which Annual Bonus shall be paid on the date annual bonuses for that
immediately preceding fiscal year are paid to Company executives generally; and
shall pay the Executive any Final Pro-Rated Bonus due for the fiscal year in
which the Date of Termination occurs, payable on the date annual bonuses for
that fiscal year are paid to Company executives generally.  Any equity granted the Executive pursuant to Section 4(c) hereof
shall be governed by that Section 4(c) and by the Stock and Option
Plan or any successor plan, any applicable agreements and any applicable
Company securities trading policies.  The
Company shall have no obligation or liability to the Executive under this Agreement
other than as expressly set forth in this Section 5(b)(i).


 


(ii)                                  The
Board may designate another employee to act in the Executive’s place during any
period of the Executive’s disability. 
Notwithstanding any such designation, the Executive shall continue to
receive the Base Salary in accordance with Section 4(a) hereof and
shall continue participation in the Employee Benefit Plans of the Company in
accordance with Section 4(e) to the extent permitted by the
then-current terms of the applicable Employee Benefit Plans, until the
Executive becomes eligible for disability income benefits under any disability
income plan in which the Executive is participating through his employment with
the Company or until the termination of his employment, whichever shall occur
first.  While receiving disability income
benefits under any such disability income plan, the Executive shall not be
entitled to receive any Base Salary under Section 4(a) hereof, but
shall be entitled to continue to participate in the Company’s Employee Benefit
Plans in accordance with Section 4(e) to the extent permitted by the
then-current terms of the Employee Benefit Plans until the termination of his
employment.


 


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(iii)                               If
any question shall arise as to whether during any period the Executive is
disabled through any illness, injury, accident or condition of either a
physical or psychological nature so as to be unable to perform all or
substantially all of his duties and responsibilities hereunder, the Executive
may, and at the request of the Company shall, submit to a medical examination
by a physician selected by the Company to whom the Executive or his duly
appointed guardian, if any, has no reasonable objection to determine whether
the Executive is so disabled and such determination shall for the purposes of
this Agreement be conclusive of the issue. 
If such question shall arise and the Executive shall fail to submit to
such medical examination, the Board’s determination of the issue shall be
binding on the Executive.


 


(c)                                  By
the Company for Cause.  The Company
may terminate the Executive’s employment hereunder for Cause at any time upon
notice to the Executive setting forth in reasonable detail the nature of such
Cause.  The following, as determined by
the Board in its reasonable judgment, shall constitute “Cause” for
termination:


 


(i)                                     The
Executive’s refusal or willful failure to perform (other than by reason of
disability), or gross negligence in the performance of, his duties and responsibilities
to the Company or any of its Affiliates, which remains uncured or continues
after thirty (30) days’ notice from the Company specifying in reasonable detail
the nature of the refusal, willful failure or gross negligence;


 


(ii)                                  A material breach of the Employee Agreement
or a material breach of a fiduciary duty owed to the Company;


 


(iii)                               Fraud, embezzlement or other dishonesty by the
Executive with respect to the Company or any of its Affiliates (exclusive of
trivial matters and good faith errors) or a breach of a published Company
policy that places the Company at substantial risk of material liability; or


 


(iv)                              The
Executive’s conviction or plea of guilty or nolo contendere to a felony or any
misdemeanor involving moral turpitude.


 


In the event of termination
hereunder, the Company shall pay the Executive any Final Compensation due
following the Date of Termination.  Any
equity granted the Executive pursuant to Section 4(c) hereof shall be
governed by that Section 4(c) and by the Stock and Option Plan or any
successor plan, any applicable agreements and any applicable Company securities
trading policies.  The Company shall have
no obligation or liability to the Executive under this Agreement, other than as
expressly set forth in this Section 5(c).


 


(d)                                 By
the Company Other than for Cause. 
The Company may terminate the Executive’s employment hereunder other
than for Cause at any time upon notice to the Executive.  In the event of such termination, the Company
shall provide the Executive any Final Compensation due and shall pay the
Executive any Annual Bonus earned for the fiscal year immediately preceding
that in which termination occurs, if unpaid on the Date of Termination, which
Annual Bonus shall be payable on the date annual bonuses for that immediately
preceding 


 


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fiscal year are paid to Company executives
generally.  In addition, the Company
shall provide the Executive the following:


 


(i)                                     Severance
Benefits.


 


(A)                              Severance
Pay.  The Company shall provide the
Executive severance pay equal to one-twelfth of the sum of the Base Salary and
the Target Bonus for the fiscal year in which the Date of Termination occurs
multiplied by 18 (the “Severance Pay”), paid over the period of eighteen
(18) months following the Date of Termination (the “Severance Pay Period”).  Subject to Section 5(h)(i) hereof, Severance Pay to which the Executive is
entitled hereunder shall be payable in accordance with the normal payroll
practices of the Company for its executives (but, excluding only the first
payment, no less frequently than monthly), with the first payment, which shall
be retroactive to the day immediately following the Date of Termination, being
due and payable on the Company’s next regular payday for its executives that
follows the expiration of sixty (60) calendar days from the Date of
Termination.


 


(B)                                Premium Contributions. 
Provided that the Executive and his eligible dependents, if any, are
participating in the Company’s group health, dental and vision plans (to the
extent offered by the Company) on the Date of Termination and elect on a timely
basis to continue that participation in some or all of the offered plans
through the federal law commonly known as “COBRA,” the Company will contribute
to the premium cost of that participation the same amount it contributes
to the premium cost of participation by its actively employed executives and
their eligible dependents in those plans, until the earlier to occur of the
last day of the Severance Pay Period and the date the Executive is eligible to
enroll in the health, dental and/or vision plans of another employer; provided,
however, that such participation is dependent on the Executive and his
dependents continuing to be eligible to continue participation in the Company’s
offered plans through COBRA and the Executive paying, by payroll deduction, any
employee contribution toward the premium cost of such participation that is
applicable to the Company’s actively employed executives generally.  The Executive agrees to notify the Company
promptly if he is eligible to enroll in the plans of another employer or if he
or any of his dependents ceases to be eligible to continue participation in
Company plans through COBRA.


 


(C)                                Final
Pro-Rated Bonus.  Subject to Section 5(h)(i) hereof,
the Company will pay the Executive a Final Pro-Rated Bonus on the later of the
date annual bonuses are paid to Company executives generally for the fiscal
year in which the Executive’s employment terminates and the date of the Company’s next regular payday for its executives that
follows the expiration of sixty (60) calendar days from the Date of
Termination.


 


(D)                               Accelerated
Vesting of Equity.  On the next
business day following the later of the effective date of the Release of Claims
(as that term is defined in Section 5(d)(ii) below) and the date the
Release of Claims, signed by the Executive, is 


 


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received by the Company (which business day is
hereafter referred to as the “Accelerated Vesting Date”), that portion
of the Option that remains unvested on the Date of Termination and any other
stock options granted the Executive in connection with his employment hereunder
(the “Additional Options”) that remain unvested on the Date of
Termination shall be deemed to have been held by the Executive for an
additional eighteen (18) months from the Date of Termination for purposes of
vesting and exercise rights and any shares subject to the Option or to one of
the Additional Options that become exercisable as a result thereof shall remain
exercisable until the earlier of (y) the end of the three (3) month
period following the Date of Termination and (z) the date on which the
option to which those shares are subject (whether it be the Option or one of
the Additional Options) would otherwise expire. 
For the avoidance of doubt, the exercise period provided under clause (y) is
that period between the date on which the Release of Claims has both been
received by the Company and taken effect and the date which is the last day of
the three (3) month period immediately following the Date of
Termination.   If the Restricted Stock
granted the Executive during the term hereof is unvested on the Date of
Termination, but its vesting date (i.e., the third anniversary of the date of
its grant) is no more than eighteen (18) months from the Date of Termination,
then on the Accelerated Vesting Date the Restricted Stock shall be fully
vested.  If the Date of Termination
occurs less than eighteen (18) months after the date of grant of the Restricted
Stock, then fifty percent (50%) of the Restricted Stock shall vest on the
Accelerated Vesting Date.  With respect
to any other grant of restricted stock provided the Executive in connection with
his employment hereunder that is unvested on the Date of Termination, such
restricted stock shall vest in full on the Accelerated Vesting Date if its
normal vesting date is no more than eighteen (18) months from the Date of
Termination and if its normal vesting date is more than eighteen (18) months
from the Date of Termination, then fifty percent (50%) of the restricted stock
grant shall vest on the Accelerated Vesting Date.  Notwithstanding the foregoing, however, the
terms of any plan or agreement applicable to the Option, any Additional Options,
the Restricted Stock or any other restricted stock or restricted stock units,
if any, granted the Executive in connection with his employment shall govern
the acceleration of vesting except to the extent that the terms of this
Agreement are more favorable to the Executive.


 


(ii)                                  Conditions
to Eligibility for Severance Benefits. 
The provisions of clauses (A) through (D) of Section 5(d)(i) hereof
are referred to in the aggregate hereafter as the  “Severance Benefits.”  The
obligation of the Company to provide the Executive the Severance Benefits, or
any of them, is conditioned on the Executive signing and return of a timely and
effective release of claims in the form attached to this Agreement and marked Exhibit A
(the “Release of Claims”) and on his continuing to meet his obligations
under the Employee Agreement in accordance with its terms. The release of claims that is required in
order for the Executive to qualify for the Severance Benefits in accordance
with Section 5(d) and Section 5(e) of this Agreement, for
the Enhanced Separation Pay and certain of the Severance Benefits in accordance
with Section 5(g) hereof or for accelerated vesting of the Option in
accordance with Section 4(c)(iv) hereof creates legally binding
obligations on the part of the Executive and the Company


 


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therefore advises the Executive to consult an attorney
before signing the release of claims in any of the foregoing circumstances.


 


(e)                                  By
the Executive for Good Reason.


 


(i)                                     The
Executive may terminate his employment hereunder for Good Reason (A) by
providing notice to the Company specifying in reasonable detail the condition
giving rise to the Good Reason no later than thirty (30) days following the
occurrence of that condition; (B) by providing the Company thirty (30)
days to remedy the condition and so specifying in the notice and (C) by
terminating his employment for Good Reason within thirty (30) days following
the expiration of the period to remedy if the Company fails to remedy the
condition.


 


(ii)                                  For
purposes of this Agreement, “Good Reason” shall mean the occurrence of
any one or more of the following conditions without the Executive’s
consent:  (A) failure of the Company
to appoint or elect the Executive as President, Chief Executive Officer and
Chairman in accordance with Section 3(a) hereof or to continue the
Executive in those positions and offices at any time during the term hereof
following such appointment or election; (B) a material adverse change in
the Executive’s duties, authority and/or responsibilities that, taken as a
whole, effectively constitutes a demotion; (C) other material breach of
this Agreement by the Company, including a material reduction in the Base
Salary or Target Bonus; or (D) the relocation of the office to which the
Executive is assigned to a place thirty-five (35) or more miles away from
Cambridge, Massachusetts and such relocation is not at the Executive’s request
or with the Executive’s prior agreement and is other than in connection with a
change in location of the Company’s principal executive offices; provided, however,
that the Company’s failure to continue the Executive’s appointment or election
as a director or officer of any of its Affiliates, a change in reporting
relationships resulting from the direct or indirect control of the Company (or
a successor corporation) by another Person and any diminution of the business
of the Company or any of its Affiliates or any sale or transfer of equity,
property or other assets of the Company or any of its Affiliates shall not
constitute Good Reason.  Notwithstanding
clause (B) of the definition of Good Reason and the proviso to that
definition, however, in the event there occurs a Change of Control (defined in Section 5(g)(iii) hereof)
and a resulting change in the Executive’s reporting relationship, without the
Executive’s consent, such that the Executive is reporting to an executive
officer of a parent entity, rather than to the board of directors of the
Company (or a successor corporation) or to the board of directors of a parent
thereof, any material erosion of the Executive’s independent authority shall in
itself constitute Good Reason for termination; provided that the Executive
complies with Section 5(e)(i) hereof and such termination for Good
Reason occurs within two years of such Change of Control and, further, with the
understanding and agreement that the fact that there has been a change in the
Executive’s reporting relationship shall not itself constitute an erosion of
the Executive’s independent authority.


 


11

















 


(iii)                               In
the event of termination of the Executive’s employment for Good Reason in
accordance with this Section 5(e), the Company shall provide the Executive
any Final Compensation due and shall pay the Executive any Annual Bonus earned
for the fiscal year immediately preceding that in which termination occurs, if
unpaid on the Date of Termination, which Annual Bonus shall be payable on the
date annual bonuses for that immediately preceding fiscal year are paid to
Company executives generally.  In
addition, the Executive shall be entitled to receive the Severance Benefits on
the same terms as would have applied had his employment been terminated by the
Company other than for Cause in accordance with Section 5(d) above;
provided that the Executive satisfies all conditions to such entitlement set
forth in Section 5(d)(ii) hereof, which include his signing and
return of a timely and effective Release of Claims and his continuing to meet
his obligations under the Employee Agreement in accordance with its terms.


 


(f)                                    By
the Executive other than for Good Reason. 
The Executive may terminate his employment hereunder other than for Good
Reason at any time upon sixty (60) days’ notice to the Company.  In the event of termination of the Executive’s
employment pursuant to this Section 5(f), the Board may elect to waive the
period of notice, or any portion thereof, and, if the Board so elects, the
Company shall pay the Executive the Base Salary for the initial sixty (60) days
of the notice period (or for any remaining portion of such initial
period).  In the event of termination
hereunder, the Company shall pay the Executive any Final Compensation due
following the Date of Termination.  Any
equity granted the Executive pursuant to Section 4(c) hereof shall be
governed by that Section 4(c) and by the Stock and Option Plan or any
successor plan, any applicable agreements and any applicable Company securities
trading policies.  The Company shall have
no obligation or liability to the Executive under this Agreement, other than as
expressly set forth in this Section 5(f).


 


(g)                                 Upon
a Change of Control.


 


(i)                                     If
a Change of Control occurs and, at the time of such occurrence  or within two (2) years thereafter, the
Company terminates the Executive’s employment other than for Cause in
accordance with Section 5(d) hereof or the Executive terminates his
employment for Good Reason in accordance with Section 5(e), the Company
shall provide the Executive any Final Compensation due and shall pay the
Executive any Annual Bonus earned for the fiscal year immediately preceding
that in which termination occurs, if unpaid on the Date of Termination, which
Annual Bonus shall be payable on the date annual bonuses for that immediately
preceding fiscal year are paid to Company executives generally and, in
addition, provided that the Executive meets all conditions to eligibility of
the Severance Benefits as set forth in Section 5(d)(ii) hereof, the
Executive shall be entitled to receive the Severance Benefits on the same terms
as would have applied had his employment been terminated by the Company other
than for Cause or by the Executive for Good Reason prior to the occurrence of a
Change of Control, except that (I) in lieu of providing the Executive
Severance Pay during the Severance Pay Period in accordance with clause (A) of
Section 5(d)(i), the Company, subject to Section 5(h)(i) hereof,
shall pay the Executive, no later than the sixtieth (60) calendar day following
the


 


12

















 


Date of Termination, a single lump sum payment equal
to twice the sum of the Base Salary (at the annual rate) and the Target Bonus
(the “Enhanced Separation Pay”); (II) in lieu of the premium
contributions that the Company would otherwise have provided under clause (B) of
Section 5(d)(i) for participation by the Executive and his eligible
dependents in the Company’s group health, dental and vision plans (to the
extent offered by the Company) under COBRA, the Company shall pay the full
premium cost and any required administrative fee for the duration specified in Section 5(d)(i)(B);
and (III) in lieu of the accelerated vesting provided under clause (D) of
Section 5(d)(i), any portion of the Option and any Additional Options that
are unvested on the Date of Termination and have not yet expired in accordance
with their terms shall vest and become exercisable on the Accelerated Vesting
Date and shall remain exercisable until the earlier of the (y) end of the
three (3) month period following the Date of Termination and (z) the
date on which the option to which those shares are subject (whether it be the
Option or one of the Additional Options) would otherwise expire and if the
Restricted Stock or any other restricted stock or restricted stock units
granted the Executive during his employment hereunder are unvested on the Date
of Termination, they too shall vest on the Accelerated Vesting Date.


 


(ii)                                  A
“Change of Control” shall be deemed to take place if hereafter 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 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.


 


(iii)                               The
Company shall promptly reimburse the Executive for the amount of all reasonable
attorneys’ fees and expenses incurred by the Executive during the period
commencing on the effective date of the Change of Control and ending on the
sixth (6th) anniversary of the Date of Termination in seeking to obtain or
enforce any right or benefit provided the Executive under this Section 5(g).


 


(h)                                 Timing of Payments and Section 409A.


 


(i)                                     If
at the time the Executive’s employment hereunder terminates, the Executive is a
“specified employee,” as hereafter defined, any and all amounts payable
under Section 5(d), Section 5(e) or Section 5(g) hereof
in connection with such


 


13

















 


termination of employment that constitute deferred
compensation subject to Section 409A, as determined by the Company in its
reasonable judgment, and that would (but for this sentence) be payable within
six (6) months following such termination of employment, shall instead be
paid on the date that follows the date of such termination of employment by six
(6) months.


 


(ii)                                  For
purposes of this Agreement, the phrase “termination of employment” and
correlative phrases mean a “separation from service” as defined in Treas.
Regs.§1.409A-1(h), and the term “specified employee” means an individual
determined by the Company to be a specified employee under Treas.
Regs.§1.409A-1(i).  For the avoidance of
doubt, any tax liability to which the Executive is subject under Section 409A
shall be solely the Executive’s responsibility.


 


(iii)                               Each
installment payment to be provided to the Executive under this Agreement shall
be a separate “payment” within the meaning of  Treasury Regulation section
1.409A-2(b)(2)(i).


 


(i)                                     Post-Agreement
Employment.  In the event the
Executive remains in the employ of the Company or any of its Affiliates
following termination of this Agreement, whether by expiration of the term
hereof or otherwise, then such employment shall be at will.


 


6.                                       Effect
of Termination.  The provisions of
this Section 6 shall apply to any termination, whether due to the
expiration of the term hereof, pursuant to Section 5 or otherwise.


 


(a)                                  Payment
by the Company of any Final Compensation due to the Executive and provision of
any Severance Pay or Enhanced Separation Pay and any other Severance Benefits
if due the Executive under the applicable termination provision of Section 5
and any accelerated vesting to which the Executive is entitled under Section 4(c)(iv) shall
constitute the entire obligation of the Company to the Executive under this
Agreement.


 


(b)                                 Except
for any right of the Executive and his eligible dependents to continue
participation any medical, dental or vision plan offered by the Company in
accordance with applicable law, the Executive’s participation in Employee
Benefit Plans of the Company shall terminate pursuant to the terms of each
applicable Employee Benefit Plan based on the Date of Termination without
regard to Severance Pay, Enhanced Separation Pay or pay for notice period
waived or any other payment to the Executive following the Date of Termination.


 


(c)                                  Provisions
of this Agreement shall survive any termination if so provided herein or if
necessary or desirable to accomplish the purposes of other surviving
provisions, including without limitation Section 4(c)(iv) in
accordance with its terms.  Further, the
Employee Agreement shall survive termination of the Executive’s employment
howsoever occurring in accordance with the terms thereof.  The obligation of the Company to make
payments of Severance Pay or Enhanced Separation Pay and to provide other
Severance Benefits to the Executive under Section 5(d), 5(e) or 5(g) hereof
and to provide accelerated vesting in accordance with Section 4(c)(iv) hereof
is expressly conditioned on the Executive’s continued full performance of his
obligations under the Employee Agreement. 
The Executive recognizes


 


14

















 


that, except as
expressly provided in Section 5(d) or 5(e) or 5(g), or in the
case of payment for notice waived pursuant to Section 5(f) hereof, or
accelerated vesting in accordance with Section 4(c)(iv) hereof, no
compensation is earned after termination of employment.


 


7.                                       Conflicting
Agreements.  The Executive hereby
represents and warrants that the execution of this Agreement and the
performance of his obligations hereunder will not breach or be in conflict with
any other agreement to which the Executive is a party or is bound and that the
Executive is not now subject to any covenants against competition or similar
covenants or any court order or other legal obligation that would affect the
performance of his obligations hereunder. 
The Executive agrees not to disclose to or use on behalf of the Company
or any of its Affiliates any proprietary information of a prior employer or
other Person, including without limitation Shire plc, without such Person’s
consent.


 


8.                                       Indemnification.  The Company shall indemnify
the Executive to the same extent as it indemnifies its other executive officers
and members of its Board under its charter or bylaws, as in effect from time to
time.  The Executive agrees to promptly
notify the Company of any actual or threatened claim arising out of or as a
result of his employment or any of his positions or offices held with the
Company or his membership on the Board.


 


9.                                       Definitions.  Words or phrases which are initially
capitalized or are within quotation marks shall have the meanings provided in
this Section and as provided elsewhere herein.  For purposes of this Agreement, the following
definitions apply:


 


(a)                                  “Affiliates”
means all persons and entities directly or indirectly controlling, controlled
by or under common control with the Company, where control may be by management
authority, contract or equity interest.


 


(b)                                 “Date
of Termination” means the date the Executive’s employment with the Company
terminates, regardless of the reason for such termination.


 


(c)                                  “Final Compensation” means (i) Base
Salary earned during the final payroll period of the Executive’s employment
hereunder, through the Date of Termination, but not yet paid, (ii) pay at
the rate of the Base Salary for any vacation earned but not used, through the
Date of Termination and (iii) any business expenses incurred by the Executive
but un-reimbursed on the Date of Termination, provided that such expenses and
required substantiation and documentation are submitted prior to, or within
sixty (60) days following, the Date of Termination and that such expenses are
reimbursable under Section 4(f) hereof and Company policies.


 


(d)                                 “Final Pro-Rated
Bonus” means the sum that results from multiplying the Annual Bonus the
Executive would have earned for the fiscal year in which the Date of
Termination occurs had he continued employment through the last day of that
fiscal year, by a fraction, the numerator of which shall be the number of days
the Executive was employed during the fiscal year, through the Date of
Termination, and the denominator of which shall be 365 (the “Final Pro-Rated
Bonus”); provided, however, in the event of a termination of employment


 


15

















 


pursuant to Section 5(b),
the numerator shall instead be the number of days the Executive was employed
during the fiscal year, through his last day of active employment.


 


(e)                                  “Immediate
Affiliates” means the Company’s direct and indirect subsidiaries, the
Company’s direct and indirect parents and their direct and indirect
subsidiaries (exclusive of the Company).


 


(f)                                    Except
as otherwise expressly provided in Section 5(g)(iii), “Person”
means an individual, a corporation, a limited liability company, an
association, a partnership, an estate, a trust and any other entity or
organization, other than the Company or any of its Affiliates.


 


10.                                 Withholding
.  All payments made by the Company
under this Agreement shall be reduced by any tax or other amounts required to
be withheld by the Company under applicable law.


 


11.                                 Assignment.  Neither the Company nor the Executive may
make any assignment of this Agreement or any interest herein, by operation of
law or otherwise, without the prior written consent of the other; provided,
however, that the Company may assign its rights and obligations under this
Agreement without the consent of the Executive in the event that the Executive
is transferred to a position with any of the Affiliates or in the event that
the Company shall hereafter effect a reorganization, consolidate with, or merge
into, any Person or transfer all or substantially all of its properties or
assets to any Person.  This Agreement
shall inure to the benefit of and be binding upon the Company and the
Executive, their respective successors, executors, administrators, heirs and
permitted assigns.


 


12.                                 Severability.  If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of
competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as
to which it is so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.


 


13.                                 Waiver.  No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party.  The failure of either party to require the
performance of any term or obligation of this Agreement, or the waiver by
either party of any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of any subsequent
breach.


 


14.                                 Notices.  Any and all notices, requests, demands and
other communications provided for by this Agreement shall be in writing and
shall be effective when delivered in person, consigned to a reputable national
courier service or deposited in the United States mail, postage prepaid, and
addressed to the Executive at his last known address on the books of the
Company or, in the case of the Company, at its principal place of business in
Cambridge, Massachusetts, attention of the Senior Vice President of Human
Resources with a copy to the


 


16

















 


Office of the
General Counsel of the Company, or to such other address as either party may
specify by notice to the other actually received.


 


15.                                 Entire
Agreement.  This Agreement
constitutes the entire agreement between the parties and supersedes all prior
communications, agreements and understandings, written or oral, with respect to
the terms and conditions of the Executive’s employment, excluding only the
disclosed Shire Obligations, the Employee Agreement and any obligations of
confidentiality or other obligations arising from the Executive’s membership on
the Board in effect on the effective date of this Agreement, all of which shall
remain in full force and effect in accordance with their terms.


 


16.                                 Amendment.  This Agreement may be amended or modified
only by a written instrument signed by the Executive and by an expressly
authorized representative of the Board.


 


17.                                 Compliance
with Section 409A.  The Company
and the Executive acknowledge that it may be desirable, in view of regulations
or other guidance issued under Section 409A, to amend provisions of this
Agreement to avoid the acceleration of tax or the imposition of additional tax
under Section 409A and that the Company will not unreasonably withhold its
consent to any such amendments that in its determination are (i) feasible
and necessary to avoid adverse tax consequences under Section 409A for the
Executive, and (ii) not materially adverse to the interests of the
Company.


 


18.                                 Headings
and Counterparts.  The headings and
captions in this Agreement are for convenience only and in no way define or
describe the scope or content of any provision of this Agreement.  This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together
shall constitute one and the same instrument.


 


19.                                 Governing
Law.  This is a Massachusetts
contract and shall be construed and enforced under and be governed in all
respects by the laws of the Commonwealth of Massachusetts, without regard to
the conflict of laws principles thereof.


 


[Remainder
of page intentionally blank. 
Signature page follows immediately.]


 


17

















 


IN WITNESS
WHEREOF, this Agreement has been executed as a sealed instrument by the
Company, by its duly authorized representative, and by the Executive, as of the
date first above written.


 


	
  THE COMPANY:

  	
   

  	
  THE EXECUTIVE:

  
	
  VERTEX PHARMACEUTICALS INCORPORATED

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Charles A. Sanders

  	
   

  	
  Signature:

  	
   /s/
  Matthew W. Emmens

  
	
   

  	
  Charles A. Sanders,
  M.D.

  	
   

  	
   

  	
  Matthew
  W. Emmens

  
	
   

  	
  Chairman of the Board

  	
   

  	
   

  	
   

  



 


18

















 


EXHIBIT A


 


RELEASE
OF CLAIMS


 


FOR AND IN CONSIDERATION OF
the severance benefits to be provided me in connection with the termination of
my employment in accordance with the applicable provision of Section 5 of
the employment agreement between me and Vertex
Pharmaceuticals Incorporated  (the
“Company”) effective as of February 5, 2009  (the “Agreement”),
which are conditioned on my signing this Release of Claims, in addition to my
continued compliance with the agreement between me and the Company
captioned “Employee Non-Disclosure, Non-Competition and Inventions Agreement”
of even date with the Agreement,
and to which I am not otherwise entitled, 
I, on my own behalf and on behalf of my heirs, executors,
administrators, beneficiaries, representatives and assigns, and all others
connected with or claiming through me, hereby release and forever discharge the
Company and its Affiliates (as defined in the Agreement) and all of their
respective past, present and future officers, directors, shareholders, employees,
agents, general and limited partners, members, managers, joint venturers,
representatives, successors and assigns, and all others connected with any of
them (collectively, the “Released”), both individually and in their official
capacities, from any and all causes of action, rights or claims of any type or
description, whether known or unknown, that I have had in the past, now have,
or might now have, through the date of my signing of this Release of Claims,
including without limitation any causes of action, rights or claims in any way
resulting from, arising out of or connected with my employment by the Company
or any of its Affiliates or the termination of that employment or pursuant to
any federal, state or local law, regulation or other requirement (including
without limitation Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Americans with Disabilities Act, and the
fair employment practices laws of the state or states in which I have been
employed by the Company or any of its Affiliates, each as amended from time to
time).


 


Excluded from the scope of
this Release of Claims is (i) any claim arising under Section 4(c)(iv) or
applicable provision of Section 5 of the Agreement after the effective
date of this Release of Claim and (ii) any right of indemnification or
contribution that I have pursuant to the charter or by laws of the Company.


 


In signing this Release of
Claims, I acknowledge my understanding that I may not sign it prior to the
termination of my employment, but that I may consider the terms of this Release
of Claims for up to twenty-one (21) days (or such longer period as the Company
may specify) from the date my employment with the Company terminates.  I also acknowledge that I have been advised
by the Company, as set forth in Section 5(d) of the Agreement, to
consult an attorney prior to signing this Release of Claims; that I have had a
full and sufficient time to consider this Release of Claims and to consult with
an attorney, if I wished to do so, or to consult with any other person of my
choosing before signing; and that I am signing this Release of Claims
voluntarily and with a full understanding of its terms.  I further acknowledge that, in signing this
Release of Claims, I have not relied on any promises or representations,
express or implied, other than those set forth expressly in the Agreement.


 

















 


I understand that I may
revoke this Release of Claims at any time within seven (7) days of the
date of my signing by written notice to the  Senior Vice President of Human Resources of
the Company or such other person whom the Board of Directors of the Company may
designate and that this Release of Claims shall not take effect until the
eighth (8th) calendar day following the date of my signing and then only if I
have not revoked it during the preceding seven (7) calendar days.


 


Intending to be legally
bound, I have signed this Release of Claims under seal as of the date written
below.


 


	
  Signature:

  	
   

  	
   

  
	
   

  	
  Matthew
  W. Emmens

  	
   

  
	
   

  	
   

  	
   

  
	
  Date Signed: