Exhibit 10.2


 


VERTEX PHARMACEUTICALS INCORPORATED


AMENDED AND RESTATED 2006 STOCK and OPTION PLAN


 


1.                                      DEFINITIONS


 


Unless
otherwise specified or unless the context otherwise requires, the following
terms, as used in this Vertex Pharmaceuticals Incorporated Amended and Restated
2006 Stock and Option Plan, have the following meanings:


 


Administrator means the Board of
Directors and/or a committee of the Board of Directors to which the Board of
Directors has delegated power to act on its behalf in administering this Plan
in whole or in part.


 


Affiliate means a corporation that,
for purposes of Section 424 of the Code, is a parent or subsidiary of the
Company, direct or indirect.


 


Board of Directors means the Board of
Directors of the Company.


 


Code means the United States Internal Revenue
Code of 1986, as amended.


 


Common Stock means shares of the Company’s
common stock, $.01 par value.


 


Company means Vertex Pharmaceuticals Incorporated, a
Massachusetts corporation.


 


Employee means an employee of the
Company or of an Affiliate (including, without limitation, an employee who is
also serving as an officer or director of the Company or of an Affiliate),
designated by the Administrator to be eligible to be granted one or more Stock
Rights under the Plan.


 


Exchange Act means the Securities
Exchange Act of 1934, as amended.


 


Fair Market Value of a Share of Common Stock
on a particular date shall be the mean between the highest and lowest quoted
selling prices on such date (the “valuation date”) on the securities market where
the Common Stock is traded, or if there were no sales on the valuation date, on
the next preceding date within a reasonable period (as determined in the sole
discretion of the Administrator) on which there were sales. If there were no
sales in such a market within a reasonable period, the fair market value shall
be as determined in good faith by the Administrator in its sole discretion. The
Fair Market Value as determined in this paragraph shall be rounded down to the next lower whole cent if the foregoing calculation
results in fractional cents.


 


ISO means an option intended to qualify as an
incentive stock option under Code Section 422.


 


Non-Employee Director means a member of the Board
of Directors who is not an employee of the Company or any Affiliate.


 


Non-Qualified Option means an option that is not
intended to qualify as an ISO.


 


Option means an ISO or Non-Qualified Option granted
under the Plan.


 


Participant means an Employee,
Non-Employee Director, consultant or advisor of the Company or an Affiliate to
whom one or more Stock Rights are granted under the Plan. As used herein, “Participant”
shall include “Participant’s Survivors” and a Participant’s permitted
transferees where the context requires.


 


Participant’s Survivors means a deceased Participant’s
legal representatives and/or any person or persons who
acquires the Participant’s rights to a Stock Right by will or by the
laws of descent and distribution.


 


Plan means this Vertex Pharmaceuticals
Incorporated Amended and Restated 2006 Stock and Option Plan, as amended from
time to time.


 

















 


Shares means shares of the Common Stock as to which
Stock Rights have been or may be granted under the Plan or any shares of
capital stock into which the Shares are changed or for which they are exchanged
within the provisions of Section 3 of the Plan. The Shares subject to
Stock Rights granted under the Plan may be authorized and unissued shares or
shares held by the Company in its treasury, or both.


 


Stock Agreement means an agreement between
the Company and a Participant delivered pursuant to the Plan with respect to a
Stock Right, in such form as the Administrator shall approve.


 


Stock-Based Award means a grant by the
Company under the Plan of an equity award or equity-based award that is not an
Option or Stock Grant.


 


Stock Grant means a grant by the
Company of Shares under the Plan.


 


Stock Right means a right to Shares or
the value of Shares of the Company granted pursuant to the Plan as an ISO, a
Non-Qualified Option, a Stock Grant or a Stock-Based Award.


 


2.                                      PURPOSES OF THE PLAN


 


The
Plan is intended to encourage ownership of Shares by Employees, Non-Employee
Directors and certain consultants and advisors to the Company in order to
attract such persons, to induce them to work for the benefit of the Company or
of an Affiliate and to provide additional incentive for them to promote the
success of the Company or of an Affiliate. The Plan provides for the granting
of Stock Rights to Employees, Non-Employee Directors, consultants and advisors
of the Company.


 


3.                                      SHARES SUBJECT TO THE PLAN


 


The
number of Shares subject to this Plan as to which Stock Rights may be granted
from time to time shall be 13,902,380 or the equivalent of such number of
Shares after the Administrator, in its sole discretion, has interpreted the
effect of any stock split, stock dividend, combination, recapitalization or
similar transaction in accordance with Section 17 of this Plan. The number
of Shares subject to this Plan shall be reduced, share for share, by the number
of shares underlying Stock Rights, if any, that are granted under the Company’s
2007 New Hire Stock and Option Plan after March 17, 2008.


 


If
an Option granted hereunder ceases to be outstanding, in whole or in part
(other than by exercise), or if the Company shall reacquire (at no more than
its original issuance price) any Shares issued pursuant to a Stock Grant, or if
any Stock Right expires or is forfeited, cancelled or otherwise terminated or
results in any Shares not being issued, the unissued Shares that were subject
to such Stock Right shall again be available for issuance from time to time
pursuant to this Plan; provided that, the following Shares may not again be
made available for issuance as Awards under the Plan: (i) Shares that are
not issued or delivered as a result of the net settlement of an outstanding
Stock-Based Award or Option and (ii) Shares that the Company acquires from
a Participant for a price that is more than the original issuance price of the
Share, including any Share acquired by the Company to fund employee payroll tax
withholding obligations on a Stock Grant or Shares applied to payment of the
exercise price for an Option.


 


After
May 14, 2008, the number of Shares that may be subject to or delivered
pursuant to any form of Stock Right other than an Option shall not exceed 20%
of the aggregate of (A) the number of Shares available as to which Stock
Rights may be granted under this Plan on May 15, 2008 (taking in account
the Shares added on such date, but which amount does not include those 536,625
Shares as to which the Company granted Options on February 7, 2008,
subject to obtaining subsequent stockholder approval of such Options) and (B) any
Shares that again become available for issuance on or after May 15, 2008
pursuant to the preceding paragraph.


 


4.                                      ADMINISTRATION OF THE PLAN


 


The
Administrator shall administer the Plan. Subject to the provisions of the Plan,
the Administrator is authorized to:


 


a.                                       Interpret the
provisions of the Plan and of any Stock Right or Stock Agreement and to make
all rules and determinations that it deems necessary or advisable for the
administration of the Plan;


 


b.                                      Determine which
Employees, Non-Employee Directors, consultants and advisors of the Company and
its Affiliates shall be granted Stock Rights;


 

















 


c.                                       Determine the
number of Shares and exercise price for which a Stock Right shall be granted;


 


d.                                      Specify the
terms and conditions upon which a Stock Right or Stock Rights may be granted;


 


e.                                       In its
discretion, accelerate:


 


(i)                                   the date of
exercise of any installment of any Option; provided that the Administrator
shall not, without the consent of the Option holder accelerate the exercise
date of any installment of any Option granted to any Employee as an ISO (and
not previously converted into a Non-Qualified Option pursuant to Section 20)
if such acceleration would violate the annual vesting limitation contained in Section 422(d) of
the Code, as described in Section 6.2.3; or


 


(ii)                                the date or
dates of vesting of Shares, or lapsing of Company repurchase rights with respect
to any Shares, under any Stock Rights; and


 


f.                                         In its
discretion, extend the exercise date for any Option;


 


provided, however, that all
such interpretations, rules, determinations, terms and conditions shall be made
and prescribed in the context of preserving the tax status under Code Section 422
of those Options which are designated as ISOs (unless the holder of any such
Option otherwise agrees). Subject to the foregoing, the interpretation and
construction by the Administrator of any provisions of the Plan or of any Stock
Right granted under it shall be final, unless otherwise determined by the Board
of Directors, if the Administrator is other than the Board of Directors.


 


The
Administrator may employ attorneys, consultants, accountants or other persons,
and the Administrator, the Company and its officers and directors shall be
entitled to rely upon the advice, opinions or valuations of such persons. All
actions taken and all interpretations and determinations made by the
Administrator in good faith shall be final and binding upon the Company, all
Participants, and all other interested persons. No member or agent of the
Administrator shall be personally liable for any action, determination, or
interpretation made in good faith with respect to this Plan or grants
hereunder. Each member of the Administrator shall be indemnified and held
harmless by the Company against any cost or expense (including counsel fees)
reasonably incurred by him or her or any liability (including any sum paid in
settlement of a claim with the approval of the Company) arising out of any act
or omission to act in connection with this Plan unless arising out of such
member’s own fraud or bad faith. Such indemnification shall be in addition to
any rights of indemnification the members of the Administrator may have as
directors or otherwise under the by-laws of the Company, or any agreement, vote
of stockholders or disinterested directors, or otherwise.


 


5.                                      ELIGIBILITY FOR PARTICIPATION


 


The
Administrator shall, in its sole discretion, name the Participants in the Plan,
provided, however, that each Participant must be a Employee, Non-Employee
Director, consultant or advisor of the Company or of an Affiliate at the time a
Stock Right is granted. Notwithstanding the foregoing, the Administrator may
authorize the grant of a Stock Right to a person not then an Employee,
Non-Employee Director, consultant or advisor of the Company or of an Affiliate;
provided, however, that the actual grant of such
Stock Right shall be conditioned upon such person becoming eligible to become a
Participant at or prior to the time of execution of the Stock Agreement
evidencing such Stock Right. ISOs may be granted only to Employees. The
granting of any Stock Right to any individual shall neither entitle that individual
to, nor disqualify him or her from, participation in other grants of Stock
Rights.


 


6.                                      TERMS AND CONDITIONS OF OPTIONS


 


6.1 
General.  Each Option shall be set forth in writing in
a Stock Agreement, duly executed by the Company and, to the extent required by
law or requested by the Company, by the Participant. The Administrator may
provide that Options be granted subject to such terms and conditions,
consistent with the terms and conditions specifically required under this Plan,
as the Administrator may deem appropriate including, without limitation,
subsequent approval by the stockholders of the Company of this Plan or any
amendments thereto. Each Stock Agreement shall state the option price (per
share) of the Shares covered by each Option, the number of Shares to which it
pertains, the date or dates on which it first is exercisable and the date after
which it may no longer be exercised (subject to Sections 11, 12 and 13 of
this Plan). Option rights may accrue or become exercisable in installments over
a period of time, or upon the achievement of certain conditions or the
attainment of stated goals or events. The Option Price per share of Shares
covered by an Option (including both ISOs and Non-Qualified Options) shall not
be less than one hundred percent (100%) of the Fair Market Value per share of
the Common Stock on the date of grant.


 

















 


6.2 
ISOs.  Each Option intended to be an ISO shall be
issued only to Employees. In addition to the minimum standards set forth in Section 6.1,
ISOs shall be subject to the following terms and conditions, with such
additional restrictions or changes as the Administrator determines are
appropriate but not in conflict with Code Section 422 and relevant
regulations and rulings of the Internal Revenue Service:


 


6.2.1  ISO
Option Price.  In addition
to the limitation set forth in Section 6.1, the Option price per share of
the Shares covered by each ISO granted to a Participant who owns, directly or
by reason of the applicable attribution rules in Code Section 424(d),
more than ten percent (10%) of the total combined voting power of all classes
of stock of the Company or an Affiliate shall not be less than one hundred ten
percent (110%) of the Fair Market Value on the date of grant.


 


6.2.2  Term
of ISO.  Each ISO shall expire not more
than ten (10) years from the date of grant; provided, however, that an ISO
granted to a Participant who owns, directly or by reason of the applicable
attribution rules in Code Section 424(d), more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company or an
Affiliate shall expire not more than five (5) years from the date of
grant.


 


6.2.3  Annual
Limit on Incentive Stock Options.  To the extent required for “incentive stock
option” treatment under Section 422 of the Code, the aggregate Fair Market
Value (determined as of the time of grant) of the Shares with respect to which
ISOs granted under this Plan and any other plan of the Company or its Affiliate
become exercisable for the first time by a Participant during any calendar year
shall not exceed the aggregate threshold for ISOs established by the Code
($100,000 as of March 22, 2006). To the extent that any Option exceeds
this limit, it shall constitute a Non-Qualified Option.


 


6.3 
Non-Employee
Directors’ Options.  Each
Non-Employee Director, upon first being elected or appointed to the Board of
Directors, shall be granted a Non-Qualified Option to purchase that number of
Shares as shall be established for such Option grants from time to time by the
Board of Directors. Each such Option shall (i) have an exercise price
equal to the Fair Market Value (per share) on the date of grant of the Option, (ii) have
a term of ten (10) years, and (ii) shall become cumulatively
exercisable in sixteen (16) equal quarterly installments, upon completion
of each full quarter of service on the Board of Directors after the date of
grant. In addition, on June 1 of each year, each Non-Employee Director
shall be granted a Non-Qualified Option to purchase that number of Shares as shall
be established for such Option grants from time to time by the Board of
Directors. Each such Option shall (i) have an exercise price equal to the
Fair Market Value (per share) on the date of grant of such Option, (ii) have
a term of ten (10) years, and (iii) be exercisable in full
immediately on the date of grant. Any director entitled to receive an Option
grant under this Section may elect to decline the Option. If a
Non-Employee Director ceases to be any of an Employee, Non-Employee Director,
consultant or advisor of the Company, Options granted under this Section 6.3
shall remain exercisable to the extent such Options are exercisable on the date
of such termination of service, for their full term, and the provisions of
Sections 11 and 13 below shall not apply to any such Options.


 


6.4 
Limitation on Number
of Options Granted. 
Notwithstanding anything in this Plan to the contrary, no Participant
shall be granted an aggregate of Options and/or Stock-Based Awards under this
Plan in any calendar year for more than an aggregate of 600,000 Shares (subject
to adjustment pursuant to Section 17 to the extent consistent with Section 162(m) of
the Code).


 


7.                                      TERMS AND CONDITIONS OF STOCK GRANTS


 


Each
Stock Grant shall be set forth in a Stock Agreement, duly executed by the
Company and, to the extent required by law or requested by the Company, by the
Participant. The Stock Agreement shall be in the form approved by the
Administrator, with such changes and modifications to such form as the
Administrator, in its discretion, shall approve with respect to any particular
Participant or Participants. The Stock Agreement shall contain terms and
conditions that the Administrator determines to be appropriate and in the best
interest of the Company; provided, however, that the purchase price per share
of the Shares covered by each Stock Grant shall not be less than the par value
per Share. Each Stock Agreement shall state the number of Shares to which the
Stock Grant pertains and the terms of any right of the Company to reacquire the
Shares subject to the Stock Grant, including the time and events upon which
such rights shall accrue and the purchase price therefor, and any restrictions
on the transferability of such Shares.


 


8.                                      TERMS AND CONDITIONS OF OTHER STOCK-BASED AWARDS


 


The
Administrator shall have the right to grant other Stock-Based Awards having
such terms and conditions as the Administrator may determine, including,
without limitation, the grant of Shares based upon certain conditions, the
grant of securities convertible into Shares and the grant of stock appreciation
rights, phantom stock awards or stock units. The principal terms of each
Stock-Based Award shall be set forth in a Stock Agreement, duly executed by the
Company and, to the extent required by law or requested by the Company, by the
Participant. The Stock Agreement shall be in a form approved by the
Administrator and shall contain terms and conditions that the Administrator
determines to be appropriate.


 

















 


9.                                      EXERCISE OF OPTIONS AND ISSUANCE OF SHARES


 


An
Option (or any part or installment thereof) shall be exercised by giving
written notice to the Company or its designee, together with provision for
payment of the full purchase price in accordance with this Section for the
Shares as to which the Option is being exercised, and upon compliance with any
other condition(s) set forth in the Stock Agreement. Such notice shall be
signed by the person exercising the Option, shall state the number of Shares
with respect to which the Option is being exercised and shall contain any
representation required by the Plan or the Stock Agreement.


 


Payment
of the purchase price for the Shares as to which such Option is being exercised
shall be made (a) in United States dollars in cash or by check acceptable
to the Administrator, or (b) at the discretion of the Administrator, (i) through
delivery of shares of Common Stock not subject to any restriction under any
plan and having a Fair Market Value equal as of the date of exercise to the
cash exercise price of the Option, (ii) in accordance with a cashless
exercise program established with a securities brokerage firm, and approved by
the Company, (iii) by any other means (excluding, however, delivery of a
promissory note of the Participant) that the Administrator determines to be
consistent with the purpose of this Plan and applicable law, or (iv) by
any combination of the foregoing. Notwithstanding the foregoing, the
Administrator shall accept only such payment on exercise of an ISO as is
permitted by Section 422 of the Code.


 


The
Company shall then as soon as is reasonably practicable deliver the Shares as
to which such Option was exercised to the Participant (or to the Participant’s
Survivors, as the case may be). It is expressly understood that the Company may
delay the delivery of the Shares in order to comply with any law or regulation
that requires the Company to take any action with respect to the Shares prior
to their issuance. The Shares shall, upon delivery, be fully paid,
non-assessable Shares.


 


10.                               ASSIGNABILITY AND TRANSFERABILITY OF STOCK RIGHTS


 


By
its terms, a Stock Right granted to a Participant shall not be transferable by
the Participant other than by will or by the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act or the rules thereunder
or as approved by the Administrator in its discretion and set forth in the
applicable Stock Agreement, provided, however, that the Administrator shall not
approve any transfer of a Stock Right for consideration. Except as provided in
the preceding sentence or as otherwise permitted under a Stock Agreement, a
Stock Right shall be exercisable, during the Participant’s lifetime only by
such Participant (or by his or her legal representative) and shall not be
assigned, pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar
process. Any attempted transfer, assignment, pledge, hypothecation or other
disposition of any Stock Right or of any rights granted thereunder contrary to
the provisions of this Plan, or the levy of any attachment or similar process
upon a Stock Right, shall be null and void.


 


11.                               EFFECT ON STOCK RIGHTS OF TERMINATION OF SERVICE


 


11.1         Except as otherwise provided in the
applicable Stock Agreement or as otherwise provided in Sections 12 or 13,
if a Participant ceases to be an Employee, Non-Employee Director, consultant or
advisor with the Company and its Affiliates (for any reason other than
termination for “cause,” or death) (a “Termination of Service”) before the
Participant has exercised all Stock Rights, the Participant may exercise any
Stock Right granted to him or her to the extent that the Stock Right is
exercisable on the date of such Termination of Service. Any such Stock Right
must be exercised within three months after the date of the Participant’s
Termination of Service, unless otherwise provided in the applicable Stock
Agreement, but in no event after the expiration of the term of the Stock Right.


 


11.2         The provisions of this Section, and not
the provisions of Section 14, shall apply to a Participant who
subsequently dies after the Termination of Service; provided, however, that in
the case of a Participant’s death within three (3) months after the
Termination of Service, the Participant’s Survivors may exercise the Stock
Right within one (1) year after the date of the Participant’s death, but
in no event after the date of expiration of the term of the Stock Right.


 


11.3         Notwithstanding anything herein to the
contrary, if subsequent to a Participant’s Termination of Service, but prior to
the exercise of a Stock Right, the Administrator determines that, either prior
or subsequent to the Participant’s Termination of Service, the Participant
engaged in conduct which would constitute “cause” (as defined in Section 12),
then such Participant shall forthwith cease to have any right to exercise any
Stock Right. Stock Rights that consist of Shares issued under Stock Grants for
which any restrictions on transfer or Company repurchase right shall have
lapsed, shall be deemed for all purposes to have been “exercised.”


 

















 


11.4         Absence from work with the Company or
an Affiliate because of temporary disability or a leave of absence for any
purpose, shall not, during the period of any such absence in accordance with
Company policies, be deemed, by virtue of such absence alone, a Termination of
Service, except as the Administrator may otherwise expressly provide.


 


11.5         Except as required by law or as set
forth in a Participant’s Stock Agreement, Stock Rights granted under the Plan
shall not be affected by any change of a Participant’s status within or among
the Company and any Affiliates, so long as the Participant continues to be an employee,
director, consultant or advisor of the Company or any Affiliate.


 


12.                               EFFECT ON STOCK RIGHTS OF TERMINATION OF SERVICE FOR “CAUSE”


 


Except
as otherwise provided in a Participant’s Stock Agreement or as otherwise agreed
in writing by the Administrator, if a Participant’s service with the Company or
an Affiliate is terminated for “cause,” all outstanding and unexercised (vested
or unvested) Stock Rights will immediately be forfeited as of the time the
Participant is notified that his or her service is terminated for “cause.”
Stock Rights that consist of Shares issued under Stock Grants for which any
restrictions on transfer or Company repurchase right shall have lapsed, shall
be deemed for all purposes to have been “exercised.” For purposes of this Plan,
“cause” shall include (and is not limited to) dishonesty with respect to the
Company and its Affiliates, insubordination, substantial malfeasance or
non-feasance of duty, unauthorized disclosure of confidential information,
breach by the Participant of any provision of any employment, consulting,
advisory, nondisclosure, non-competition or similar agreement between the
Participant and the Company, and conduct substantially prejudicial to the
business of the Company or any Affiliate. The determination of the
Administrator as to the existence of cause will be conclusive on the
Participant and the Company. “Cause” is not limited to events that have
occurred prior to a Participant’s termination of service, nor is it necessary
that the Administrator’s finding of “cause” occur prior to termination of
service. If the Administrator determines, subsequent to a Participant’s
termination of service but prior to the exercise of a Stock Right, that either
prior or subsequent to the Participant’s termination of service the Participant
engaged in conduct which would constitute “cause,” then the right to exercise
any Stock Right shall be forfeited as set forth in this Section 12. Any
definition in an agreement between a Participant and the Company or an
Affiliate which contains a conflicting definition of “cause” for termination of
service and which is in effect at the time of such termination of service shall
supersede the definition in this Plan with respect to that Participant.


 


13.                               EFFECT ON STOCK RIGHTS OF DEATH WHILE AN EMPLOYEE, DIRECTOR, CONSULTANT
OR ADVISOR


 


Except
as otherwise provided in a Participant’s Stock Agreement, in the event of death
of a Participant while the Participant is an Employee, Non-Employee Director,
consultant or advisor of the Company or of an Affiliate, any Stock Rights
granted to such Participant may be exercised by the Participant’s Survivors to
the extent exercisable but not exercised on the date of death. Any such Stock
Right must be exercised within one (1) year after the date of death of the
Participant but in no event after the date of expiration of the term of the
Stock Right, notwithstanding that the decedent might have been able to exercise
the Stock Right as to some or all of the Shares on a later date if he or she
had not died and had continued to be an Employee, Non-Employee Director,
consultant or advisor.


 


14.                               RIGHTS AS A STOCKHOLDER


 


No
Participant to whom a Stock Right (other than a Stock Grant) has been granted
shall have rights as a stockholder with respect to any Shares covered by such
Stock Right, except after due exercise thereof and/or tender of the full
purchase price for the Shares being purchased pursuant to such exercise. The
provisions of this Section 14 shall not be applicable to Shares issued
pursuant to Stock Grants, provided that the Participant shall have tendered the
purchase price therefore, notwithstanding the existence of stock transfer
restrictions on or a Company repurchase right with respect to such Shares.


 


15.                               EMPLOYMENT OR OTHER RELATIONSHIP


 


Nothing
in this Plan or any Stock Agreement shall be deemed to prevent the Company or
an Affiliate from terminating the employment, consultancy or director status of
a Participant, or to prevent a Participant from terminating his or her own
employment, consultancy or director status or to give any Participant a right
to be retained in employment or other service by the Company or any Affiliate
for any period of time.


 


16.                               DISSOLUTION OR LIQUIDATION OF THE COMPANY


 


Upon
the dissolution or liquidation of the Company (other than in connection with a
transaction subject to the provisions of Section 17.2), all Stock Rights
granted under this Plan which as of such date shall not have been exercised
will 


 

















 


terminate and become null
and void; provided, however, that if the rights of a Participant or a
Participant’s Survivors have not otherwise terminated and expired, the
Participant or Participant’s Survivors will have the right immediately prior to
such dissolution or liquidation to exercise any Stock Right to the extent that
such Stock Right is exercisable as of the date immediately prior to such
dissolution or liquidation. Upon the dissolution or liquidation of the Company,
any outstanding Stock-Based Awards shall immediately terminate unless otherwise
determined by the Administrator or specifically provided in the applicable
Stock Agreement.


 


17.                               ADJUSTMENTS


 


Upon
the occurrence of any of the following events, a Participant’s rights with
respect to any Stock Right granted to him or her hereunder that have not
previously been exercised in full shall be adjusted as hereinafter provided,
unless otherwise specifically provided in the Stock Agreement or in any
employment agreement between a Participant and the Company or an Affiliate:


 


17.1  Stock
Dividends and Stock Splits.  If the shares of Common Stock shall be
subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock subject to or
deliverable upon the exercise of a Stock Right shall be appropriately increased
or decreased, and appropriate adjustments shall be made in the purchase price
per Share to reflect such event. The number of Shares subject to Options to be
granted to Non-Employee Directors pursuant to Section 6.3 and the number
of Shares subject to the limitation in Section 6.4 shall also be
proportionately adjusted upon the occurrence of such events.


 


17.2  Consolidations
or Mergers.  In the event
of a consolidation or merger in which the Company is not the surviving
corporation or which results in the acquisition of substantially all the
Company’s outstanding stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company’s assets (any of the foregoing, an “Acquisition”),
all then outstanding Stock Rights (excluding any Shares subject to Stock Grants
as to which all Company repurchase rights shall have lapsed) shall terminate
unless assumed pursuant to clause (i) below; provided that either (i) the
Administrator shall provide for the surviving or acquiring entity or an
affiliate thereof to assume the outstanding Stock Rights or grant replacement
stock rights in lieu thereof, any such replacement to be upon an equitable
basis as determined by the Administrator, or (ii) if there is no such
assumption or substitution, all outstanding Stock Rights shall become
immediately and fully exercisable and all Company repurchase rights with
respect to Stock Rights shall lapse, in each case immediately prior to the
Acquisition, notwithstanding any restrictions or vesting conditions set forth
therein.


 


17.3  Recapitalization
or Reorganization.  In the event
of a recapitalization or reorganization of the Company (other than a
transaction described in Section 17.2 above) pursuant to which securities
of the Company or of another corporation are issued with respect to the
outstanding shares of Common Stock, a Participant upon exercising a Stock Right
shall be entitled to receive for the purchase price paid upon such exercise the
securities he or she would have received if he or she had exercised such Stock
Right prior to such recapitalization or reorganization.


 


17.4  Adjustments
to Stock Grants and Stock-Based Awards.  Upon the happening of any of the events
described in Sections 17.1, 17.2 or 17.3, any outstanding Stock-Based
Award and the Shares subject to any Stock Grant, vested or unvested, shall be
appropriately adjusted to reflect the events described in such Sections. The
Administrator shall determine the specific adjustments to be made under this Section 17.4.


 


17.5  Modification
of ISOs. 
Notwithstanding the foregoing, any adjustments made pursuant to Section 17.1,
17.2 or 17.3 with respect to ISOs shall be made only after the Administrator
determines whether such adjustments would constitute a “modification” of such
ISOs (as that term is defined in Section 424(h) of the Code) or would
cause any adverse tax consequences for the holders of such ISOs. If the
Administrator determines that such adjustments made with respect to ISOs would
constitute a modification of such ISOs, it may refrain from making such
adjustments, unless the holder of an ISO specifically requests in writing that
such adjustment be made and such writing indicates that the holder has full
knowledge of the consequences of such “modification” on his or her income tax
treatment with respect to the ISO.


 


18.                               ISSUANCES OF SECURITIES


 


Except
as expressly provided herein, no issuance (including for this purpose the
delivery of shares held in treasury) by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of Shares subject to Stock Rights. Except as 


 

















 


expressly provided
herein, no adjustments shall be made for dividends paid in cash or in property
(including without limitation, securities) of the Company.


 


19.                               FRACTIONAL SHARES


 


No
fractional share shall be issued under the Plan and the person exercising any
Stock Right shall receive from the Company cash in lieu of any such fractional
share equal to the Fair Market Value thereof.


 


20.                               CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS: TERMINATION OF ISOs


 


Any
Options granted under this Plan that do not meet the requirements of the Code
for ISOs shall automatically be deemed to be Non-Qualified Options without
further action on the part of the Administrator. The Administrator, at the
written request of any Participant, may in its discretion take such actions as
may be necessary to convert such Participant’s ISOs (or any portion thereof)
that have not been exercised on the date of conversion into Non-Qualified
Options at any time prior to the expiration of such ISOs, regardless of whether
the Participant is an employee of the Company or an Affiliate at the time of
such conversion. At the time of such conversion, the Administrator (with the
consent of the Participant) may impose such conditions on the exercise of the
resulting Non-Qualified Options as the Administrator in its discretion may
determine, provided that such conditions shall not be inconsistent with this
Plan. Nothing in the Plan shall be deemed to give any Participant the right to
have such Participant’s ISOs converted into Non-Qualified Options, and no such
conversion shall occur until and unless the Administrator takes appropriate
action. The Administrator, with the consent of the Participant, may also
terminate any portion of any ISO that has not been exercised at the time of
such termination.


 


21.                               WITHHOLDING


 


If
any federal, state, or local income taxes, employment taxes, Federal Insurance
Contributions Act (“FICA”) withholdings or other amounts are required by applicable
law or governmental regulation to be withheld from the Participant’s salary,
wages or other remuneration in connection with the exercise of a Stock Right,
the lapsing of a Company repurchase right or a Disqualifying Disposition (as
defined in Section 22), the Company may withhold from the Participant’s
compensation, if any, or may require that the Participant advance in cash to
the Company, or to any Affiliate of the Company which employs or employed the
Participant, the amount of such withholdings unless a different withholding
arrangement, including the use of shares of the Company’s Common Stock, is
authorized by the Administrator (and permitted by law). For purposes hereof,
the Fair Market Value of any shares withheld for purposes of payroll withholding
shall be determined in the manner provided in Section 1 above, as of the
most recent practicable date prior to the date of exercise. If the Fair Market
Value of the shares withheld is less than the amount of payroll withholdings
required, the Participant may be required to advance the difference in cash to
the Company or the Affiliate employer. The Administrator in its discretion may
condition the exercise of an Option for less than the then Fair Market Value on
the Participant’s payment of such additional withholding. In no event shall
shares be withheld from any award in satisfaction of tax withholding
requirements in an amount that exceeds the statutory minimum amount of tax
withholding required.


 


22.                               NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION


 


Each
Employee who receives an ISO must agree to notify the Company in writing
immediately after the Employee makes a “Disqualifying Disposition” of any
Shares acquired pursuant to the exercise of an ISO. A Disqualifying Disposition
is any disposition (as defined in Section 424(c) of the Code) of such
Shares before the later of (a) two years from the date the Employee was
granted the ISO, or (b) one year after the date the Employee acquired
Shares by exercising the ISO. If the Employee has died before such Shares are
sold, the notice provisions of this Section 22 shall not apply.


 


23.                               EFFECTIVE DATE; TERMINATION OF THE PLAN


 


This
Plan shall be effective on March 29, 2006, the date of its adoption by the
Board of Directors, subject to approval by the shareholders of the Company. The
Plan will terminate on March 28, 2016. The Plan also may be terminated at
an earlier date by vote of the Board of Directors. Termination of this Plan
will not affect any Stock Rights granted or Stock Agreements executed prior to
the effective date of such termination.


 


24.                               AMENDMENT OF THE PLAN; AMENDMENT OF STOCK RIGHTS


 


The
Plan may be amended by the stockholders of the Company by affirmative vote of a
majority of the votes cast at a meeting of the stockholders at which a quorum is
present. The Plan also may be amended by the Board of Directors or the 


 

















 


Administrator, including,
without limitation, to the extent necessary to qualify any or all outstanding
Stock Rights granted under the Plan or Stock Rights to be granted under the
Plan for favorable federal income tax treatment (including deferral of taxation
upon exercise) as may be afforded incentive stock options under Section 422
of the Code, and to the extent necessary to qualify the shares issuable upon
exercise of any outstanding Stock Rights granted, or Stock Rights to be
granted, under the Plan for listing on any national securities exchange or
quotation in any national automated quotation system of securities dealers. Any
amendment approved by the Administrator that the Administrator determines is of
a scope that requires stockholder approval shall be subject to stockholder
approval. No modification or amendment of the Plan shall adversely affect a
Participant’s rights under a Stock Right previously granted to the Participant,
without such Participant’s consent.


 


In
its discretion, the Administrator may amend any term or condition of any
outstanding Stock Right, provided: (i) such term or condition is not
prohibited by the Plan; (ii) if the amendment is adverse to the Participant,
such amendment shall be made only with the consent of the Participant or the
Participant’s Survivors, as the case may be; and (iii) any such amendment
of any ISO shall be made only after the Administrator determines whether such
amendment would constitute a “modification” of any Stock Right which is an ISO
(as that term is defined in Section 424(h) of the Code) or would
cause any adverse tax consequences for the holder of such ISO (in which case,
the Participant’s or Participant’s Survivors’ consent to such amendment shall
be required). Notwithstanding the foregoing, the Administrator shall not have
the authority to reduce the exercise price of any Option after the date of
grant, except for adjustments permitted under Section 17 of this Plan.


 


25.                               GOVERNING LAW


 


This
Plan shall be construed and enforced in accordance with the law of The
Commonwealth of Massachusetts.


 

















 


AMENDMENT NO. 1

TO THE

AMENDED AND RESTATED

VERTEX PHARMACEUTICALS INCORPORATED

2006 STOCK AND OPTION PLAN


 


Effective February 5,
2009, the Amended and Restated Vertex Pharmaceuticals Incorporated 2006 Stock
and Option Plan (the “Plan”) is
hereby amended as follows:


 


Section 6.4
of the Plan is deleted in its entirety and the following is substituted
therefor:


 


6.4    Limitation on Number of
Shares Granted.    Notwithstanding anything in
this Plan to the contrary, no Participant shall be granted an aggregate of
Options and/or Stock-Based Awards under this Plan in any calendar year for more
than an aggregate of 700,000 Shares (subject to adjustment pursuant to Section 17
to the extent consistent with Section 162(m) of the Code).


 

















 


AMENDMENT
NO. 2

TO THE

AMENDED AND RESTATED

VERTEX PHARMACEUTICALS INCORPORATED

2006 STOCK AND OPTION PLAN


 


Effective May 14,
2009, the Amended and Restated Vertex Pharmaceuticals Incorporated 2006 Stock
and Option Plan (the “Plan”) is
hereby amended as follows:


 


The
first paragraph of Section 3 of the Plan is deleted in its entirety and
the following is substituted therefor:


 


The number of Shares
subject to this Plan as to which Stock Rights may be granted from time to time
shall be 21,602,380 or the equivalent of such number of Shares after the
Administrator, in its sole discretion, has interpreted the effect of any stock
split, stock dividend, combination, recapitalization or similar transaction in
accordance with Section 17 of this Plan.