ITEM 10:
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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Board of Directors
The Board currently consists of nine members classified into three
classes. Listed below are our nine directors by class. At each annual meeting of stockholders, the term for one class of directors expires, and directors are elected for a full term of three years to succeed the directors of such class.
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Class
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Name
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Position with ARIAD
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Age*
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Director
Since
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1
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Alexander J. Denner, Ph.D.
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Director
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44
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2014
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Athanase Lavidas, Ph.D.
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Director
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66
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2003
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Massimo Radaelli, Ph.D.
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Director
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56
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2008
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2
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Jay R. LaMarche
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Director
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67
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1992
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Norbert G. Riedel, Ph.D.
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Director
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56
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2011
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Robert M. Whelan, Jr.
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Director
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62
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2010
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3
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Harvey J. Berger, M.D.
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Chairman of the Board of Directors, Chief Executive Officer and President
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64
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1991
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Sarah J. Schlesinger, M.D.
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Director
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54
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2013
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Wayne Wilson
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Lead Director
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65
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2008
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*
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Ages are provided as of June 25, 2014, which is the date of our 2014 annual meeting of stockholders.
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Certain biographical information is set forth below for our directors. Additionally, information about the specific experience, qualifications,
attributes or skills that led to our Board of Directors conclusion that each person listed below should serve as a director is also set forth below.
Class 1 Directors (Term to Expire in 2016)
Alexander J. Denner, Ph.D.
founded Sarissa Capital, a registered investment advisor, in 2012. Sarissa Capital focuses on improving the strategies of companies to better provide stockholder value. From 2006 to November 2011, Dr. Denner served as a Senior Managing Director
of Carl C. Icahns investment activities. Prior to that, he served as a portfolio manager at Viking Global Investors, a private investment fund, and Morgan Stanley Investment Management, a global asset management firm, for the Health Sciences
Trust Fund and the Biotechnology Fund. Dr. Denner is presently a director of Biogen Idec Inc. and VIVUS, Inc. During the past five years, Dr. Denner had also served as a director of the following life sciences companies: Amylin
Pharmaceuticals, Inc., Enzon Pharmaceuticals, Inc. and Mast Therapeutics, Inc. Prior to that time, he served as a director of ImClone Systems Incorporated, where he also served as Chairman of the Executive Committee.
Dr. Denner has been a member of our Board since February 2014. He is a member of the Nominating and Corporate Governance Committee. Dr. Denner
brings to the Board a strong background overseeing the operations and research and development of biopharmaceutical companies and evaluating corporate governance matters. He also has extensive experience as an investor, particularly with respect to
healthcare companies, and has broad healthcare-industry knowledge.
Dr. Denner received his S.B. degree from the Massachusetts Institute
of Technology and his M.S., M.Phil. and Ph.D. degrees from Yale University.
Athanase Lavidas, Ph.D
. has been the Chairman and
Chief Executive Officer of the Lavipharm Group, a pharmaceutical, cosmetics and consumer health-products company headquartered in Greece, since 1976. Dr. Lavidas is also Chairman of the Greece-U.S. Business Council and Chairman of SEV Business
Council for International Activities, the international arm of the Hellenic Federation of Industries and Enterprises (SEV).
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Dr. Lavidas has been a member of our Board since September 2003 and served as our lead director from
November 2008 until January 2014. He is chair of the Nominating and Corporate Governance Committee and a member of the Compensation Committee. Dr. Lavidas brings to the Board over thirty years of international pharmaceutical industry experience
in strategic development and operational management. Dr. Lavidas has expertise in the research, development and commercialization of innovative pharmaceutical and cosmetic products, as well as global pharmaceutical and biotechnology
collaborations.
Dr. Lavidas received his B.S. and M.S. in chemistry from the University of Munich, his M.B.A. from the Institut
Superieur de Marketing et de Management in Paris and his Ph.D. degree in pharmaceutical chemistry from the University of Athens.
Massimo Radaelli, Ph.D.
is the President and Chief Executive Officer of Noventia Pharma, a specialty pharmaceutical company focused on
orphan drugs for the treatment of rare diseases, in particular for the central nervous system and respiratory system. Prior to joining Noventia in May 2009, Dr. Radaelli was President and Chief Executive Officer of Dompé International
SA, the international pharmaceutical company of the Dompé Group. He joined Dompé in 1996 as director of corporate business development. Dr. Radaelli is also Executive Chairman of Bioakos Pharma Laboratories, a specialty
pharmaceuticals company concentrated in the fields of gynecology, dermatology, ear, nose and throat and pediatrics and a director of Arriani International, SA, the international subsidiary of Arriani Pharmaceuticals, a pharmaceutical company in
southeastern Europe. Since January 2014, Dr. Radaelli has served as a director of NovaBay Pharmaceuticals, Inc., a clinical-stage biopharmaceutical company. He also serves as a director of Innotex Sa, a privately held specialty pharmaceuticals
and cosmetics business, and IDRI, a non-profit organization focused on neglected diseases.
Dr. Radaelli is a member of the Italian
Society of Pharmacology and has been awarded the highest ranking honor of the Italian Republic by the President and Prime Minister of Italy for merit acquired in the fields of science and biopharma and for his commitment to patients with rare
diseases and unmet medical needs.
Dr. Radaelli has been a member of our Board since October 2008. He brings over twenty-five years of
industry experience to our Board, including senior leadership positions with major European pharmaceutical companies. He is a member of the Audit Committee and Science and Medicine Committee. Dr. Radaelli brings to the Board significant
strategic and operational industry experience, including expertise in pharmaceutical business development, strategic planning, alliance management, and product development and commercialization.
Dr. Radaelli received a University Degree in pharmaceutical sciences and a Ph.D. in clinical pharmacology from the University of Milan and an
Executive Master of Business from Bocconi University of Milan.
Class 2 Directors (Term to Expire in 2014)
Jay R. LaMarche
is a retired financial executive who brings to our Board over forty years of financial and senior operating experience. He
has served us for over twenty years as a director and in executive leadership positions including Chief Financial Officer and Treasurer from January 1992 to November 2000. Mr. LaMarche was our Executive Vice President from March 1997 to
November 2000 and Senior Vice President, Finance from January 1992 to February 1997. Prior to joining ARIAD, he was Chief Financial Officer and a director of ChemDesign Corporation, a fine chemicals manufacturer. Previously, Mr. LaMarche was an
audit partner with Deloitte Haskins & Sells, a public accounting firm. Mr. LaMarche also served as an officer in the United States Navy.
Mr. LaMarche has been a member of our Board since January 1992. He is a member of the Audit Committee and the Nominating and Corporate Governance Committee. Mr. LaMarche provides the Board with
an extensive knowledge of our operations, as well as expertise in financial and accounting issues, particularly as they relate to the pharmaceutical and biotechnology industry. Mr. LaMarches management experience and financial background
serve him well in providing guidance concerning our operations and business strategy.
Mr. LaMarche received his B.B.A. degree in public
accountancy from the University of Notre Dame.
Norbert G. Riedel, Ph.D.
is the President and Chief Executive Officer of Naurex
Inc., a clinical-stage biopharmaceutical company developing therapies for difficult-to-treat depression as well as orphan and other challenging diseases of the central nervous system. Prior to joining Naurex Inc. in January 2014, he was Corporate
Vice President and Chief Scientific Officer of Baxter International Inc., a diversified healthcare company from
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March 2001 until January 2013. Between January 2013 and January 2014, Dr. Riedel served on our Board of Directors and the boards of directors of the other companies noted below. Before
assuming this role, from 1998 to 2001, Dr. Riedel served as President and General Manager of the recombinant therapeutic proteins business unit and Vice President of Research and Development at Baxters bioscience business. Prior to
joining Baxter, from 1996 to 1998, he was head of worldwide biotechnology and worldwide core research functions at Hoechst-Marion Roussel, now Sanofi-Aventis, a global pharmaceutical company. Previously, he held a series of scientific management
positions at Hoechst-Marion Roussel and Hoechst AG.
Dr. Riedel has been a member of the board of directors of Jazz Pharmaceuticals since
May 2013 and was a member of the Supervisory Board of MediGene AG, a biotechnology company from 2003 to 2013. He is a member of the Board of Directors of the Illinois Biotechnology Industry Organization and also serves on the Advisory Board of
Northwestern Universitys Kellogg School of Management Center for Biotechnology, and the McCormick School of Engineering. Most recently, he was appointed by Illinois Governor Pat Quinn to the newly formed Illinois Innovation Council.
From 1999 to 2010, Dr. Riedel was a member of the board of directors of Oscient Pharmaceuticals Corporation, a biopharmaceutical
company, and its predecessor company, Genome Therapeutics Corporation, a genomics company.
Dr. Riedel was a postdoctoral fellow at
Harvard University from 1984 to 1987 and an Assistant Professor and Associate Professor of medicine and biochemistry at Boston University School of Medicine from 1987 to 1991, is an adjunct professor at Boston University School of Medicine, and an
adjunct professor of Medicine at Northwestern Universitys Feinberg School of Medicine and was a visiting professor at Massachusetts Institute of Technology in 1992. In 2009, Dr. Riedel was elected as a member of the Austrian Academy of
Sciences.
Dr. Riedel has been a member of our Board since April 2011. He is the Chair of the Compensation Committee and a member of the
Science and Medicine Committee. Given his experience as a senior executive in the healthcare field, Dr. Riedel brings to the Board invaluable scientific and commercial expertise, as well as a keen understanding of the biotechnology industry,
drug discovery and development, and pharmaceutical management.
Dr. Riedel received his Diploma in biochemistry from the University of
Frankfurt in 1981 and his Ph.D. in biochemistry from the University of Frankfurt in 1983.
Robert M. Whelan, Jr.
has nearly
forty years of investment banking experience working predominantly with high technology and healthcare companies. He has been the President of Whelan & Company, LLC, providing business and financial consulting and strategic services to a
broad range of companies, since 2001. From 2001 to 2005, Mr. Whelan served as Managing Director of Valuation Perspectives, Inc., a consulting firm. Prior to that, he held a number of senior-level positions at various investment banking and
brokerage firms. Mr. Whelan was Vice Chairman of Prudential Volpe Technology Group, the technology investment banking and research division of Prudential Securities. Prior to Prudential Volpe, he was Chief Operating Officer, Managing Director,
board member and Head of Investment Banking of Volpe Brown Whelan & Company, a private technology and healthcare investment banking, brokerage and asset management firm. Volpe Brown Whelan & Company was acquired by Prudential
Securities in 1999.
From 2008 to 2009, Mr. Whelan was a Fellow at the Harvard University Advanced Leadership Initiative, an innovative
year-long program aimed at providing a rigorous educational curriculum for exceptional leaders who have reached the height of their professions and are seeking to contribute their skills to solve global social problems.
Mr. Whelan currently serves as chairman of the board of directors of Aspen Technology, Inc., a publicly traded provider of software and services for
the process industries based in Burlington, Massachusetts.
Mr. Whelan has been a member of our Board since April 2010. He serves on the
Audit Committee and Compensation Committee. His extensive investment-banking experience provides him with a wealth of knowledge in dealing with financial, accounting and regulatory matters as he offers the Board insight into the views of
shareholders, investors, analysts and others in the financial community.
Mr. Whelan received a B.A. in history from Dartmouth College
and a M.B.A. from Stanford University Graduate School of Business.
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Class 3 Directors (Term to Expire in 2015)
Harvey J. Berger, M.D.
is our principal founder and has served as our Chairman of the Board and Chief Executive Officer since April 1991. He
served as our President from April 1991 to September 2003 and from December 2004 to present. From 1986 to 1991, Dr. Berger held a series of executive management positions at Centocor, Inc., a biotechnology company, including Executive Vice
President and President, Research and Development Division. He has also held senior academic and administrative appointments at Emory University, Yale University and the University of Pennsylvania and was an Established Investigator of the American
Heart Association. Dr. Berger currently serves as a member of the Deans Council of Yale School of Medicine.
Dr. Berger, as
the principal founder of ARIAD and our Chief Executive Officer for 23 years, brings to the Board a unique combination of strategic vision, leadership skills, and critical knowledge of our operations, research and development programs,
commercialization efforts, and the biopharmaceutical industry generally. We benefit from his deep experience in evaluating ARIADs opportunities and challenges, his perspectives in shaping the Companys long-term strategy, and his
active leadership in the execution of our operating objectives across the Companys numerous mission-critical business functions. In addition, Dr. Berger is one of our largest stockholders, beneficially owning approximately 2.4% of
our common stock, which directly aligns his interests with those of all of our stockholders. Our Board believes that these attributes, together with Dr. Bergers demonstrated years of success in building ARIAD into a biopharmaceutical
company with its first marketed cancer medicine and an advancing pipeline of highly promising drug candidates, distinctly qualify him for service as a director and as the Chairman of the Board.
Dr. Berger received his A.B. degree in Biology from Colgate University and his M.D. degree from Yale University School of Medicine. He obtained
further medical and research training at the Massachusetts General Hospital and Yale-New Haven Hospital.
Sarah J. Schlesinger,
M.D.
has spent more than 20 years working in the field of cellular immunity, including as clinical director of the laboratory led by the late Ralph M. Steinman, M.D., 2011 Nobel Laureate in Physiology or Medicine. She is currently Senior
Attending Physician and Associate Professor of Clinical Investigation at the Laboratory of Cellular Physiology and Immunology at The Rockefeller University. Prior to joining The Rockefeller University in 2003, Dr. Schlesinger was a scientist at
the International AIDS Vaccine Initiative in New York City from 2002 to 2003. From 1996 to 2002, Dr. Schlesinger was a Research Physician/Pathologist at the Division of Retrovirology at Walter Reed Army Institute of Research, having previously
served, from 1994 to 2002, as Staff Pathologist at the Armed Force Institute of Pathology in Washington, DC. Dr. Schlesinger trained in Surgery at the Albert Einstein College of Medicine and began her career in pathology at Georgetown
University in Washington, DC, and hospitals in New York including Buffalo General, Hospital New York and the Manhattan Eye, Ear and Throat Hospital.
Dr. Schlesinger has been a member of our Board since July 2013. She is a member of the Science and Medicine Committee. Dr. Schlesinger leads clinical trials and also chairs the research
education and training committee of the Center for Clinical and Translational Science at The Rockefeller University Hospital. She is co-director of Rockefellers Clinical Scholars program, the Certificate in Clinical and Translational Sciences
program and is the vice-chair of the hospitals Institutional Review Board. Widely published in her field, Dr. Schlesinger has been recognized with numerous awards for her research and teaching. She also belongs to a number of prominent
medical societies including the United States and Canadian Academy of Pathology, the American Association for the Advancement of Science and the College of American Pathologists Dr. Schlesinger brings to the Board expertise in scientific
research and clinical trials.
Dr. Schlesinger received her bachelors degree from Wellesley College in Wellesley, MA, and her M.D.
from Rush Medical College in Chicago.
Wayne Wilson
has over thirty years of business, financial, and accounting experience. He
has been an independent business advisor since 2002. From 1995 to 2002, he served in various roles, including as President, Chief Operating Officer, and Chief Financial Officer, at PC Connection, Inc., a Fortune 1000 direct marketer of information
technology products and services. From 1986 to 1995, Mr. Wilson was a partner in the assurance and advisory services practice of Deloitte & Touche LLP.
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Mr. Wilson has been a member of our Board since October 2008 and was appointed as lead director in
January 2014. He is chair of the Audit Committee and a member of the Nominating and Corporate Governance Committee. Mr. Wilson is also a member of the boards of directors of FairPoint Communications, Inc., a telecommunications company, Hologic,
Inc., a medical diagnostics and device company focusing on womens health, and Edgewater Technology, Inc., a technology management consulting firm. He previously served as a director of Cytyc Corporation, a medical diagnostics and device
company. Mr. Wilson brings substantial general business and financial expertise to our Board, as well as our Audit Committee. His background and extensive experience in financial accounting and reporting make him well versed in accounting
principles and financial reporting rules and regulations, and he is well equipped to evaluate financial results and generally oversee the financial reporting process of a publicly traded corporation, making him highly qualified to be the
Boards lead director.
Mr. Wilson received an A.B. degree in political science from Duke University and an M.B.A. from the
University of North Carolina at Chapel Hill.
Agreements with Dr. Denner and Sarissa Capital
On February 20, 2014, we entered into a Nomination and Standstill Agreement with Dr. Denner and Sarissa Capital Management LP and certain of its
affiliated funds and entities, referred to hereinafter collectively as the Sarissa Group.
Pursuant to this agreement, the Board increased the
size of the Board from eight to nine members and appointed Dr. Denner to the Board as a Class 1 director to serve until the 2016 annual meeting of stockholders. Dr. Denner was also appointed as a member of the Nominating and Corporate
Governance Committee of the Board. We also agreed to appoint an additional director, referred to as the Additional Designee, selected by the Board and approved by Dr. Denner, as a Class 2 director with a term expiring at the 2017 annual meeting
of stockholders. We expect to make this appointment in 2014, after the annual meeting of stockholders.
In addition, under the terms of the
agreement, during the Standstill Period, as defined below, the Sarissa Group has agreed not to solicit proxies regarding any matter to come before a meeting of our stockholders, including for the election of directors. Among other provisions, the
Sarissa Group has also agreed that, subject to certain exceptions, during the Standstill Period the Sarissa Group will not acquire beneficial ownership of additional shares of our voting stock. The agreement generally defines the Standstill
Period as the period beginning February 20, 2014 and ending on the earlier of the date, if any, that the Sarissa Group gives notice of the nomination of two or more directors at the 2015 annual meeting of stockholders and the date on
which Dr. Denner resigns from the Board.
The agreement also provides that, for so long as Dr. Denner is a member of the Board, we
will give prior notice to the Sarissa Group before the advance notice deadline in our bylaws if Dr. Denner or the Additional Designee will not be nominated for election at any future annual meeting of stockholders when their current terms
expire. Following the appointment of the Additional Designee and for so long as Dr. Denner is a member of the Board, we have agreed not to increase the size of the Board above ten members. Pursuant to the agreement, Dr. Denner will
automatically resign if the Sarissa Group no longer beneficially owns at least 6 million shares of our common stock.
In conjunction with
the agreement, we and the Sarissa Group also entered into a Confidentiality Agreement governing the provision of confidential information obtained by Dr. Denner during his service on the Board to the Sarissa Group.
The foregoing is not a complete description of the terms of our agreements with Dr. Denner and the Sarissa Group. For a further description of the
terms of the agreements, including copies thereof, please see our Current Report on Form 8-K that we filed with the SEC on February 21, 2014.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the
Exchange Act requires our directors and officers, and persons who own more than 10% of our common stock, to file reports of securities ownership and changes in that ownership with the SEC. Officers, directors, and greater than 10% beneficial owners
are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely upon a review of the copies of the forms furnished to us and written representations that no other forms were
required, we believe that all Section 16(a) filing requirements were timely met during the fiscal year ended December 31, 2013, except that one report covering one stock option grant to Martin J. Duvall on December 9, 2013 was filed
late.
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Corporate Code of Conduct and Ethics
Our Corporate Code of Conduct and Ethics applies to all of our employees and directors. Any changes in or waivers from our Corporate Code of Conduct and Ethics will be included in a Current Report on Form
8-K within four business days following the date of the change or waiver, unless website posting of the amendments or waivers is then permitted by NASDAQ rules. Our Corporate Code of Conduct and Ethics is publicly available on the Investors section
of our website at
http://investor.ariad.com
under the heading Corporate Governance.
Corporate Governance Guidelines
Our Corporate Governance Guidelines, which were developed and are overseen by the Nominating and Corporate Governance Committee, establish
basic principles of corporate governance by which the Board operates. These guidelines address selection, composition and independence of the Board, director compensation, majority voting in director elections and director resignation in the event
of a failure to receive the required vote, evaluation of the performance of the Board and its committees, the structure and operations of the committees of the Board, the establishment and implementation of corporate governance guidelines,
principles and practices, leadership development, and succession planning.
Under our Corporate Governance Guidelines, so long as the Chief
Executive Officer is also Chairman of the Board, the Board shall appoint one of the independent directors to serve in the role of lead director. His or her role is to support the independent directors in meeting their responsibilities as independent
directors. As such, he or she is responsible for oversight of those processes of the Board that independent directors are required to perform. In addition, he or she presides at meetings of the non-management directors.
The Nominating and Corporate Governance Committee is responsible for the establishment, implementation, and oversight of our Corporate Governance
Guidelines, Conflict of Interest Policy for Board of Directors, and other corporate governance guidelines, policies, and practices. Our Corporate Governance Guidelines and Conflict of Interest Policy are publicly available on the Investors section
of our website at
http://investor.ariad.com
under the heading Corporate Governance.
Majority Voting in Director
Elections
On April 28, 2014, we amended our Amended and Restated By-laws to provide that our directors must be elected by a majority
of votes cast in uncontested elections and by a plurality of votes cast in contested elections. This change will be in effect for the election of directors starting with this years annual meeting of stockholders. In connection with this
change, we have also adopted a director resignation policy as part of our Corporate Governance Guidelines. Under this policy, the Board will only nominate directors for election or re-election who have submitted an irrevocable letter of
resignation that will be effective upon (1) their failure to receive the required number of votes for reelection at the next annual meeting of stockholders at which they face reelection and (2) acceptance of such resignation by the Board.
If an incumbent director fails to receive the number of votes required for reelection, the Nominating and Corporate Governance Committee will act on an expedited basis to determine whether to accept the directors resignation and will submit
its recommendation for prompt consideration to the Board, who, with the director in question abstaining, will decide whether to accept the directors resignation, taking into account such factors as it deems relevant. Such factors may include
the stated reasons why stockholders voted against such directors reelection, the qualifications of the director and whether accepting the resignation would cause us to fail to meet any applicable listing standards or would violate state law.
Board Committees
The Board
currently has four standing committees: the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Science and Medicine Committee. The Science and Medicine Committee was created in October 2013 to
assist management in promoting, maintaining and continually enhancing ARIADs scientific excellence and clinical scholarship as fundamental corporate values and drivers of corporate success. During 2013, we also had an Executive Committee, but
the committee did not meet in 2013 and we decided to eliminate the committee in February 2014. Each committee meets periodically throughout the year, reports its actions and recommendations to the Board, receives reports from senior management,
annually evaluates its performance and has the authority to retain outside advisors in its discretion. The primary responsibilities of each committee are summarized below and set forth in more detail in each committees written charter, which
can be found on the Investors section of our website at http://investor.ariad.com under the heading Corporate Governance.
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The information under the caption Director Independence and Committee Qualifications in
Item 13 of this Form 10-K/A is incorporated herein by reference.
Audit Committee
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Oversee managements maintenance of the reliability and integrity of our accounting policies and financial
reporting and disclosure practices;
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CURRENT COMMITTEE MEMBERS:
Wayne Wilson, Chair
Jay R. LaMarche
Massimo Radaelli, Ph.D.
Robert M. Whelan,
Jr.
OTHER COMMITTEE MEMBERS DURING 2013:
None
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Oversee managements
establishment and maintenance of processes to ensure that we have an adequate system of internal control;
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Oversee managements
establishment and maintenance of processes to ensure our compliance with legal and regulatory requirements that may impact our financial reporting and disclosure obligations;
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Review our independent
registered public accounting firms qualifications and independence;
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Appoint, compensate, and
oversee the work of our independent registered public accounting firm;
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Pre-approve all audit and
non-audit services performed by our independent registered public accounting firm;
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Review, in consultation with
our management and independent registered public accounting firm, the scope and results of reviews of our quarterly financial statements, audits of our annual financial statements, and audits of our system of internal control over financial
reporting;
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Perform other additional
duties and responsibilities, including reviewing, evaluating, and approving related person or similar transactions or relationships and recommending approval of such transactions to the disinterested and independent members of the Board, if
necessary; and
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Oversee our compliance with applicable laws, regulations and corporate policies, including our Code of Conduct and Ethics.
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Compensation Committee
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Assess the performance of and approve, or recommend for approval by the Board, the compensation of our executive officers;
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CURRENT COMMITTEE MEMBERS:
Norbert G. Riedel, Ph.D., Chair
Athanase
Lavidas, Ph.D.
Robert M. Whelan, Jr.
OTHER COMMITTEE MEMBERS DURING 2013:
Massimo
Radaelli, Ph.D., Chair
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Analyze our officer and director compensation plans, policies, and
programs;
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Administer our stock-based compensation and executive compensation
plans; and
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Review and approve all
proposed compensation disclosures, including the Compensation Discussion and Analysis (CD&A), for inclusion in our proxy statement and review all recommendations by stockholders of the compensation of our named executive officers and
the frequency of voting by stockholders on the compensation of our named executive officers.
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Nominating and Corporate Governance Committee
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Identify and evaluate individuals to become directors;
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CURRENT COMMITTEE MEMBERS:
Athanase Lavidas, Ph.D., Chair
Jay R.
LaMarche
Wayne Wilson
Alexander J.
Denner, Ph.D.
OTHER COMMITTEE MEMBERS DURING 2013:
Massimo Radaelli, Ph.D.
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Make recommendations to the
Board concerning the size, structure, and composition of the Board and its committees;
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Monitor the process to
assess the Boards effectiveness;
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Review and assess the
adequacy of our corporate governance, including our Corporate Governance Guidelines and our Board Conflict of Interest Policy; and
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Oversee matters relating to the independence (including potential conflicts of interest), education, operation, and effectiveness of the Board and its committees.
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Science and Medicine Committee
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Consult with and advise management regarding the strategy, focus and direction of our research and development,
clinical programs and initiatives, as well as competitive and other factors that may affect those programs and initiatives;
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CURRENT COMMITTEE MEMBERS:
Sarah Schlesinger, M.D., Chair
Norbert G.
Riedel, Ph.D.
Massimo Radaelli, Ph.D.
OTHER COMMITTEE MEMBERS DURING 2013:
None
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Identify and discuss
significant emerging science and technology trends and issues, including their potential impact on our research and development and clinical programs, plans or policies;
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Help lead periodic updates
and discussions with the Board regarding our progress in achieving our strategic research and development and clinical goals and objectives; and
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Consult with and advise management, as appropriate, regarding our internal and external investments in science and technology and for any material external investments in research and development that
require approval by the Board and assist the Board in evaluating such opportunities.
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Executive Officers
The following table sets forth certain information regarding our executive officers, including their ages as of June 25, 2014, which is the date of our 2014 annual meeting of stockholders.
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Name
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Age
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Position
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Harvey J. Berger, M.D.
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64
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Chairman of the Board of Directors, Chief Executive Officer and President
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Timothy P. Clackson, Ph.D.
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49
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President of Research and Development and Chief Scientific Officer
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Edward M. Fitzgerald
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59
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Executive Vice President, Chief Financial Officer and Treasurer
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Martin J. Duvall
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52
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Executive Vice President and Chief Commercial Officer
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David L. Berstein, Esq.
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62
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Senior Vice President, General Counsel and Chief Intellectual Property Counsel, and Secretary
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Daniel M. Bollag, Ph.D
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53
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Senior Vice President, Regulatory Affairs and Quality
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Maria E. Cantor
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46
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Senior Vice President, Corporate Affairs and Human Resources
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Hugh M. Cole
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49
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Senior Vice President, Chief Business Officer
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Frank G. Haluska, M.D., Ph.D.
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55
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Senior Vice President, Clinical Research and Development and Chief Medical Officer
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Biographical information for Dr. Berger is set forth above under the caption Board of Directors.
Timothy P. Clackson, Ph.D.
has served as our President of Research and Development and Chief Scientific Officer since June
2010. Previously, he served as our Senior Vice President and Chief Scientific Officer from September 2003 to June 2010.
Edward M.
Fitzgerald
has served as our Executive Vice President, Chief Financial Officer and Treasurer since June 2010. Previously, he served as our Senior Vice President, Chief Financial Officer and Treasurer from May 2002 to June 2010.
Martin J. Duvall
has served as our Executive Vice President, Chief Commercial Officer since December 2013, having served as our Senior Vice
President, Commercial Operations since September 2011. Previously, from 2010 to 2011, he served as Senior Vice President and General Manager of Merck and Companys global oncology franchise. From 2009 to 2010, Mr. Duvall led global
marketing and commercial operations at Abraxis Bioscience, Inc. From 2004 to 2009, Mr. Duvall held roles leading commercial operations, commercial development and oncology strategy for MGI Pharma, Inc. and its acquirer, Eisai Pharmaceuticals.
David L. Berstein, Esq.
has served as our Senior Vice President, General Counsel and Chief Intellectual Property Officer and
Secretary since November 2013, having served as our Senior Vice President and Chief Intellectual Property Officer since May 2008. Previously, he served as our Senior Vice President and Chief Patent Counsel from June 2003 to June 2007.
Daniel M. Bollag, Ph.D.
has served as our Senior Vice President, Regulatory Affairs and Quality since January 2009. He previously was Vice
President, Regulatory Affairs for Genzyme Corporation, a biotechnology company, from 2006 to 2008.
Maria E. Cantor
has served
as our Senior Vice President, Corporate Affairs and Human Resources since November 2013, having served as our Senior Vice President, Corporate Affairs since January 2012. Previously, she served as our Vice President, Corporate Communications and
Investor Relations since July 2008. Ms. Cantor held several positions of increasing responsibility at Genzyme Corporation from 2001 to 2008, most recently serving as Senior Director, Corporate Communications.
11
Hugh M. Cole
has served as our Senior Vice President and Chief Business Officer since March
2014. Previously, from 2007 to 2014, Mr. Cole held management positions at Shire Pharmaceuticals, most recently as Senior Vice President, Strategic Planning and Program Management and, previously, as a global franchise head, and before that, as
Vice President, Business Development. Previously he held senior positions in business and corporate development at Oscient Pharmaceuticals (formerly, Genome Therapeutics) and at Millennium Pharmaceuticals and its affiliates.
Frank G. Haluska, M.D., Ph.D.
has served as our Senior Vice President, Clinical Research and Development and Chief Medical Officer since
January 2012, having held the position of Vice President and Chief Medical Officer since June 2010. Previously, he served as our Vice President, Clinical Affairs from May 2009 to June 2010, Vice President, Clinical Research from July 2008 to May
2009, and Senior Medical Director from October 2007 to July 2008.
12
ITEM 11:
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EXECUTIVE COMPENSATION
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Compensation
Discussion and Analysis
Executive Summary
OVERVIEW
Our success in 2013 was made possible in large measure by our ability to attract, retain
and motivate talented and experienced individuals across all areas of our business, including our named executive officers (NEOs):
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Harvey J. Berger, M.D.
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Chairman of the Board of Directors, Chief Executive Officer and President
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Timothy P. Clackson, Ph.D.
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President of Research and Development and Chief Scientific Officer
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Edward M. Fitzgerald
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Executive Vice President, Chief Financial Officer and Treasurer
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Martin J. Duvall
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Executive Vice President and Chief Commercial Officer
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Daniel M. Bollag, Ph.D.
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Senior Vice President, Regulatory Affairs and Quality
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We believe that our compensation program has been and will continue to be effective in attracting, retaining and
motivating the right executive team during this critical phase of ARIADs evolution from a research and development-stage enterprise to a fully integrated, commercial-stage global oncology company. Our compensation program for our NEOs was
supported by 82.7% of the Say-on-Pay advisory votes cast by shareholders at our 2013 annual meeting of shareholders. Based on the effectiveness of our compensation program and after consideration of last years
Say-on-Pay advisory vote, the Compensation Committee determined to continue the same fundamental structure for our executive compensation program this year, with certain refinements discussed below.
PERFORMANCE SUMMARY AND RELATED COMPENSATION DECISIONS
2013 has been a challenging year for ARIAD. Although we achieved our key strategic objectives in the first three quarters of the year, including the initial commercial launch in the United States of our
first new cancer medicine, Iclusig
®
(ponatinib), the achievement of marketing authorization for Iclusig by the
European Commission as an orphan medicinal product for two indications and the commencement of sales in Europe in the second half of the year, we experienced a significant setback in the fourth quarter, when the U.S. Food and Drug Administration, or
FDA, placed a partial clinical hold on all additional patient enrollment in clinical trials of Iclusig and issued several Drug Safety Communications. On October 31, 2013, we temporarily suspended marketing and commercial distribution of Iclusig
in the United States, in response to a request by the FDA, while we negotiated an update to the prescribing information and a risk mitigation strategy.
As a result of the challenges that have arisen with respect to Iclusig, our Compensation Committee held a number of meetings in the last quarter of 2013 to evaluate the evolving situation and consider
appropriate actions with respect to our executive compensation programs. Among key factors discussed and considered by the Compensation Committee were the following:
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The continued appropriateness of our peer group given the decrease in ARIADs market value immediately after the FDA action;
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Our executive compensation philosophy of generally targeting executives cash and equity compensation at the 65
th
percentile of the market;
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The appropriateness of paying cash bonuses to the executive team for 2013, even though most of the metrics set out at the beginning of the year had
been achieved, given the FDA action relating to Iclusig and its effect on our stockholders;
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13
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The decrease in our stock value and the reduced incentive value of previously granted stock options and other equity awards; and
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To assess the degree of alignment between our Chief Executive Officers pay and performance, the Compensation Committee also considered
realizable pay relative to our peer group. The Compensation Committee noted that the compensation awarded to our Chief Executive Officer over the last three years has been closely aligned with the performance of our stock (TSR) over the
same period, both on an absolute basis and relative to the companies in our peer group. See Pay for Performance for further discussion of and charts relating to the alignment of Chief Executive Officer pay and our stock performance.
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Following the suspension of commercial distribution of Iclusig in the United States, ARIAD management continued to work
with the FDA to gain re-approval of Iclusig and resume commercial distribution of the drug. On December 20, 2013, we obtained FDA approval to resume marketing and commercial distribution of Iclusig under a revised U.S. Prescribing Information,
or USPI, and a Risk Evaluation and Mitigation Strategy, or REMS. As a result, we announced that we had resumed marketing and commercial distribution of Iclusig through an exclusive specialty pharmacy. This continued progress towards resuming normal
commercial distribution of Iclusig in the United States has been recognized by the market, as reflected in the increase in our stock price since we announced the FDAs approval to resume marketing and commercial distribution.
In the context of these ongoing developments, our Compensation Committee continued to evaluate and consider the status of Iclusig in the first quarter of
2014, as it made final decisions regarding 2013 and 2014 executive compensation. Key decisions made by the Committee in late 2013 and early 2014 included:
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No cash bonuses to executives under the 2013 annual performance award program.
Although we had achieved most of our strategic objectives
during the first three quarters of 2013, the Compensation Committee determined that no cash bonus should be delivered given the adverse FDA action on Iclusig during the fourth quarter of 2013. As a result, each of our NEOs was positioned below the
market 25
th
percentile in terms of his total cash
compensation for 2013.
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No base salary merit or market-based adjustment increases for 2014.
Notwithstanding the progress we have made in resuming commercial
distribution of Iclusig in the United States, the Compensation Committee determined that base salaries for our NEOs should be maintained at 2013 levels.
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2014 executive equity grants are even more heavily focused on performance.
Although we have historically utilized performance-based
equity grants tied to key milestones as an important part of executives annual equity awards, the Compensation Committee approved increasing the proportion of executives equity awards tied to key performance milestones from 33% of the
total award in 2013 to 50% of the total award in 2014. This very-heavy focus on performance-based equity places us at the forefront of the market, and ensures that half of each executives award will be earned only if ARIAD is able to
successfully execute on its strategy. The remaining half of each NEOs 2014 equity award is being delivered in time-based restricted stock units vesting in equal installments over the next three years.
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In making these compensation decisions our Compensation Committee also considered the results of our annual Say on Pay vote held in 2013. At our 2013
annual meeting, our shareholders approved the compensation program for our NEOs by a vote of 82.7% in favor. Notwithstanding the continued support of our investors for the structure of our compensation programs, the Compensation Committee believed
that the changes described above were warranted and appropriate to maintain strong alignment between our executives and our shareholders and to continue to emphasize our historically strong linkage between executive pay and our Companys
performance.
14
KEY COMPONENTS OF COMPENSATION AND RELATED PERFORMANCE PERIODS
We provide three basic forms of direct compensation to our executive officers: base salary, bonuses (which we refer to as annual performance
awards), and long-term equity incentive awards. Our Compensation Committee, with the assistance of Radford, our compensation consultant, and Dr. Berger, our Chief Executive Officer, reviews each of these compensation components annually
for each of the nine executive officers on our executive leadership team, including our NEOs, and adjusts each component based primarily on corporate and individual performance.
In order to understand the compensation reported in this Form 10-K/A, it is important to be aware of the fact that two separate fiscal years play a role in our compensation decisions. This is because the
time periods over which performance is assessed vary depending on the particular component of compensation, and SEC disclosure rules require us to discuss awards determined based on 2013 performance in different fiscal years. Specifically, the
performance review periods are as follows:
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Base Salary
The Compensation Committee sets executive salaries in the first quarter of each fiscal year, effective as of
January 1
st
of that year. Typically, a target
percentage level of salary increase is established for the executive team, and each executives salary is then determined based on an assessment of the corporate and individual performance objectives applicable to that executive during the
preceding year. Thus, the salary amounts reported in the Summary Compensation Table later in this Form 10-K/A for fiscal 2013 were established based on 2012 corporate and individual performance. Salary amounts for fiscal 2014, which as discussed
above are unchanged from 2013 (with the exception of Mr. Duvall, who was promoted last year), are briefly described below and will be set forth in the Summary Compensation Table next year.
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Annual Performance Awards
These awards are determined after the completion of the fiscal year to which they apply, based on an
evaluation of each executives performance in relation to corporate and individual objectives for that year. Therefore, unlike the 2013 salary amounts, which were based on 2012 performance, our executives annual performance awards for
2013, as reported in the Summary Compensation Table for fiscal 2013, were based on 2013 performance.
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Long-term Equity Incentive Awards
These forward-looking awards are determined in the first quarter of each fiscal year, based on
performance during the previous year. Consequently, the 2013 long-term equity incentive awards reported in the Summary Compensation Table and Grant of Plan-Based Awards Table for fiscal 2013 were established based on 2012 performance. The long-term
equity incentive awards granted in early 2014 based on 2013 performance are briefly described below and will be set forth in the Summary Compensation Table and Grant of Plan-Based Awards Table next year.
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PAY MIX
Our Compensation Committee considers
the mix of the elements of compensation discussed above to be critical in driving our pay-for-performance philosophy. The vast majority of our executives annual compensation is delivered in short- or long-term incentive
compensation whose value is contingent upon the achievement of specific performance targets, appreciation of our stock value, or both. In 2013, as in the past, our Chief Executive Officers pay mix was more than 90% comprised of
performance-based compensation via our annual performance awards (referred to as STI in the table below) and grants of stock options, restricted stock units and performance shares (referred to as LTI in the table below), and only 9% was delivered
via guaranteed compensation in the form of his base salary. By comparison, among our peer group listed below in the section entitled Use of Competitive Market Compensation Data and Compensation Benchmark, the median pay mix
included twice the level of guaranteed base pay, at 20% of the total. Percentages are based on target values for each component of Chief Executive Officer pay, including the fair value of equity awards, including performance shares, on the date of
grant:
15
PAY FOR PERFORMANCE
Our Compensation Committee is strongly committed to the principle that compensation delivered to our NEOs should be strongly aligned with value creation for our shareholders. This principle is reflected
both in the pay mix referenced above and in our significant historical and continuing use of performance-based equity to deliver executives annual long-term incentive awards. Over the past five years, annual pay levels have closely tracked the
change in our stock value year-over-year, highlighting the effectiveness of our programs in advancing this goal. Our use of long-term incentives and focus on performance-based vehicles, whether via stock options, whose value is wholly contingent
upon stock price performance, or performance shares that vest only upon the achievement of designated milestones/performance targets, ensures that our executives are aligned with our shareholders. We also issue time-based restricted stock units,
which further align executives with our shareholders by helping executives build a meaningful, direct ownership stake in our stock.
The
following chart compares our total shareholder return, or TSR, over the last five years with the total reported compensation of our Chief Executive Officer (as disclosed in the Summary Compensation Table) over the same period. For 2013, when our
stock price declined in the last quarter following the announcement of the partial clinical hold on new patient enrollment in clinical trials of Iclusig and the temporary suspension of marketing and commercial distribution of Iclusig in the United
States, the table reflects not only the Chief Executive Officers reported pay, which includes the value of his long-term incentive awards at the beginning of the year, but also his 2013 realizable pay, which reflects cash plus the
year-end value of his 2013 equity grants.
As shown in the table above, the compensation awarded to our Chief Executive Officer over the last five years closely
tracked our TSR over the same period. Consistent with our objective to align the interests of our executives
16
with the interests of our shareholders, as the price of our common stock appreciated over the last five years, the value of stock option awards, the most significant component of the compensation
of our Chief Executive Officer (as well as the other NEOs), increased as well. With the decline in ARIADs market value by the end of 2013, the actual, realizable value of Dr. Bergers 2013 compensation decreased as well.
To assess the degree of alignment between our Chief Executive Officers pay and performance, the Compensation Committee also considers
realizable pay relative to our peer group. We believe that the compensation awarded to our Chief Executive Officer in the last three years displayed a strong connection to our TSR performance over the same period both on an absolute
basis and relative to the companies in our peer group, as shown in the following chart.
For both the three-year period from 2011-2013 and the preceding three years from 2010-2012, ARIADs relative TSR
ranking is closely tied to our Chief Executive Officer pay ranking, falling squarely within the zone of alignment indicated in the chart. The Compensation Committee believes these analyses confirm the continued effectiveness of our
executive compensation programs.
BUSINESS HIGHLIGHTS
We present below business highlights for our 2013 fiscal year to assist our shareholders in understanding the compensation decisions made with respect to reported 2013 annual performance awards, and
business highlights for 2012 to facilitate an understanding of our reported 2013 salary determinations and long-term equity incentive awards.
Fiscal 2013
2013 was both a very
successful and a challenging year for ARIAD. Since the beginning of 2013, we:
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Commenced sales and marketing of Iclusig in the United States in the first quarter of 2013 and in certain European countries in the second half of
2013, recognizing $45.2 million in product revenue during 2013, compared to no product revenue in the prior year.
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Obtained marketing authorization for Iclusig from the European Commission in July 2013, commenced sales of Iclusig in Germany, the United Kingdom,
France, Austria and the Netherlands, and laid the groundwork to expand commercialization of Iclusig to all of the major markets in Europe during 2014, subject to obtaining pricing and reimbursement approvals.
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17
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Successfully worked with the FDA to obtain revised prescribing information and resume marketing and commercial distribution of Iclusig in the United
States in December 2013, following the temporary suspension of Iclusig in October 2013 in the United States due to safety concerns raised by the FDA.
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Continued development of Iclusig in patients with gastrointestinal stromal tumors, or GIST, in a Phase 2 clinical trial, which is almost fully
enrolled, with the goal of completing patient enrollment upon lifting of the partial clinical hold expected in the second quarter of 2014.
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Announced the initiation of a pivotal global Phase 2 trial of our next drug candidate, AP26113, in patients with locally advanced or metastatic
non-small cell lung cancer, or NSCLC, who were previously treated with crizotinib, the current standard of care. The ALTA (
A
LK in
L
ung Cancer
T
rial of
A
P26113) trial is designed to determine the safety and efficacy of
AP26113 in refractory NSCLC patients who test positive for anaplastic lymphoma kinase, or ALK, oncogene. We expect this trial to be the basis for our initial filing for regulatory approval of AP26113.
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Continued our internal drug discovery efforts, as a result of which we expect to nominate a potential best-in-class development candidate in the second
half of 2014.
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Strengthened our balance sheet through a common stock offering of $310.0 million in net proceeds at the beginning of 2013, ending the year with cash,
cash equivalents and marketable securities of $237.2 million, compared to $164.4 million at the end of 2012.
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Fiscal 2012
Our 2012 fiscal year was one of great success and progress at ARIAD as we advanced Iclusig towards commercialization:
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We received accelerated approval in the United States of Iclusig for the treatment of adult patients with chronic, accelerated or blast phase chronic
myeloid leukemia (CML) that is resistant or intolerant to prior tyrosine kinase inhibitor (TKI) therapy or Philadelphia chromosome-positive acute lymphoblastic leukemia (Ph+ ALL) that is resistant or intolerant to prior TKI therapy. This approval
followed completion of our NDA submission ahead of schedule.
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We recruited, hired and trained a complete commercial organization in the U.S. and were fully prepared for the U.S. commercial launch of Iclusig upon
receipt of marketing approval from the FDA. All of the key functions in our U.S. commercial organization, including account specialists, market access, and marketing, were put in place and we began implementing our commercial plans for Iclusig.
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In Europe, we submitted a Marketing Authorization Application (MAA) for Iclusig to the European Medicines Agency seeking marketing approval in the EU
of Iclusig in adult patients with resistant or intolerant CML or Ph+ ALL. The Committee for Medicinal Products for Human Use granted ARIADs request for accelerated assessment of the MAA.
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In preparation for our planned commercial launch of Iclusig in Europe, we established our European headquarters in Lausanne, Switzerland, and recruited
and hired our General Manager of European operations, along with other key members of our European leadership team. We began recruiting medical science liaisons and sales representatives in each of other major markets in Europe. We also established
early-access programs for Iclusig, established the supply chain in key markets and implemented initial pricing and reimbursement activities.
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We advanced the development of AP26113, our investigational ALK inhibitor, and presented positive clinical proof-of-concept data showing the promise of
AP26113 as our next internally discovered cancer medicine that overcomes drug resistance. Compelling anti-tumor activity of AP26113 in patients with ALK-positive non-small cell lung cancer (NSCLC) and initial anti-tumor activity in patients with
EGFR-mutant NSCLC were presented at the European Society of Medical Oncology meeting. Importantly, AP26113 showed clinical activity in ALK-positive NSCLC patients with brain metastases.
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18
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We initiated the global, Phase 3 EPIC trial of Iclusig in patients with newly diagnosed CML. This trial compares Iclusig to imatinib and has a primary
endpoint of major molecular response at 12 months of treatment.
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We initiated a Phase 1/2 clinical trial of Iclusig in resistant or intolerant CML and Ph+ ALL patients in Japan in the second half of 2012. The trial
is designed to establish the recommended dose of Iclusig in Japanese patients, confirm its anti-leukemic activity in this patient population, and provide the necessary data required for regulatory approval of Iclusig in Japan.
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Our 2012 achievements positioned us to further strengthen our balance sheet at the beginning of 2013 through an underwritten public offering yielding
net proceeds of $310 million.
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THE PHILOSOPHY AND IMPORTANT FEATURES OF OUR COMPENSATION PROGRAM
The philosophy underlying our compensation program has three foundational objectives:
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First, we endeavor to attract and retain the best available executive talent to lead our Company, recognizing that we do so in a highly competitive
environment. Thus, our Compensation Committee works closely with Radford to identify our peer group and other companies within our competitive environment and then to align the components of our compensation program at levels that will
reasonably position us to successfully compete. We discuss this below under the heading Use of Competitive Market Compensation Data and Compensation Benchmark.
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Second, we seek to motivate our executives to achieve ambitious corporate goals by placing a substantial portion of our executives compensation
at risk and then rewarding high levels of performance in the pursuit of those goals. We consider this pay-for-performance philosophy to be central to our success to date and pivotal to our success in the future. Moreover, as described
below under the heading Targets and Performance Multipliers, we believe that a system which provides substantially greater rewards for individual performance that exceeds requirements or is outstanding in
comparison to performance that merely meets requirements creates a powerful incentive for executives to perform at extraordinary levels.
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Third, we strive to align the interests of our executive officers with those of our shareholders. We do this not only by paying for performance aimed
at enhancing shareholder value, but also by structuring a substantial portion of our executives compensation as long-term equity compensation. In 2013, approximately 84% of the value of our Chief Executive Officers compensation consisted
of long-term equity, including the value of performance shares at the target level.
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Use of Competitive Market
Compensation Data and Compensation Benchmark
COMPETITIVE MARKET COMPENSATION DATA
As noted above, we draw upon a pool of executive talent that is highly sought after by similarly situated biotechnology companies, as well as larger
pharmaceutical and biotechnology companies from which we frequently recruit, both within and outside our geographic area. We believe that the compensation practices of our peer group in particular, as well as of these larger companies and our
industry in general, provide useful information to help us compete in this arena. Therefore, our Compensation Committee works closely with Radford and our management each year to review and update a comparator group of companies considered to be our
peer group to ensure its continued relevance as ARIAD evolves as a company. The Compensation Committee also reviews broader life science industry data to further inform its decisions. With Radfords assistance, our Compensation Committee uses
two primary market frames of reference (which we collectively refer to as the market) against which to compare our executive compensation practices, as follows:
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Select Peer Group A select group of national biotechnology companies at a similar stage of development as our Company, with similar headcount,
market capitalization, short- and long-term growth objectives, and similar therapeutic targets.
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Radford Global Life Sciences Survey A national survey of executive compensation levels and practices that covers approximately sixty executive
positions in over 600 multinational life sciences organizations.
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19
We do not apply a specific weighting to either data source when making compensation comparisons. Instead,
our Compensation Committee reviews composite market data synthesized by Radford from these two groups showing levels of cash, equity, and total compensation for all comparable officers relative to the elements of compensation paid to our officers.
In October and November 2013, our Compensation Committee met with Radford and discussed various factors relating to the selection of a peer
group, including the continued reasonableness of the companies comprising the prior years peer group and ARIADs near- and mid-term profile in the context of the FDA action on Iclusig. Based on this review, the Compensation Committee
selected a peer group of companies for compensation comparisons for 2013. This peer group consisted of public companies in the biopharmaceutical industry with a commercial branded drug, with annual revenues generally less than $1 billion, and market
capitalization and headcount targeted from one-third to three times the value and size, respectively, of ARIAD at the time of the review.
The
2013 peer group reflects substantial changes from the 2012 group, primarily based on the Compensation Committees decision that it was appropriate to target smaller market capitalization and revenue companies than in the past. Ten companies
from last years peer group were removed from the list for 2013: Alkermes plc, BioMarin Pharmaceuticals Inc., Cubist Pharmaceuticals, Inc., Incyte Corporation, Jazz Pharmaceuticals plc, Regeneron Pharmaceuticals, Inc., Salix Pharmaceuticals,
Ltd., Seattle Genetics, Inc. and United Therapeutics, Inc. were all removed because they were above the updated market value criterion and Onyx Pharmaceuticals, Inc. was acquired by Amgen. To replace the peers that were removed, 11 new companies
were added, with each company falling within the 1/3 to 3x target range of ARIADs revenue and market value. The new additions were: Aegerion Pharmaceuticals, Inc., Arena Pharmaceuticals, Inc., Dyax Corp., Exelixis, Inc., ImmunoGen, Inc., Isis
Pharmaceuticals, Inc., Momenta Pharmaceuticals, Inc., Nektar Therapeutics, NPS Pharmaceuticals, Inc., Santarus, Inc. and Vivus, Inc.
As a
result of these changes, the 2013 peer group consists of the following 19 companies:
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Acorda Therapeutics, Inc.
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Ironwood Pharmaceuticals, Inc.
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Questcor Pharmaceuticals, Inc.
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Aegerion Pharmaceuticals, Inc.
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Isis Pharmaceuticals, Inc.
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Santarus, Inc.
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Arena Pharmaceuticals, Inc.
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The Medicines Company
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Theravance, Inc.
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Auxilium Pharmaceuticals, Inc.
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Medivation, Inc.
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ViroPharma Incorporated
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Dyax Corp.
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Momenta Pharmaceuticals, Inc.
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Vivus, Inc.
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Exelixis, Inc.
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Nektar Therapeutics
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ImmunoGen, Inc.
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NPS Pharmaceuticals, Inc.
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COMPENSATION BENCHMARK
In connection with our efforts to maintain a competitive compensation program, our Compensation Committee annually establishes a benchmark for our executive compensation packages relative to other
companies in our market. This benchmark is expressed as a percentile of the market. Beginning in 2012, recognizing that ARIAD was transitioning from a clinical-stage biotechnology company into a commercial-stage enterprise and that our
future success would depend even more on competitive compensation positioning, our Compensation Committee adopted a benchmark generally targeting each element of executive compensation, as well as total compensation at the 65
th
percentile of the market, and the Compensation Committee maintained
this target in 2013 in recognition of the very competitive market for executive talent in which we continued to operate and the critical importance of attracting and retaining such talent as we continue our evolution into a fully integrated, global
oncology company.
The compensation benchmark is not intended to set a ceiling or a floor on any executives
compensation. Instead, the actual value received by an executive in a given year may fluctuate above or below this level based on the actual level of payout or value creation to the executive under our performance-based short- and long-term
incentive programs. As discussed below under Targets and Performance Multipliers, if an executive substantially exceeds the corporate and individual performance objectives applicable to him or her, the executive may receive compensation
above the 65
th
percentile of market. Alternatively, an
executive may receive less than 100% of the compensation target depending on his or her performance.
20
Targets and Performance Multipliers
As noted above, each year our Compensation Committee analyzes the competitive market compensation data prepared by our compensation consultant to establish the following compensation parameters for each
of our three levels of NEOs:
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A target percentage increase in base salary,
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A target annual cash performance award based on a percentage of base salary, and
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A target amount of long-term equity incentive award.
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With respect to our NEOs, the three officer tiers are as follows:
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Tier I our Chief Executive Officer, Dr. Berger
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Tier II our Executive Vice Presidents, Dr. Clackson, Mr. Duvall and Mr. Fitzgerald
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Tier III our Senior Vice President, Dr. Bollag
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PERFORMANCE MULTIPLIERS
We believe that one of the most important motivators for our executives
is the opportunity to earn compensation greater than the established targets by exceeding applicable performance requirements. We accomplish this through a system of performance multipliers, which reward exceptional performance at
substantially higher levels than performance that merely meets requirements of the position. Under our performance multiplier approach, the level of performance of each executive directly influences his or her increase in base salary, annual
performance award and long-term equity incentive award relative to target awards, and such amounts may be greater or less than the target levels based on the assessment and rating of each officers performance. Our Compensation Committee
establishes the performance multiplier scale, which ranged from 0% 160% for salary and long-term equity awards for fiscal 2012, and 0% 200% for annual cash performance awards for fiscal 2013. Each executive officers performance
was rated on a scale from unsatisfactory to outstanding. As an example of the impact of our performance multipliers on 2013 annual performance awards, an executive whose performance meets requirements
would receive only 50% of his or her target bonus, whereas an executive whose performance exceeds requirements could earn up to 150% of his or her target bonus, and an executive whose performance is assessed as outstanding
would receive up to 200% of his or her target bonus.
Process for Determining Executive Compensation
Our Compensation Committee is responsible for, among other duties, reviewing the performance of our Chief Executive Officer and reviewing and recommending
his compensation for approval by the Board. The Compensation Committee is also responsible for reviewing the assessment of performance of our other executive officers conducted by our Chief Executive Officer and reviewing and approving their
compensation in consultation with our Chief Executive Officer. While our Compensation Committee has ultimate authority and responsibility for approving all executive officer compensation, our Chief Executive Officer plays an active role in such
decisions, except with respect to his own compensation where he participates in neither the deliberations nor the decision.
At the beginning
of each year, the executive leadership team of the Company establishes annual corporate objectives, which are reviewed and discussed with the Compensation Committee and the Board and form the basis for our annual operating plan. The status of our
corporate objectives, as well as our performance relative to our operating plan, are reviewed and discussed with the Board regularly during the year. Based on the annual corporate objectives and the associated operating plan, each of the executive
officers is responsible for developing plans and managing the key initiatives and activities designed to achieve our objectives.
21
Generally, at the end of each year, each of the executive officers provides a detailed self-assessment of
his or her performance relative to the established corporate and individual objectives, as well as to key leadership and management measures described below. In addition, each executive officer is evaluated on a confidential basis by several of his
or her peers, subordinates, and in some instances, external colleagues, selected by our Chief Executive Officer. The Chief Executive Officer reviews and evaluates all of these assessments and completes an overall evaluation of performance for each
officer for the year, taking into account his judgment regarding the Companys overall progress, each officers contribution to the achievement of corporate objectives, his or her achievement of individual objectives, and his or her
performance in relation to leadership and management measures. Specific numerical weightings or ratings are not applied to individual corporate or personal objectives; rather, the performance of the executive officer is evaluated as a whole in the
context of his or her peers at the same level of management within the Company. Our assessments in 2013 concluded that we had achieved most of our corporate objectives through the first three quarters of the year. With the challenges regarding
Iclusig that we faced in the fourth quarter, the unified focus of the executive leadership team turned to obtaining FDA approval to resume marketing and distribution of Iclusig in the United States, which was achieved before year-end.
The level of performance is then used by the Chief Executive Officer to guide his recommendations to the Compensation Committee regarding each executive
officers performance rating. As part of this process, the Compensation Committee, with input from the Chief Executive Officer, reviews the overall performance of the Company relative to the key corporate objectives established at the beginning
of the year. This assessment, along with the assessments made by the Chief Executive Officer regarding the individual officers, forms the basis for the decisions regarding the individuals performance rating. Performance ratings can range from
unsatisfactory to meets requirements to exceeds requirements to outstanding. The performance rating is then used to determine the performance multiplier applicable to the executive, which forms the
basis for increases in salary, annual performance awards and long-term incentive awards.
The Compensation Committee also undertakes a
comprehensive review of the Chief Executive Officers performance based on its evaluation of our Companys overall performance, the Chief Executive Officers individual contributions to achievement of key objectives, his strategic
leadership of the Company and his demonstration of our vision and corporate values, including a commitment to building shareholder value. His overall performance is rated, and his compensation is adjusted using the same performance scale as the
other executive officers. The Compensation Committee makes these determinations in executive session and then makes recommendations to the Board for subsequent approval.
In addition to an evaluation of the level of achievement of our corporate and certain individual objectives, each executive officer is evaluated as to key leadership and management measures, including
each individuals:
|
|
|
Contribution to the management team and development and application of leadership skills reflective and supportive of our corporate values, vision and
mission,
|
|
|
|
Ability to attract, hire, manage, retain, and motivate talent in support of the achievement of our objectives,
|
|
|
|
Management of his or her functions and responsibilities within established financial budgets and forecasts, and
|
|
|
|
Management of regulatory compliance requirements related to his or her responsibilities.
|
There are no thresholds or maximum levels of achievement applicable to these individual objectives or the corporate objectives. In addition, no specific
weight is given to any of these factors in determining base salary increases, annual performance awards or long-term equity incentive awards for any of our executive officers. Instead, as noted above, each executive officers performance is
evaluated as a whole, taking into account all of these objectives and measures, encouraging collaboration among senior executives in achieving inter-dependent corporate objectives.
22
Elements of Total Compensation
As briefly described above, we provide three basic forms of direct compensation to our executive officers: base salary, annual performance awards, and long-term equity incentive awards.
BASE SALARY
Base salary is intended to provide
all of our employees with a fair and competitive base level of compensation that reflects their job function, organizational level, experience and tenure, and sustained performance over time. Executive officer base salary levels are set using these
criteria.
On an annual basis, our executives are eligible for a salary increase. The amount of this increase, if any, is determined by our
Compensation Committee, which establishes a target salary increase based on analysis of market compensation data and the recommendation of our compensation consultant.
Each executives actual salary increase, if any, is determined based on the executives performance in achieving key corporate and individual objectives established at the beginning of each
year, internal pay equity, and demonstrated levels of core job competency and effective leadership. As discussed above under Targets and Performance Multipliers, the executives performance rating leads to the application of a
performance multiplier, which results in the actual salary adjustment. Adjustments to base salary levels typically are made in the first quarter of each year and are paid retroactively to January 1 of that year.
ANNUAL PERFORMANCE AWARDS
Annual performance
awards are intended to reward our executive officers for achievement of corporate, individual, and key leadership and management objectives on an annual basis. Prior to payment of our 2012 annual performance awards to our Chief Executive Officer,
his payments had been made, in whole or in part, in the form of shares of common stock, in order to conserve cash to fund our priority research and development programs and commercialization efforts. Also prior to payment of our 2012 annual
performance awards, our other executive officers received payment in cash, but were required to defer such payments under our 2005 Executive Compensation Plan, as amended (the 2005 Executive Compensation Plan), which also allowed us to
conserve cash for operations. For performance in 2012, annual performance awards to our Chief Executive Officer and other NEOs were paid in cash in recognition of the transition of the Company to a commercial organization, which is also consistent
with the practices of our peers and the broader life sciences marketplace. For performance in 2013, no annual performance awards were paid to our Chief Executive Officer or any of our NEOs for the reasons described above.
As discussed above under Targets and Performance Multipliers, our Compensation Committee annually establishes target annual performance
awards for the different tiers of executives, which are expressed as a percentage of base salary. These target awards are then adjusted for each executive through the application of a performance multiplier based on the individual executives
performance rating for the year.
LONG-TERM EQUITY INCENTIVE AWARDS
Long-term equity incentive awards are also intended to reward our executive officers for achievement of corporate, individual, and key leadership and management objectives. In addition, such awards are
intended to align the interests of all of our executive officers with those of our stockholders, promote progress toward achieving our long-term strategy and assist in long-term retention of our executive officers. As such, long-term equity
incentive awards for our executive officers are made in the form of stock options, restricted stock units and/or performance shares. Stock options and restricted stock units generally vest annually over three years. Performance shares vest upon the
achievement of one or more key corporate objectives or metrics and, once achieved, are subject in certain cases to further time-based vesting to provide further retention. The mix of types of equity awards provides various long-term incentives.
Stock options align the interests of our executives with those of our stockholders in that value will only be realized from these awards if our stock price increases over time; restricted stock units provide some certainty of receiving some amount
of compensation during periods of market volatility and provide the opportunity for our executives to maintain holdings of our common stock; and performance shares provide a direct link between achievement of key corporate objectives that we expect
will drive long-term value for our stockholders. Long-term equity incentive awards are granted under our 2006 Long-Term Incentive Plan. The target long-term equity incentive awards for each officer are based on recommendations by Radford, taking
into consideration the value of equity-based awards and total compensation of executives of companies in the composite market compiled by Radford, as described under Competitive Market Compensation Data above.
23
For performance shares granted in March 2012, the performance objective was regulatory approval by the
European Medicines Agency of a Marketing Authorization Application (MAA) for Iclusig prior to the end of 2016, and if not obtained by then, the award would terminate and have no value. This objective was achieved in July 2013 and pursuant to the
terms of the performance share awards, 160% of the target award was earned with immediate vesting of 50% of the total award and 25% vesting on each of the first and second anniversaries of the achievement of the objective. For performance shares
granted in March 2013, the performance objective is tied to continued success in certain research and development initiatives through the end of 2016, with the number of shares to be issued ranging from 50% to 160% of target, and the vesting
schedule varying, depending on the year in which such performance objective is achieved. If the program objective is not obtained prior to the end of 2016, the performance shares will terminate and have no value.
MIX OF DIRECT COMPENSATION COMPONENTS
As our
executive officers have increasing responsibility for and impact on our results, we place greater emphasis on variable, performance-based compensation and longer term compensation vehicles in the form of equity awards and deferred performance
awards.
We do not have specific policies nor do we use formulas to determine a mix of total compensation. We intend for total compensation to
vary based on our progress towards achievement of corporate, departmental and team objectives, as well as individual performance goals. For fiscal 2013, our annual performance awards and long-term equity incentive awards, including the value of
performance shares awarded at target level, represent over 75% of the total direct compensation (excluding benefits) on average for our NEOs.
BENEFITS AND PERQUISITES
In addition to
general benefits offered to all other salaried employees, we provide our executive officers with supplemental long-term disability insurance and long-term care insurance, tax return preparation services and an auto allowance in accordance with their
employment agreements. These are the only perquisites we provided to our executive officers during 2013. Perquisites represent less than 2% of each NEOs total compensation as set forth in the Summary Compensation Table below. We believe that
our benefits and perquisites represent competitive market practices for executives at companies within our peer group. They are offered as a means to attract and retain our executive officers.
EMPLOYMENT AGREEMENTS
We have entered into
employment agreements with our NEOs. Each of these agreements provides for certain payments and other benefits if the executives employment terminates under certain circumstances other than for cause, including in connection with a
change in control. See the subsection Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table for a description of the agreement terms impacting current compensation and Potential Payments upon
Termination or Change in Control for a description of applicable severance and change in control benefits.
Our Compensation Committee
believes that change-in-control and severance arrangements are important parts of the overall compensation program for our NEOs. Change-in-control provisions help to secure the continued employment and dedication of our executive officers, to reduce
any concern that they might have regarding their own continued employment prior to or following a change in control, and to promote a continuity of management during a corporate transaction. Severance arrangements are used primarily to attract,
retain and motivate individuals with the requisite experience and ability to drive our success. Severance arrangements also serve, in part, as consideration to secure commitments from our executive officers not to compete with us after termination
of their employment.
COMPENSATION COMMITTEE POLICY REGARDING CHANGE IN CONTROL SEVERANCE PAYMENTS
Effective April 2010, our Compensation Committee adopted a policy that restricts our Company from entering into any future agreement that provides an
executive officer with a severance payment following a change in control of our Company, except in the case of a termination event (
i.e.,
a double-trigger). In addition, the policy also restricts our Company from entering into any
future agreement that provides an executive officer with the right to receive excise tax gross-ups following a change in control, except in certain unusual circumstances. Effective April
24
2013, our Compensation Committee revised this policy eliminating the exception to allow for an excise tax-gross in certain unusual circumstances. We have not entered into any agreements with any
of our executive officers that provide for an excise tax gross-up, other than Dr. Bergers employment agreement, which pre-dated the April 2010 policy.
Factors Considered in the Determination of Executive Compensation
2012 PERFORMANCE
CONSIDERED FOR 2013 SALARY AND LONG-TERM EQUITY INCENTIVE AWARDS
As described above under Key Components of Compensation and Related
Performance Periods, in early 2013, our Compensation Committee made decisions regarding 2013 salary increases and 2013 grants of long-term equity incentive awards, in each case based on 2012 performance. The Compensation Committee determined
the performance rating of each executive officer based on his or her contribution to the achievement of our key corporate objectives for 2012, as well as each officers performance in relation to individual goals and leadership and management
measures. Our key corporate objectives applicable to our executive officers for 2012 corresponded to ARIADs 2012 accomplishments described in the Executive Summary section above under Business Highlights Fiscal
2012. Briefly summarized:
|
|
|
We completed the regulatory submission of and obtained U.S. marketing approval for Iclusig.
|
|
|
|
We established European operations in preparation for the European commercial approval and launch of Iclusig in 2013.
|
|
|
|
We continued to advance the clinical development of AP26113.
|
|
|
|
We enhanced our discovery efforts with the goal of designating our next development candidate.
|
|
|
|
We managed substantial growth in personnel and internal systems.
|
|
|
|
We positioned the Company to further strengthen our balance sheet through an underwritten public offering in early 2013.
|
Dr. Bergers 2013 Salary and Equity Awards
Our Chief Executive Officers salary increase and long-term equity incentive awards were based predominantly on our Companys level of achievement of above-described key corporate
accomplishments, as well as successfully demonstrating the following:
|
|
|
Building long-term shareholder value,
|
|
|
|
Building and retaining our senior management team,
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|
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Exemplifying our corporate values, mission and vision,
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|
Developing and executing on our long-term strategy, and
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|
|
Providing long-term leadership for our company.
|
Based on the above, Dr. Bergers 2012 performance was rated outstanding. His 2013 salary increase to $751,000 reflects a merit increase of 3%, plus an adjustment of approximately 4.7% based on
an assessment of market data and Dr. Bergers performance. His long-term equity incentive awards delivered in March 2013 based on 2012 performance consisted of 95,000 performance shares, 108,000 restricted stock units and 216,000 stock
options, delivering roughly 60% of his target value via performance-based awards (including stock options and performance shares at the target level).
Dr. Clacksons 2013 Salary and Equity Awards
Dr. Clackson, as President of
Research and Development and Chief Scientific Officer, continued to have broad responsibilities for the management of our business, including leading our discovery research, preclinical
25
development, clinical development, medical affairs, manufacturing and program and alliance management. Based on his contributions to the achievement of our corporate objectives for 2012, as well
as his performance in relation to individual objectives and leadership and management standards, Dr. Clacksons performance was rated as exceeding requirements.
His 2013 salary increase to $493,000 reflects a merit increase of 3%, plus an adjustment of approximately 2.3% based on an assessment of market data and Dr. Clacksons performance. His long-term
equity incentive awards delivered in March 2013 based on 2012 performance consisted of 35,000 performance shares, 32,500 restricted stock units and 65,000 stock options, delivering roughly 60% of his target value via performance-based awards
(including stock options and performance shares at the target level).
Mr. Fitzgeralds 2013 Salary and Equity Awards
Mr. Fitzgerald, as Executive Vice President and Chief Financial Officer, continued to have broad responsibilities for many aspects of
our operations and business. These included planning and overseeing the growth and international expansion of our business, leading the planning and implementation of key systems necessary to support the needs of our business, managing significant
initiatives that provided additional funding for our programs, and effectively managing our spending in support of our key corporate objectives. Based on his contributions to the achievement of our corporate objectives for 2012, as well as his
performance in relation to individual objectives and leadership and management standards, Mr. Fitzgeralds performance was rated as exceeding requirements.
His 2013 salary increase to $466,000 reflects a merit increase of 3%, plus an adjustment of approximately 3.4% based on an assessment of market data and Mr. Fitzgeralds performance. His
long-term equity incentive awards delivered in March 2013 based on 2012 performance consisted of 35,000 performance shares, 32,500 restricted stock units and 65,000 stock options, delivering roughly 60% of his target value via performance-based
awards (including stock options and performance shares at the target level).
Mr. Duvalls 2013 Salary and Equity Awards
Mr. Duvall, as Senior Vice President, Commercial Operations in 2012, had responsibilities for the management of our commercial
business on a global basis, including the development and implementation of our commercial strategy related to the commercial launch of Iclusig in the United States and Europe and the building of our commercial teams, systems and processes necessary
to support the launch. Based on his contributions to the achievement of our corporate objectives for 2012, as well as his performance in relation to individual objectives and leadership and management standards, Mr. Duvalls performance
was rated as exceeding requirements.
His 2013 salary increased to $420,000, from $388,000 in 2012, reflecting a merit increase of 3% plus an
adjustment of approximately 5.2% based on an assessment of market data and Mr. Duvalls performance. His long-term equity incentive awards delivered in March 2013 based on 2012 performance consisted of 20,000 performance shares, 24,000
restricted stock units and 48,000 stock options, delivering roughly 60% of his target value via performance-based awards (including stock options and performance shares at the target level). In December 2013, in connection with his promotion to
Executive Vice President, Chief Commercial Officer, Mr. Duvalls annual salary was increased to $455,000 and he was granted an additional 35,000 stock options.
Dr. Bollags 2013 Salary and Equity Awards
Dr. Bollag, as Senior Vice
President, Regulatory Affairs and Quality, has responsibilities for the management of our regulatory affairs and quality operations on a global basis, including the development and implementation of regulatory strategy related to our products and
product candidates. Based on his contributions to the achievement of our corporate objectives for 2012, as well as his performance in relation to individual objectives and leadership and management standards, Dr. Bollags performance was
rated as exceeding requirements.
His 2013 salary increased to $387,000, from $362,000 in 2012, reflecting a merit increase of 3% plus an
adjustment of approximately 3.9% based on an assessment of market data and Dr. Bollags performance. His long-term equity incentive awards delivered in March 2013 based on 2012 performance consisted of 20,000 performance shares, 24,000
restricted stock units and 48,000 stock options, delivering roughly 60% of his target value via performance-based awards (including stock options and performance shares at the target level).
26
2013 PERFORMANCE CONSIDERED FOR 2013 ANNUAL PERFORMANCE AWARDS AND 2014 SALARY AND LONG-TERM EQUITY
INCENTIVE AWARDS
2013 Annual Performance Awards
Target annual performance awards for 2013 for all members of our executive leadership team except Dr. Berger were targeted at the 65
th
percentile of the market. For Dr. Berger, the Compensation Committee set the target annual performance award
above the 75
th
percentile in order to increase the
proportion of Dr. Bergers compensation that is variable based on company performance. Although we did achieve most of our corporate objectives during 2013, the Compensation Committee decided not to pay any cash bonuses to our NEOs because
of the FDA action on Iclusig.
2013 Annual Performance Awards
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Target
Percentage
|
|
|
Performance
Multiplier
|
|
|
Actual
Award
Percentage
|
|
|
Actual
Award
|
|
H. Berger
|
|
|
85
|
%
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
T. Clackson
|
|
|
50
|
%
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
E. Fitzgerald
|
|
|
50
|
%
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
M. Duvall
|
|
|
45
|
%
(1)
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
D. Bollag
|
|
|
45
|
%
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
(1)
|
Mr. Duvalls target bonus percentage increased from 45% to 50% upon his promotion to Executive Vice President, Chief Commercial Officer in
December 2013.
|
2014 Salary and Long-term Equity Incentive Awards
The Compensation Committee also determined that no increase in base salaries should be provided to Dr. Berger or the other NEOs. However, in January
2014, the Compensation Committee did approve a 2014 salary increase of $35,000 for Mr. Duvall retroactive to January 1, 2014 in connection with Mr. Duvalls promotion in December 2013 to Executive Vice President, Chief Commercial
Officer.
In January 2014, the Compensation Committee approved long-term incentive awards to our NEOs. These awards were made based on
consideration of the challenges presented by the FDA action on Iclusig, the considerable diminution in the value of previously granted equity awards, and the need to restore meaningful go-forward incentives to the executive leadership team with
respect to our efforts to resume regular marketing of Iclusig and continue advancement on our other clinical goals. The Compensation Committee initially determined a target number of stock options to be delivered to each member of the executive
leadership team and then determined the appropriate equity mix among long-term incentive vehicles (e.g., stock options, performance shares and restricted stock unit awards). For 2013, the Compensation Committee determined not to issue stock options
and converted the number of stock options that would have been granted into performance shares at a ratio of 1.6 to 1 and into restricted stock units at a ratio of 2 to 1 based on equivalent accounting values of the various types of awards. With
respect to the award of restricted stock units, the Committee used a premium conversion ratio to account for the downside protection in the award and the absence of performance-orientation inherent in performance shares and stock options. Based on
these calculations, equity grants were made as to 50% of the value of such awards in the form of performance shares, on a 1.6 to 1 basis, and as to the remaining 50% of the value of such awards in the form of time-based restricted stock units that
vest ratably over three years, on a 2 to1 basis. Regarding the performance shares, 50% of each executives award will be earned based on the achievement of specific research and development objectives with the remaining 50% based on the
achievement of specific commercial objectives.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2014
Salary
|
|
|
Performance
Shares at
Target(#)
|
|
|
Restricted
Stock
Units(#)
|
|
|
Grant Date
Fair Value
of Equity
|
|
H. Berger
|
|
$
|
751,000
|
|
|
|
239,000
|
(1)
|
|
|
261,000
|
(2)
|
|
$
|
3,695,000
|
|
T. Clackson
|
|
$
|
493,000
|
|
|
|
77,000
|
|
|
|
88,000
|
|
|
$
|
1,219,350
|
|
E. Fitzgerald
|
|
$
|
466,000
|
|
|
|
77,000
|
|
|
|
88,000
|
|
|
$
|
1,219,350
|
|
M. Duval
|
|
$
|
455,000
|
|
|
|
77,000
|
|
|
|
88,000
|
|
|
$
|
1,219,350
|
|
D. Bollag
|
|
$
|
387,000
|
|
|
|
77,000
|
|
|
|
88,000
|
|
|
$
|
1,219,350
|
|
27
(1)
|
Dr. Berger
will not earn more than the target number of shares in order to comply with the 500,000 per employee share award limit set forth in the 2006 Long-Term Incentive Plan.
|
(2)
|
Dr. Bergers award was calculated at
272,000 shares but was reduced by 11,000 shares in order to comply with the 500,000 per employee share award limit set forth in the 2006 Long-Term Incentive Plan.
|
For the performance shares granted in January 2014, the number of shares earned will range from 160% to 50% of target, with the actual number of shares earned and the vesting schedule varying depending on
the year in which such performance objectives are obtained. If the performance objectives are not obtained prior to the dates set forth in the award, which includes an outside date of 2017, the award will terminate and have no value.
2014 Target Annual Performance Awards
In March 2014, the Compensation Committee approved 2014 target annual performance awards as a percentage of 2014 salaries which annual performance awards
will be paid in 2015 based on 2014 performance. The targets were maintained at 2013 levels except for Mr. Duvall, whose target bonus increased in connection with his promotion to Executive Vice President, Chief Commercial Officer in December
2013, and are as follows:
|
|
|
|
|
Name
|
|
2014 Target Payout as a % of
2014 Base Salary
|
|
H. Berger
|
|
|
85
|
%
|
T. Clackson
|
|
|
50
|
%
|
E. Fitzgerald
|
|
|
50
|
%
|
M. Duvall
|
|
|
50
|
%
|
D. Bollag
|
|
|
45
|
%
|
The actual payout of the 2014 annual performance awards may be above or below target based on performance.
Hedging Transactions, Pledges of Stock, and Insider Trading Policy
Our insider trading policy expressly bars our executive officers, directors and employees from engaging in hedging transactions such as buying or selling puts and calls on ARIAD stock. We also prohibit
our executive officers, directors and employees from purchasing ARIAD stock on margin and pledging our stock as collateral. In addition, we prohibit our officers, directors and employees from purchasing or selling ARIAD securities while in
possession of material, non-public information, or otherwise using such information for their personal benefit. We also permit and encourage our executives and directors to enter into trading plans that are intended to comply with the requirements
of Rule 10b5-1 promulgated under the Exchange Act when they desire to prudently diversify their asset portfolios and exercise their stock options before their scheduled expiration dates.
Tax Deductibility of Compensation
Section 162(m) of the Internal Revenue Code
of 1986, as amended (the Code) limits the deduction a public company is permitted for compensation paid to the chief executive officer and to the three most highly compensated executive officers (other than the chief executive officer or
chief financial officer). Generally, amounts paid in excess of $1,000,000 to a covered executive cannot be deducted, unless the compensation is paid pursuant to a plan that is performance related, non-discretionary and has been approved by
shareholders. Our 2006 Long-Term Incentive Plan permits the issuance of performance-based stock awards that would be compliant with Section 162(m). In 2013, we granted performance shares that are intended to comply with Section 162(m). We
have not adopted a policy that all executive compensation be fully deductible.
28
Summary Compensation Table
The following table sets forth the compensation paid to or accrued on behalf of our Chief Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers,
whom we refer to collectively as our named executive officers, during the fiscal years ended December 31, 2011, 2012 and 2013.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
Awards
(1)
|
|
|
Option
Awards
(1)
|
|
|
All
Other
Compensation
(2)
|
|
|
Total
|
|
Harvey J. Berger, M.D.
Chairman, Chief Executive Officer,
and
President
|
|
|
2013
2012
2011
|
|
|
$
|
749,754
695,777
663,923
|
|
|
$
|
976,000
372,000
|
|
|
$
|
2,256,120
1,911,350
1,530,765
|
|
|
$
|
2,831,090
2,368,901
1,264,736
|
|
|
$
|
35,473
34,810
28,234
|
|
|
$
|
5,872,437
5,986,838
3,859,658
|
|
|
|
|
|
|
|
|
|
Timothy P. Clackson, Ph.D.
President of Research and
Development, Chief Scientific
Officer
|
|
|
2013
2012
2011
|
|
|
|
492,423
466,077
417,000
|
|
|
|
365,000
300,000
|
|
|
|
678,925
602,000
304,980
|
|
|
|
851,949
911,971
390,918
|
|
|
|
31,979
31,030
25,378
|
|
|
|
2,055,275
2,376,078
1,438,276
|
|
|
|
|
|
|
|
|
|
Edward M. Fitzgerald
Executive Vice President,
Chief Financial Officer and
Treasurer
|
|
|
2013
2012
2011
|
|
|
|
465,354
436,461
397,308
|
|
|
|
329,000
179,000
|
|
|
|
678,925
376,250
304,980
|
|
|
|
851,949
775,272
390,918
|
|
|
|
30,306
29,636
23,163
|
|
|
|
2,026,533
1,946,619
1,295,369
|
|
|
|
|
|
|
|
|
|
Martin J. Duvall
Executive Vice President and
Chief Commercial Officer
|
|
|
2013
|
|
|
|
427,262
|
|
|
|
|
|
|
|
501,360
|
|
|
|
748,558
|
|
|
|
23,457
|
|
|
|
1,700,637
|
|
|
|
|
|
|
|
|
|
Daniel M. Bollag, Ph.D.
Senior Vice President,
Regulatory Affairs and Quality
|
|
|
2013
|
|
|
|
386,423
|
|
|
|
|
|
|
|
501,360
|
|
|
|
629,131
|
|
|
|
30,772
|
|
|
|
1,547,687
|
|
(1)
|
The amounts
included under Stock Awards and Option Awards represent the aggregate grant date fair value for stock awards and option awards granted during the year, computed in accordance with FASB ASC Topic 718. The assumptions used in
the calculation of the grant date fair value of the stock awards and option awards granted in 2013 are set forth in note 13 to our audited consolidated financial statements titled Stock-Based Compensation included in the Original Filing.
The grant date fair value of performance shares awarded in 2013 was determined to be $0 and therefore is not included in the table. The grant date fair value of performance shares awarded in 2013, assuming the maximum potential value is achieved, is
$3,108,400 for Dr. Berger; $1,145,200 for Dr. Clackson; $1,145,200 for Mr. Fitzgerald; $654,400 for Mr. Duvall and $654,400 for Dr. Bollag.
|
(2)
|
Amounts included
under All Other Compensation for 2013 consist of: (i) matching contributions to our defined contribution retirement savings plan ($7,500 for each of Dr. Berger, Dr. Clackson, Mr. Fitzgerald, Mr. Duvall and
Dr. Bollag); and (ii) other compensation ($27,973 for Dr. Berger, $24,479 for Dr. Clackson, $22,806 for Mr. Fitzgerald, $15,957 for Mr. Duvall and $23,272 for Dr. Bollag) consisting of the cost of supplemental
long-term disability and long-term care insurances, an annual auto allowance, and tax preparation services for each of the named executive officers.
|
29
Grants of Plan-Based Awards in 2013
The following table shows information regarding grants of equity awards that were made during the year ended December 31, 2013 to each of our named executive officers. All awards were made under our
2006 Long-Term Incentive Plan. There were no grants of non-equity incentive plan awards to our named executive officers during 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
Equity Incentive Plan Awards:
(1)
|
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
|
|
|
Exercise or
Base Price
of Option
Awards
($/sh)
|
|
|
Grant Date Fair
Value of Stock
and Option
Awards
(2)
|
|
|
|
Grant
Date
|
|
|
Threshold
(#)
|
|
|
Target (#)
|
|
|
Maximum
(#)
|
|
|
|
|
|
Harvey J. Berger
|
|
|
03/19/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
216,000
|
(4)
|
|
$
|
20.89
|
|
|
$
|
2,831,090
|
|
|
|
|
03/19/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,000
|
(3)
|
|
|
|
|
|
|
|
|
|
$
|
2,256,120
|
|
|
|
|
03/19/13
|
|
|
|
47,500
|
|
|
|
95,000
|
|
|
|
152,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy P. Clackson
|
|
|
03/19/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,000
|
(4)
|
|
$
|
20,89
|
|
|
$
|
851,949
|
|
|
|
|
03/19/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,500
|
(3)
|
|
|
|
|
|
|
|
|
|
$
|
678,925
|
|
|
|
|
03/19/13
|
|
|
|
17,500
|
|
|
|
35,000
|
|
|
|
56,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward M. Fitzgerald
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/19/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,000
|
(4)
|
|
$
|
20.89
|
|
|
$
|
851,949
|
|
|
|
|
03/19/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,500
|
(3)
|
|
|
|
|
|
|
|
|
|
$
|
678,925
|
|
|
|
|
03/19/13
|
|
|
|
17,500
|
|
|
|
35,000
|
|
|
|
56,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin J. Duvall
|
|
|
03/19/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,000
|
(4)
|
|
$
|
20.89
|
|
|
$
|
629,131
|
|
|
|
|
03/19/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,000
|
(3)
|
|
|
|
|
|
|
|
|
|
$
|
501,360
|
|
|
|
|
03/19/13
|
|
|
|
10,000
|
|
|
|
20,000
|
|
|
|
32,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/09/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
(5)
|
|
$
|
4.29
|
|
|
$
|
119,427
|
|
|
|
|
|
|
|
|
|
|
Daniel M. Bollag
|
|
|
03/19/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,000
|
(4)
|
|
$
|
20,89
|
|
|
$
|
629,131
|
|
|
|
|
03/19/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,000
|
(3)
|
|
|
|
|
|
|
|
|
|
$
|
501,360
|
|
|
|
|
03/19/13
|
|
|
|
10,000
|
|
|
|
20,000
|
|
|
|
32,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
These awards are
performance shares that will vest based on the achievement, and timing of the achievement, of certain research and development initiatives prior to the end of 2016 provided that the executive is then employed with us.
|
(2)
|
The grant date
fair values of the awards have been determined in accordance with FASB ASC Topic 718. The assumptions used in the calculation of the grant date fair values of these awards are set forth in Note 13 to our audited financial statements for the year
ended December 31, 2013 included in the Original Filing.
|
(3)
|
These awards are
in the form of restricted stock units that vest as to 33
1
/
3
% of the awards on each of March 19, 2014, 2015 and 2016 provided that the executive is then employed with us, at
which times the underlying shares of common stock will be delivered to the recipient, subject to the terms of the recipients executive employment agreement.
|
(4)
|
The stock options
vest as to 33
1
/
3
% of the award on each of March 19, 2014, 2015 and 2016 provided that the executive is then employed with us, subject to the terms of the recipients executive employment agreement.
|
(5)
|
The stock option
vests as to 25% of the award on each of December 9, 2014, 2015, 2016 and 2017.
|
30
Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table
Employment agreements with our named executive officers provide for base salary as may be adjusted annually, annual bonus opportunities, participation in
our benefit plans, the opportunity to receive equity awards, and post-termination benefits and obligations.
Dr. Bergers employment
agreement has been in effect since April 2010. It was automatically renewed in December 2013 and will expire on December 31, 2016, subject to automatic renewal for successive three-year terms absent notice to the contrary by either party, and
following a change in control (as defined in the agreement), until the later of the expiration of the then current term or the second anniversary of the date on which the change in control occurs. The employment agreements with our other named
executive officers provided for initial terms, which automatically renew for successive one-year terms absent notice to the contrary by either party. In April 2014, the terms of employment of each of our named executive officers, other than
Dr. Berger, were extended to December 31, 2016. Each employment agreement specifies a minimum level of base salary for the executive, but gives our Compensation Committee authority to increase the executives base salary from time to
time.
Dr. Bergers employment agreement, as currently in effect, provides that we shall pay him a discretionary cash bonus based on
a target of not less than fifty percent of his then current salary, with the actual amount determined by our Board. In 2012, we paid half of the value of Dr. Bergers 2011 bonus in shares of common stock and half in cash. The employment
agreements for the other named executive officers provide for discretionary bonuses based on a target of thirty percent of their then current salaries, payable in the form of stock options, stock awards, restricted stock units, deferred compensation
or cash, as determined by our Board. The annual targets are reviewed and established each year by the Compensation Committee. The target awards for 2013 are set forth in the Compensation Discussion and Analysis under the heading Process for
Determining Executive Compensation.
In 2011, we awarded performance shares to each of the named executive officers who were employed at
that time that would vest upon obtaining regulatory approval from the FDA to market Iclusig prior to the end of 2016. This objective was achieved in December 2012 and, in accordance with the terms of the grant, 50% of the award vested in December
2012 and the remaining 50% vested in December 2013. In 2012, we awarded performance shares to each of the named executive officers that would vest upon obtaining regulatory approval from the European Medicines Agency to market Iclusig in the
European Union prior to the end of 2016. The objective was achieved in July 2013 and, in accordance with the terms of the grant, 50% of the award vested in July 2013, 25% will vest in July 2014 and the remaining 25% will vest in July 2015. In 2013,
we awarded performance shares to each of the named executive officers that will vest upon the achievement, and timing of the achievement, of certain research and development initiatives prior to the end of 2016. The number of shares that will vest
and the vesting schedule are dependent on when prior to the end of 2016 the performance milestone is achieved. If the performance milestone is not achieved prior to December 31, 2016, these performance shares will terminate and have no value.
The employment agreements also provide that each executive is entitled to, among other things, participation in any incentive, stock award or
bonus plan, pension, group insurance, and fringe benefits on the same basis as executives at a comparable level; group health, disability and life insurance; paid vacation; an auto allowance of $750 per month which was increased to $1,000 per month
in 2012; standard tax preparation and planning services; reimbursement of business expenses; indemnification and directors and officers insurance coverage; and for executives who had received credit under our sabbatical policy prior to
its termination in 2008, a lump sum payment upon termination of employment in good standing equal to three months of their base salary for each sabbatical that was fully earned under the policy. In addition, Dr. Bergers employment
agreement provides him with medical malpractice insurance with coverage reasonably satisfactory to Dr. Berger and legal costs to enforce the employment agreement on an as-incurred basis subject to repayment if we prevail.
The employment agreements with our named executive officers also provide for severance payments upon termination of employment by us without cause,
termination by the executive for material breach of the agreement by us, non-renewal (for Dr. Berger only) or termination in connection with a change in control. Dr. Bergers agreement also provides for a tax gross-up in the event
that any amounts payable by us or our successor are subject to excise taxes under Sections 280G and 4999 of the Code. See Potential Payments upon Termination or Change in Control for a description of these provisions in the employment
agreements.
31
Outstanding Equity Awards at December 31, 2013
The following table lists the outstanding equity awards at December 31, 2013 for each of the named executive officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options:
Exercisable
(1)
|
|
|
Number of
Securities
Underlying
Unexercised
Options:
Unexercisable
(1)
|
|
|
Option
Exercise
Price
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
|
|
|
Market
Value of
Shares
or
Units of
Stock That
Have Not
Vested
(2)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or
Other
Rights That
Have Not
Vested
|
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Values
of
Unearned
Shares,
Units or
Other
Rights
that Have
Not
Vested
(2)
|
|
|
|
|
|
|
|
|
|
|
Harvey J. Berger
|
|
|
150,000
|
|
|
|
|
|
|
$
|
5.23
|
|
|
|
09/09/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
$
|
7.56
|
|
|
|
10/04/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
240,000
|
|
|
|
|
|
|
$
|
4.64
|
|
|
|
03/06/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
(3)
|
|
|
|
|
|
$
|
4.49
|
|
|
|
04/16/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
146,667
|
|
|
|
73,333
|
(4)
|
|
$
|
7.82
|
|
|
|
04/01/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,000
|
|
|
|
142,000
|
(5)
|
|
$
|
15.05
|
|
|
|
03/20/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
216,000
|
(6)
|
|
$
|
20.89
|
|
|
|
03/19/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,667
|
(10)
|
|
$
|
284,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,000
|
(11)
|
|
$
|
463,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,600
|
(12)
|
|
$
|
501,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,000
|
(13)
|
|
$
|
736,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,000
|
(14)
|
|
$
|
647,900
|
|
Timothy P. Clackson
|
|
|
20,657
|
|
|
|
|
|
|
$
|
7.56
|
|
|
|
10/04/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,458
|
|
|
|
|
|
|
$
|
4.49
|
|
|
|
04/16/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,999
|
(3)
|
|
|
|
|
|
$
|
2.62
|
|
|
|
12/08/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
10,000
|
(7)
|
|
$
|
3.25
|
|
|
|
06/24/20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,702
|
|
|
|
22,667
|
(4)
|
|
$
|
7.82
|
|
|
|
04/01/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,334
|
|
|
|
54,666
|
(5)
|
|
$
|
15.05
|
|
|
|
03/20/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,000
|
(6)
|
|
$
|
20.89
|
|
|
|
03/19/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
(10)
|
|
$
|
88,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,666
|
(11)
|
|
$
|
181,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,000
|
(12)
|
|
$
|
190,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,500
|
(13)
|
|
$
|
221,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
(14)
|
|
$
|
238,700
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options:
Exercisable
(1)
|
|
|
Number of
Securities
Underlying
Unexercised
Options:
Unexercisable
(1)
|
|
|
Option
Exercise
Price
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
|
|
|
Market
Value of
Shares
or
Units of
Stock That
Have Not
Vested
(2)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or
Other
Rights That
Have Not
Vested
|
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Values
of
Unearned
Shares,
Units or
Other
Rights
that Have
Not
Vested
(2)
|
|
Edward M. Fitzgerald
|
|
|
50,000
|
|
|
|
|
|
|
$
|
5.23
|
|
|
|
09/09/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
$
|
7.56
|
|
|
|
10/04/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
$
|
4.49
|
|
|
|
04/16/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
10,000
|
(7)
|
|
$
|
3.25
|
|
|
|
06/24/20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,333
|
|
|
|
22,667
|
(4)
|
|
$
|
7.82
|
|
|
|
04/01/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
(3)
|
|
|
|
|
|
$
|
14.50
|
|
|
|
01/17/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,000
|
|
|
|
34,000
|
(5)
|
|
$
|
15.05
|
|
|
|
03/20/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,000
|
(6)
|
|
$
|
20.89
|
|
|
|
03/19/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
(10)
|
|
$
|
88,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,666
|
(11)
|
|
$
|
113,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,000
|
(12)
|
|
$
|
190,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,500
|
(13)
|
|
$
|
221,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
(14)
|
|
|
238,700
|
|
Martin J. Duvall
|
|
|
50,000
|
|
|
|
50,000
|
(8)
|
|
$
|
10.28
|
|
|
|
09/19/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,334
|
|
|
|
6,666
|
(5)
|
|
$
|
15.05
|
|
|
|
03/20/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,000
|
(6)
|
|
$
|
20.89
|
|
|
|
03/19/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
(9)
|
|
$
|
4.29
|
|
|
|
12/09/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,333
|
(11)
|
|
$
|
22,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,600
|
(12)
|
|
$
|
38,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,000
|
(13)
|
|
$
|
163,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
(14)
|
|
|
136,400
|
|
Daniel M. Bollag
|
|
|
37,500
|
|
|
|
|
|
|
$
|
1.30
|
|
|
|
03/10/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,333
|
|
|
|
10,667
|
(4)
|
|
$
|
7.82
|
|
|
|
04/01/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,667
|
|
|
|
25,333
|
(5)
|
|
$
|
15.05
|
|
|
|
03/20/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,000
|
(6)
|
|
$
|
20.89
|
|
|
|
03/19/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
(10)
|
|
$
|
40,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
(11)
|
|
$
|
81,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000
|
(12)
|
|
$
|
109,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,000
|
(13)
|
|
$
|
163,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
(14)
|
|
|
136,400
|
|
(1)
|
Options have
ten-year terms. Unless otherwise indicated, the options reported in this table vest 25% per year over the four-year period following the date of grant, provided that the option holder is still an employee of ARIAD.
|
(2)
|
The market value
of the stock awards is determined by multiplying the number of shares by $6.82, the closing price of our common stock on the NASDAQ Global Select Market on December 31, 2013, the last business day of our most recently completed fiscal year.
|
(3)
|
These options were
granted pursuant to our program to grant options to employees and directors upon reaching ten, fifteen or twenty years of service with ARIAD. These options are fully vested upon grant and have a term of ten years.
|
(4)
|
These options vest
on April 1, 2014.
|
(5)
|
These options vest
as to 50% of the balance of the award on March 20, 2014 and March 20, 2015.
|
(6)
|
These options vest
as to 33% of the award on March 19, 2014, 2015 and 2016.
|
(7)
|
These options vest
on June 24, 2014.
|
(8)
|
These option vests
as to 50% of the balance of the award on September 19, 2014 and on September 19, 2015.
|
(9)
|
This option vests
as to 25% of the award on December 9, 2014, 2015, 2016 and 2017.
|
(10)
|
These restricted
stock units vest on April 1, 2014.
|
(11)
|
These restricted
stock units vest as to 50% of the balance of the award on each of March 20, 2014 and 2015.
|
(12)
|
These performance
shares relate to the approval by the European Medicines Agency to market Iclusig in the European Union, at which time 50% of the award vested of this remaining balance, 50% will vest on July 15, 2014 and 50% on July 15, 2015.
|
33
(13)
|
These restricted
stock units vest as to 33
1
/
3
% of the balance on each of March 19, 2014, 2015 and 2016.
|
(14)
|
These performance
shares vest only if we achieve a certain research and development initiative prior to the end of 2016. These amounts represent target awards with the final number of shares to be issued being dependent upon when, prior to the end of 2016, such
performance milestone is achieved.
|
Option Exercises and Stock Vested in 2013
The following table contains information regarding option exercises and stock awards that vested during the year ended December 31, 2013 held by our
named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Shares
Acquired on
Exercise
|
|
|
Value Realized on
Exercise
(1)
|
|
|
Shares
Acquired on
Vesting
|
|
|
Value Realized on
Vesting
|
|
Harvey J. Berger
|
|
|
|
|
|
|
|
|
|
|
97,667
|
(2)
|
|
$
|
1,892,786
|
|
|
|
|
|
|
|
|
|
|
|
|
41,666
|
(3)
|
|
$
|
762,488
|
|
|
|
|
|
|
|
|
|
|
|
|
62,500
|
(4)
|
|
$
|
311,250
|
|
|
|
|
|
|
|
|
|
|
|
|
34,000
|
(5)
|
|
$
|
695,300
|
|
|
|
|
|
|
|
|
|
|
|
|
73,600
|
(6)
|
|
$
|
1,544,128
|
|
Timothy P. Clackson
|
|
|
4,766
|
|
|
$
|
71,632.98
|
|
|
|
|
|
|
|
|
|
|
|
|
44,542
|
|
|
$
|
702,427.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,333
|
(2)
|
|
$
|
742,894
|
|
|
|
|
8,631
|
|
|
$
|
107,369.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
(3)
|
|
$
|
237,900
|
|
|
|
|
|
|
|
|
|
|
|
|
19,500
|
(4)
|
|
$
|
97,110
|
|
|
|
|
|
|
|
|
|
|
|
|
13,334
|
(5)
|
|
$
|
272,680
|
|
|
|
|
|
|
|
|
|
|
|
|
28,000
|
(6)
|
|
$
|
587,440
|
|
Edward M. Fitzgerald
|
|
|
33,000
|
|
|
$
|
468,930.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,333
|
(2)
|
|
$
|
626,614
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
(3)
|
|
$
|
237,900
|
|
|
|
|
|
|
|
|
|
|
|
|
19,500
|
(4)
|
|
$
|
97,110
|
|
|
|
|
|
|
|
|
|
|
|
|
8,334
|
(5)
|
|
$
|
170,430
|
|
|
|
|
|
|
|
|
|
|
|
|
28,000
|
(6)
|
|
$
|
587,440
|
|
Martin J. Duvall
|
|
|
|
|
|
|
|
|
|
|
1,667
|
(5)
|
|
$
|
34,090
|
|
|
|
|
|
|
|
|
|
|
|
|
5,600
|
(6)
|
|
$
|
117,488
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
(7)
|
|
$
|
537,250
|
|
Daniel M. Bollag
|
|
|
|
|
|
|
|
|
|
|
32,333
|
(2)
|
|
$
|
626,619
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
(3)
|
|
$
|
109,800
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
(4)
|
|
$
|
44,820
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
(5)
|
|
$
|
122,700
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000
|
(6)
|
|
$
|
335,680
|
|
(1)
|
Value represents
the market value of a share of our common stock at the time of exercise minus the exercise price per share of the option, multiplied by the number of shares acquired upon exercise.
|
(2)
|
This represents
the vesting of restricted stock units granted on March 22, 2010. The value realized is calculated by multiplying the number of shares issued times $19.38, the closing price of our common stock on March 22, 2013.
|
34
(3)
|
This represents
the vesting of restricted stock units granted on April 1, 2011. The value realized is calculated by multiplying the number of shares issued times $18.30, the closing price of our common stock on April 1, 2013.
|
(4)
|
This represents
the vesting of performance shares granted on April 1, 2011 which became fully vested on December 18, 2013. The value realized is calculated by multiplying the number of shares issued times $4.98, the closing price of our common stock on
December 18, 2013.
|
(5)
|
This represents
the vesting of restricted stock units granted on March 20, 2012. The value realized is calculated by multiplying the number of shares issued times $20.45, the closing price of our common stock on March 20, 2013.
|
(6)
|
This represents
the vesting of performance shares granted on April 1, 2011 of which 50% vested on July 15, 2013. The value realized is calculated by multiplying the number of shares issued times $20.98, the closing price of our common stock on
July 15, 2013.
|
(7)
|
This represents
the vesting of restricted stock units granted on September 19, 2011, which vested on September 19, 2013. The value realized is calculated by multiplying the number of shares issued times $21.49, the closing price of our common stock on
September 19, 2013.
|
Non-Qualified Deferred Compensation in 2013
The following table contains information about the participation of our named executive officers in our 2005 Executive Compensation Plan during and as of
the year ended December 31, 2013. Dr. Berger does not participate in this plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive
Contributions ($)
|
|
|
Registrant
Contributions ($)
|
|
|
Aggregate
Earnings
($)
(1)
|
|
|
Aggregate
Withdrawals/
Distributions ($)
|
|
|
Aggregate
Balance at
Year End ($)
|
|
Timothy P. Clackson
|
|
|
|
|
|
|
|
|
|
$
|
49,344
|
|
|
$
|
(558,816
|
)
|
|
$
|
340,651
|
|
Edward M. Fitzgerald
|
|
|
|
|
|
|
|
|
|
|
41,707
|
|
|
|
(452,951
|
)
|
|
|
298,816
|
|
Martin J. Duvall
|
|
|
|
|
|
|
|
|
|
|
986
|
|
|
|
(27,588
|
)
|
|
|
|
|
Daniel M. Bollag
|
|
|
|
|
|
|
|
|
|
|
19,507
|
|
|
|
(238,140
|
)
|
|
|
147,979
|
|
(1)
|
No portion of the
amounts listed in the Aggregate Earnings column was reported as compensation in 2013 in the Summary Compensation Table.
|
The 2005 Executive Compensation Plan is an unfunded, non-qualified, deferred compensation plan and is intended to comply with the requirements of Section 409A of the Code. The Compensation Committee
may from time to time in its sole discretion allow participants to defer payment of part of their compensation under the 2005 Executive Compensation Plan on a pre-tax basis. In addition, the Compensation Committee may elect to issue awards under the
2005 Executive Compensation Plan to participants either as performance-based awards or on an
ad hoc
basis. Deferred amounts are subject to certain vesting requirements (other than for salary deferrals) and payment provisions as specified at
the time of the deferral. Our Compensation Committee, in its sole discretion, determines the terms of awards, including the acceleration or modification of vesting terms. Amounts that are not vested as of the time of a participants separation
from service are forfeited, subject to the terms of the participants executive employment agreement. Vesting of unvested amounts may be accelerated in connection with a change in control at the Compensation Committees discretion. The
value of amounts deferred under the 2005 Executive Compensation Plan is increased or decreased over time based on the actual total return of specified mutual funds. Participants may choose to receive payment of their vested benefits in either a lump
sum or annual installments (but not to exceed twenty years) at either a specified date, upon the first anniversary of their separation from service, or the earlier of these two dates. A participant may subsequently change the form of payment or
elect to defer the timing of payment, within certain limits, provided the change is elected at least twelve months before the previously scheduled date for commencement of payment. Any changes to the timing of payment must be deferred for at least
five additional years.
35
Potential Payments upon Termination or Change in Control
Chief Executive Officer
The
following is a summary of the severance and change in control benefits provided to Dr. Berger, our Chief Executive Officer, under the terms of his employment agreement in effect since April 2010.
E
MPLOYMENT
T
ERMINATION
WITHOUT
C
AUSE
If we terminate Dr. Bergers employment without cause or Dr. Berger terminates his employment for good reason, each as defined below, we are obligated to:
|
|
|
Accelerate the vesting of all stock options, stock grants, and similar equity rights and provide for continued exercisability of all awards through
their original terms with all rights, and
|
|
|
|
Make a cash lump sum payment equal to the sum of three times the executives then current annual salary and three times the bonus amount paid for
the preceding year, provided that such bonus amount shall not be less than 50% of the executives salary.
|
Cause for purposes of Dr. Bergers employment agreement consists of:
|
|
|
Willful neglect of duties following written notice and a 30-day opportunity to correct,
|
|
|
|
Conviction of a felony involving moral turpitude, or
|
|
|
|
Any act of fraud or embezzlement involving us or any of our affiliates.
|
Any determination of cause requires at least a two-thirds vote of the entire Board.
Termination
for good reason for purposes of Dr. Bergers employment agreement consists of:
|
|
|
A material reduction of duties or authority that continues for 30 days,
|
|
|
|
An uncured material breach of the employment agreement or any other material agreement with the Company that continues for 30 days,
|
|
|
|
A Change in Control (as defined below) occurs and Dr. Berger is not the chief executive officer of the surviving corporation,
|
|
|
|
Dr. Berger is no longer elected to our Board, named as Chairman and designated as our chief executive officer,
|
|
|
|
Dr. Berger ceases to be our highest ranking executive with the power to appoint and remove all other ARIAD employees,
|
|
|
|
A person other than Dr. Berger or a person designated by Dr. Berger is elected ARIADs president,
|
|
|
|
The retention of any senior executive officer by ARIAD, or an offer to pay compensation to any senior executive officer that in either case is
unacceptable to Dr. Berger, in his reasonable judgment, or
|
|
|
|
We file for bankruptcy or similar proceedings or an involuntary petition is commenced against us.
|
N
ON
-R
ENEWAL
If
we do not renew Dr. Bergers employment agreement at the end of its term, we are obligated to make a lump sum cash payment equal to two times his then current annual salary and accelerate the vesting of all stock options, stock grants and
similar equity rights and provide for continued exercisability of all awards through their original terms with all rights. Any determination not to renew Dr. Bergers employment requires at least a two-thirds vote of the entire Board.
36
M
EDICAL
C
OVERAGE
Dr. Bergers employment agreement requires us to continue providing medical coverage in all group health plans for the maximum COBRA continuation period at our expense following any termination
of employment other than for death.
C
HANGE
IN
C
ONTROL
Dr. Bergers employment agreement provides that in the event of a Change in Control (as defined in this subsection), all stock,
stock option, stock award and similar equity rights granted to him shall immediately vest and remain fully exercisable through their original term with all rights.
In addition, Dr. Berger has the right to terminate his employment agreement for good reason if a Change in Control occurs and he is not the chief executive officer of the surviving
corporation, in which case we will pay Dr. Berger the same benefits as if we had terminated his employment without cause. Dr. Bergers agreement also provides that, following a Change in Control, his term of employment will continue
until the later of the existing term or two years and one day following the Change in Control.
A tax gross-up will be paid on
Dr. Bergers behalf if any amounts payable by us (or our successor) become subject to excise taxes under Sections 280G and 4999 of the Code.
Generally, pursuant to Dr. Bergers employment agreement, a Change in Control occurs if:
|
|
|
Any person makes a tender or exchange offer for our common stock pursuant to which such person acquires 40% or more of our issued and outstanding
common stock,
|
|
|
|
A merger or consolidation of ARIAD, other than a merger or consolidation of ARIAD in which our voting securities prior to the transaction continue to
represent more than 50% of the total voting power of the surviving corporation, or the sale or disposition of all or substantially all of our assets, or
|
|
|
|
Any person acquires more than 40% of our issued and outstanding voting securities.
|
The following table sets out the estimated potential payments upon termination or a Change in Control for Dr. Berger, based on the assumptions
discussed above and assuming such event occurred on December 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Berger
Payments and Benefits
|
|
Voluntary
termination or
termination for
Cause
|
|
|
Non-
Renewal
|
|
|
Termination
by ARIAD
Without Cause
or by the
Executive with
Good Reason
Absent
a
Change-in-
Control
|
|
|
Death,
Disability or
Acceleration
of Vesting
upon Change-
in-Control
without
Termination
|
|
|
Termination by
ARIAD without
Cause or by the
Executive with
Good Reason
Following
a
Change-in-
Control
|
|
|
|
|
|
|
|
Severance benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump sum payment
|
|
|
|
|
|
$
|
1,502,000
|
|
|
$
|
3,379,500
|
|
|
|
n/a
|
|
|
$
|
3,379,500
|
|
Healthcare benefits
|
|
$
|
36,982
|
|
|
|
36,982
|
|
|
|
36,982
|
|
|
|
n/a
|
|
|
|
36,982
|
|
|
|
|
|
|
|
Acceleration of equity awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value of equity vesting on termination
(1)
|
|
|
|
|
|
|
2,634,339
|
|
|
|
2,634,339
|
|
|
|
3,023,079
|
|
|
|
3,023,079
|
|
280G Tax Gross-Up
(2)
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Payment
|
|
$
|
36,982
|
|
|
$
|
4,193,320
|
|
|
$
|
6,050,820
|
|
|
$
|
3,023,079
|
|
|
$
|
6,439,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts do not
include the value associated with vested stock options. Information about all stock options and other unvested equity awards held by Dr. Berger as of December 31, 2013 is included in the Outstanding Equity Awards at December 31,
2013 table.
|
(2)
|
Based on the
assumptions set forth above, Dr. Bergers payments will not result in a tax gross-up payment to him based on Dr. Bergers taxable wages per Form W-2 for the years 2008 through 2012. The amount of the tax gross-up, if any, that
would arise would depend upon the facts and circumstances at the time of a change-in-control and any related employment termination.
|
37
The acceleration of equity awards in the table above includes the value of unvested stock options and
restricted stock units, the value of performance shares granted in 2012 the vesting of which is now time based as the performance objective has been achieved, and the value of performance shares granted in 2013 for which the performance objective
had not been achieved as of December 31, 2013. The 2013 performance shares vest in connection with a change in control at the maximum award level, or 160% of the target. The values of equity awards included in the table above are based on the
intrinsic value of such awards on December 31, 2013 (i.e. the difference between the market value of the Companys common stock on that date and the exercise or purchase price, if any).
The amounts in the table do not include the value of the lump sum payment ($563,250) we will make to Dr. Berger upon termination of employment in
good standing for amounts previously earned under our now terminated sabbatical policy, as described in subsection Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table.
Other Named Executive Officers
The following is a description of the potential payments upon termination or change in control with respect to the named executive officers other than
Dr. Berger:
E
MPLOYMENT
T
ERMINATION
WITHOUT
C
AUSE
If we terminate the employment of our other named executive officers without cause, we are obligated to continue payment of the executives then
current salary for a period of twelve months following the effective date of termination; accelerate vesting of all stock, stock options, stock awards, and similar equity awards and deferred compensation awards granted to the executive that would
have otherwise vested during the remaining term of that executives contract, subject to the normal post termination exercise period; and continue payment of all benefits covered under COBRA for up to one year.
Cause for purposes of the other named executive officers employment agreements consists of:
|
|
|
The officers failure to perform any of his material duties,
|
|
|
|
The conviction of the officer of any felony,
|
|
|
|
Commission of any crime related to the officers employment with the Company,
|
|
|
|
Violation of any law or regulation related to our business,
|
|
|
|
Conduct that could result in unfavorable publicity for us in a material way,
|
|
|
|
Unprofessional conduct inconsistent with the officers position with the Company,
|
|
|
|
Failure to comply with our written policies, or
|
|
|
|
Breach of the terms of the employment agreement.
|
The executive officer has a right to cure any conduct that constitutes cause, if curable, within 30 days after receiving written notice.
For purposes of determining payments upon termination, a termination of the employment agreement by the named executive officer due to an uncured breach by us of the employment agreement is treated as a
termination of the executives employment without cause.
N
ON
-R
ENEWAL
If we do not renew the employment agreement of our other named executive officers, no severance benefit is payable. In addition, any unvested stock
awards, stock options, restricted stock or restricted stock units, performance shares or unvested portions of past bonuses in the form of deferred compensation shall be forfeited to the Company.
38
E
MPLOYMENT
T
ERMINATION
WITH
C
AUSE
Any unvested stock awards, stock options, restricted stock or restricted stock units, performance shares or unvested portions of past bonuses in the form
of deferred compensation shall be forfeited to the Company in the event the employment is terminated by the Company for Cause.
C
HANGE
IN
C
ONTROL
In the event of a consummation of a Change in Control, if within one year following such occurrence the Company terminates the executive officers employment without cause or the
executive officer resigns for good reason, we are obligated to accelerate the vesting of all stock options, stock grants and similar equity rights and deferred compensation awards and provide for continued exercisability of all awards through their
original terms with all rights. We are also obligated to continue to pay the named executive officer their then current salary for a period of 24 months from the effective date of termination. Good reason means the involuntary relocation of more
than 25 miles, the material breach of the employment agreement by the Company, or the material diminution of the officers responsibilities, which situation remains uncured within a specified timeframe after notice.
The Change in Control definition with respect to the employment agreements for the other named executive officers is similar to the employment agreement
for Dr. Berger except that the threshold for acquisition of shares of our common stock is 50% for the other named executive officers.
The following tables set out the estimated potential payments upon termination or a change in control for Dr. Clackson, Mr. Fitzgerald,
Mr. Duvall and Dr. Bollag, based on the assumptions following the table and assuming such event occurred on December 31, 2013. The total of continued payments in the case of termination by ARIAD without cause in the tables below
reflect the remaining terms of the employment agreements with each of these executives. The footnotes to all of the tables follow the last table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Clackson
Payments and benefits
|
|
Voluntary
Termination or
Termination
for Cause
|
|
|
Death or Disability
|
|
|
Termination by
ARIAD Without
Cause or by the
Executive for
ARIADs
Material Breach
|
|
|
Termination by
ARIAD without
Cause or by the
Executive for Good
Reason
within One
Year after a Change
in Control
|
|
|
|
|
|
|
Severance benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of continued payments
|
|
|
|
|
|
|
|
|
|
$
|
493,000
|
|
|
$
|
986,000
|
|
Healthcare benefits
|
|
|
|
|
|
$
|
24,992
|
|
|
|
24,992
|
|
|
|
37,488
|
|
Non-qualified benefits
(1)
|
|
|
|
|
|
|
|
|
|
|
340,651
|
|
|
|
340,651
|
|
Acceleration of equity awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value of equity vesting on termination
(2)
|
|
|
|
|
|
|
258,952
|
|
|
|
384,652
|
|
|
|
1,100,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Payment
|
|
|
|
|
|
$
|
283,945
|
|
|
$
|
1,243,295
|
|
|
$
|
2,464,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Fitzgerald
Payments and benefits
|
|
Voluntary
Termination or
Termination
for Cause
|
|
|
Death or Disability
|
|
|
Termination by
ARIAD Without
Cause or by
the
Executive for
ARIADs
Material Breach
|
|
|
Termination by
ARIAD without
Cause or by the
Executive for Good
Reason
within One
Year after a Change
in Control
|
|
|
|
|
|
|
Severance benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of continued payments
|
|
|
|
|
|
|
|
|
|
$
|
466,000
|
|
|
$
|
932,000
|
|
Healthcare benefits
|
|
|
|
|
|
$
|
24,654
|
|
|
|
24,654
|
|
|
|
36,982
|
|
Non-qualified benefits
(1)
|
|
|
|
|
|
|
|
|
|
|
298,816
|
|
|
|
298,816
|
|
Acceleration of equity awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value of equity vesting on termination
(2)
|
|
|
|
|
|
|
232,233
|
|
|
|
350,552
|
|
|
|
1,032,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Payment
|
|
|
|
|
|
$
|
256,887
|
|
|
$
|
1,140,023
|
|
|
$
|
2,300,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Duvall
Payments and benefits
|
|
Voluntary
Termination or
Termination
for Cause
|
|
|
Death or Disability
|
|
|
Termination by
ARIAD Without
Cause or by
the
Executive for
ARIADs
Material Breach
|
|
|
Termination by
ARIAD without
Cause or by the
Executive for Good
Reason
within One
Year after a Change
in Control
|
|
|
|
|
|
|
Severance benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of continued payments
|
|
|
|
|
|
|
|
|
|
$
|
420,000
|
|
|
$
|
840,000
|
|
Healthcare benefits
|
|
|
|
|
|
$
|
24,654
|
|
|
|
24,654
|
|
|
|
36,982
|
|
Non-qualified benefits
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of equity awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value of equity vesting on termination
(2)
|
|
|
|
|
|
|
62,037
|
|
|
|
107,162
|
|
|
|
531,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Payment
|
|
|
|
|
|
$
|
86,692
|
|
|
$
|
551,817
|
|
|
$
|
1,408,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Bollag
Payments and benefits
|
|
Voluntary
Termination or
Termination
for Cause
|
|
|
Death or Disability
|
|
|
Termination by
ARIAD Without
Cause or by
the
Executive for
ARIADs
Material Breach
|
|
|
Termination by
ARIAD without
Cause or by the
Executive for Good
Reason
within One
Year after a Change
in Control
|
|
|
|
|
|
|
Severance benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of continued payments
|
|
|
|
|
|
|
|
|
|
$
|
387,000
|
|
|
$
|
774,000
|
|
Healthcare benefits
|
|
|
|
|
|
$
|
24,992
|
|
|
|
24,992
|
|
|
|
37,488
|
|
Non-qualified benefits
(1)
|
|
|
|
|
|
|
|
|
|
|
147,979
|
|
|
|
147,979
|
|
Acceleration of equity awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value of equity vesting on termination
(2)
|
|
|
|
|
|
|
131,093
|
|
|
|
190,960
|
|
|
|
613,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Payment
|
|
|
|
|
|
$
|
156,086
|
|
|
$
|
750,931
|
|
|
$
|
1,573,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts are based on the value and vesting schedule of unvested deferred compensation awards under our 2005 Executive Compensation Plan at
December 31, 2013; no such awards were made and deferred in 2013.
|
(2)
|
Amounts do not include the value associated with vested stock options. Information about all stock options and other unvested equity awards held by the
named executive officers as of December 31, 2013 is included in the Outstanding Equity Awards at December 31, 2013 table.
|
40
The acceleration of equity awards in the tables above includes the value of unvested stock options and
restricted stock units, as well as the value of performance shares granted in 2012 the vesting of which is now time based as the performance objective has been achieved. In the case of termination by the Company without Cause or by the officer for
the Companys material breach, awards that would have vested during the remaining term of the officers employment agreement accelerate. In the case of termination by the Company without Cause or by the officer for good reason within one
year of a Change in Control, all such outstanding awards immediately vest and remain exercisable according to their terms. In addition, performance shares granted in 2013, for which the performance objective has not yet been achieved, will
immediately vest upon termination in connection with a change in control at the maximum level, or 160% of the award, and are included in the above tables.
The amounts in the above tables do not include the value of the lump sum payments payable upon termination in good standing to Dr. Clackson ($123,250) and Mr. Fitzgerald ($116,500) for amounts
previously earned under our now terminated sabbatical policy, as described in the Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table above. The amounts in the above tables also do not reflect any reduction in
payments related to the modified economic cutback provisions in the executive officers employment agreements that may apply on or after a change-in-control.
Assumptions Regarding Post Termination Payment Tables
Except as otherwise
specifically noted above, the tables presented on the preceding pages were prepared as though each named executive officers employment was terminated on December 31, 2013, using the closing price of our common stock on that date ($6.82).
We are required by the SEC to use these assumptions. With those assumptions taken as a given, we believe that the remaining assumptions listed above, which are necessary to produce these estimates and reflect solely our interpretation of our
contractual obligations, are reasonable in the aggregate. However, the executives employment was not terminated on December 31, 2013, and a change in control did not occur on that date. There can be no assurance that a termination of
employment, a change in control or both would produce the same or similar results as those described if either or both of them occur on any other date or at any other price of our common stock, or if any assumption is not correct in fact.
Director Compensation
Director Compensation Policy in Effect During 2013
Effective January 2, 2012, the Board of Directors adopted the following policy for compensation of the non-management members of our Board:
|
|
|
A one-time grant upon initial appointment or election to the Board of 40,000 stock options, which vest over three years in equal amounts on the first,
second and third anniversaries of the date of grant;
|
|
|
|
Annual cash compensation of $50,000, paid in equal quarterly amounts on or about the last day of each calendar quarter. In lieu of cash, a director may
elect to receive $50,000 worth of restricted shares of our common stock on January 31, subject to a lapsing repurchase right as described below. The number of shares to be issued will be determined based on the volume weighted average price
(VWAP) of our common stock for the month of December of the prior year. A director electing to receive his or her retainer in shares of our common stock must make such election by January 15 of each calendar year; and
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An annual equity grant of 14,000 restricted shares of our common stock, made on or about January 31 of each calendar year, subject to a lapsing
repurchase right as described below. The number of restricted shares to be awarded will be evaluated annually to take into account the underlying value of the shares. The value of restricted share awards made on January 31, 2013 to each
director was $278,320.
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For stock option awards, the exercise price of each award is the closing price of our common stock
as quoted on the NASDAQ Global Select Market on the date of grant. These awards have terms of ten years, subject to earlier termination. For restricted stock awards, we have the right to repurchase the restricted shares for a nominal amount if the
director ceases to be a member of the Board or ceases to provide us with other services following their service as a director. Our right to repurchase the restricted shares lapses as to 25% of the shares on each of
March 31, June 30, September 30 and December 31 of the year of the award. All awards are granted under and subject to the terms and conditions of our 2006 Long-Term Incentive Plan, as amended (the 2006 Long-Term
Incentive Plan).
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No other compensation, in the form of cash or otherwise, was paid to our non-management directors other than
reimbursement of their reasonable expenses incurred in attending Board and committee meetings. Management directors do not receive any compensation for their service as directors.
Set forth below is information concerning the compensation paid to or earned by our non-management directors during 2013.
2013 Director Compensation Table
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Name
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Fees Earned
or Paid in
Cash
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Stock
Awards
(1)
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Option
Awards
(1)(2)
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Total
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Jay R. LaMarche
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$
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50,000
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$
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278,320
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$
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328,320
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Athanase Lavidas, Ph.D.
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$
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50,000
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$
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278,320
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$
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328,320
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Massimo Radaelli, Ph.D.
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$
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50,000
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$
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278,320
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$
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328,320
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Norbert G. Riedel, Ph.D.
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$
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50,000
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$
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278,320
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$
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328,320
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Sarah J. Schlesinger, M.D.
(3)
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$
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25,000
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$
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533,536
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$
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558,536
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Robert M. Whelan, Jr.
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$
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50,000
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$
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278,320
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$
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328,320
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Wayne Wilson
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$
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50,000
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$
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278,320
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$
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328,320
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(1)
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As of
December 31, 2013, no director held any restricted stock.
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(2)
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The amounts included under Stock Awards and Option Awards represent the aggregate grant date fair value for stock awards and
option awards granted during the year, computed in accordance with FASB ASC Topic 718. The assumptions used in the calculation of the grant date fair value of the stock awards and option awards are set forth in note 13 to our audited consolidated
financial statements, entitled Stock-Based Compensation, included in the Original Filing. As of December 31, 2013, each non-management director had the following aggregate number of stock options outstanding: Mr. LaMarche
70,000; Dr. Lavidas 20,000; Dr. Radaelli 52,319; Dr. Riedel 25,000; Dr. Schlesinger 40,000; Mr. Whelan 25,000; and Mr. Wilson 25,000.
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(3)
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Dr. Schlesinger was appointed to the Board on July 15, 2013.
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Director Compensation Policy in Effect as of January 1, 2014
With the help of
our compensation consultant, based on a review of our 2014 peer group of companies listed below in the section entitled Use of Competitive Market Compensation Data and Compensation Benchmark and in order to more closely align our
director compensation with those companies, the Compensation Committee approved an increase in the compensation to be paid to our non-management directors effective January 1, 2014. We believe that our revised compensation policy recognizes the
increased time and responsibilities required of our directors for their service on the Board and the Board committees. The revised policy is as follows:
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A one-time grant upon initial appointment or election to the Board of 75,000 stock options, which vest over three years in equal amounts on the first,
second and third anniversaries of the date of grant;
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Annual cash compensation of $70,000, paid in equal quarterly amounts on or about the last day of each calendar quarter. In lieu of cash, a director may
elect to receive the equivalent value in restricted shares of our common stock on January 31, subject to a lapsing repurchase right as to 25% of the shares on March 31, June 30, September 30 and December 31 of the
year of the award. The number of shares to be issued will be determined based on the volume weighted average price (VWAP) of our common stock for the month of December of the prior year. Such election to be paid in shares in lieu of cash must be
made by January 15 of each calendar year; and
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An annual equity grant of 25,000 stock options and 12,500 restricted stock units which will vest as to 25% of the shares on
March 31, June 30, September 30 and December 31 of the year of the award.
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For stock option
awards, the exercise price of each award is the closing price of our common stock as quoted on the NASDAQ Global Select Market on the date of grant. These awards have terms of ten years, subject to earlier
42
termination. The annual cash component will be prorated for any director who joins the Board during the year beginning on the first day of the fiscal quarter in which he or she was initially
appointed or elected and the individual may elect to be paid in shares in lieu of cash. If a director dies, resigns or is removed during any quarter, he or she shall be entitled to a cash payment (or shares in lieu thereof) on a pro-rated basis
through his or her last day of service.
Director Stock Ownership Guidelines
In 2012, we adopted stock ownership guidelines, to be phased in over five years, for the non-employee directors. The guideline for the non-employee
directors is ownership of our common stock with a value of at least three times the annual cash compensation. Newly elected directors will have five years from when they are first elected or appointed to the Board to comply with these guidelines.
All of our non-employee directors with the exception of Sarah Schlesinger and Alexander Denner, who each recently joined the Board, are in early compliance with our stock ownership guidelines.
Compensation Practices and Policies Relating to Risk Management
Consistent with SEC disclosure requirements, we have assessed the Companys compensation policies, practices and awards, including the use of performance shares, and have concluded that our
compensation policies, practices and awards do not create risks that are reasonably likely to have a material adverse effect on the Company. Our management assessed the Companys compensation and benefits programs to determine if the
programs provisions and operations create undesired or unintentional risk of a material nature. We do not have any programs where a participant may be able to directly affect variability or timing of payout. Rather, our compensation programs
include a combination of fixed base salaries, cash bonuses, long-term incentive awards, including performance-based compensation, and employee retirement plans that are generally uniform in design and operation throughout the Company and with all
levels of employees.
In 2012, we implemented a minimum stock ownership guideline for our Chief Executive Officer equal to six times his base
salary, to be phased in over five years, as well as minimum stock ownership guidelines for the non-employee members of our Board of Directors equal to three times their annual cash compensation, to be phased in over five years. Our Chief Executive
Officer already meets this minimum stock ownership guideline and our non-employee directors, with the exception of Drs. Denner and Schlesinger, who recently joined the Board, are in early compliance with this guideline. We believe the adoption of
such guidelines further aligns the interests of our Chief Executive Officer and our Board of Directors with those of our shareholders.
In
April 2014, we adopted the Recoupment Principles which we will use, together with the compensation clawback requirements set forth in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, to create a formal clawback and incentive
recoupment policy before the end of 2014. The policy will provide the Compensation Committee with broad discretion to recoup certain incentive awards in instances of material violations of company policy that cause significant harm to us and in
certain instances of a failure to manage or monitor conduct or risks appropriately. This policy will also provide for the recovery of incentive based compensation in the event of a significant restatement of financial results of the Company caused
by executive fraud or willful misconduct.
Based on the foregoing, we believe that our compensation policies, practices and awards do not
create risks that are likely to have a material adverse effect on the Company as a whole. We also believe that our incentive compensation arrangements provide incentives that do not encourage risk-taking beyond the organizations ability to
effectively identify and manage significant risks, are compatible with our effective internal controls and our risk management practices, and are supported by the oversight and administration of the Compensation Committee with regard to executive
compensation programs.
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Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 2013, Drs. Lavidas, Radaelli and Riedel and Mr. Whelan served as members of our Compensation
Committee. In 2013, none of our executive officers served on the board of directors or compensation committee of any entity that had one or more executive officers serving as a member of our Board or Compensation Committee. There are no family
relationships between or among the members of our Board or executive officers.
Compensation Committee Report
The Compensation Committee of the Board has reviewed and discussed with members of management the Compensation Discussion and Analysis
(CD&A) section included in this Form 10-K/A, as required by Item 402(b) of Regulation S-K. Based on this review and discussion, the Compensation Committee recommended to the Board that the CD&A be included in this Form
10-K/A.
Members of the Compensation Committee
Norbert G. Riedel, Ph.D., Chair
Athanase Lavidas, Ph.D.
Robert M. Whelan, Jr.
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