June 19, 2014
Dear Shareholder:
As we approach ARIAD Pharmaceuticals, Inc. (“ARIAD”, “the Company” or “our”) Annual Meeting of Stockholders to be held on June 25, 2014, we ask for
your support by voting in accordance with the recommendations of our Board of Directors (the “Board”) on all proposals. In particular, we request your
support on Proposal 2, the approval of a Section 382 Rights Agreement, Proposal 3, approval of the 2014 Long-Term Incentive Plan, and Proposal 5, the
annual advisory vote to approve executive compensation (“Say on Pay”).
Proposal 3: Approval of 2014 Long-Term Incentive Plan
We strongly believe that the 2014 Long-Term Incentive Plan is in the best interests of stockholders and ARIAD, as equity awards granted under this plan will
be used to help attract, motivate and retain key talent, align employee and stockholder interests, link employee compensation to Company performance and
maintain a culture based on employee stock ownership. We believe that our use of equity-based awards is central to building our organization, achieving our
long-term objectives and driving further value for our shareholders.
If this proposal is not approved by stockholders at the 2014 Annual Meeting, the Compensation Committee will not be authorized to make grants under the
2014 Long-Term Incentive Plan. Instead, the Compensation Committee would only be able grant equity awards under the 2006 Long-Term Incentive Plan,
and awards under that plan could only be granted in a manner to qualify as “performance based compensation” exempt from the $1 million deduction
limitation until the 2016 Annual Meeting. Management believes that it will face significant difficulties retaining many of its key employees without the
additional share reserve provided under the 2014 Long-Term Incentive Plan.
• ARIAD’s existing pool puts us at risk of running out of shares, and the 2014 Plan represents a very conservative, needs-based request intended to
carry us to 2016. As of March 31, 2014, our 2006 Long-Term Incentive Plan has only 4.8 million shares remaining available for grant, or 2.6% of total
shares outstanding. The 2014 Plan would add only 8 million shares to the total pool, or 4.2% of our shares outstanding. If shareholders approve the
2014 Plan, our go-forward pool will represent 6.8% of our shares outstanding, sufficient to fund 2 years of grants at prudent and responsible levels
based on our burn rate described above.
• ARIAD has historically used equity much more broadly than our peers, with stock-based compensation issued annually to employees across all levels
of our organization rather than focused solely on our executive team. The grants to our CEO represented only 6.4% of total equity awards in 2013, and
grants to all NEOs represented only 13.8%. These numbers compare to industry medians that are twice as high – among our GICS industry group, the
median CEO award represents 12.7% of total annual awards, and grants to all NEOs at median represent 34% of all awards.
• Even while using stock-based compensation more broadly than our peers, we have managed our annual equity usage (burn rate) and aggregate
dilution to conservative levels well below the median |
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