-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ac5lPrgEQbqAEzq0r6jyCFBwa3pHYKxu/9FVQVj1lJ39BSbmAbgIpoYBf6IdTsOj 9aq3JCL6L2L3khLfgMrZQg== /in/edgar/work/20000810/0000950135-00-003896/0000950135-00-003896.txt : 20000921 0000950135-00-003896.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950135-00-003896 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARIAD PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000884731 STANDARD INDUSTRIAL CLASSIFICATION: [2836 ] IRS NUMBER: 223106987 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-76414 FILM NUMBER: 691567 BUSINESS ADDRESS: STREET 1: 26 LANDSDOWNE ST CITY: CAMBRIDGE STATE: MA ZIP: 02139 BUSINESS PHONE: 6174940400 MAIL ADDRESS: STREET 1: 26 LANDSDOWNE STREET 2: 26 LANDSDOWNE CITY: CAMBRIDGE STATE: MA ZIP: 02139 10-Q 1 e10-q.txt ARIAD PHARMACEUTICALS 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2000 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____ COMMISSION FILE NUMBER: 0-21696 ARIAD PHARMACEUTICALS, INC. (Exact name of Registrant as specified in its charter) DELAWARE 22-3106987 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 26 LANDSDOWNE STREET, CAMBRIDGE, MASSACHUSETTS 02139 (Address of principal executive offices)(Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 494-0400 Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report: Not Applicable Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- The number of shares of the Registrant's common stock outstanding as of August 7, 2000 was 26,877,364. 2 ARIAD PHARMACEUTICALS, INC. TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page No. - -------- --------------------- -------- ITEM 1. UNAUDITED FINANCIAL STATEMENTS: Condensed Consolidated Balance Sheets - June 30, 2000 and December 31, 1999...................................................... 1 Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2000 and 1999................... 2 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2000 and 1999.................................... 3 Notes to Unaudited Condensed Consolidated Financial Statements............. 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................................ 7 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................. 11 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HODLERS........................ 13 ITEM 5. OTHER INFORMATION.......................................................... 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................................... 14
3 PART I. FINANCIAL INFORMATION ITEM 1. UNAUDITED FINANCIAL STATEMENTS ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS JUNE 30, DECEMBER 31, 2000 1999 ------------- --------------- Current assets: Cash and cash equivalents $ 29,117,658 $ 28,319,870 Marketable securities 12,639,302 Inventory and other current assets 1,588,976 1,608,695 ------------- ------------- Total current assets 43,345,936 29,928,565 ------------- ------------- Property and equipment: Leasehold improvements 12,594,070 12,566,650 Equipment and furniture 4,480,408 4,413,453 ------------- ------------- Total 17,074,478 16,980,103 Less accumulated depreciation and amortization 14,245,801 13,645,750 ------------- ------------- Property and equipment, net 2,828,677 3,334,353 ------------- ------------- Intangible and other assets, net 4,721,154 10,973,095 ------------- ------------- Total $ 50,895,767 $ 44,236,013 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 1,200,000 $ 1,200,000 Accounts payable 1,166,931 2,276,447 Accrued liabilities 2,229,467 3,721,679 ------------- ------------- Total current liabilities 4,596,398 7,198,126 ------------- ------------- Long-term debt 1,300,000 1,900,000 ------------- ------------- Redeemable convertible preferred stock 8,070,415 ------------- Stockholders' equity: Common stock, $.001 par value; authorized, 60,000,000 shares; issued and outstanding, 26,828,073 shares in 2000 and 22,031,888 shares in 1999 26,828 22,032 Additional paid-in capital 126,569,235 101,928,618 Accumulated other comprehensive loss (1,491) Accumulated deficit (81,595,203) (74,883,178) ------------- ------------- Stockholders' equity 44,999,369 27,067,472 ------------- ------------- Total $ 50,895,767 $ 44,236,013 ============= =============
See notes to unaudited condensed consolidated financial statements. 1 4 ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------------- ---------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ Revenue: Research revenue (principally related parties in 1999) $ 18,029 $ 2,723,576 $ 126,153 $ 7,306,473 Interest income 452,281 143,405 759,216 316,296 ------------ ------------ ------------ ------------ Total revenue 470,310 2,866,981 885,369 7,622,769 ------------ ------------ ------------ ------------ Operating expenses: Research and development 2,936,245 7,824,038 5,834,893 15,970,466 General and administrative 666,333 884,343 1,643,452 1,614,590 Interest expense 57,384 91,465 119,049 197,246 ------------ ------------ ------------ ------------ Total operating expenses 3,659,962 8,799,846 7,597,394 17,782,302 Equity in net loss of Genomics Center 427,711 765,750 ------------ ------------ ------------ ------------ Loss before cumulative effect of change in accounting principle (3,189,652) (6,360,576) (6,712,025) (10,925,283) ------------ ------------ ------------ ------------ Cumulative effect of change in accounting principle (364,388) ------------ ------------ ------------ ------------ Net loss (3,189,652) (6,360,576) (6,712,025) (11,289,671) Accretion cost attributable to redeemable convertible preferred stock (62,329) (123,973) ------------ ------------ ------------ ------------ Net loss attributable to common stockholders $ (3,189,652) $ (6,422,905) $ (6,712,025) $(11,413,644) ============ ============ ============ ============ Per common share (basic and diluted): Loss attributable to common stockholders before cumulative effect of change in accounting principle $ (.12) $ (.29) $ (.27) $ (.50) Cumulative effect of change in accounting principle (.02) ------------ ------------ ------------ ------------ Net loss $ (.12) $ (.29) $ (.27) $ (.52) ============ ============ ============ ============ Weighted average number of shares of common stock outstanding 25,549,363 22,004,467 24,635,901 21,984,138
See notes to unaudited condensed consolidated financial statements. 2 5 ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, ----------------------------- 2000 1999 ------------- ------------- Cash flows from operating activities: Net loss $ (6,712,025) $(11,289,671) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 654,107 1,836,170 Stock-based compensation 72,881 37,660 Increase (decrease) from: Inventory and other 19,719 271,022 Due from Genomics Center (520,222) Other assets (396,244) 131,618 Accounts payable (1,109,516) 567,465 Accrued liabilities (1,466,505) 457,918 Advance from Genomics Center (25,707) 629,192 ------------ ------------ Net cash used in operating activities (8,963,290) (7,878,848) ------------ ------------ Cash flows from investing activities: Acquisitions of marketable securities (16,502,653) Proceeds from sales and maturities of marketable securities 4,000,000 5,369,000 Investment in Genomics Center (4,839,988) Return of investment in Genomics Center 4,072,223 Investment in property and equipment, net (94,375) (454,680) Acquisition of intangible assets (469,010) (468,774) ------------ ------------ Net cash (used in) provided by investing activities (13,066,038) 3,677,781 ------------ ------------ Cash flows from financing activities: Proceeds from issuance of series B convertible preferred stock 5,747,000 Proceeds from related party long-term debt 1,228,049 Repayment of borrowings (600,000) (924,736) Proceeds from sale/leaseback of equipment 308,753 Proceeds from issuance of common stock, net of issuance costs 7,539,323 Proceeds from exercise of common stock purchase warrants 11,637,772 Proceeds from issuance of stock pursuant to stock option and purchase plans 4,250,021 136,634 ------------ ------------ Net cash provided by financing activities 22,827,116 6,495,700 ------------ ------------ Net increase in cash and equivalents 797,788 2,294,633 Cash and equivalents, beginning of period 28,319,870 6,501,648 ------------ ------------ Cash and equivalents, end of period $ 29,117,658 $ 8,796,281 ============ ============
See notes to unaudited condensed consolidated financial statements. 3 6 ARIAD PHARMACEUTICALS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. MANAGEMENT STATEMENT In the opinion of the Company's management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of June 30, 2000 and the results of operations for the three month and six month periods ended June 30, 2000 and 1999. These financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1999, which includes consolidated financial statements and notes thereto for the years ended December 31, 1999, 1998 and 1997. The results of operations for the three month and six month period ended June 30, 2000 are not necessarily indicative of the results to be expected for the full year. 2. MARKETABLE SECURITIES The Company has classified its marketable securities as available for sale and accordingly, carries such securities at aggregate fair value. At December 31, 1999, the Company held no marketable securities. At June 30, 2000, the aggregate fair value was $12,639,302 and amortized cost was $12,640,793. Realized gains and losses on sales of marketable securities were not material during the quarter ended June 30, 2000; the net unrealized loss of $1,491 is included in stockholders' equity at June 30, 2000. 3. INVENTORY Inventories are carried at cost using the first in, first out method and are charged to research and development expense when consumed. Inventory consists of bulk pharmaceutical material to be used for multiple preclinical and clinical drug development programs and amounted to $1,004,000 at June 30, 2000 and $1,182,000 at December 31, 1999. 4. INTANGIBLE AND OTHER ASSETS Intangible and other assets consist primarily of the cost of purchased patents, patent applications, and deposits. The balance at December 31, 1999 included $6,925,000 of cash subsequently expended on January 14, 2000 to repurchase Series C Redeemable Convertible Preferred Stock (Note 8). 5. LONG-TERM DEBT At June 30, 2000, the Company had outstanding with its principal bank a five-year term loan in the amount of $2,500,000 maturing July 1, 2002. The bank term note is collateralized by all assets of the Company. The Company may, at its option, pledge marketable securities as collateral under the bank term note, and in such event, the interest rate would be adjusted to the equivalent of 90-day LIBOR plus 1.25%. 4 7 6. NET LOSS PER SHARE Net loss per share amounts have been computed based on the weighted average number of common shares outstanding during each period. Because of the net loss reported in each period, diluted and basic per share amounts are the same. In 2000 and 1999, options, warrants and the effects of the conversion of convertible preferred stock were not included in the computation of earnings per share because this effect would be antidilutive. 7. HOECHST-ARIAD GENOMICS CENTER, LLC From November 1995 through December 1999, substantially all of the Company's research revenue and the majority of its research expenses were incurred in collaboration or in partnership with Aventis Pharmaceuticals Inc. (formerly known as Hoechst Marion Roussel, Inc.), ("Aventis") and its affiliates. In November 1995, the Company entered into an agreement with Hoechst Marion Roussel, S.A. to collaborate on the discovery and development of drugs to treat osteoporosis and related bone diseases, one of the Company's signal transduction inhibitor programs. In March 1997, the Company entered into an agreement, which established a 50/50 joint venture, called the Hoechst-ARIAD Genomics Center, LLC (the "Genomics Center"), with Aventis to pursue functional genomics with the goal of identifying genes that encode novel therapeutic proteins and small-molecule drug targets. On December 31, 1999, the Company completed the sale of its 50% interest in the Genomics Center to Aventis and received $40,000,000 in cash, the return of 3,004,436 shares of the Company's series B convertible preferred stock, the forgiveness of $1,857,000 of long-term debt owed to Aventis, drug candidates and related technologies resulting from a November 1995 Osteoporosis collaboration agreement and the right to use certain genomics and bioinformatics technologies developed by the Genomics Center. The Company recorded a net gain on the sale of $46,440,000. As a result of this sale, the revenue generated from the relationship with Aventis will not recur, and the Company expects to realize a reduction of revenue in fiscal 2000 of at least $12,468,000, which will be offset by an expected reduction in research and development expenses associated with the Genomics Center of approximately $16,700,000. 8. REDEEMABLE CONVERTIBLE PREFERRED STOCK On January 14, 2000, the Company completed the repurchase of the remaining 3,000 shares of its Series C Redeemable Convertible Preferred Stock for an aggregate consideration of $6,925,000 plus 1,078,038 shares of common stock. (Note 4). 5 8 9. EQUITY FINANCING FACILITY On June 27, 2000, the Company entered into an Equity Financing Facility (the "Equity Facility") with Acqua Wellington North American Equities Fund, Ltd. ("Acqua Wellington"). Under the terms of the purchase agreement, the Company may from time to time sell up to $75 million of its common stock to Acqua Wellington over an 18 month period expiring in December, 2001. The Company agreed to issue and sell the shares to Acqua Wellington at a per share price equal to the daily volume weighted average price of the Company's common stock on each date during a specified period during which the shares are purchased, less a discount of between 3.5% and 6.0%, or under certain circumstances, less a discount mutually agreed to by the parties. The discount is determined based on the threshold price to be established by ARIAD for the applicable period. 10. REDEMPTION OF WARRANTS The Company received additional funds aggregating $11.6 million from the exercise of approximately 1.4 million of its publicly traded Warrants. The Warrants, exercisable one for one, with an exercise price of $8.40 per share, had been called for redemption effective April 27, 2000. 11. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The new standard requires that all companies record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. Management is currently assessing the impact of SFAS No. 133 on the consolidated financial statements of the Company. The Company will adopt this accounting standard, as amended, on January 1, 2001, as required. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin 101, "Revenue Recognition in Financial Statements" ("SAB 101"), which provides guidance related to revenue recognition based on interpretations and practices followed by the SEC. SAB 101 is effective in the quarter ended December 31, 2000, and requires companies to report any changes in revenue recognition as a cumulative effect of a change in accounting principle at the time of implementation in accordance with Accounting Principles Board Opinion No. 20, "Accounting Changes." The Company is currently assessing the impact of SAB 101 on its financial position and results of operations. 6 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW We are a biopharmaceutical company focused on the discovery, development and commercialization of proprietary platform technologies and therapeutic products based on gene regulation and signal transduction. Our core competencies in functional genomics, protein engineering and structure-based drug design allow us to capitalize on the wealth of genetic information being generated by government, academic and commercial laboratories. We apply this expertise to the development of proprietary technology platforms that allow manipulation of signal transduction, gene transcription, and protein secretion events using small-molecule drugs. We believe that our ability to control the activity of genes and proteins allows us to broadly apply discoveries in genomics to the development of innovative therapeutic products. AVENTIS RELATIONSHIP From November 1995 through December 1999, substantially all of our research revenue and the majority of our research expenses were incurred in collaboration or in partnership with Aventis Pharmaceuticals Inc. (formerly known as Hoechst Marion Roussel, Inc.) ("Aventis"), and its affiliates. In November 1995, we entered into an agreement with Hoechst Marion Roussel, S.A. to collaborate on the discovery and development of drugs to treat osteoporosis and related bone diseases (the "1995 Osteoporosis Agreement"), one of our signal transduction inhibitor programs. In March 1997, we entered into an agreement, which established a 50/50 joint venture, called the Hoechst-ARIAD Genomics Center, LLC (the "Genomics Center"), with Aventis to pursue functional genomics with the goal of identifying genes that encode novel therapeutic proteins and small-molecule drug targets. On December 31, 1999, we completed the sale of our 50% interest in the Genomics Center to Aventis and received $40,000,000 in cash, the return of 3,004,436 shares of our series B convertible preferred stock, the forgiveness of $1,857,000 of long-term debt we owed to Aventis, drug candidates and related technologies resulting from the 1995 Osteoporosis Agreement and the right to use certain genomics and bioinformatics technologies developed by the Genomics Center. We recorded a net gain on the sale of $46,440,000. As a result of this sale, the revenue generated in our relationship with Aventis will not recur, and we expect to realize a reduction of revenue from this relationship in fiscal 2000 of approximately $12,500,000, which will be offset by an expected reduction in research and development expenses associated with the Genomics Center of approximately $16,700,000. GENERAL Since our inception in 1991, we have devoted substantially all of our resources to our research and development programs. We receive no revenue from the sale of pharmaceutical products, and substantially all revenue to date has been received in connection with our relationship with Aventis. Except for the gain on the sale of the Genomics Center in 7 10 December 1999, which resulted in net income for fiscal 1999, we have not been profitable since inception. We expect to continue to incur substantial and increasing operating losses for the foreseeable future, primarily due to the expansion of our research and development programs and manufacturing and clinical development. We expect that losses will fluctuate from quarter to quarter and that these fluctuations may be substantial. As of June 30, 2000, we had an accumulated deficit of $81,595,000. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2000 COMPARED WITH THE THREE MONTHS ENDED JUNE 30, 1999 REVENUE We recognized research revenue of $18,000 for the quarter ended June 30, 2000 compared to $2,724,000 for the same period in 1999. Research revenue in 2000 is comprised principally of transitional research revenue services provided to Aventis following the December 31, 1999 sale of our interest in the Genomics Center. The decrease in research revenue for the quarter ending June 30, 2000, when compared to the corresponding period in 1999 is due to the termination of research services provided to the Genomics Center and the termination of research revenue associated with the 1995 Osteoporosis Agreement. Research revenue in 1999 is comprised principally of research revenue recognized under the 1995 Osteoporosis Agreement and research services provided to the Genomics Center. Interest income increased by $309,000 to $452,000 for the quarter ended June 30, 2000 compared to $143,000 for the same period in 1999 primarily as a result of higher levels of funds invested during the period. OPERATING EXPENSES Research and development expenses decreased to $2,936,000 for the quarter ended June 30, 2000 compared to $7,824,000 for the same period in 1999 due primarily to the termination of research services provided to the Genomics Center. We expect our research and development expenses to decrease on a comparative basis over the remainder of this year as a result of the termination of research services provided to the Genomics Center. General and administrative expenses decreased to $666,000 for the quarter ended June 30, 2000 compared to $884,000 for the corresponding period in 1999 primarily due to decreased professional and legal services. We incurred interest expense of $57,000 for the quarter ended June 30, 2000 compared to $91,000 for the corresponding period in 1999. The decrease resulted from a lower level of long-term debt during the period. 8 11 OPERATING RESULTS We incurred losses of $3,190,000 for the quarter ended June 30, 2000 and $6,361,000 for the corresponding period in 1999, or $.12 and $.29 per share, respectively. We expect that substantial operating losses will continue for several more years but will decrease on a comparative basis over the remainder of this year as a result of the sale of our interest in the Genomics Center. However, operating losses are expected to increase thereafter as our product development activities expand and will fluctuate as a result of differences in the timing and composition of revenue earned and expenses incurred. SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 1999 REVENUE We recognized research revenue of $126,000 for the six months ended June 30, 2000 compared to $7,306,000 for the same period in 1999. Research revenue in 2000 is comprised principally of transitional research revenue services provided to Aventis following the December 31, 1999 sale of our interest in the Genomics Center. The decrease in research revenue for the six months ending June 30, 2000, when compared to the corresponding period in 1999 is due to the termination of research services provided to the Genomics Center and the termination of research revenue associated with the 1995 Osteoporosis Agreement. Research revenue in 1999 is comprised principally of research revenue recognized under the 1995 Osteoporosis Agreement and research services provided to the Genomics Center. As a result of the sale of the Genomics Center and termination of the 1995 Osteoporosis Agreement, we expect to realize a reduction in revenue in fiscal 2000 of approximately $12,500,000 from the termination of our relationship with Aventis. Interest income increased by $443,000 to $759,000 for the six months ended June 30, 2000 compared to $316,000 for the same period in 1999 primarily as a result of higher levels of funds invested during the period. OPERATING EXPENSES Research and development expenses decreased to $5,835,000 for the six months ended June 30, 2000 compared to $15,970,000 for the same period in 1999 due primarily to the termination of research services provided to the Genomics Center as well as a lower level of manufacturing, development and other preclinical development costs that had been incurred in the prior period. We expect our research and development expenses to continue to decrease over the remainder of this year on a comparative basis as a result of the termination of research services provided to the Genomics Center. General and administrative expenses increased slightly to $1,643,000 for the six months ended June 30, 2000 compared to $1,615,000 for the corresponding period in 1999 primarily due to increased professional and legal services incurred principally in connection with the repurchase and retirement of the remaining outstanding series C convertible preferred stock which was offset partially by a reduction in personnel expenses. 9 12 We incurred interest expense of $119,000 for the six months ended June 30, 2000 compared to $197,000 for the corresponding period in 1999. The decrease resulted from a lower level of long-term debt during the period. OPERATING RESULTS We incurred losses of $6,712,000 for the six months ended June 30, 2000 and $11,290,000 for the corresponding period in 1999, or $.27 and $.52 per share, respectively. We expect that substantial operating losses will continue for several more years but will decrease over the remainder of the year as a result of the sale of our interest in the Genomics Center. However, operating losses are expected to increase thereafter as our product development activities expand and will fluctuate as a result of differences in the timing and composition of revenue earned and expenses incurred. LIQUIDITY AND CAPITAL RESOURCES We have financed our operations and investments primarily through the private placement and public offering of our securities, including the sale of series C preferred stock to investors and the sale of series B preferred stock to Aventis as well as the exercise of stock options and warrants, supplemented by the issuance of long-term debt, operating and capital lease transactions, interest income, government-sponsored research grants, research revenue under the 1995 Osteoporosis Agreement, research revenue under the terms of our services agreements with the Genomics Center and, in December 1999, the sale to Aventis of our 50% interest in the Genomics Center. On June 27, 2000 we entered into a definitive agreement with Acqua Wellington North American Equities Fund, Ltd. ("Acqua Wellington") for an equity financing facility providing for the sale from time to time of up to $75,000,000 of the Company's common stock over an eighteen month period. In addition, on June 27, 2000 we sold to Acqua Wellington 680,851 shares of common stock for $8,000,000 in a direct equity placement at $11.75 per share. At June 30, 2000, we had cash and marketable securities totaling $41,757,000 and working capital of $38,750,000 compared to cash and cash equivalents totaling $28,320,000 and working capital of $22,730,000 at December 31, 1999. The primary uses of cash during the six months ended June 30, 2000 were $8,963,000 to finance our operations and working capital requirements, $16,503,000 to purchase marketable securities, $94,000 to purchase laboratory equipment, $600,000 to repay long-term debt, and $469,000 to acquire intellectual property. The primary source of funds during the six months ended June 30, 2000, were $4,000,000 for the sales and maturities of marketable securities, $11,638,000 from the exercise of warrants, $4,250,000 from the exercise of stock options and $7,539,000 from the issuance of common stock, net of issuance costs. 10 13 We have substantial fixed commitments under various research and licensing agreements, consulting and employment agreements, lease agreements and long-term debt instruments. These fixed commitments currently aggregate in excess of $4,600,000 per year and may increase. We will require substantial additional funding for our research and development programs, including preclinical development and clinical trials, for operating expenses, for the pursuit of regulatory clearances and for establishing manufacturing, marketing and sales capabilities. Adequate funds for these purposes, whether obtained through financial markets or collaborative or other arrangements with collaborative partners, or from other sources, may not be available when needed or on terms acceptable to us. We believe that our available funds will be adequate to satisfy our capital and operating requirements at least through the next two years. However, there can be no assurance that changes in our research and development plans or other events affecting our revenues or operating expenses will not result in the earlier depletion of our funds. SECURITIES LITIGATION REFORM ACT Safe harbor statement under the Private Securities Litigation Reform Act of 1995: Except for the historical information contained in this Quarterly Report on Form 10-Q, the matters discussed herein are forward-looking statements that involve risks and uncertainties, including but not limited to risks and uncertainties regarding our ability of the Company to succeed in developing marketable drugs or generating product revenues, our ability to accurately estimate the actual research and development expenses and other costs associated with the preclinical and clinical development of our products, the success of our preclinical studies, our ability to commence clinical studies, the adequacy of our capital resources and the availability of additional funding, as well as general economic, competitive, governmental and technological factors affecting our operations, markets, products, services and prices, and other factors discussed under the heading "Cautionary Statement Regarding Forward-Looking Statements" in our Annual Report on Form 10-K for the year ended December 31, 1999 which has been filed with the Securities and Exchange Commission. As a result of these or other factors, actual events or results could differ materially from those described herein. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We own financial instruments that are sensitive to market risks as part of our investment portfolio. The investment portfolio is used to preserve our capital until it is required to fund operations, including our research and development activities. Our marketable securities consist of U.S. Treasuries and other government securities, commercial and corporate paper and corporate notes. Substantially all investments mature within one year, are not callable by the issuer and have fixed interest rates and are available for sale. These investments are subject to interest rate risk, and could decline in value if interest rates fluctuate. Due to the conservative nature of our marketable securities, we do not believe that we have a material exposure to interest rate risk. At June 30, 2000, we have an outstanding bank term note with an interest rate of prime plus 1%. This note is sensitive to interest rate risk. In the event of a hypothetical 10% increase in 11 14 the prime rate, or 95 basis points, we would incur approximately $24,000 of additional interest expense per year. 12 15 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS The Annual Meeting of Stockholders was held on June 8, 2000. Of 25,968,118 shares of common stock issued and outstanding and eligible to vote as of the record date of April 27, 2000, a quorum of 20,901,615 shares or 80.48% of the eligible shares were present in person or represented by proxy. The following actions were taken at such meeting: (a) Re-election of the following Class 3 Directors: Number of Shares ---------------------------------- For Withheld Authority ---------- ------------------ Harvey J. Berger, M.D. 20,818,532 83,083 Vaughn D. Bryson 20,829,446 72,169 Sanford D. Smith 20,827,298 74,317 Raymond S. Troubh 20,822,256 79,359 ITEM 5. OTHER INFORMATION On June 8, 2000, the Board of Directors of the Company adopted the Restated By-laws of the Company in the form previously filed with the Securities and Exchange Commission and incorporated by reference elsewhere in this Form 10-Q. Also on June 8, 2000, the Board of Directors of the Company adopted a new Rights Agreement, dated as of June 8, 2000 (the "Rights Agreement"), between the Company and State Street Bank and Trust Company, as Rights Agent, and approved the declaration of a dividend distribution of one Preferred Share Purchase Right (a "Right") on each outstanding share of its Common Stock. In general, the Rights become exercisable if a person or group hereafter acquires 15% or more of the Common Stock of the Company or announces a tender offer for 15% or more of the Common Stock. The Board of Directors will, in general, be entitled to redeem the Rights at one cent per Right at any time before any such person hereafter acquires 15% or more of the outstanding Common Stock. The Rights Agreement was previously filed with the Securities and Exchange Commission and is incorporated by reference elsewhere in this Form 10-Q. On June 27, 2000, the Company entered into two common stock purchase agreements for the sale of up to an aggregate of 3,480,851 shares of Common Stock. The shares had been registered pursuant to an effective Registration Statement on Form S-3. Pursuant to one common stock purchase agreement, the Company has issued 680,851 shares of 13 16 Common Stock to Acqua Wellington North American Equities Fund, Ltd. ("Acqua Wellington") at a purchase price of $11.75 per share for a total purchase price of $8,000,000. The Company may sell up to an additional 2,800,000 shares of Common Stock, at a small discount to the market price, to Acqua Wellington pursuant to another common stock purchase agreement for up to an additional $75,000,000. The common stock purchase agreements were previously filed with the Securities and Exchange Commission and are incorporated by reference elsewhere in this Form 10-Q. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The following exhibits are filed herewith:
EXHIBIT NO. TITLE ------- ----- 3.1 Restated By-laws of the Company, as amended. (Filed as Exhibit 4.2 to the Company's Registration Statement on Form S-3 (Registration No. 333-38664) filed with the Securities and Exchange Commission and incorporated herein by reference.) 4.1 Rights Agreement, dated as of June 8, 2000, between the Company and State Street Bank and Trust Company, which includes the Form of Certificate of Designations in respect of the Series A Preferred Stock, as Exhibit A, the Form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Series A Preferred Stock as Exhibit C. (Previously filed and incorporated by reference to Form 8-A of the Company filed with the Securities and Exchange Commission on June 19, 2000.) 10.1 Common Stock Purchase Agreement, dated as of June 27, 2000, by and between the Company and the Purchaser named therein. (Filed as Exhibit 10.1 to the Company's Form 8-K filed with the Securities and Exchange Commission on July 7, 2000 and incorporated herein by reference.) 10.2 Common Stock Purchase Agreement, dated as of June 27, 2000, by and between the Company and Acqua Wellington North American Equities Fund, Ltd. (Filed as Exhibit 10.2 to the Company's Form 8-K filed with the Securities and Exchange Commission on July 7, 2000 and incorporated herein by reference.) 10.3+ Executive Employment Agreement, dated May 1, 1992, Fourth Amendment to Employment Agreement dated June 8, 2000, Third Amendment to Employment Agreement dated January 1, 1999, and Amendments to Employment Agreements dated January 1, 1997 and March 2, 1994 between ARIAD Pharmaceuticals, Inc. and John Iuliucci, Ph.D. 10.4+ Executive Employment Agreement dated August 1, 1993, Third Amendment to Employment Agreement dated June 8, 2000, and Amendments to Employment Agreements dated January 1, 1997 and March 2, 1994 between ARIAD Pharmaceuticals, Inc. and David L. Berstein, J.D. 27.1 Financial Data Schedule
- ----------- + Management Contract or Compensatory Plan or Arrangement (b) Reports on Form 8-K The Company filed two Current Reports on Form 8-K during the quarter ended June 30, 2000. 14 17 The first Form 8-K, dated March 27, 2000 and filed on April 4, 2000, reported that the Company called for redemption all of its outstanding common stock purchase warrants. The second Form 8-K, dated June 8, 2000 and filed on June 19, 2000, reported that the Company adopted a new Rights Agreement between it and State Street Bank and Trust Company, as Rights Agent, and approved the declaration of a dividend distribution of one Preferred Share Purchase Right on each outstanding share of its Common Stock. 15 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ARIAD Pharmaceuticals, Inc. (Registrant) By: /s/ Jay R. LaMarche ---------------------------------- Jay R. LaMarche Executive Vice President and Chief Financial Officer (Duly authorized Officer and Principal Financial Officer) Date: August 10, 2000 16 19 EXHIBIT INDEX
Exhibit No. Title ------- ----- 3.1 Restated By-laws of the Company, as amended. (Filed as Exhibit 4.2 to the Company's Registration Statement on Form S-3 (Registration No. 333-38664) filed with the Securities and Exchange Commission and incorporated herein by reference.) 4.1 Rights Agreement, dated as of June 8, 2000, between the Company and State Street Bank and Trust Company, which includes the Form of Certificate of Designations in respect of the Series A Preferred Stock, as Exhibit A, the Form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Series A Preferred Stock as Exhibit C. (Previously filed and incorporated by reference to Form 8-A of the Company filed with the Securities and Exchange Commission on June 19, 2000.) 10.1 Common Stock Purchase Agreement, dated as of June 27, 2000, by and between the Company and the Purchaser named therein. (Filed as Exhibit 10.1 to the Company's Form 8-K filed with the Securities and Exchange Commission on July 7, 2000 and incorporated herein by reference.) 10.2 Common Stock Purchase Agreement, dated as of June 27, 2000, by and between the Company and Acqua Wellington North American Equities Fund, Ltd. (Filed as Exhibit 10.2 to the Company's Form 8-K filed with the Securities and Exchange Commission on July 7, 2000 and incorporated herein by reference.) 10.3+ Executive Employment Agreement, dated May 1, 1992, Fourth Amendment to Employment Agreement dated June 8, 2000, Third Amendment to Employment Agreement dated January 1, 1999, and Amendments to Employment Agreements dated January 1, 1997 and March 2, 1994 between ARIAD Pharmaceuticals, Inc. and John Iuliucci, Ph.D. 10.4+ Executive Employment Agreement dated August 1, 1993, Third Amendment to Employment Agreement dated June 8, 2000, and Amendments to Employment Agreements dated January 1, 1997 and March 2, 1994 between ARIAD Pharmaceuticals, Inc. and David L. Berstein, J.D. 27.1 Financial Data Schedule
- ---------- + Management Contract or Compensatory Plan or Arrangement. 17 EX-10.3 2 ex10-3.txt EXECUTIVE EMPLOYEMENT AGREEMENT 1 Exhibit 10.3 EXECUTIVE EMPLOYMENT AGREEMENT FOR JOHN D. IULIUCCI, PH.D. EMPLOYMENT AGREEMENT (the "Agreement") made as of May 1, 1992 between ARIAD Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and John D. Iuliucci, Ph.D. (the "Employee"). 1. EMPLOYMENT, DUTIES AND ACCEPTANCE. 1.1 The Company hereby employs the Employee, for the Term (as hereinafter defined), to render full-time services to the Company, and to perform such duties as he shall reasonably be directed by the Chief Executive Officer of the Company to perform. The Employee's title shall be designated by the Chief Executive Officer and initially shall be Vice President, Preclinical Development. 1.2 The Employee hereby accepts such employment and agrees to render the services described above. 1.3 The principal place of employment of the Employee hereunder shall be in the greater Boston, Massachusetts area, or other locations reasonably acceptable to the Employee. The Employee acknowledges that for limited periods of time he may be required to provide services to the Company outside of the Boston, Massachusetts area. 1.4 Notwithstanding anything to the contrary herein, although the Employee shall provide services as a full time employee, it is understood that the Employee may (a) have an academic appointment and (b) participate in professional activities (collectively, "Permitted Activities"); PROVIDED, HOWEVER, that such Permitted Activities do not interfere with the Employee's duties to the Company. 2. TERM OF EMPLOYMENT. The term of the Employee's employment under this Agreement (the "Term") shall commence June 15, 1992 (the "Effective Date") and shall end on December 31, 1995 unless sooner terminated pursuant to Section 4 or 5 of this Agreement; PROVIDED that this Agreement shall automatically be renewed for successive one-year terms (the Term and, if the period of employment is so renewed, such additional period (s) of employment are collectively referred to herein as the "Term") unless terminated by written notice given by either party to the other at least 90 days prior to the end of the applicable Term. 3. COMPENSATION. 2 3.1 As full compensation for all services to be rendered pursuant to this Agreement, the Company agrees to pay the Employee, during the Term, a salary at the fixed rate of $135,000 per annum during the first year of the Term and increased each year thereafter, by amounts, if any, to be determined by the Board of Directors of the Company (the "Board"), in its sole discretion, payable in equal semimonthly installments, less such deductions or amounts to be withheld as shall be required by applicable law and regulations. 3.2 Each year the Company shall pay the Employee a bonus of up to 30% of base salary, which bonus shall be determined annually by the Board. The bonus, if any, may be paid in the form of stock options, stock awards or cash, as determined by the Board. 3.3 The Company shall pay or reimburse the Employee for all reasonable expenses actually incurred or paid by him during the Term in the performance of his services under this Agreement, upon presentation of expense statements or vouchers or such other supporting information as it may require. 3.4 The Employee shall be eligible under any incentive plan, stock award plan, bonus, participation or extra compensation plan, pension, group health, disability and life insurance or other so-called "fringe" benefits which the Company provides for its executives. All options and stock awards granted to the Employee shall be subject to a vesting schedule which shall be determined by the Incentive Committee of the Board. The options and awards, if any, to be granted to the Employee shall also be subject to the terms of a stock option plan and certificate and stock award plan and certificate. 3.5 The Company will grant the Employee an option to purchase 135,000 shares of the Company's Common Stock at a purchase price of $2.00 per share (the "Options"). The Employee agrees that all such Options shall be subject to a four-year vesting schedule, vesting in equal increments of 25% on each anniversary of the Effective Date. Any unvested Options shall be forfeited to the Company in the event (a) this Agreement is terminated by the Company for cause pursuant to Section 4 herein, or (b) either party elects not to renew this Agreement pursuant to Section 2 herein. 3.6 The Options and any common stock purchased upon the exercise of any vested Options ("Option Stock") shall not, without the Company's prior written consent, be transferable until the earlier of (a) March 31, 1996 and (b) one year after the Company's initial public offering; PROVIDED, HOWEVER, that in the event of the death of the 3 Employee, any vested Options and any Option Stock shall be transferable to the legal representatives, legatees and distributees of the Employee, if such persons agree to be bound by the same restrictions applicable to such Options and Option Stock. In the event that the Company commences an initial public offering, the Employee will execute "lock-up" agreements with respect to the Option Stock and all other equity interests in the Company held by the Employee providing that the Employee will not sell Option Stock or any other equity interests for a period of one year after the closing of the initial public offering. If the Company elects, the certificates representing the Option Stock will be transferred to the Company to be held by the Company pursuant to an escrow agreement consistent with the terms set forth in this Section 3.6. This Section 3.6 shall survive the termination of this Agreement. 4. TERMINATION BY THE COMPANY. The Company may terminate this Agreement, if any one or more of the following shall occur: (a) The Employee shall die during the Term; PROVIDED, HOWEVER, the Employee's legal representatives shall be entitled to receive the compensation provided for hereunder to the last day of the month in which his death occurs. (b) The Employee shall become physically or mentally disabled, whether totally or partially, so that he is unable substantially to perform his services hereunder for (i) a period of 180 consecutive days, or (ii) for shorter periods aggregating 180 days during any twelve month period. (c) The Employee acts, or fails to act, in a manner that provides Cause for termination. For purposes of this Agreement, the term "Cause" means (i) the failure by the Employee to perform any of his material duties hereunder, (ii) the conviction of the Employee of any felony involving moral turpitude, (iii) any acts of fraud or embezzlement involving the Company or any of its Affiliates, (iv) material violation of any federal, state or local law, or any administrative regulation related to the business of the Company, (v) a conflict of interest, (vi) conduct that could reasonably be expected to result in publicity reflecting unfavorably on the Company in a material way, (vii) failure to comply with the written policies of the Company, or (viii) a breach of the terms of this Agreement by the Employee. The Company shall provide the Employee written notice of termination pursuant to this Section 4. 5. TERMINATION BY THE EMPLOYEE. 4 5.1 The Employee may terminate this Agreement, if any one or more of the following shall occur: (a) a material breach of the terms of this Agreement by the Company and such breach continues for 30 days after the Employee gives the company written notice of such breach; (b) the Company shall make a general assignment for benefit of creditors; or any proceeding shall be instituted by the Company seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property or the Company shall take any corporate action to authorize any of the actions set forth above in this subsection 5(b); (c) an involuntary petition shall be filed or an action or proceeding otherwise commenced against the Company seeking reorganization, arrangement or readjustment of the Company's debts or for any other relief under the Federal Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act or law, state or federal, now or hereafter existing and remain undismissed or unstayed for a period of 30 days; or (d) a receiver, assignee, liquidator, trustee or similar officer for the Company or for all or any part of its property shall be appointed involuntarily. 6. SEVERANCE. If (i) the Company terminates this Agreement without Cause or (ii) the Employee terminates this Agreement pursuant to Section 5.1(a), then: (1) except in the case of death or disability, the Company shall continue to pay Employee his current salary for the remaining period of the applicable Term; (2) all Options granted pursuant to Section 3.5 herein that would have vested during the Term shall vest immediately prior to such termination; and (3) the Company shall continue to provide all benefits subject to COBRA at its expense for up to one year. 7. OTHER BENEFITS. In addition to all other benefits contained herein, the Employee shall be entitled to: (a) relocation expenses for the Employee and his family, consisting of (i) real estate taxes, mortgage payments, 5 utilities and routine maintenance on Employee's principal residence for up to six months from the time the Employee begins additional mortgage payments on a new principal residence for the Employee and his family in the greater Boston, Massachusetts area; PROVIDED the Employee shall use his best efforts to sell his current residence within such six month time period; PROVIDED, FURTHER, the Company shall consider, in its sole discretion, reimbursement for additional carrying costs if the Employee has not sold his residence within such six month period, (ii) all reasonable costs for rent, storage and primary services (e.g., gas, heat, electricity, phone hook-up) associated with temporary housing at an approved location until the Employee finds a suitable residence, (iii) all reasonable direct out-of-pocket costs of transporting the Employee, the Employee's family and household items from the Employee's current residence to a new residence located in the greater Boston, Massachusetts area, and (iv) except as described in the next succeeding sentence and subject to prior approval, the reasonable closing costs of the sale of the Employee's current residence and purchase of a new residence in the greater Boston, Massachusetts area within one year of the Employee's date of employment. The following closing (settlement) costs will not be paid by the Company: (1) real estate and other taxes, (2) insurance premiums other than title insurance, and (3) commitment fees and prepaid interest (i.e., "points") in excess of 2%. If any payments made to or in respect of the Employee pursuant to this Section 7(a) become subject to any tax (taking into account relevant deductions), the Company shall make a special payment to him sufficient, on an after-tax basis (taking into account federal, state and local taxes), to put him in the same position as would have been the case had no such taxes been applicable to any payments or benefits provided in this subsection. This special payment will be made to the Employee in April 1993. (b) Vacation time of four weeks per year taken in accordance with the vacation policy of the Company during each year of the Term. (c) After six years of employment, one three-month period of fully paid leave of absence in accordance with Company policies in place at that time; it being understood that such policies may restrict the Employee from taking such leave of absence until a time that is acceptable to the Company and may include other such limitations. (d) Group health, disability and life insurance. (e) The Company shall, in its sole discretion, provide the Employee with either (i) an automobile for the Employee's exclusive use, at a cost to the Company not exceeding $750 6 per month or (ii) an automobile allowance of $750 per month toward the cost of maintaining the Employee's car. 8. CONFIDENTIALITY. 8.1 The Employee acknowledges that, during the course of performing his services hereunder, the Company shall be disclosing information to the Employee related to the Company's Field of Interest, Inventions, projects and business plans, as well as other information (collectively, "Confidential Information"). The Employee acknowledges that the Company's business is extremely competitive, dependent in part upon the maintenance of secrecy, and that any disclosure of the Confidential Information would result in serious harm to the Company. 8.2 The Employee agrees that the Confidential Information only shall be used by the Employee in connection with his activities hereunder as an employee of the Company, and shall not be used in any way that is detrimental to the Company. 8.3 The Employee agrees not to disclose, directly or indirectly, the Confidential Information to any third person or entity, other than representatives or agents of the Company. The Employee shall treat all such information as confidential and proprietary property of the Company. 8.4 The term "Confidential Information" does not include information that (a) is or becomes generally available to the public other than by disclosure in violation of this Agreement, (b) was within the relevant party's possession prior to being furnished to such party, (c) becomes available to the relevant party on a nonconfidential basis or (d) was independently developed by the relevant party without reference to the information provided by the Company. 8.5 The Employee may disclose any Confidential Information that is required to be disclosed by law, government regulation or court order. If disclosure is required, the Employee shall give the Company advance notice so that the Company may seek a protective order or take other action reasonable in light of the circumstances. 8.6 Upon termination of this Agreement, the Employee shall promptly return to the Company all materials containing Confidential Information, as well as data, records, reports and other property, furnished by the Company to the Employee or produced by the Employee in connection with services rendered hereunder. Notwithstanding such return or any of the provisions of this Agreement, the Employee shall continue to be bound by the terms of the confidentiality 7 provisions contained in this Section 8 for a period of three years after the termination of this Agreement. 9. INVENTIONS DISCOVERED BY THE EMPLOYEE WHILE PERFORMING SERVICES HEREUNDER. During the Term, the Employee shall promptly disclose to the Company any invention, improvement, discovery, process, formula, or method or other intellectual property, whether or not patentable, whether or not copyrightable (collectively, "Inventions") made, conceived or first reduced to practice by the Employee, either alone or jointly with others, while performing service hereunder. The Employee hereby assigns to the Company all of his right, title and interest in and to any such Inventions. During and after the Term, the Employee shall execute any documents necessary to perfect the assignment of such Inventions to the Company and to enable the Company to apply for, obtain, and enforce patents and copyrights in any and all countries on such Inventions. The Employee hereby irrevocably designates the General Counsel to the Company as his agent and attorney-in-fact to execute and file any such document and to do all lawful acts necessary to apply for and obtain patents and copyrights and to enforce the Company's rights under this paragraph. This Section 9 shall survive the termination of this Agreement. 10. NON-COMPETITION AND NON-SOLICITATION. During the Term and for a period of one year following the date of termination or nonrenewal for any reason (other than termination pursuant to Section 5.1(a)): (a) the Employee shall not in the United States or in any country in which the Employer shall then be doing business, directly or indirectly, enter the employ of, or render any services to, any person, firm or corporation engaged in any business directly competitive with the business of the Company or of any of its subsidiaries or affiliates of which the Employee may become an employee or officer during the Term; he shall not engage in such business on his own account; and he shall not become interested in any such business, directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or any other relationship or capacity; provided, however, that nothing contained in this Section 10 shall be deemed to prohibit the Employee from acquiring, solely as an investment, shares of capital stock of any public corporation; (b)neither the Employee nor any Affiliate of the Employee shall solicit or utilize, or assist any person in any way to solicit or utilize, the services, directly or indirectly, of any of the Company's directors, consultants, members of the Board of Scientific and Medical Advisors, officers or employees (collectively, "Associates of the Company"). This nonsolicitation and nonutilization provision shall not apply to Associates of the Company who have previously terminated their relationship with the Company. 8 10.1 If the Employee commits a breach, or threatens to commit a breach, of any of the provisions of this Section 10, the Company shall have the following rights and remedies: 10.1.1 The right and remedy to have the provisions of this Agreement specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the Company and that money damages shall not provide an adequate remedy to the Company; and 10.1.2 The right and remedy to require the Employee to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits (collectively "Benefits") derived or received by the Employee as the result of any transactions constituting a breach of any of the provisions of the preceding paragraph, and the Employee hereby agrees to account for and pay over such Benefits to the Company. Each of the rights and remedies enumerated above shall be independent of the other, and shall be severally enforceable, and all of such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity. 10.2 If any of the covenants contained in Section 8, 9 or 10, or any part thereof, is hereafter construed to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect without regard to the invalid portions. 10.3 If any of the covenants contained in Section 8, 9 or 10, or any part thereof, is held to be unenforceable because of the duration of such provision or the area covered thereby, the parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and, in its reduced form, such provision shall then be enforceable. 10.4 The parties hereto intend to and hereby confer jurisdiction to enforce the covenants contained in Sections 8, 9 and 10 upon the courts of any state within the geographical scope of such covenants. In the event that the courts of any one or more of such states shall hold any such covenant wholly unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the Company's right to the relief provided above in the courts of any other states within the geographical scope of such covenants, as to breaches of such covenants 9 in such other respective jurisdictions, the above covenants as they relate to each state being, for this purpose, severable into diverse and independent covenants. 11. INDEMNIFICATION. The Company shall indemnify the Employee, to the maximum extent permitted by applicable law, against all costs, charges and expenses incurred or sustained by him in connection with any action, suit or proceeding to which he may be made a party by reason of his being an officer, director or employee of the Company or of any subsidiary or affiliate of the Company. The Company shall provide, subject to its availability upon reasonable terms (which determination shall be made by the Board) at its expense, Directors and Officers insurance for the Employee in reasonable amounts. Determination with respect to (a) the availability of insurance upon reasonable terms and (b) the amount of such insurance coverage shall be made by the Board in its sole discretion. 12. NOTICES. All notices, requests, consents and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given if sent by prepaid telegram (confirmed delivery by the telegram service), private overnight mail service (delivery confirmed by such service), registered or certified mail (return receipt requested), or delivered personally, as follows (or to such other address as either party shall designate by notice in writing to the other in accordance herewith): If to the Company: ARIAD Pharmaceuticals, Inc. 26 Landsdowne Street Cambridge, MA 02139 Attention: Chief Executive Officer Telephone: (617) 494-0400 Fax: (617) 494-8144 If to the Employee: Dr. John D. Iuliucci 3 Pendant Ct. Andover, MA 01810 13. GENERAL. 13.1 This Agreement shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts applicable to agreements made and to be performed entirely in Massachusetts. 10 13.2 The Section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 13.3 This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter hereof, and supersedes all prior agreements, arrangements and understandings, written or oral, relating to the subject matter hereof. No representation, promise or inducement has been made by either party that is not embodied in this Agreement, and neither party shall be bound by or liable for any alleged representation, promise or inducement not so set forth. 13.4 This Agreement and the Employee's rights and obligations hereunder may not be assigned by the Employee or the Company; PROVIDED, HOWEVER, the Company may assign this Agreement to an Affiliate or a successor-in-interest. 13.5 This Agreement may be amended, modified, superseded, cancelled, renewed or extended, and the terms or covenants hereof may be waived, only by a written instrument executed by the parties hereto, or in the case of a waiver, by the party waiving compliance. The failure of a party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by a party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement. 14. DEFINITIONS. As used herein the following terms have the following meaning: (a) "Affiliate" means and includes any corporation or other business entity controlling, controlled by or under common control with the corporation in question. (b) "Company's Field of Interest" means the discovery and development of pharmaceutical agents that target or intervene with intracellular regulatory and control mechanisms; associated diagnostic products; structure-based drug design; any artificial platelet product; and other related areas. The Company's Field of Interest may be changed at the Company's sole discretion from time to time. (c) "person" means any natural person, corporation, partnership, firm, joint venture, association, joint stock company, trust, unincorporated organization, governmental body or other entity. 11 (d) "Subsidiary" means any corporation or other business entity directly or indirectly controlled by the corporation in question. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. ARIAD PHARMACEUTICALS, INC. By Harvey J. Berger, M.D. Chairman and Chief Executive Officer EMPLOYEE John D. Iuliucci, Ph.D. 12 FOURTH AMENDMENT TO EMPLOYMENT AGREEMENT This AMENDMENT TO EMPLOYMENT AGREEMENT (the "Fourth Amendment") made as of June 8, 2000 between ARIAD Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and John D. Iuliucci, Ph.D. (the "Employee"). The Company and the Employee have entered into an Employment Agreement dated as of May 1, 1992, as previously amended (the "Agreement"), and the parties hereto desire to further amend certain provisions of the Agreement. NOW, THEREFORE, in consideration of the premises set forth herein and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree to further amend the Agreement as follows: I. TERM OF EMPLOYMENT. The first sentence of Section 2 is hereby amended to read as follows: "The term of the Employee's employment under the Agreement is hereby extended to December 31, 2001 (the "Term"), unless sooner terminated pursuant to Section 4 or 5 of this Agreement; PROVIDED, however, that this Agreement shall automatically be renewed for successive one-year terms (the Term and, if the period of employment is so renewed, such additional period(s) of employment are collectively referred to herein as the "Term") unless terminated by written notice given by either party to the other at least 90 days prior to the end of the applicable Term." II. COMPENSATION. Section 3.1 is hereby replaced and amended in its entirety as follows: "3.1 As full compensation for all services to be rendered pursuant to this Agreement, the Company agrees to pay the Employee, during the Term, a salary at the fixed rate of $207,500 per annum during the first year of the Term and increased each year thereafter, by amounts, if any, to be determined by the Board of Directors of the Company (the "Board") in its sole discretion, payable in equal semi-monthly installments, less such deductions or amounts to be withheld as shall be required by applicable law and regulations." III. DEFINITIONS. The definition of the Company's "Field of Interest" in Section 14 (b) of the Agreement is hereby amended to read as follows: "The `Company's Field of Interest' is the discovery, development and commercialization of pharmaceutical products based on (a) intervention in signal transduction pathways and (b) gene and cell therapy. The Company's Field of Interest 13 may be changed at any time at the sole discretion of the Company." IV. This Amendment shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts applicable to agreements made and to be performed entirely in Massachusetts. V. Except as modified by this Fourth Amendment, the Agreement remains in full force and effect and unchanged. IN WITNESS WHEREOF, the parties have executed this Second Amendment as of the date first written above. ARIAD PHARMACEUTICALS, INC. By: --------------------------------- Harvey J. Berger, M.D. Chairman and Chief Executive Officer EMPLOYEE ------------------------------------ John D. Iuliucci, Ph.D. 14 THIRD AMENDMENT EMPLOYMENT AGREEMENT This THIRD AMENDMENT TO EMPLOYMENT AGREEMENT (the Third "Amendment") made as of January 1, 1999, between ARIAD Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and John Iuliucci, Ph.D. (the "Employee"). The Company and the Employee have entered into an Employment Agreement dated as of May 1, 1992 (the "Agreement"), as previously amended, and the parties hereto desire to further amend certain provisions of the Agreement. NOW, THEREFORE, in consideration of the premises set forth herein and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree to further amend the Agreement as follows: I. EMPLOYMENT, DUTIES AND ACCEPTANCE. The second sentence of Section 1.1 is hereby amended to read as follows: "The Employee's title shall be designated by the Chief Executive Officer and initially shall be Senior Vice President, Drug Development. II. COMPENSATION. Section 3.1 is hereby replaced and amended in its entirety as follows: "3.1 As full compensation for all services to be rendered pursuant to this Agreement, the Company agrees to pay the Employee, during the Term, a salary at the fixed rate of $200,000 per annum during the first year of the Term and increased each year thereafter, by amounts, if any, to be determined by the Board of Directors of the Company (the "Board") in its sole discretion, payable in equal semi-monthly installments, less such deductions or amounts to be withheld as shall be required by applicable law and regulations." III. TERMINATION BY THE EMPLOYEE. Section 5 is hereby replaced and amended in its entirety as follows: "5.1 The Employee may terminate this Agreement, if any one or more of the following shall occur: (a) a material breach of the terms of this Agreement by the Company and such breach continues for 30 days after the Employee gives the Company written notice of such breach; (b) the Company shall make a general assignment for benefit of creditors; or any proceeding shall be instituted by the Company seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, 15 relief, or composition of it or its debts under law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking entry of an order for relief of the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property or the Company shall take any corporate action to authorize any of the actions set forth above in this subsection 5.1(b); (c) an involuntary petition shall be filed or an action or proceeding otherwise commenced against the Company seeking reorganization, arrangement or readjustment of the Company's debts or for any other relief under the Federal Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act or law, state or federal, now or hereafter existing and remain undismissed or unstayed for a period of 30 days; (d) a receiver, assignee, liquidator, trustee or similar officer for the Company or for all or any part of its property shall be appointed involuntarily, or (e) a Change in Control as defined in Section 14." IV. SEVERANCE. Section 6 is hereby replaced and amended in its entirety as follows: "6. If (i) the Company terminates this Agreement without Cause or (ii) the Employee terminates this Agreement pursuant to Section 5.1(a), then: (1) except in the case of death or disability, the Company shall continue to pay Employee his current salary for the remaining period of the applicable Term; (2) all options granted pursuant to this Agreement that would have vested during the Term shall vest immediately prior to such termination; (3) the Company shall continue to provide all benefits subject to COBRA at its expense for up to one year. In the event of a consummation of a Change in Control of the Company, and if the Employee gives notice of termination within 90 days after such occurrence, then (i) all stock, stock options, stock awards and similar equity rights granted to the Employee shall immediately vest and remain fully exercisable through their original term with all rights; and (ii) the Company shall continue to pay Employee his current salary for the shorter of (a) six months, or (b) the remaining period of the applicable Term." V. DEFINITIONS. The definition of the Company's "Field of Interest" in Section 14 (b) of the Agreement is hereby amended to read as follows: "The `Company's Field of Interest' is the discovery, development and commercialization of pharmaceutical products based on (a) intervention in signal transduction pathways; (b) gene and cell therapy; (c) functional genomics; and (d) natural products, 16 including without limitation, studies of microbial diversity. The Company's Field of Interest may be changed at the sole discretion of the Company from time to time." The definition of "Change in Control" shall be added as Section 14 (e) of the Agreement as follows: " 'Change in Control' means the occurrence of any of the following events (without the consent of the Employee): (i) Any corporation, person or other entity makes a tender or exchange offer for shares of the Company's Common Stock pursuant to which such corporation, person or other entity acquires more than 50% of the issued and outstanding shares of the Company's Common Stock; (ii) The stockholders of the Company approve a definitive agreement to merge or consolidate the Company with or into another corporation or to sell or otherwise dispose of all or substantially all of the Company's assets; or (iii) Any person within the meaning of Section 3 (a) (9) or Section 13 (d) of the Securities Exchange Act of 1934 acquires more than 50% of the combined voting power of Company's issued and outstanding voting securities entitled to vote in the election of the Board." VI. This Amendment shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts applicable to agreements made and to be performed entirely in Massachusetts. VII. Except as modified by this Amendment, the Agreement remains in full force and effect and unchanged. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. ARIAD PHARMACEUTICALS, INC. By: --------------------------------------- Harvey J. Berger, M.D. Chairman and Chief Executive Officer EMPLOYEE ---------------------------------------- John Iuliucci, Ph.D. 17 AMENDMENT TO EMPLOYMENT AGREEMENT This AMENDMENT TO EMPLOYMENT AGREEMENT (the "Second Amendment") made as of January 1, 1997, between ARIAD Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and John D. Iuliucci, Ph.D. (the "Employee"). The Company and the Employee have entered into an Employment Agreement dated as of May 1, 1992 and amended as of March 2, 1994 (the "Agreement"), and the parties hereto desire to further amend certain provisions of the Agreement. NOW, THEREFORE, in consideration of the premises set forth herein and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree to further amend the Agreement as follows: I. EMPLOYMENT, DUTIES AND ACCEPTANCE. The second sentence of Section 1.1 is hereby amended to read as follows: "The Employee's title shall be designated by the Chief Executive Officer and initially shall be Vice President, Drug Development." II. TERM OF EMPLOYMENT. The first sentence of Section 2 is hereby amended to read as follows: "The term of the Employee's employment under the Agreement is hereby extended to December 31, 1999 (the "Term"), unless sooner terminated pursuant to Section 4 or 5 of this Agreement; PROVIDED, however, that this Agreement shall automatically be renewed for successive one-year terms (the Term and, if the period of employment is so renewed, such additional period(s) of employment are collectively referred to herein as the "Term") unless terminated by written notice given by either party to the other at least 90 days prior to the end of the applicable Term." III. COMPENSATION. Section 3.1 is hereby replaced and amended in its entirety as follows: "3.1 As full compensation for all services to be rendered pursuant to this Agreement, the Company agrees to pay the Employee, during the Term, a salary at the fixed rate of $165,000 per annum during the first year of the Term and increased each year thereafter, by amounts, if any, to be determined by the Board of Directors of the Company (the "Board") in its sole discretion, payable in equal semi-monthly installments, less such deductions or amounts to be withheld as shall be required by applicable law and regulations." 18 IV. DEFINITIONS. The definition of the Company's "Field of Interest" in Section 14 (b) of the Agreement is hereby amended to read as follows: "The Company's 'Field of Interest' is: the discovery, development and commercialization of pharmaceutical products based on (a) intervention in signal transduction pathways; (b) gene and cell therapy; and (c) functional genomics. The Company's Field of Interest may be changed at the sole discretion of the Company from time to time." V. This Amendment shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts applicable to agreements made and to be performed entirely in Massachusetts. VI. Except as modified by this Second Amendment, the Agreement remains in full force and effect and unchanged. IN WITNESS WHEREOF, the parties have executed this Second Amendment as of the date first written above. ARIAD PHARMACEUTICALS, INC. By: ---------------------------------- Harvey J. Berger, M.D. Chairman and Chief Executive Officer EMPLOYEE ------------------------------------- John D. Iuliucci, Ph.D. 19 AMENDMENT TO EMPLOYMENT AGREEMENT This AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") made as of March 2, 1994, between ARIAD Pharmaceuticals, Inc. a Delaware corporation (the "Company"), and John D. Iuliucci, Ph.D. the "Employee"). The Company and the Employee have entered into an Employment Agreement dated as of June 15, 1992 (the "Agreement"), and the parties hereto desire to amend certain provisions of the Agreement. NOW, THEREFORE, in consideration of the premises set forth herein and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. SECTION 2. The Term of the Employee's employment under the Agreement is hereby extended to December 31, 1996. 2. ARTICLE 3. 2.1 Section 3.6 is hereby replaced and amended in its entirety as follows: "3.6 All shares of the Company's Common Stock or Option Stock (as defined below) owned by the Employee or with respect to which the Employee has the power of disposition, shall not, without the Company's prior written consent, be transferable until the earlier of (a) March 31, 1996 and (b) eighteen months after the Company's initial public offering; PROVIDED, HOWEVER, that in the event of the death of the Employee, any Common Stock or Option Stock shall, subject to the terms of such Option Stock, be transferable to the legal representatives, legatees and distributees of the Employee, if such persons agree to be bound by the same restrictions applicable to such security. "Option Stock" shall mean all Options or any other options or rights to acquire shares of the Company's Common Stock or any securities convertible into or exchangeable or exercisable into shares of the Company's Common Stock. In the event that the Company commences an initial public offering, the Employee will execute "lock-up" agreements with respect to the Common Stock or Option Stock held by the Employee providing that the Employee will not sell the Common Stock or Option Stock for a period of eighteen months after the closing of the initial public offering 20 If the Company elects, the certificates representing the Common Stock or Option Stock will be transferred to the Company to be held by the Company pursuant to an escrow agreement consistent with the terms set forth in this Section 3.6. This Section 3.6 shall survive termination of this Agreement." 2.2 Section 3.7 is hereby added to the Agreement to read in its entirety as follows: "3.7 Any shares of common stock ("Subsidiary Common Stock") of any current or future subsidiary of the Company, including, without limitation, ARIAD Gene Therapeutics, Inc., or any Subsidiary Option Stock (as defined below) owned by the Employee or with respect to which the Employee has the power of disposition shall not, without the Company's prior written consent, be transferable until eighteen months after the applicable subsidiary's initial public offering; PROVIDED, HOWEVER, that in the event of the death of the Employee, all such Subsidiary Common Stock or Subsidiary Option Stock shall, subject to the terms of such Subsidiary Option Stock, be transferable to the legal representatives, legatees, and distributees of the Employee, if such persons agree to be bound by the same restrictions applicable to such security. "Subsidiary Option Stock" shall mean all options or rights to acquire shares of Subsidiary Common Stock or any securities convertible into or exchangeable or exercisable for shares of Subsidiary Common Stock. If the Company elects, the certificates representing the Subsidiary Common Stock or Subsidiary Option Stock will be transferred to the Company to be held by the Company pursuant to an escrow agreement consistent with the terms set forth in this Section 3.7. This Section 3.7 shall survive the termination of this Agreement." 3. The definition of the "Company's Field of Interest" in Section 4 (b) of the Agreement is hereby amended to read as follows: "Company's Field of Interest means (1) the discovery, development and commercialization of pharmaceutical products, diagnostic products, or research reagents that target or intervene with intracellular regulatory or control mechanisms (e.g., signal transduction, gene transcription and protein trafficking); (2) gene therapy; (3) drug discovery based on molecular structure or diversity; (4) any platelet substitute product; and (5) other related areas. The Company's Field of Interest may be changed at the Company's sole discretion from time to time." 21 4. This Amendment shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts applicable to agreements made and to be performed entirely in Massachusetts. 5. Except as modified by this Amendment, the Agreement remains in full force and effect and unchanged. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. ARIAD PHARMACEUTICALS, INC. By: ------------------------------------- Harvey J. Berger, M.D. Chairman and Chief Executive Officer EMPLOYEE --------------------------------------- John D. Iuliucci, Ph.D. EX-10.4 3 ex10-4.txt EXECUTIVE EMPLOYEMENT AGREEMENT 1 Exhibit 10.4 EXECUTIVE EMPLOYMENT AGREEMENT FOR DAVID L. BERSTEIN, J.D. EMPLOYMENT AGREEMENT (the "Agreement") made as of August 1, 1993 between ARIAD Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and David L. Berstein, J.D. (the "Employee"). 1. EMPLOYMENT, DUTIES AND ACCEPTANCE. 1.1 The Company hereby employs the employee, for the Term (as hereinafter defined), to render full-time services to the Company, and to perform such duties as he shall reasonably be directed by the Chief Executive Officer of the Company to perform. The Employee's title shall be designated by the Chief Executive Officer and initially shall be Vice President and Chief Patent Counsel. 1.2 The Employee hereby accepts such employment and agrees to render the services described above. 1.3 The principal place of employment of the Employee hereunder shall be in the greater Boston, Massachusetts area, or other locations reasonably acceptable to the Employee. The Employee acknowledges that for limited periods of time he may be required to provide services to the Company outside of the Boston, Massachusetts area. 1.4 Notwithstanding anything to the contrary herein, although the Employee shall provide services as a full time employee, it is understood that the Employee may (a) have an academic appointment and (b) participate in professional activities (collectively, "Permitted Activities"); PROVIDED, HOWEVER, that such Permitted Activities do not interfere with the Employee's duties to the Company. 2. TERM OF EMPLOYMENT. The term of the Employee's employment under this Agreement (the "Term") shall commence September 20, 1993 (the "Effective Date") and shall end on December 31, 1995 unless sooner terminated pursuant to Section 4 or 5 of this Agreement; PROVIDED that this Agreement shall automatically be renewed for successive one-year terms (the Term and, if the period of employment is so renewed, such additional period(s) of employment are collectively referred to herein as the "Term") unless terminated by written notice given by either party to the other at least 90 days prior to the end of the applicable Term. 2 3. COMPENSATION. 3.1 As full compensation for all services to be rendered pursuant to this Agreement, the Company agrees to pay the Employee, during the Term, a salary at the fixed rate of $135,000 per annum during the first year of the Term and increased each year thereafter, by amounts, if any, to be determined by the Board of Directors of the Company (the "Board"), in its sole discretion, payable in equal semi-monthly installments, less such deductions or amounts to be withheld as shall be required by applicable law and regulations. 3.2 Each year the Company shall pay the Employee a bonus of up to 30% of base salary, which bonus shall be determined annually by the Board. The bonus, if any, may be paid in the form of stock options, stock awards or cash, as determined by the Board. 3.3 The Company shall pay or reimburse the Employee for all reasonable expenses actually incurred or paid by him during the Term in the performance of his services under this Agreement, upon presentation of expense statements or vouchers or such other supporting information as it may require. 3.4 The Employee shall be eligible under any incentive plan, stock award plan, bonus, participation or extra compensation plan, pension, group health, disability and life insurance or other so-called "fringe" benefits which the Company provides for its executives. All options and stock awards granted to the Employee shall be subject to a vesting schedule which shall be determined by the Incentive Committee of the Board. The options and awards, if any, to be granted to the Employee shall also be subject to the terms of a stock option plan and certificate and stock award plan and certificate. 3.5 The Company will grant the Employee an option to purchase 90,000 shares of the Company's Common Stock at a purchase price of $2.50 per share (the "Options"). The Employee agrees that all such Options shall be subject to a four-year vesting schedule, vesting in equal increments of 25% on each anniversary of the Effective Date. Any unvested Options shall be forfeited to the Company in the event (a) this Agreement is terminated by the Company for cause pursuant to Section 4 herein, or (b) either party elects not to renew this Agreement pursuant to Section 2 herein. 3.6 The Options and any common stock purchased upon the exercise of any vested Options ("Option Stock") shall 3 not, without the Company's prior written consent, be transferable until the earlier of (a) March 31, 1996 and (b) one year after the Company's initial public offering; PROVIDED, HOWEVER, that in the event of the death of the Employee, any vested Options and any Option Stock shall be transferable to the legal representatives, legatees and distributees of the Employee, if such persons agree to be bound by the same restrictions applicable to such Options and Option Stock. In the event that the Company commences an initial public offering, the Employee will execute "lock-up" agreements with respect to the Option Stock and all other equity interests in the Company held by the Employee providing that the Employee will not sell Option Stock or any other equity interests for a period of one year after the closing of the initial public offering. If the Company elects, the certificates representing the Option Stock will be transferred to the Company to be held by the Company pursuant to an escrow agreement consistent with the terms set forth in this Section 3.6. This Section 3.6 shall survive the termination of this Agreement. 4. TERMINATION BY THE COMPANY. The Company may terminate this Agreement, if any one or more of the following shall occur: (a) The Employee shall die during the Term; PROVIDED, HOWEVER, the Employee's legal representatives shall be entitled to receive the compensation provided for hereunder to the last day of the month in which his death occurs. (b) The Employee shall become physically or mentally disabled, whether totally or partially, so that he is unable substantially to perform his services hereunder for (i) a period of 180 consecutive days, or (ii) for shorter periods aggregating 180 days during any twelve month period. (c) The Employee acts, or fails to act, in a manner that provides Cause for termination. For purposes of this Agreement, the term "Cause" means (i) the failure by the Employee to perform any of his material duties hereunder, (ii) the conviction of the Employee of any felony involving moral turpitude, (iii) any acts of fraud or embezzlement involving the Company or any of its Affiliates, (iv) violation of any federal, state or local law, or administrative regulation related to the business of the Company, (v) a conflict of interest, (vi) conduct that could result in publicity reflecting unfavorably on the Company in a material way, (vii) failure to comply with the written policies of the 4 Company, or (viii) a breach of the terms of this Agreement by the Employee. The Company shall provide the Employee written notice of termination pursuant to this Section 4. 5. TERMINATION BY THE EMPLOYEE. 5.1 The Employee may terminate this Agreement, if any one or more of the following shall occur: (a) a material breach of the terms of this Agreement by the Company and such breach continues for 30 days after the Employee gives the company written notice of such breach; (b) the Company shall make a general assignment for benefit of creditors; or any proceeding shall be instituted by the Company seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property or the Company shall take any corporate action to authorize any of the actions set forth above in this subsection 5(b); (c) an involuntary petition shall be filed or an action or proceeding otherwise commenced against the Company seeking reorganization, arrangement or readjustment of the Company's debts or for any other relief under the Federal Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act or law, state or federal, now or hereafter existing and remain undismissed or unstayed for a period of 30 days; or (d) a receiver, assignee, liquidator, trustee or similar officer for the Company or for all or any part of its property shall be appointed involuntarily. 6. SEVERANCE. If (i) the Company terminates this Agreement without Cause or (ii) the Employee terminates this Agreement pursuant to Section 5.1(a), then: (1) except in the case of death or disability, the Company shall continue to pay Employee his current salary for the remaining period of the applicable Term; (2) all Options granted pursuant to Section 3.5 herein that would have vested during the Term shall vest immediately 5 prior to such termination; and (3) the Company shall continue to provide all benefits subject to COBRA at its expense for up to one year. 7. OTHER BENEFITS. In addition to all other benefits contained herein, the Employee shall be entitled to: (a) Vacation time of four weeks per year taken in accordance with the vacation policy of the Company during each year of the Term. (b) After six years of employment, one three-month period of fully paid leave of absence in accordance with Company policies in place at that time; it being understood that such policies may restrict the Employee from taking such leave of absence until a time that is acceptable to the Company and may include other such limitations. (c) Group health, disability and life insurance. 8. CONFIDENTIALITY. 8.1 The Employee acknowledges that, during the course of performing his services hereunder, the Company shall be disclosing information to the Employee related to the Company's Field of Interest, Inventions, projects and business plans, as well as other information (collectively, "Confidential Information"). The Employee acknowledges that the Company's business is extremely competitive, dependent in part upon the maintenance of secrecy, and that any disclosure of the Confidential Information would result in serious harm to the Company. 8.2 The Employee agrees that the Confidential Information only shall be used by the Employee in connection with his activities hereunder as an employee of the Company, and shall not be used in any way that is detrimental to the Company. 8.3 The Employee agrees not to disclose, directly or indirectly, the Confidential Information to any third person or entity, other than representatives or agents of the Company. The Employee shall treat all such information as confidential and proprietary property of the Company. 8.4 The term "Confidential Information" does not include information that (a) is or becomes generally available to the public other than by disclosure in violation of this Agreement, (b) was within the relevant party's 6 possession prior to being furnished to such party, (c) becomes available to the relevant party on a noncon-fidential basis or (d) was independently developed by the relevant party without reference to the information provided by the Company. 8.5 The Employee may disclose any Confidential Information that is required to be disclosed by law, government regulation or court order. If disclosure is required, the Employee shall give the Company advance notice so that the Company may seek a protective order or take other action reasonable in light of the circumstances. 8.6 Upon termination of this Agreement, the Employee shall promptly return to the Company all materials containing Confidential Information, as well as data, records, reports and other property, furnished by the Company to the Employee or produced by the Employee in connection with services rendered hereunder. Notwithstanding such return or any of the provisions of this Agreement, the Employee shall continue to be bound by the terms of the confidentiality provisions contained in this Section 8 for a period of three years after the termination of this Agreement. 8.7 In connection with his employment by the Company, the Employee hereby acknowledges that he may enter into more than one agreement with regard to (a) the confidentiality of certain books, records, documents and business, (b) rights to certain inventions, proprietary information, and writings, (c) publication of certain materials, and (d) other related matters (the "Confidential Matters") of the Company (the "Confidentiality Agreements"). In order to clarify any potential conflicts between certain respective provisions of such Confidentiality Agreements, the Employee and the Company hereby agree that, as among such Confidentiality Agreements, the provision (or part thereof) in any such Confidentiality Agreement which affords the greatest protection to the Company with respect to the Confidential Matters shall control. 9. INVENTIONS DISCOVERED BY THE EMPLOYEE WHILE PERFORMING SERVICES HEREUNDER. During the Term, the Employee shall promptly disclose to the Company any invention, improvement, discovery, process, formula, or method or other intellectual property, whether or not patentable, whether or not copyrightable (collectively, "Inventions") made, conceived or first reduced to practice by the Employee, either alone or jointly with others, while performing service hereunder. The Employee hereby assigns to the Company all of his right, title and interest in and to any such Inventions. During and 7 after the Term, the Employee shall execute any documents necessary to perfect the assignment of such Inventions to the Company and to enable the Company to apply for, obtain, and enforce patents and copyrights in any and all countries on such Inventions. The Employee hereby irrevocably designates the General Counsel to the Company as his agent and attorney-in-fact to execute and file any such document and to do all lawful acts necessary to apply for and obtain patents and copyrights and to enforce the Company's rights under this paragraph. This Section 9 shall survive the termination of this Agreement. 10. NON-COMPETITION AND NON-SOLICITATION. During the Term and for a period of one year following the date of termination or nonrenewal for any reason (other than termination pursuant to Section 5.1(a)): (a) the Employee shall not in the United States or in any country in which the Employer shall then be doing business, directly or indirectly, enter the employ of, or render any services to, any person, firm or corporation engaged in any business competitive with the business of the Company or of any of its subsidiaries or affiliates of which the Employee may become an employee or officer during the Term; he shall not engage in such business on his own account; and he shall not become interested in any such business, directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or any other relationship or capacity; provided, however, that nothing contained in this Section 10 shall be deemed to prohibit the Employee from acquiring, solely as an investment, shares of capital stock of any public corporation; (b) neither the Employee nor any Affiliate of the Employee shall solicit or utilize, or assist any person in any way to solicit or utilize, the services, directly or indirectly, of any of the Company's directors, consultants, members of the Board of Scientific and Medical Advisors, officers or employees (collectively, "Associates of the Company"). This nonsolicitation and nonutilization provision shall not apply to Associates of the Company who have previously terminated their relationship with the Company. 10.1 If the Employee commits a breach, or threatens to commit a breach, of any of the provisions of this Section 10, the Company shall have the following rights and remedies: 10.1.1 The right and remedy to have the provisions of this Agreement specifically enforced by any 8 court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the Company and that money damages shall not provide an adequate remedy to the Company; and 10.1.2 The right and remedy to require the Employee to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits (collectively "Benefits") derived or received by the Employee as the result of any transactions constituting a breach of any of the provisions of the preceding paragraph, and the Employee hereby agrees to account for and pay over such Benefits to the Company. Each of the rights and remedies enumerated above shall be independent of the other, and shall be severally enforceable, and all of such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity. 10.2 If any of the covenants contained in Section 8, 9 or 10, or any part thereof, is hereafter construed to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect without regard to the invalid portions. 10.3 If any of the covenants contained in Section 8, 9 or 10, or any part thereof, is held to be unenforceable because of the duration of such provision or the area covered thereby, the parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and, in its reduced form, such provision shall then be enforceable. 10.4 The parties hereto intend to and hereby confer jurisdiction to enforce the covenants contained in Sections 8, 9 and 10 upon the courts of any state within the geographical scope of such covenants. In the event that the courts of any one or more of such states shall hold any such covenant wholly unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the Company's right to the relief provided above in the courts of any other states within the geographical scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, the above covenants as they relate to each state being, for this purpose, severable into diverse and independent covenants. 9 11. INDEMNIFICATION. The Company shall indemnify the Employee, to the maximum extent permitted by applicable law, against all costs, charges and expenses incurred or sustained by him in connection with any action, suit or proceeding to which he may be made a party by reason of his being an officer, director or employee of the Company or of any subsidiary or affiliate of the Company. The Company shall provide, subject to its availability upon reasonable terms (which determination shall be made by the Board) at its expense, Directors and Officers insurance for the Employee in reasonable amounts. Determination with respect to (a) the availability of insurance upon reasonable terms and (b) the amount of such insurance coverage shall be made by the Board in its sole discretion. 12. NOTICES. All notices, requests, consents and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given if sent by prepaid telegram (confirmed delivery by the telegram service), private overnight mail service (delivery confirmed by such service), registered or certified mail (return receipt requested), or delivered personally, as follows (or to such other address as either party shall designate by notice in writing to the other in accordance herewith): If to the Company: ARIAD Pharmaceuticals, Inc. 26 Landsdowne Street Cambridge, MA 02139 Attention: Chief Executive Officer Telephone: (617) 494-0400 Fax: (617) 494-8144 If to the Employee: Mr. David L. Berstein 43 Hancock Street #2 Somerville, MA 02144 13. GENERAL. 13.1 This Agreement shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts applicable to agreements made and to be performed entirely in Massachusetts. 13.2 The Section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 10 13.3 This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter hereof, and supersedes all prior agreements, arrangements and understandings, written or oral, relating to the subject matter hereof. No representation, promise or inducement has been made by either party that is not embodied in this Agreement, and neither party shall be bound by or liable for any alleged representation, promise or inducement not so set forth. 13.4 This Agreement and the Employee's rights and obligations hereunder may not be assigned by the Employee or the Company; PROVIDED, HOWEVER, the Company may assign this Agreement to an Affiliate or a successor-in-interest. 13.5 This Agreement may be amended, modified, superseded, cancelled, renewed or extended, and the terms or covenants hereof may be waived, only by a written instrument executed by the parties hereto, or in the case of a waiver, by the party waiving compliance. The failure of a party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by a party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement. 14. DEFINITIONS. As used herein the following terms have the following meaning: (a) "Affiliate" means and includes any corporation or other business entity controlling, controlled by or under common control with the corporation in question. (b) "Company's Field of Interest" means the discovery and development of pharmaceutical agents that target or intervene with intracellular regulatory and control mechanisms; associated diagnostic products; structure-based drug design; any artificial platelet product; gene therapy; and other related areas. The Company's Field of Interest may be changed at the Company's sole discretion from time to time. (c) "person" means any natural person, corporation, partnership, firm, joint venture, association, joint stock company, trust, unincorporated organization, governmental body or other entity. 11 (d) "Subsidiary" means any corporation or other business entity directly or indirectly controlled by the corporation in question. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. ARIAD PHARMACEUTICALS, INC. By -------------------------------- Harvey J. Berger, M.D. Chairman and Chief Executive Officer EMPLOYEE -------------------------------- David L. Berstein, J.D. 12 THIRD AMENDMENT TO EMPLOYMENT AGREEMENT This THIRD AMENDMENT TO EMPLOYMENT AGREEMENT (the "Third Amendment") made as of June 8, 2000 between ARIAD Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and David Berstein, Esq. (the "Employee"). The Company and the Employee have entered into an Employment Agreement dated as of August 3, 1993, as previously amended (the "Agreement"), and the parties hereto desire to further amend certain provisions of the Agreement. NOW, THEREFORE, in consideration of the premises set forth herein and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree to further amend the Agreement as follows: I. EMPLOYMENT, DUTIES AND ACCEPTANCE. The second sentence of Section 1.1 is hereby amended to read as follows: "The Employee's title shall be designated by the Chief Executive Officer and initially shall be Senior Vice President and Chief Patent Counsel. II. TERM OF EMPLOYMENT. The first sentence of Section 2 is hereby amended to read as follows: "The term of the Employee's employment under the Agreement is hereby extended to December 31, 2001 (the "Term"), unless sooner terminated pursuant to Section 4 or 5 of this Agreement; PROVIDED, however, that this Agreement shall automatically be renewed for successive one-year terms (the Term and, if the period of employment is so renewed, such additional period(s) of employment are collectively referred to herein as the "Term") unless terminated by written notice given by either party to the other at least 90 days prior to the end of the applicable Term." III. COMPENSATION. Section 3.1 is hereby replaced and amended in its entirety as follows: "3.1 As full compensation for all services to be rendered pursuant to this Agreement, the Company agrees to pay the Employee, during the Term, a salary at the fixed rate of $200,000 per annum during the first year of the Term and increased each year thereafter, by amounts, if any, to be determined by the Board of Directors of the Company (the "Board") in its sole discretion, payable in equal semi-monthly installments, less such deductions or amounts to be withheld as shall be required by applicable law and regulations." 13 IV. TERMINATION BY THE EMPLOYEE. Section 5 is hereby replaced and amended in its entirety as follows: "5.1 The Employee may terminate this Agreement, if any one or more of the following shall occur: (a) a material breach of the terms of this Agreement by the Company and such breach continues for 30 days after the Employee gives the Company written notice of such breach; (b) the Company shall make a general assignment for benefit of creditors; or any proceeding shall be instituted by the Company seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking entry of an order for relief of the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property or the Company shall take any corporate action to authorize any of the actions set forth above in this subsection 5.1(b); (c) an involuntary petition shall be filed or an action or proceeding otherwise commenced against the Company seeking reorganization, arrangement or readjustment of the Company's debts or for any other relief under the Federal Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act or law, state or federal, now or hereafter existing and remain undismissed or unstayed for a period of 30 days; (d) a receiver, assignee, liquidator, trustee or similar officer for the Company or for all or any part of its property shall be appointed involuntarily, or (e) a Change in Control as defined in Section 14." V. SEVERANCE. Section 6 is hereby replaced and amended in its entirety as follows: "6. If (i) the Company terminates this Agreement without Cause or (ii) the Employee terminates this Agreement pursuant to Section 5.1(a), then: (1) except in the case of death or disability, the Company shall continue to pay Employee his current salary for the remaining period of the applicable Term; (2) all options granted pursuant to this Agreement that would have vested during the Term shall vest immediately prior to such termination; (3) 14 the Company shall continue to provide all benefits subject to COBRA at its expense for up to one year. In the event of a consummation of a Change in Control of the Company, and if the Employee gives notice of termination within 90 days after such occurrence, then (i) all stock, stock options, stock awards and similar equity rights granted to the Employee shall immediately vest and remain fully exercisable through their original term with all rights; and (ii) the Company shall continue to pay Employee his current salary for the shorter of (a) six months, or (b) the remaining period of the applicable Term." VI. DEFINITIONS. The definition of the Company's "Field of Interest" in Section 14 (b) of the Agreement is hereby amended to read as follows: "The `Company's Field of Interest' is the discovery, development and commercialization of pharmaceutical products based on (a) intervention in signal transduction pathways and (b) gene and cell therapy. The Company's Field of Interest may be changed at any time at the sole discretion of the Company." The definition of "Change in Control" shall be added as Section 14 (d) of the Agreement as follows: " 'Change in Control' means the occurrence of any of the following events (without the consent of the Employee): (i) Any corporation, person or other entity makes a tender or exchange offer for shares of the Company's Common Stock pursuant to which such corporation, person or other entity acquires more than 50% of the issued and outstanding shares of the Company's Common Stock; (ii) The stockholders of the Company approve a definitive agreement to merge or consolidate the Company with or into another corporation or to sell or otherwise dispose of all or substantially all of the Company's assets; or (iii) Any person within the meaning of Section 3 (a) (9) or Section 13 (d) of the Securities Exchange Act of 1934 acquires more than 50% of the combined voting power of Company's issued and outstanding voting securities entitled to vote in the election of the Board." VII. This Amendment shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts applicable to agreements made and to be performed entirely in Massachusetts. VIII. Except as modified by this Third Amendment, the Agreement remains in full force and effect and unchanged. 15 IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. ARIAD PHARMACEUTICALS, INC. By: ------------------------------------ Harvey J. Berger, M.D. Chairman and Chief Executive Officer EMPLOYEE -------------------------------------- David Berstein, Esq. 16 AMENDMENT TO EMPLOYMENT AGREEMENT This AMENDMENT TO EMPLOYMENT AGREEMENT (the "Second Amendment") made as of January 1, 1997, between ARIAD Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and David L. Berstein, J.D. (the "Employee"). The Company and the Employee have entered into an Employment Agreement dated as of August 1, 1993 and amended as of March 2, 1994 (the "Agreement"), and the parties hereto desire to further amend certain provisions of the Agreement. NOW, THEREFORE, in consideration of the premises set forth herein and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree to further amend the Agreement as follows: I. TERM OF EMPLOYMENT. The first sentence of Section 2 is hereby amended to read as follows: "The term of the Employee's employment under the Agreement is hereby extended to December 31, 1999 (the "Term"), unless sooner terminated pursuant to Section 4 or 5 of this Agreement; PROVIDED, however, that this Agreement shall automatically be renewed for successive one-year terms (the Term and, if the period of employment is so renewed, such additional period(s) of employment are collectively referred to herein as the "Term") unless terminated by written notice given by either party to the other at least 90 days prior to the end of the applicable Term." II. COMPENSATION. Section 3.1 is hereby replaced and amended in its entirety as follows: "3.1 As full compensation for all services to be rendered pursuant to this Agreement, the Company agrees to pay the Employee, during the Term, a salary at the fixed rate of $160,000 per annum during the first year of the Term and increased each year thereafter, by amounts, if any, to be determined by the Board of Directors of the Company (the "Board") in its sole discretion, payable in equal semi-monthly installments, less such deductions or amounts to be withheld as shall be required by applicable law and regulations." III. DEFINITIONS. The definition of the Company's "Field of Interest" in Section 14 (b) of the Agreement is hereby amended to read as follows: "The Company's 'Field of Interest' is: the discovery, development and commercialization of pharmaceutical products based on (a) intervention in signal transduction pathways; (b) gene and cell 17 therapy; and (c) functional genomics. The Company's Field of Interest may be changed at the sole discretion of the Company from time to time." IV. This Amendment shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts applicable to agreements made and to be performed entirely in Massachusetts. V. Except as modified by this Second Amendment, the Agreement remains in full force and effect and unchanged. IN WITNESS WHEREOF, the parties have executed this Second Amendment as of the date first written above. ARIAD PHARMACEUTICALS, INC. By: ---------------------------------- Harvey J. Berger, M.D. Chairman and Chief Executive Officer EMPLOYEE ------------------------------------ David L. Berstein, J.D. 18 AMENDMENT TO EMPLOYMENT AGREEMENT This AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") made as of March 2, 1994, between ARIAD Pharmaceuticals, Inc. a Delaware corporation (the "Company"), and David L. Berstein, J.D. (the "Employee"). The Company and the Employee have entered into an Employment Agreement dated as of August 1, 1993 (the "Agreement"), and the parties hereto desire to amend certain provisions of the Agreement. NOW, THEREFORE, in consideration of the premises set forth herein and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. SECTION 2. The Term of the Employee's employment under the Agreement is hereby extended to December 31, 1996. 2. ARTICLE 3. 2.1. Section 3.6 is hereby replaced and amended in its entirety as follows: "3.6 All shares of the Company's Common Stock or Option Stock (as defined below) owned by the Employee or with respect to which the Employee has the power of disposition, shall not, without the Company's prior written consent, be transferable until the earlier of (a) March 31, 1996 and (b) eighteen months after the Company's initial public offering; PROVIDED, HOWEVER, that in the event of the death of the Employee, any Common Stock or Option Stock shall, subject to the terms of such Option Stock, be transferable to the legal representatives, legatees and distributees of the Employee, if such persons agree to be bound by the same restrictions applicable to such security. "Option Stock" shall mean all Options or any other options or rights to acquire shares of the Company's Common Stock or any securities convertible into or exchangeable or exercisable into shares of the Company's Common Stock. In the event that the Company commences an initial public offering, the Employee will execute "lock-up" agreements withrespect to the Common Stock or Option Stock held by the Employee providing that the Employee will not sell the Common Stock or Option Stock for a period of eighteen months after the closing of the initial public offering. 19 If the Company elects, the certificates representing the Common Stock or OptionStock will be transferred to the Company to be held by the Company pursuant to an escrow agreement consistent with the terms set forth in this Section 3.6. This Section 3.6 shall survive termination of this Agreement." 2.2. Section 3.7 is hereby added to the Agreement to read in its entirety as follows: "3.7 Any shares of common stock ("Subsidiary Common Stock") of any current or future subsidiary of the Company, including, without limitation, ARIAD Gene Therapeutics, Inc., or any Subsidiary Option Stock (as defined below) owned by the Employee or with respect to which the Employee has the power of disposition shall not, without the Company's priorwritten consent, be transferable until eighteen months after the applicable subsidiary's initial public offering; PROVIDED, HOWEVER, that in the event of the death of the Employee, all such Subsidiary Common Stock or Subsidiary Option Stock shall, subject to the terms of such Subsidiary Option Stock, be transferable to the legal representatives, legatees, and distributees of the Employee, if such persons agree to be bound by the same restrictions applicable to such security. "Subsidiary Option Stock" shall mean all options or rights to acquire shares of Subsidiary Common Stock or any securities convertible into or exchangeable or exercisable for shares of Subsidiary Common Stock. If the Company elects, the certificates representing the Subsidiary Common Stock or Subsidiary Option Stock will be transferred to the Company to be held by the Company pursuant to an escrow agreement consistent with the terms set forth in this Section 3.7. This Section 3.7 shall survive the termination of this Agreement." 3. The definition of the "Company's Field of Interest" in Section 14 (b) of the Agreement is hereby amended to read as follows: "Company's Field of Interest means (1) the discovery, development and commercialization of pharmaceutical products, diagnostic products, or research reagents that target or intervene with intracellular regulatory or control mechanisms (e.g., signal transduction, gene transcription and protein trafficking); (2) gene therapy; (3) drug discovery based on molecular structure or diversity; (4) any platelet substitute product; and (5) other related areas. The Company's Field of Interest may be changed at the Company's sole discretion from time to time." 20 4. This Amendment shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts applicable to agreements made and to be performed entirely in Massachusetts. 5. Except as modified by this Amendment, the Agreement remains in full force and effect and unchanged. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. ARIAD PHARMACEUTICALS, INC. By: ------------------------------------ Harvey J. Berger, M.D. Chairman and Chief Executive Officer EMPLOYEE ------------------------------------- David L. Berstein, J.D. EX-27.1 4 ex27-1.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 29,118 12,639 0 0 1,589 43,346 17,074 (14,246) 50,896 4,596 1,300 0 0 27 44,972 50,896 0 885 0 0 7,478 0 119 0 (6,712) 0 0 0 0 (6,712) (0,27) (0.27)
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