2005 EXECUTIVE COMPENSATION PLAN

Exhibit 10.31

ARIAD PHARMACEUTICALS, INC.

2005 EXECUTIVE COMPENSATION PLAN

(AS AMENDED AND RESTATED EFFECTIVE AS OF OCTOBER 1, 2005)

ARIAD PHARMACEUTICALS, INC.

2005 EXECUTIVE COMPENSATION PLAN, AS AMENDED AND RESTATED

TABLE OF CONTENTS

ARIAD PHARMACEUTICALS, INC.

2005 EXECUTIVE COMPENSATION PLAN, AS AMENDED AND RESTATED

ARTICLE I

PURPOSE

1.1            Purpose .  The purpose of the Plan is to assist the Company and any Affiliate (as defined below) to recruit, motivate and retain executive officers, key employees and key advisors who will contribute to the Company’s long range success by providing incentives in a form that will reward superior performance and provide tax-advantaged savings opportunities.

1.2            Intent .  The Plan is intended to be an unfunded deferred compensation arrangement for the benefit of a select group of management and highly compensated employees of the Company and its Affiliates, within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  As such, the Plan is intended to be a “top hat” plan exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.  Any obligation of the Company or its Affiliates to pay benefits hereunder shall be deemed to be an unsecured promise, and any right of a Participant (as defined below) or Beneficiary (as defined below) to enforce such obligation shall be solely as a general creditor of the Company.

ARTICLE II

DEFINITIONS

2.1            “Account” means one or more bookkeeping entries maintained by the Committee with respect to each Participant.

2.2            “Affiliate” means any corporation or other form of entity of which the Company owns, directly or indirectly, fifty percent or more of the total combined voting power of all classes of stock or other equity interests, provided that such entity is designated by the Committee as a participating entity hereunder.

2.3            “Award” means a credit made to a Participant’s Account in accordance with the provisions of Article V hereof, as the case may be.  An Award may either be an Annual Award under Section 5.1 or an Initial Award under Section 5.2.

2.4            “Beneficiary” means the person, persons, entity or entities designated by a Participant in accordance with Article VIII of the Plan.  If no Beneficiary is designated with respect to the Plan, a Participant’s designation made under the Prior Plan shall control; if there is no such designation or such designation cannot be administered, a Participant’s designation under the ARIAD Retirement Savings Plan (or the default provisions thereof) shall control.

2.5            “Board” or “Board of Directors” means the Board of Directors of the Company.

2.6            “Bonus” means remuneration that (i) is “performance-based compensation,” as defined by Section 409A(a)(4)(B)(iii) of the Code, (ii) is designated as a Bonus by the Committee and (iii) relates to services performed by a Participant during a performance period of at least twelve months.  A Bonus shall not include an Award granted under Article V of the Plan.

 

2.7            “Change of Control” means any one of the following events:

2.8            “Code” means the Internal Revenue Code of 1986, as amended, related regulations and, in the absence of regulations, revenue rulings, revenue procedures, notices or transition guidance from the IRS.

2.9            “Committee” means the Compensation Committee of the Board, which shall act as the administrator of the Plan.

2.10            “Company” means ARIAD Pharmaceuticals, Inc. or its successor.

2.11            “Compensation” means the Participant’s Salary and Bonus.

2.12            “Deferrals” means the portion of Compensation that a Participant elects to defer under the Plan in accordance with Section 4.1.

2.13            “Deferral Election” means the separate written agreement, submitted to the Committee, by which a Participant agrees to participate in the Plan and make Deferrals.

2.14            “Installment Period” means the period for paying installments as elected by the Participant under a Payment Election Form that complies with Section 7.3(a).

2.15           “ Investment Funds” means the investment funds designated by the Committee from time to time for the purpose of determining the investment return to be credited to each Participant’s Account.  Participants shall not have the right to designate Investment Funds.

 

2.16           “ Participant ” means an executive officer, key employee or key advisor of the Company or its Affiliates for whom an Account is maintained hereunder.

2.17           “ Payment Date ” means the last day of the first calendar month that is at least sixty (60) days after the date or event triggering payment under the Plan, or as soon as practicable thereafter.

2.18            “Payment Election Form” means a form required to be used by Participants to elect the time and form of benefit payments under Section 7.1 of the Plan.

2.19           “ Plan ” means this 2005 ARIAD Pharmaceuticals, Inc. Executive Compensation Plan, as the same may be amended or restated from time to time.

2.20           “ Plan Year ” means the 12-month period beginning each January 1st and ending each December 31st; provided, however, that the first Plan Year means the period from October 1, 2005 to December 31, 2005.

2.21           “ Prior Plan ” means the ARIAD Pharmaceuticals, Inc. Executive Compensation Plan, which was first approved on September 16, 1997.

2.22            “Salary” means a Participant’s base salary rate or rates in effect at the time of a Participant’s Deferral Election.

2.23            “Separation from Service” means cessation of service with the Company and its Affiliates within the meaning of Section 409A of the Code (after giving effect to the presumptions contained therein).

2.24           “ Unforeseeable Emergency ” means the occurrence of a severe financial hardship resulting from (i) an illness or accident of a Participant or his or her spouse or dependents, (ii) the loss of a Participant’s property due to casualty or (iii) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of a Participant.

2.25           “ Valuation Date ” means (a) the last day of each calendar quarter for purposes of periodically adjusting Account balances under Article VI, (b) the last day of the calendar month for purposes of paying Account balances under Articles VII, VIII and XI, and (c) any other date or dates as may be designated in good faith by the Committee.

ARTICLE III

PARTICIPATION

3.1            Eligibility .  Executive officers, key employees and key advisors of the Company or an Affiliate shall participate in the Plan when and as designated by the Committee in its sole discretion, which designation may be made individually or by groups or categories, in the discretion of the Committee.  The Committee shall notify each individual who becomes eligible to participate in the Plan.  Without the necessity of further action, Participants hereunder shall include those individuals listed on Schedule A hereto, which shall be deemed a part of the Plan by this reference.

3.2            Loss of Eligible Status .  If the Committee determines that a Participant shall no longer be eligible to participate in the Plan, such Participant shall no longer be entitled to receive an Award or make Deferrals thereafter.  However, amounts credited to the Account of such Participant shall continue to be held pursuant to the terms of the Plan and shall be distributed as provided in Article VII or Article VIII.

 

ARTICLE IV

DEFERRALS

4.1            Right to Defer Compensation .  The Committee may from time to time in its sole discretion allow Participants to defer payment of part of their Compensation under the Plan on a pre-tax basis under this Article IV.  If a Participant is allowed to defer Compensation for a Plan Year, the Committee shall credit to the Account of a Participant an amount equal to the amount designated in the Participant’s Deferral Election for that Plan Year.  Amounts shall not be made available to such Participant, except as provided in Article VII, and shall reduce such Participant’s Compensation in accordance with the provisions of the applicable Deferral Election.

4.2            Timing for Deferral Elections .  A Deferral Election shall be void with respect to Salary unless submitted before the beginning of the calendar year during which the amount to be deferred will be earned.  A Deferral Election shall be void with respect to any Bonus unless submitted at least six months prior to the end of the performance period over which the services for such Bonus are performed.  Notwithstanding the foregoing, in the year in which the Plan is first adopted or an individual is first eligible to participate, such Deferral Election may be filed within thirty (30) days of the date on which the Plan is adopted or the date on which such individual is first eligible to participate (after taking into account the plan aggregation rules under Section 409A of the Code), respectively, with respect to Compensation earned during the remainder of the calendar year after the filing and acceptance of such Deferral Election.  A Deferral Election must be delivered to the Committee before any Deferrals can become effective.

4.3            Matters for Deferral Election .  A Participant’s Deferral Election shall, subject to the limitation set forth in Section 4.4 hereof, designate the amount of Compensation to be deferred on the Participant’s behalf as a fixed dollar amount, the Beneficiary to receive any Death Benefits and such other items as may be prescribed by the Committee.  A Participant shall file a Payment Election Form (as defined in Section 7.1 below) with the Committee at the same time as a Deferral Election.  A Deferral Election filed by a Participant for a Plan Year shall be irrevocable after the beginning of such Plan Year except as may be permitted by the Committee consistent with the requirements of Section 409A of the Code.

4.4            Minimum and Maximum Deferral .  The minimum amount that may be deferred hereunder each Plan Year is ten thousand dollars ($10,000).  The maximum amount that may be deferred hereunder each Plan Year is fifty percent (50%) of the Participant’s Salary and one hundred percent (100%) of the Participant’s Bonus.

ARTICLE V

AWARDS

5.1            Annual Awards .  The Committee reserves the right annually to award credits (each, an “Annual Award”) to Accounts in its sole discretion.  The Committee may grant Annual Awards in such amounts and in such manner as it considers appropriate or desirable.

 

A Participant who receives an Annual Award with respect to all or part of a Plan Year shall not have the right to receive an Annual Award in a subsequent Plan Year.  Any power that may be exercised by the Committee under this Section 5.1 may be delegated to an officer of the Company as provided under Section 9.3 below.

5.2            Initial Award .  An individual providing services to the Company or an Affiliate who became a Participant on the Effective Date and who participated in the Prior Plan shall receive an Initial Award under this Section 5.2 equal to the “Rollover Amount” (as defined under Section 3.10 of the Prior Plan) and any additional amount that may be determined by the Committee in its sole discretion.  Except as provided to the contrary in Section 5.4 below, the Initial Award shall be subject to the same terms and conditions as any other Award granted under the Plan.

5.3            Vesting of Annual Awards .  A Participant shall have a vested right to the portion of his or her Account attributable to a specific Annual Award and any earnings or losses on the deemed investment of such Annual Awards according to such vesting schedule as the Committee shall determine at the time an Annual Award is made.

5.4            Vesting of Initial Award .  A Participant shall have a vested right to the portion of his or her Account attributable to his or her Rollover Amount and any earnings or losses on the investment of his or her Rollover Amount according to the vesting schedule as in effect under Section 3.4 of the Prior Plan.  Any additional amount that may be determined by the Committee as part of the Initial Award shall vest (a) fifty percent upon the first anniversary of the grant date and (b) one hundred percent upon the second anniversary of the grant date; provided that the Participant is then employed or otherwise providing services to the Company and/or its Affiliates on such date.

5.5            Discretionary Vesting on Change of Control .  Notwithstanding anything to the contrary in Sections 5.3 and 5.4, upon a Change of Control, the Committee may elect to accelerate the vesting of some or all amounts credited to a Participant’s Account upon such Change of Control.  For avoidance of doubt, nothing in this Section 5.5 shall be construed to prohibited accelerated vesting upon a Change of Control or similar event to the extent required under an employment agreement or other contract with a Participant.

5.6            Amounts Not Vested .  Any amounts credited to a Participant’s Account with respect to an Award granted under Article V and any earnings or losses on the investment of such Awards that are not vested at the time of the Participant’s Separation from Service shall be forfeited.

 

ARTICLE VI

ACCOUNTS AND ACCOUNTING

6.2            Status of Accounts .  Accounts are bookkeeping entries only.  Assets that may be set aside by the Company or an Affiliate to pay for Plan benefits shall not create a t