Exhibit 10.2

EXECUTION VERSION

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JPMorgan Chase Bank, National Association

London Branch

25 Bank Street

Canary Wharf

London E14 5JP

England

June 12, 2014

 

To: ARIAD Pharmaceuticals, Inc.

26 Lansdowne Street

Cambridge, Massachusetts 02139

 

Re: Base Call Option Transaction

The purpose of this letter agreement (this “Confirmation”) is to confirm the
terms and conditions of the call option transaction entered into between
JPMorgan Chase Bank, National Association, London Branch (“JPMorgan”) and ARIAD
Pharmaceuticals, Inc. (“Counterparty”) as of the Trade Date specified below (the
“Transaction”). This letter agreement constitutes a “Confirmation” as referred
to in the ISDA Master Agreement specified below. This Confirmation shall replace
any previous agreements and serve as the final documentation for the
Transaction.

The definitions and provisions contained in the 2002 ISDA Equity Derivatives
Definitions (the “Equity Definitions”), as published by the International Swaps
and Derivatives Association, Inc. (“ISDA”) are incorporated into this
Confirmation. In the event of any inconsistency between the Equity Definitions
and this Confirmation, this Confirmation shall govern. Certain defined terms
used herein are based on terms that are defined in the Offering Memorandum dated
June 12, 2014 (the “Offering Memorandum”) relating to the 3.625% Convertible
Senior Notes due 2019 (as originally issued by Counterparty, the “Convertible
Notes” and each USD 1,000 principal amount of Convertible Notes, a “Convertible
Note”) issued by Counterparty in an aggregate initial principal amount of USD
200,000,000 (as increased by up to an aggregate principal amount of USD
30,000,000 if and to the extent that the Initial Purchasers (as defined herein)
exercise their option to purchase additional Convertible Notes pursuant to the
Purchase Agreement (as defined herein)) pursuant to an Indenture to be dated
June 17, 2014 between Counterparty and Wells Fargo Bank, National Association,
as trustee (the “Indenture”). In the event of any inconsistency between the
terms defined in the Offering Memorandum, the Indenture and this Confirmation,
this Confirmation shall govern. The parties acknowledge that this Confirmation
is entered into on the date hereof with the understanding that (i) definitions
set forth in the Indenture which are also defined herein by reference to the
Indenture and (ii) sections of the Indenture that are referred to herein will
conform to the descriptions thereof in the Offering Memorandum. If any such
definitions in the Indenture or any such sections of the Indenture differ from
the descriptions thereof in the Offering Memorandum, the descriptions thereof in
the Offering Memorandum will govern for purposes of this Confirmation. The
parties further acknowledge that the Indenture section numbers used herein are
based on the draft of the Indenture last reviewed by JPMorgan as of the date of
this Confirmation, and if any such section numbers are changed in the Indenture
as executed, the parties will amend this Confirmation in good faith to preserve
the intent of the parties. Subject to the foregoing, references to the Indenture
herein are references to the Indenture as in effect on the date of its
execution, and if the Indenture is amended or supplemented following such date
(other than any amendment or supplement (x) pursuant to Section 11.01(h) of the
Indenture that, as determined by the Calculation Agent, conforms the Indenture
to the description of Convertible Notes in the Offering Memorandum or
(y) pursuant to Section 15.06 of the Indenture, subject, in the case of this
clause (y), to the second paragraph under “Method of Adjustment” in Section 3),
any such amendment or supplement will be disregarded for purposes of this
Confirmation unless the parties agree otherwise in writing.

 

JPMorgan Chase Bank, National Association

Organised under the laws of the United States as a National Banking Association.

Main Office 1111 Polaris Parkway, Columbus, Ohio 43240

Registered as a branch in England & Wales branch No. BR000746

Registered Branch Office 25 Bank Street, Canary Wharf, London E14 5JP

Authorised by the Office of the Comptroller of the Currency in the jurisdiction
of the USA.

Authorised by the Prudential Regulation Authority. Subject to regulation by the
Financial Conduct

Authority and to limited regulation by the Prudential Regulation Authority.
Details about the

extent of our regulation by the Prudential Regulation Authority are available
from us on request.

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Each party is hereby advised, and each such party acknowledges, that the other
party has engaged in, or refrained from engaging in, substantial financial
transactions and has taken other material actions in reliance upon the parties’
entry into the Transaction to which this Confirmation relates on the terms and
conditions set forth below.

 

1. This Confirmation evidences a complete and binding agreement between JPMorgan
and Counterparty as to the terms of the Transaction to which this Confirmation
relates. This Confirmation shall supplement, form a part of, and be subject to
an agreement in the form of the 2002 ISDA Master Agreement (the “Agreement”) as
if JPMorgan and Counterparty had executed an agreement in such form (but without
any Schedule except for the election of the laws of the State of New York as the
governing law (without reference to choice of law doctrine)) on the Trade Date.
In the event of any inconsistency between provisions of the Agreement and this
Confirmation, this Confirmation will prevail for the purpose of the Transaction
to which this Confirmation relates. The parties hereby agree that no transaction
other than the Transaction to which this Confirmation relates shall be governed
by the Agreement.

 

2. The terms of the particular Transaction to which this Confirmation relates
are as follows:

 

  General Terms.       Trade Date:  

June 12, 2014

    Effective Date:  

The third Exchange Business Day immediately prior to the Premium Payment Date

    Option Style:  

“Modified American”, as described under “Procedures for Exercise” below

    Option Type:  

Call

    Buyer:  

Counterparty

    Seller:  

JPMorgan

    Shares:  

The common stock of Counterparty, par value USD 0.001 per share (Exchange symbol
“ARIA”).

    Number of Options:  

200,000. For the avoidance of doubt, the Number of Options shall be reduced by
any Options exercised by Counterparty. In no event will the Number of Options be
less than zero.

    Option Entitlement:  

107.5095.

    Strike Price:  

USD 9.3015

    Premium:  

USD 43,220,000

    Premium Payment Date:  

June 17, 2014

    Exchange:  

The NASDAQ Global Select Market

    Related Exchange(s):  

All Exchanges

    Excluded Provisions:  

Section 15.04(i) and Section 15.03 of the Indenture.

  Procedures for Exercise.     Conversion Date:  

With respect to any conversion of a Convertible Note, the date on which the
Holder (as such term is defined in the Indenture) of such Convertible Note
satisfies all of the requirements for conversion thereof as set forth in Section
15.02(d) of the Indenture.

 

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    Free Convertibility Date:   December 15, 2018     Expiration Time:   The
Valuation Time     Expiration Date:   June 15, 2019, subject to earlier
exercise.     Multiple Exercise:   Applicable, as described under “Automatic
Exercise” below.     Automatic Exercise:   Notwithstanding Section 3.4 of the
Equity Definitions, and subject to Section 9(j)(ii), on each Conversion Date in
respect of which a “Notice of Conversion” (as defined in the Indenture) that is
effective as to Counterparty has been delivered by the relevant converting
Holder, a number of Options equal to (i) the number of Convertible Notes in
denominations of USD 1,000 as to which such Conversion Date has occurred shall
be deemed to be automatically exercised; provided that such Options shall be
exercised or deemed exercised only if Counterparty has provided a Notice of
Exercise to JPMorgan in accordance with “Notice of Exercise” below.      
Notwithstanding the foregoing, in no event shall the number of Options that are
exercised or deemed exercised hereunder exceed the Number of Options.     Notice
of Exercise:   Notwithstanding anything to the contrary in the Equity
Definitions or under “Automatic Exercise” above, in order to exercise any
Options, Counterparty must notify JPMorgan in writing before 5:00 p.m. (New York
City time) on the Scheduled Valid Day immediately preceding the scheduled first
day of the Settlement Averaging Period for the Options being exercised of (i)
the number of such Options, (ii) the scheduled first day of the Settlement
Averaging Period and the scheduled Settlement Date, (iii) the Relevant
Settlement Method for such Options, and (iv) if the settlement method for the
related Convertible Notes is not Settlement in Shares or Settlement in Cash
(each as defined below), the fixed amount of cash per Convertible Note that
Counterparty has elected to deliver to Holders (as such term is defined in the
Indenture) of the related Convertible Notes (the “Specified Cash Amount”);
provided that in respect of any Options relating to Convertible Notes with a
Conversion Date occurring on or after the Free Convertibility Date, (A) such
notice may be given on or prior to the second Scheduled Valid Day immediately
preceding the Expiration Date and need only specify the information required in
clause (i) above, and (B) if the Relevant Settlement Method for such Options is
(x) Net Share Settlement and the Specified Cash Amount is not USD 1,000, (y)
Cash Settlement or (z) Combination Settlement, JPMorgan shall have received a
separate notice (the “Notice of Final Settlement Method”) in

 

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      respect of all such Convertible Notes before 5:00 p.m. (New York City
time) on the Free Convertibility Date specifying the information required in
clauses (iii) and (iv) above. Counterparty acknowledges its responsibilities
under applicable securities laws, and in particular Section 9 and Section 10(b)
of the Exchange Act (as defined below) and the rules and regulations thereunder,
in respect of any election of a settlement method with respect to the
Convertible Notes.     Valuation Time:   At the close of trading of the regular
trading session on the Exchange; provided that if the regular trading session is
extended, the Calculation Agent shall determine the Valuation Time in its
reasonable discretion.     Market Disruption Event:   Section 6.3(a) of the
Equity Definitions is hereby replaced in its entirety by the following:      
“‘Market Disruption Event’ means, in respect of a Share, (i) a failure by the
Relevant Stock Exchange to open for trading during its regular trading session
or (ii) the occurrence or existence prior to 1:00 p.m. (New York City time) on
any Scheduled Valid Day for the Shares for more than one half-hour period in the
aggregate during regular trading hours of any suspension or limitation imposed
on trading (by reason of movements in price exceeding limits permitted by the
Relevant Stock Exchange or otherwise) in the Shares or in any options contracts
or futures contracts relating to the Shares.”   Settlement Terms.      
Settlement Method:   For any Option, Net Share Settlement; provided that if the
Relevant Settlement Method set forth below for such Option is not Net Share
Settlement, then the Settlement Method for such Option shall be such Relevant
Settlement Method, but only if Counterparty shall have notified JPMorgan of the
Relevant Settlement Method in the Notice of Exercise or Notice of Final
Settlement Method, as applicable, for such Option.     Relevant Settlement
Method:   In respect of any Option:       (i) if Counterparty has elected to
settle its conversion obligations in respect of the related Convertible Note (A)
entirely in Shares pursuant to Section 15.02(b)(iv)(A) of the Indenture
(together with cash in lieu of fractional Shares) (such settlement method,
“Settlement in Shares”), (B) in a combination of cash and Shares pursuant to
Section 15.02(b)(iv)(C) of the Indenture with a Specified Cash Amount less than
USD 1,000 or (C) in a combination of cash and Shares pursuant to Section
15.02(b)(iv)(C) of the Indenture with a Specified Cash Amount equal to
USD 1,000, then, in each case, the Relevant Settlement Method for such Option
shall be Net Share Settlement;

 

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      (ii) if Counterparty has elected to settle its conversion obligations in
respect of the related Convertible Note in a combination of cash and Shares
pursuant to Section 15.02(b)(iv)(C) of the Indenture with a Specified Cash
Amount greater than USD 1,000, then the Relevant Settlement Method for such
Option shall be Combination Settlement; and       (iii) if Counterparty has
elected to settle its conversion obligations in respect of the related
Convertible Note entirely in cash pursuant to Section 15.02(b)(iv)(B) of the
Indenture (such settlement method, “Settlement in Cash”), then the Relevant
Settlement Method for such Option shall be Cash Settlement.     Net Share
Settlement:   If Net Share Settlement is applicable to any Option exercised or
deemed exercised hereunder, JPMorgan will deliver to Counterparty, on the
relevant Settlement Date for each such Option, a number of Shares (the “Net
Share Settlement Amount”) equal to the sum, for each Valid Day during the
Settlement Averaging Period for each such Option, of (i) (a) the Daily Option
Value for such Valid Day, divided by (b) the Relevant Price on such Valid Day,
divided by (ii) the number of Valid Days in the Settlement Averaging Period;
provided that in no event shall the Net Share Settlement Amount for any Option
exceed a number of Shares equal to the Applicable Limit for such Option divided
by the Applicable Limit Price on the Settlement Date for such Option.      
JPMorgan will pay cash in lieu of delivering any fractional Shares to be
delivered with respect to any Net Share Settlement Share Amount valued at the
Relevant Price for the last Valid Day of the Settlement Averaging Period.    
Combination Settlement:   If Combination Settlement is applicable to any Option
exercised or deemed exercised hereunder, JPMorgan will pay or deliver, as the
case may be, to Counterparty, on the relevant Settlement Date for each such
Option:      

(i)     cash (the “Combination Settlement Cash Amount”) equal to the sum, for
each Valid Day during the Settlement Averaging Period for such Option, of (A) an
amount (the “Daily Combination Settlement Cash Amount”) equal to the lesser of
(1) the Specified Cash Amount minus USD 1,000 and (2) the Daily Option Value,
divided by (B) the number of Valid Days in the Settlement Averaging Period;
provided that if the calculation in clause (A) above results in zero or a
negative number for any Valid Day, the Daily Combination Settlement Cash Amount
for such Valid Day shall be deemed to be zero; and

 

(ii)    Shares (the “Combination Settlement Share Amount”) equal to the sum, for
each Valid Day

     

 

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during the Settlement Averaging Period for such Option, of a number of Shares
for such Valid Day (the “Daily Combination Settlement Share Amount”) equal to
(A) (1) the Daily Option Value on such Valid Day minus the Daily Combination
Settlement Cash Amount for such Valid Day, divided by (2) the Relevant Price on
such Valid Day, divided by (B) the number of Valid Days in the Settlement
Averaging Period; provided that if the calculation in sub-clause (A)(1) above
results in zero or a negative number for any Valid Day, the Daily Combination
Settlement Share Amount for such Valid Day shall be deemed to be zero;

      provided that in no event shall the sum of (x) the Combination Settlement
Cash Amount for any Option and (y) the Combination Settlement Share Amount for
such Option multiplied by the Applicable Limit Price on the Settlement Date for
such Option, exceed the Applicable Limit for such Option.       JPMorgan will
pay cash in lieu of delivering any fractional Shares to be delivered with
respect to any Combination Settlement Share Amount valued at the Relevant Price
for the last Valid Day of the Settlement Averaging Period.     Cash Settlement:
  If Cash Settlement is applicable to any Option exercised or deemed exercised
hereunder, in lieu of Section 8.1 of the Equity Definitions, JPMorgan will pay
to Counterparty, on the relevant Settlement Date for each such Option, an amount
of cash (the “Cash Settlement Amount”) equal to the sum, for each Valid Day
during the Settlement Averaging Period for such Option, of (i) the Daily Option
Value for such Valid Day, divided by (ii) the number of Valid Days in the
Settlement Averaging Period; provided that in no event shall the Cash Settlement
Amount for such Option exceed the Applicable Limit for such Option.     Daily
Option Value:   For any Valid Day, an amount equal to (i) the Option Entitlement
on such Valid Day, multiplied by (ii) the Relevant Price on such Valid Day less
the Strike Price on such Valid Day; provided that if the calculation contained
in clause (ii) above results in a negative number, the Daily Option Value for
such Valid Day shall be deemed to be zero. In no event will the Daily Option
Value be less than zero.     Applicable Limit:   For any Option, an amount of
cash equal to the excess of (i) the aggregate of (A) the amount of cash, if any,
paid to the Holder of the related Convertible Note upon conversion of such
Convertible Note and (B) the number of Shares, if any, delivered to the Holder
of the related Convertible Note upon conversion of such Convertible Note
multiplied by the Applicable Limit Price on the Settlement Date for such Option,
over (ii) USD 1,000.

 

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    Applicable Limit Price:   On any day, the opening price as displayed under
the heading “Op” on Bloomberg page ARIA <equity> (or any successor thereto).    
Valid Day:   A day on which (i) there is no Market Disruption Event and (ii)
trading in the Shares generally occurs on the Relevant Stock Exchange. If the
Shares are not listed or admitted for trading on any U.S. securities exchange or
any other market, “Valid Day” means a Business Day.     Relevant Stock Exchange:
  The NASDAQ Global Select Market or, if the Shares are not then listed on The
NASDAQ Global Select Market, the principal other U.S. national or regional
securities exchange on which the Shares are then listed or, if the Shares are
not then listed on a U.S. national or regional securities exchange, the
over-the-counter market, as reported by OTC Markets Group Inc. or a similar
organization or, if the Shares are not then quoted by OTC Markets Group Inc. or
a similar organization, the principal other market on which the Shares are then
traded.     Scheduled Valid Day:   A day that is scheduled to be a Valid Day.  
  Business Day:   Any day other than a Saturday, a Sunday or a day on which the
Federal Reserve Bank of New York or banks in Minnesota are authorized or
required by law, regulation or executive order to close or be closed.    
Relevant Price:   On any Valid Day, the per Share volume-weighted average price
as displayed under the heading “Bloomberg VWAP” on Bloomberg page “ARIA <equity>
VAP” (or its equivalent successor) in respect of the period from the scheduled
open of trading until the scheduled close of trading of the primary trading
session on such Valid Day (or if such volume-weighted average price is
unavailable at such time, the market value of one Share on such Valid Day, as
determined by the Calculation Agent using, if practicable, a volume-weighted
average method). The Relevant Price will be determined without regard to
after-hours trading or any other trading outside of the regular trading session
trading hours.     Settlement Averaging Period:   For any Option and regardless
of the Settlement Method applicable to such Option:      

(i)     if the related Conversion Date occurs prior to the Free Convertibility
Date, the 40 consecutive Valid Days commencing on, and including, the third
Valid Day following such Conversion Date; or

 

(ii)    if the related Conversion Date occurs on or following the Free
Convertibility Date, the 40 consecutive Valid Days commencing on, and including,
the 42nd Scheduled Valid Day immediately prior to the Expiration Date.

     

 

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    Settlement Date:   For any Option, the third Business Day immediately
following the final Valid Day of the Settlement Averaging Period for such
Option.     Settlement Currency:   USD     Other Applicable Provisions:   The
provisions of Sections 9.1(c), 9.8, 9.9 and 9.11 of the Equity Definitions will
be applicable, except that all references in such provisions to
“Physically-settled” shall be read as references to “Share Settled”. “Share
Settled” in relation to any Option means that Net Share Settlement or
Combination Settlement is applicable to that Option.     Representation and
Agreement:   Notwithstanding anything to the contrary in the Equity Definitions
(including, but not limited to, Section 9.11 thereof), the parties acknowledge
that (i) any Shares delivered to Counterparty shall be, upon delivery, subject
to restrictions and limitations arising from Counterparty’s status as issuer of
the Shares under applicable securities laws, (ii) JPMorgan may deliver any
Shares required to be delivered hereunder in certificated form in lieu of
delivery through the Clearance System and (iii) any Shares delivered to
Counterparty may be “restricted securities” (as defined in Rule 144 under the
Securities Act of 1933, as amended (the “Securities Act”)).

 

3. Additional Terms applicable to the Transaction.

 

  Adjustments applicable to the Transaction:       Potential Adjustment Events:
  Notwithstanding Section 11.2(e) of the Equity Definitions, a “Potential
Adjustment Event” means an occurrence of any event or condition, as set forth in
any Dilution Adjustment Provision, that would result in an adjustment under the
Indenture to the “Conversion Rate” or the composition of a “unit of Reference
Property” or to any “Last Reported Sale Price”, “Daily VWAP,” “Daily Conversion
Value” or “Daily Settlement Amount” (each as defined in the Indenture). For the
avoidance of doubt, JPMorgan shall not have any delivery or payment obligation
hereunder, and no adjustment shall be made to the terms of the Transaction, on
account of (x) any distribution of cash, property or securities by Counterparty
to holders of the Convertible Notes (upon conversion or otherwise) or (y) any
other transaction in which holders of the Convertible Notes are entitled to
participate, in each case, in lieu of an adjustment under the Indenture of the
type referred to in the immediately preceding sentence (including, without
limitation, pursuant to the proviso immediately following the first formula in
Section 15.04(c) of the Indenture or the proviso immediately following the
formula in Section 15.04(d) of the Indenture).     Method of Adjustment:  
Calculation Agent Adjustment, which means that, notwithstanding Section 11.2(c)
of the Equity Definitions, upon any Potential Adjustment Event, the Calculation

 

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       Agent shall make a corresponding adjustment to any one or more of the
Strike Price, Number of Options, Option Entitlement and any other variable
relevant to the exercise, settlement or payment for the Transaction.       
Notwithstanding the foregoing and “Consequences of Merger Events / Tender
Offers” below, if the Calculation Agent in good faith disagrees with any
adjustment to the Convertible Notes that involves an exercise of discretion by
Counterparty or its board of directors (including, without limitation, pursuant
to the definition of “Stock Price” in the Indenture, Section 15.04(h) of the
Indenture, Section 15.06 of the Indenture or any supplemental indenture entered
into thereunder or in connection with any proportional adjustment or the
determination of the fair value of any securities, property, rights or other
assets), then in each such case, the Calculation Agent will determine the
adjustment to be made to any one or more of the Strike Price, Number of Options,
Option Entitlement and any other variable relevant to the exercise, settlement
or payment for the Transaction in a commercially reasonable manner; provided,
further, that, notwithstanding the foregoing, if any Potential Adjustment Event
occurs during the Settlement Averaging Period but no adjustment was made to any
Convertible Note under the Indenture because the relevant Holder (as such term
is defined in the Indenture) was deemed to be a record owner of the underlying
Shares on the related Conversion Date, then the Calculation Agent shall make an
adjustment, as determined by it, to the terms hereof in order to account for
such Potential Adjustment Event.     Dilution Adjustment Provisions:    Sections
15.04(a), (b), (c), (d) and (e) and the definition of “Stock Price” in the
Indenture.   Extraordinary Events applicable to the Transaction:     Merger
Events:    Applicable; provided that notwithstanding Section 12.1(b) of the
Equity Definitions, a “Merger Event” means the occurrence of any event or
condition set forth in the definition of “Merger Event” in Section 15.06 of the
Indenture.     Tender Offers:    Applicable; provided that notwithstanding
Section 12.1(d) of the Equity Definitions, a “Tender Offer” means the occurrence
of any event or condition set forth in Section 15.04(e) of the Indenture.    
Consequences of Merger Events / Tender Offers:    Notwithstanding Section 12.2
and Section 12.3 of the Equity Definitions, upon the occurrence of a Merger
Event or a Tender Offer, the Calculation Agent shall make a corresponding
adjustment in respect of any adjustment under the Indenture to any one or more
of the

 

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       nature of the Shares (in the case of a Merger Event), Strike Price,
Number of Options, Option Entitlement and any other variable relevant to the
exercise, settlement or payment for the Transaction, subject to the second
paragraph under “Method of Adjustment”; provided, however, that such adjustment
shall be made without regard to any adjustment to the Conversion Rate pursuant
to any Excluded Provision; provided further that if, with respect to a Merger
Event or a Tender Offer, (i) the consideration for the Shares includes (or, at
the option of a holder of Shares, may include) shares of an entity or person
that is not a corporation or is not organized under the laws of the United
States, any State thereof or the District of Columbia or (ii) the Counterparty
to the Transaction following such Merger Event or Tender Offer, (a) will not be
a corporation or (b) will not be the Issuer following such Merger Event or
Tender Offer, then (I) in the case of sub-clause (ii)(b) above, with respect to
such Merger Event, as a condition precedent to the adjustments contemplated
hereby, JPMorgan, Counterparty and the entity that will be the issuer of the
Shares (the “New Issuer”) shall work in good faith to negotiate and enter into
such documentation containing representations, warranties and agreements
relating to securities law and other issues as requested by JPMorgan that
JPMorgan has determined, in its reasonable discretion, to be reasonably
necessary or appropriate to allow JPMorgan and Counterparty to continue, or the
New Issuer to accede, as applicable, as a party to the Transaction, as adjusted
hereby (which adjustments shall be made without duplication of any adjustments
determined pursuant to any other provision of this Transaction), and to preserve
JPMorgan’s hedging or hedge unwind activities in connection with the Transaction
in a manner compliant with applicable legal, regulatory or self-regulatory
requirements, or with related policies and procedures applicable to JPMorgan
(whether or not such requirements, policies or procedures are imposed by law or
have been voluntarily adopted by JPMorgan), and (II) (A) in the case of
sub-clause (ii)(b) above, if (1) such documentation has not been mutually agreed
to on or prior to the date the Merger Event becomes effective or settlement of
the Tender Offer occurs, as applicable, (2) the New Issuer does not fully and
unconditionally guarantee all contractual obligations of Counterparty or (3) the
Calculation Agent determines that the adjustment hereunder will not produce a
commercially reasonable result, or (B) in the case of clause (i) or sub-clause
(ii)(a) above, Cancellation and Payment (Calculation Agent Determination) may
apply at JPMorgan’s sole election.     Nationalization, Insolvency or Delisting:
   Cancellation and Payment (Calculation Agent Determination); provided that, in
addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it
will also constitute a Delisting if the

 

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             Exchange is located in the United States and the Shares are
not immediately re-listed, re-traded or re-quoted on any of
the New York Stock Exchange, The NASDAQ Global
Select Market or The NASDAQ Global Market (or their
respective successors); if the Shares are immediately re-
listed, re-traded or re-quoted on any of the New York
Stock Exchange, The NASDAQ Global Select Market or
The NASDAQ Global Market (or their respective
successors), such exchange or quotation system shall
thereafter be deemed to be the Exchange.    

Additional Disruption Events:

      

Change in Law:

   Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is
hereby amended by (i) replacing the word “Shares” with the phrase “Hedge
Positions of the type generally used by such party in transactions of a type
similar to the Transaction” in clause (X) thereof, (ii) inserting the
parenthetical “(including, for the avoidance of doubt and without limitation,
adoption or promulgation of new regulations authorized or mandated by existing
statute)” at the end of clause (A) thereof and (iii) adding the following
proviso to the end of clause (Y) thereof: “provided that (1) such party has used
commercially reasonable efforts to avoid such increased cost on terms reasonably
acceptable to such party, as long as (i) such party would not incur a materially
increased cost (including, without limitation, due to any increase in tax
liability, decrease in tax benefit or other adverse effect on its tax position),
as reasonably determined by such party, in doing so, (ii) such party would not
violate any applicable law, rule, regulation or policy of such party, as
reasonably determined by such party, in doing so, (iii) such party would not
suffer a material penalty, injunction, non-financial burden, reputational harm
or other material adverse consequence in doing so, (iv) such party would not
incur any material operational or administrative burden in doing so and (v) such
party would not, in doing so, be required to take any action that is contrary to
the intent of the law or regulation that is subject to the Change in Law and (2)
JPMorgan may exercise its termination right with respect to such event described
in this clause (Y) only if JPMorgan is generally exercising its rights to
terminate or adjust as a result of such event with respect to any similarly
situated customers in the context of the event constituting such Change in Law”.
   

Failure to Deliver:

   Applicable

 

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Hedging Disruption:

   Applicable; provided that:       

(i)     

   Section 12.9(a)(v) of the Equity Definitions is hereby amended by
(a) inserting the following words at the end of clause (A) thereof: “in the
manner contemplated by the Hedging Party on the Trade Date” and (b) inserting
the following two phrases at the end of such Section:           “For the
avoidance of doubt, the term “equity price risk” shall be deemed to include, but
shall not be limited to, stock price and volatility risk. And, for the further
avoidance of doubt, any such transactions or assets referred to in phrases (A)
or (B) above must be available on commercially reasonable pricing terms. Any
inability of the Hedging Party referred to in phrases (A) and (B) above that is
solely attributable to the deterioration of the creditworthiness of the Hedging
Party shall not be deemed a Hedging Disruption.”; and       

(ii)    

   Section 12.9(b)(iii) of the Equity Definitions is hereby amended by inserting
in the third line thereof, after the words “to terminate the Transaction”, the
words “or a portion of the Transaction affected by such Hedging Disruption”.    

Increased Cost of Hedging:

   Applicable; provided that Section 12.9(a)(vi) of the Equity Definitions is
hereby amended by inserting in the third line thereof, after the word “expense”,
the words “(other than increases in the price of Shares)”.    

Hedging Party:

   For all applicable Additional Disruption Events, JPMorgan.   Determining
Party:    For all applicable Extraordinary Events, JPMorgan.   Non-Reliance:   
Applicable.   Agreements and Acknowledgments Regarding Hedging Activities:   
Applicable   Additional Acknowledgments:    Applicable

4.

 

Calculation Agent.

   JPMorgan; provided that all determinations made by Calculation Agent shall be
made in good faith and in a commercially reasonable manner; provided further
that (i) upon receipt of written request from Counterparty, the Calculation
Agent shall promptly provide Counterparty with a written explanation describing
in reasonable detail any calculation, adjustment, or determination made by it
(including any quotation, market data or information from internal or external
sources used in making such calculation, adjustment or determination, as the
case may be, but without disclosing Calculation Agent’s proprietary models or
other information that may be proprietary or confidential) and shall use
commercially reasonable efforts to provide such written explanation within five
(5) Exchange Business Days from receipt of such request, (ii) if an Event of
Default described in Section 5(a)(vii) of the Agreement has occurred and is
continuing with respect to JPMorgan, the Calculation Agent shall be a leading
recognized dealer in equity derivatives designated in good faith by Counterparty
for so long as such Event of Default is continuing and (iii) if Counterparty
promptly disputes in writing any calculation, adjustment or

 

12

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       determination and provides reasonable detail as to the basis for such
dispute, the Calculation Agent shall, to the extent permitted by applicable law
(as reasonably determined by JPMorgan), discuss the dispute with Counterparty,
it being understood that the Calculation Agent’s calculation, adjustment or
determination (as modified, if modified by the Calculation Agent), shall apply
to the Transaction.

 

5. Account Details.

 

  (a) Account for payments to Counterparty:

 

  (b) Account for payments to JPMorgan:

 

6. Offices.

 

  (a) The Office of Counterparty for the Transaction is: Inapplicable,
Counterparty is not a Multibranch Party.

 

  (b) The Office of JPMorgan for the Transaction is: London

JPMorgan Chase Bank, National Association

London Branch

25 Bank Street

Canary Wharf

London E14 5JP

England

 

13

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7. Notices.

 

  (a) Address for notices or communications to Counterparty:

 

ARIAD Pharmaceuticals, Inc.

26 Lansdowne Street

Cambridge, Massachusetts 02139

Attention:

   Chief Financial Officer

Telephone No.:

   617-494-0400

With a copy to:

Jonathan Kravetz

Mintz Levin

One Financial Center

Boston, Massachusetts 02111

 

  (b) Address for notices or communications to JPMorgan:

 

JPMorgan Chase Bank, National Association

EDG Marketing Support

Email:

   edg_notices@jpmorgan.com    edg_ny_corporate_sales_support@jpmorgan.com

Facsimile No:

   1-866-886-4506

With a copy to:

  

Attention:

   Santosh Sreenivasan

Title:

   Managing Director, Head of Equity-Linked Capital Markets, Americas

Telephone No:

   1-212-622-5604

Facsimile No.:

   1-212-622-6037

 

8. Representations and Warranties.

Each of the representations and warranties of Counterparty set forth in
Section 3 of the Purchase Agreement (the “Purchase Agreement”), dated as of
June 12, 2014, between Counterparty and J.P. Morgan Securities LLC, as
representative of the Initial Purchasers party thereto (the “Initial
Purchasers”), are true and correct and are hereby deemed to be repeated to
JPMorgan as if set forth herein. Counterparty hereby further represents and
warrants to JPMorgan, and, as to representations made by “each of the parties”
or “either of the parties”, each party represents as to itself to the other
party, on the date hereof and on and as of the Premium Payment Date that:

 

  (a) Each of the parties has all necessary corporate power and authority to
execute, deliver and perform its obligations in respect of the Transaction; such
execution, delivery and performance have been duly authorized by all necessary
corporate action on such party’s part; and this Confirmation has been duly and
validly executed and delivered by such party and constitutes its valid and
binding obligation, enforceable against it in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors’ rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity) and except
that rights to indemnification and contribution hereunder may be limited by
federal or state securities laws or public policy relating thereto.

 

  (b)

Each party represents to the other party that neither the execution and delivery
of this Confirmation nor the incurrence or performance of obligations of such
party hereunder will conflict with or result in a breach of the certificate of
incorporation or by-laws (or any equivalent

 

14

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  documents) of such party, or any applicable law or regulation, or any order,
writ, injunction or decree of any court or governmental authority or agency, or
any agreement or instrument to which such party or any of its subsidiaries is a
party or by which it or any of its subsidiaries is bound or to which it or any
of its subsidiaries is subject, or constitute a default under, or result in the
creation of any lien under, any such agreement or instrument.

 

  (c) Each party represents to the other party that no consent, approval,
authorization, or order of, or filing with, any governmental agency or body or
any court is required in connection with the execution, delivery or performance
of this Confirmation by such party, except such as have been obtained or made
and such as may be required under the Securities Act or state securities laws.

 

  (d) Each of the parties is not and, after consummation of the transactions
contemplated hereby, will not be required to register as an “investment company”
as such term is defined in the Investment Company Act of 1940, as amended.

 

  (e) Each of the parties is an “eligible contract participant” (as such term is
defined in Section 1a(18) of the Commodity Exchange Act, as amended, other than
a person that is an eligible contract participant under Section 1a(18)(C) of the
Commodity Exchange Act).

 

  (f) Counterparty and its affiliates is not, on the date hereof, in possession
of any material non-public information with respect to Counterparty or the
Shares.

 

  (g) No state or local (including any non-U.S. jurisdiction’s) law, rule,
regulation or regulatory order applicable to the Shares would give rise to any
reporting, consent, registration or other requirement (including without
limitation a requirement to obtain prior approval from any person or entity) as
a result of JPMorgan or its affiliates owning or holding (however defined)
Shares.

 

  (h) Counterparty (A) is capable of evaluating investment risks independently,
both in general and with regard to all transactions and investment strategies
involving a security or securities; (B) will exercise independent judgment in
evaluating the recommendations of any broker-dealer or its associated persons,
unless it has otherwise notified the broker-dealer in writing; and (C) has total
assets of at least $50 million.

 

  (i) Counterparty has delivered to JPMorgan resolutions of Counterparty’s board
of directors validly designating each of JPMorgan and its permitted assignees
and transferees hereunder and its and their “Affiliates” and “Associates” as an
“Exempt Person” (each, as defined in the Rights Agreement) under the Rights
Agreement (such exemption, as in effect on the date hereof, the “Rights
Agreement Exemption”).

 

9. Other Provisions.

 

  (a) Opinions; Rights Agreement Exemption.

 

  (i) On the Premium Payment Date, Counterparty shall deliver to JPMorgan an
opinion of counsel, dated as of the Premium Payment Date, with respect to the
matters set forth in Sections 8(a) through (c) of this Confirmation. Delivery of
such opinion to JPMorgan shall be a condition precedent for the purpose of
Section 2(a)(iii) of the Agreement with respect to each obligation of JPMorgan
under Section 2(a)(i) of the Agreement.

 

  (ii) From the Premium Payment Date until the earlier of the Rights Agreement
Termination Date and the final Settlement Date, as long as the conditions set
forth in the Rights Agreement Exemption Letter (the “Exemption Letter”) dated as
of the date hereof, between Counterparty and JPMorgan (such conditions, the
“Exemption Conditions”) are satisfied, Counterparty shall ensure that the Rights
Agreement Exemption remains in full force and effect and shall not be modified
(unless JPMorgan shall have agreed in writing to such modification).
Counterparty shall notify JPMorgan within one Business Day of the Rights
Agreement Termination Date.

 

15

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Counterparty agrees to indemnify and hold harmless each Indemnified Person (as
defined below) from and against any and all losses (including losses relating to
JPMorgan’s or its Affiliate’s hedging activities as a consequence of becoming,
or of the risk of becoming, an “Acquiring Person” (as defined in the Rights
Agreement), including without limitation, any forbearance from hedging
activities or cessation of hedging activities and any losses in connection
therewith with respect to the Transaction), claims, damages, judgments,
liabilities and expenses (including reasonable attorney’s fees), joint or
several, which an Indemnified Person may become subject to, as a result of
Counterparty’s failure to ensure that, as long as the Exemption Conditions are
satisfied, the Rights Agreement Exemption remains in full force and effect and
is not modified (unless JPMorgan shall have agreed in writing to such
modification) until the earlier of the Rights Agreement Termination Date and the
final Settlement Date, and to reimburse, within 30 days, upon written request,
each of such Indemnified Persons for any reasonable legal or other expenses
incurred in connection with investigating, preparing for, providing testimony or
other evidence in connection with or defending any of the foregoing. If any
suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against the
Indemnified Person as a result of Counterparty’s failure to ensure that as long
as the Exemption Conditions are satisfied, the Rights Agreement Exemption
remains in full force and effect and is not modified (unless JPMorgan shall have
agreed in writing to such modification) until the earlier of the Rights
Agreement Termination Date and the final Settlement Date, such Indemnified
Person shall promptly notify Counterparty in writing, and Counterparty, upon
request of the Indemnified Person, shall retain counsel reasonably satisfactory
to the Indemnified Person to represent the Indemnified Person and any others
Counterparty may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. Counterparty shall not be
liable for any settlement of any proceeding contemplated by this paragraph that
is effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, Counterparty agrees to indemnify
any Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Counterparty shall not, without the prior written
consent of the Indemnified Person, effect any settlement of any pending or
threatened proceeding contemplated by this paragraph that is in respect of which
any Indemnified Person is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Person, unless such settlement
includes an unconditional release of such Indemnified Person from all liability
on claims that are the subject matter of such proceeding on terms reasonably
satisfactory to such Indemnified Person. If the indemnification provided for in
this paragraph is unavailable to an Indemnified Person or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
Counterparty hereunder, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities. The remedies
provided for in this paragraph are not exclusive and shall not limit any rights
or remedies which may otherwise be available to any Indemnified Person at law or
in equity. The indemnity and contribution agreements contained in this paragraph
shall remain operative and in full force and effect regardless of the
termination of the Transaction.

“Rights Agreement Termination Date” means the earliest of (i) the occurrence of
the “Expiration Date” (as defined in the Rights Agreement), (ii) the Rights
Agreement otherwise terminating or ceasing to be in effect or (iii) the date on
which no “Rights” (as defined in therein) remain outstanding thereunder.

“Rights Agreement” means the Section 382 Rights Agreement, dated as of
October 31, 2013, between Counterparty and Computershare Trust Company, N.A., as
Rights Agent, or any similar shareholder rights plan (as determined by JPMorgan
in its sole discretion).

 

  (b)

Repurchase Notices. Counterparty shall, on any day on which Counterparty effects
any repurchase of Shares, promptly give JPMorgan a written notice of such
repurchase (a

 

16

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  “Repurchase Notice”) on such day if following such repurchase, the number of
outstanding Shares as determined on such day is (i) less than 180 million (in
the case of the first such notice) or (ii) thereafter more than 6.3 million less
than the number of Shares included in the immediately preceding Repurchase
Notice. Counterparty agrees to indemnify and hold harmless JPMorgan and its
affiliates and their respective officers, directors, employees, affiliates,
advisors, agents and controlling persons (each, an “Indemnified Person”) from
and against any and all losses (including losses relating to JPMorgan’s or its
Affiliate’s hedging activities as a consequence of becoming, or of the risk of
becoming, a Section 16 “insider”, including without limitation, any forbearance
from hedging activities or cessation of hedging activities and any losses in
connection therewith with respect to the Transaction), claims, damages,
judgments, liabilities and expenses (including reasonable attorney’s fees),
joint or several, which an Indemnified Person may become subject to, as a result
of Counterparty’s failure to provide JPMorgan with a Repurchase Notice on the
day and in the manner specified in this paragraph, and to reimburse, within 30
days, upon written request, each of such Indemnified Persons for any reasonable
legal or other expenses incurred in connection with investigating, preparing
for, providing testimony or other evidence in connection with or defending any
of the foregoing. If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
the Indemnified Person as a result of Counterparty’s failure to provide JPMorgan
with a Repurchase Notice in accordance with this paragraph, such Indemnified
Person shall promptly notify Counterparty in writing, and Counterparty, upon
request of the Indemnified Person, shall retain counsel reasonably satisfactory
to the Indemnified Person to represent the Indemnified Person and any others
Counterparty may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. Counterparty shall not be
liable for any settlement of any proceeding contemplated by this paragraph that
is effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, Counterparty agrees to indemnify
any Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Counterparty shall not, without the prior written
consent of the Indemnified Person, effect any settlement of any pending or
threatened proceeding contemplated by this paragraph that is in respect of which
any Indemnified Person is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Person, unless such settlement
includes an unconditional release of such Indemnified Person from all liability
on claims that are the subject matter of such proceeding on terms reasonably
satisfactory to such Indemnified Person. If the indemnification provided for in
this paragraph is unavailable to an Indemnified Person or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
Counterparty hereunder, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities. The remedies
provided for in this paragraph (b) are not exclusive and shall not limit any
rights or remedies which may otherwise be available to any Indemnified Person at
law or in equity. The indemnity and contribution agreements contained in this
paragraph shall remain operative and in full force and effect regardless of the
termination of the Transaction.

 

  (c) Regulation M. Counterparty is not on the Trade Date engaged in a
distribution, as such term is used in Regulation M under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), of any securities of Counterparty,
other than a distribution meeting the requirements of the exception set forth in
Rules 101(b)(10) and 102(b)(7) of Regulation M. Counterparty shall not, until
the second Scheduled Trading Day immediately following the Effective Date,
engage in any such distribution.

 

  (d) No Manipulation. Counterparty is not entering into the Transaction to
create actual or apparent trading activity in the Shares (or any security
convertible into or exchangeable for the Shares) or to raise or depress or
otherwise manipulate the price of the Shares (or any security convertible into
or exchangeable for the Shares) or otherwise in violation of the Exchange Act.

 

17

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  (e) Transfer or Assignment.

 

  (i) Counterparty shall have the right to transfer or assign its rights and
obligations hereunder with respect to all, but not less than all, of the Options
hereunder (such Options, the “Transfer Options”); provided that such transfer or
assignment shall be subject to reasonable conditions that JPMorgan may impose,
including but not limited, to the following conditions:

 

  (A) With respect to any Transfer Options, Counterparty shall not be released
from its notice and indemnification obligations pursuant to Section 9(b) or any
obligations under Section 9(o) or 9(t) of this Confirmation;

 

  (B) Any Transfer Options shall only be transferred or assigned to a third
party that is a United States person (as defined in the Internal Revenue Code of
1986, as amended);

 

  (C) Such transfer or assignment shall be effected on terms, including any
reasonable undertakings by such third party (including, but not limited to, an
undertaking with respect to compliance with applicable securities laws in a
manner that, in the reasonable judgment of JPMorgan, will not expose JPMorgan to
material risks under applicable securities laws) and execution of any
documentation and delivery of legal opinions with respect to securities laws and
other matters by such third party and Counterparty, as are requested and
reasonably satisfactory to JPMorgan;

 

  (D) JPMorgan will not, as a result of such transfer and assignment, be
required to pay the transferee on any payment date an amount under
Section 2(d)(i)(4) of the Agreement greater than an amount that JPMorgan would
have been required to pay to Counterparty in the absence of such transfer and
assignment;

 

  (E) An Event of Default, Potential Event of Default or Termination Event will
not occur as a result of such transfer and assignment;

 

  (F) Without limiting the generality of clause (B), Counterparty shall cause
the transferee to make such Payee Tax Representations and to provide such tax
documentation as may be reasonably requested by JPMorgan to permit JPMorgan to
determine that results described in clauses (D) and (E) will not occur upon or
after such transfer and assignment; and

 

  (G) Counterparty shall be responsible for all reasonable costs and expenses,
including reasonable counsel fees, incurred by JPMorgan in connection with such
transfer or assignment.

 

  (ii)

JPMorgan may, without Counterparty’s consent, transfer or assign all or any part
of its rights or obligations under the Transaction (A) to any affiliate of
JPMorgan (1) that has a long-term issuer rating that is equal to or better than
JPMorgan’s credit rating at the time of such transfer or assignment, or
(2) whose obligations hereunder will be guaranteed, pursuant to the terms of a
customary guarantee in a form used by JPMorgan generally for similar
transactions, by JPMorgan or JPMorgan Chase & Co., or (B) to any other third
party with a rating for its long-term, unsecured and unsubordinated indebtedness
equal to or better than A- by Standard and Poor’s Rating Group, Inc. or its
successor (“S&P”), or A3 by Moody’s Investor Service, Inc. (“Moody’s”) or, if
either S&P or Moody’s ceases to rate such debt, at least an equivalent rating or
better by a substitute rating agency mutually agreed by Counterparty and
JPMorgan. If at any time at which (A) the Section 16 Percentage exceeds the
Section 16 Threshold Percentage, (B) the Option Equity Percentage exceeds 14.5%
or (C) the Share Amount exceeds the Applicable Share Limit (if any applies) (any
such condition described in clauses (A), (B) or (C), an “Excess Ownership
Position”), JPMorgan is unable after using its commercially reasonable efforts
to effect a transfer or assignment of Options to a third party satisfying the
above

 

18

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  requirements on pricing terms reasonably acceptable to JPMorgan and within a
time period reasonably acceptable to JPMorgan such that no Excess Ownership
Position exists, then JPMorgan may designate any Exchange Business Day as an
Early Termination Date with respect to a portion of the Transaction (the
“Terminated Portion”), such that following such partial termination no Excess
Ownership Position exists. In the event that JPMorgan so designates an Early
Termination Date with respect to a portion of the Transaction, a payment shall
be made pursuant to Section 6 of the Agreement as if (1) an Early Termination
Date had been designated in respect of a Transaction having terms identical to
the Transaction and a Number of Options equal to the number of Options
underlying the Terminated Portion, (2) Counterparty were the sole Affected Party
with respect to such partial termination and (3) the Terminated Portion were the
sole Affected Transaction (and, for the avoidance of doubt, the provisions of
Section 9(m) shall apply to any amount that is payable by JPMorgan to
Counterparty pursuant to this sentence as if Counterparty was not the Affected
Party). The “Section 16 Percentage” as of any day is the fraction, expressed as
a percentage, (A) the numerator of which is the number of Shares that JPMorgan
and each person subject to aggregation of Shares with JPMorgan under Section 13
or Section 16 of the Exchange Act and rules promulgated thereunder directly or
indirectly beneficially own (as defined under Section 13 or Section 16 of the
Exchange Act and rules promulgated thereunder) and (B) the denominator of which
is the number of Shares outstanding. The “Section 16 Threshold Percentage” means
(i) prior to the Rights Agreement Termination Date, the greatest of (a) 4.0%,
(b) if the Exemption Letter has been modified to increase the maximum percentage
of Shares outstanding that JPMorgan and its “Affiliates” and “Associates” are
permitted to “Beneficially Own” in connection with the “Relevant Transactions”
(each as defined in the Exemption Letter; such maximum percentage, the
“Exemption Letter Limitation”), the lesser of (x) the Exemption Letter
Limitation less 0.99% and (y) 9.0%, and (c) if the Exemption Letter Agreement
has been modified to remove any limitation on the number of Shares that JPMorgan
and its “Affiliates” and “Associates” may “Beneficially Own” in connection with
the “Relevant Transactions” (each, as defined in the Exemption Letter) while
preserving the Rights Agreement Exemption, 9.0%, and (ii) following the Rights
Agreement Termination Date, 9.0%. As long as the Section 16 Percentage is less
than 9.0%, JPMorgan will notify Counterparty at least three Exchange Business
Days prior to designating an Early Termination Date on account of the Section 16
Percentage exceeding the Section 16 Threshold Percentage, which notice (the
“Threshold Notice”) shall specify the Section 16 Percentage (as determined by
JPMorgan in good faith) prompting such notice, and (i) if Counterparty so
requests, JPMorgan will consent to a modification to the Exemption Letter solely
for the purpose of increasing the Exemption Letter Limitation or removing the
provision therein that limits the number of Shares that JPMorgan and its
“Affiliates” and “Associates” may “Beneficially Own” in connection with the
“Relevant Transactions” (each, as defined in the Exemption Letter) and (ii) if a
modification described in clause (i) above is requested and implemented on or
before the close of business on the third Exchange Business Day following
Counterparty’s receipt of the applicable Threshold Notice, the Section 16
Percentage shall not be deemed to have exceeded the Section 16 Threshold
Percentage, and JPMorgan shall not be entitled to designate an Early Termination
Date based on the Section 16 Percentage specified in the applicable Threshold
Notice, unless such Section 16 Percentage exceeds the modified Section 16
Threshold Percentage. For the avoidance of doubt, prior to any subsequent
designation of an Early Termination Date on account of the Section 16 Percentage
being in excess of any modified Section 16 Threshold Percentage, as long as the
Section 16 Percentage is less than 9.0%, the provisions set forth in the
immediately preceding sentence, including the requirement of delivery by
JPMorgan of another Threshold Notice, shall be applicable. The “Option Equity
Percentage” as of any day is the fraction, expressed as a percentage, (A) the
numerator of which is the sum of (1) the product of the Number of Options and
the Option Entitlement and (2) the aggregate number of Shares underlying any
other call option transaction sold by JPMorgan to Counterparty, and (B) the
denominator of which is the

 

19

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  number of Shares outstanding. The “Share Amount” as of any day is the number
of Shares that JPMorgan and any person whose ownership position would be
aggregated with that of JPMorgan (JPMorgan or any such person, a “JPMorgan
Person”) under any law, rule, regulation, regulatory order or organizational
documents or contracts of Counterparty (other than the Exemption Letter) that
are, in each case, applicable to ownership of Shares (“Applicable
Restrictions”), owns, beneficially owns, constructively owns, controls, holds
the power to vote or otherwise meets a relevant definition of ownership under
any Applicable Restriction, as determined by JPMorgan in its reasonable
discretion. The “Applicable Share Limit” means a number of Shares equal to
(A) the minimum number of Shares that could give rise to reporting or
registration obligations or other requirements (including obtaining prior
approval from any person or entity) of a JPMorgan Person, or could result in an
adverse effect on a JPMorgan Person, under any Applicable Restriction, as
determined by JPMorgan in its reasonable discretion, minus (B) 1% of the number
of Shares outstanding.

 

  (iii) Notwithstanding any other provision in this Confirmation to the contrary
requiring or allowing JPMorgan to purchase, sell, receive or deliver any Shares
or other securities, or make or receive any payment in cash, to or from
Counterparty, JPMorgan may designate any of its affiliates to purchase, sell,
receive or deliver such Shares or other securities, or to make or receive such
payment in cash, and otherwise to perform JPMorgan’s obligations in respect of
the Transaction and any such designee may assume such obligations. JPMorgan
shall be discharged of its obligations to Counterparty to the extent of any such
performance.

 

  (f) Staggered Settlement. If upon advice of counsel with respect to applicable
legal and regulatory requirements, including any requirements relating to
JPMorgan’s hedging activities hereunder, JPMorgan reasonably determines that it
would not be practicable or advisable to deliver, or to acquire Shares to
deliver, any or all of the Shares to be delivered by JPMorgan on any Settlement
Date for the Transaction, JPMorgan may, by notice to Counterparty on or prior to
any Settlement Date (a “Nominal Settlement Date”), elect to deliver the Shares
on two or more dates (each, a “Staggered Settlement Date”) as follows:

 

  (i) in such notice, JPMorgan will specify to Counterparty the related
Staggered Settlement Dates (the first of which will be such Nominal Settlement
Date and the last of which will be no later than the twentieth (20th) Exchange
Business Day following such Nominal Settlement Date) and the number of Shares
that it will deliver on each Staggered Settlement Date;

 

  (ii) the aggregate number of Shares that JPMorgan will deliver to Counterparty
hereunder on all such Staggered Settlement Dates will equal the number of Shares
that JPMorgan would otherwise be required to deliver on such Nominal Settlement
Date; and

 

  (iii) if the Net Share Settlement terms set forth above were to apply on the
Nominal Settlement Date, then the Net Share Settlement terms will apply on each
Staggered Settlement Date, except that the Shares otherwise deliverable on such
Nominal Settlement Date will be allocated among such Staggered Settlement Dates
as specified by JPMorgan in the notice referred to in clause (i) above.

 

  (g) [Reserved.]

 

  (h) Role of Agent. Each party agrees and acknowledges that (i) J.P. Morgan
Securities LLC, an affiliate of JPMorgan (“JPMS”), has acted solely as agent and
not as principal with respect to the Transaction and (ii) JPMS has no obligation
or liability, by way of guaranty, endorsement or otherwise, in any manner in
respect of the Transaction (including, if applicable, in respect of the
settlement thereof). Each party agrees it will look solely to the other party
(or any guarantor in respect thereof) for performance of such other party’s
obligations under the Transaction.

 

20

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  (i) [Reserved.]

 

  (j) Additional Termination Events.

 

  (i) Notwithstanding anything to the contrary in this Confirmation if an event
of default with respect to Counterparty (other than an event of default
resulting directly from an Event of Default of the type set forth in
Section 5(a)(i) of the Agreement with respect to JPMorgan) occurs under the
terms of the Convertible Notes as set forth in Section 7.01 of the Indenture and
the outstanding Convertible Notes have been declared immediately due and payable
in accordance with Section 7.01 of the Indenture, then such event of default
shall constitute an Additional Termination Event applicable to the Transaction
and, with respect to such Additional Termination Event, (A) Counterparty shall
be deemed to be the sole Affected Party, (B) the Transaction shall be the sole
Affected Transaction and (C) JPMorgan shall be the party entitled to designate
an Early Termination Date pursuant to Section 6(b) of the Agreement.

 

  (ii) Notwithstanding anything to the contrary in this Confirmation, the
receipt by JPMorgan from Counterparty, within the applicable time period set
forth under “Notice of Exercise” above, of any Notice of Exercise in respect of
Options that relate to Convertible Notes as to which additional Shares would be
added to the Conversion Rate pursuant to Section 15.03 of the Indenture in
connection with a “Make-Whole Fundamental Change” (as defined in the Indenture)
shall constitute an Additional Termination Event as provided in this Section
9(j)(ii). Upon receipt of any such Notice of Exercise, JPMorgan shall designate
an Exchange Business Day following such Additional Termination Event (which
Exchange Business Day shall in no event be earlier than the related settlement
date for such Convertible Notes) as an Early Termination Date with respect to
the portion of the Transaction corresponding to a number of Options (the
“Make-Whole Conversion Options”) equal to the lesser of (A) the number of such
Options specified in such Notice of Exercise and (B) the Number of Options as of
the date JPMorgan designates such Early Termination Date and, as of such date,
the Number of Options shall be reduced by the number of Make-Whole Conversion
Options. Any payment hereunder with respect to such termination shall be
calculated pursuant to Section 6 of the Agreement as if (1) an Early Termination
Date had been designated in respect of a Transaction having terms identical to
the Transaction and a Number of Options equal to the number of Make-Whole
Conversion Options, (2) Counterparty were the sole Affected Party with respect
to such Additional Termination Event and (3) the terminated portion of the
Transaction were the sole Affected Transaction (and, for the avoidance of doubt,
in determining the amount payable pursuant to Section 6 of the Agreement, the
Calculation Agent shall not take into account any adjustments to the Option
Entitlement that result from corresponding adjustments to the Conversion Rate
pursuant to Section 15.03 of the Indenture); provided that the amount of cash
deliverable in respect of such early termination by JPMorgan to Counterparty
shall not be greater than the excess of (I) (1) the number of Make-Whole
Conversion Options, multiplied by (2) the Conversion Rate (after taking into
account any applicable adjustments to the Conversion Rate pursuant to
Section 15.03 of the Indenture), multiplied by (3) the Applicable Limit Price on
the Settlement Date for the Make-Whole Conversion Options over (II) the
aggregate principal amount of such Convertible Notes, as determined by the
Calculation Agent in a commercially reasonable manner.

 

  (k) Amendments to Equity Definitions; No Automatic Early Termination.

 

  (i) Section 12.9(b)(i) of the Equity Definitions is hereby amended by
(1) replacing “either party may elect” with “JPMorgan may elect” and
(2) replacing “notice to the other party” with “notice to Counterparty” in the
first sentence of such section.

 

  (ii) The “Automatic Early Termination” provision of Section 6(a) of the
Agreement will not apply to JPMorgan and will not apply to Counterparty.

 

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  (l) No Setoff. Each party waives any and all rights it may have to set off
obligations arising under the Agreement and the Transaction against other
obligations between the parties, whether arising under any other agreement,
applicable law or otherwise.

 

  (m) Alternative Calculations and Payment on Early Termination and on Certain
Extraordinary Events. If (a) an Early Termination Date (whether as a result of
an Event of Default or a Termination Event) occurs or is designated with respect
to the Transaction or (b) the Transaction is cancelled or terminated upon the
occurrence of an Extraordinary Event (except as a result of (i) a
Nationalization, Insolvency or Merger Event in which the consideration to be
paid to holders of Shares consists solely of cash, (ii) a Merger Event or Tender
Offer that is within Counterparty’s control, or (iii) an Event of Default in
which Counterparty is the Defaulting Party or a Termination Event in which
Counterparty is the Affected Party other than an Event of Default of the type
described in Section 5(a)(iii), (v), (vi), (vii) or (viii) of the Agreement or a
Termination Event of the type described in Section 5(b) of the Agreement, in
each case that resulted from an event or events outside Counterparty’s control),
and if JPMorgan would owe any amount to Counterparty pursuant to
Section 6(d)(ii) of the Agreement or any Cancellation Amount pursuant to Article
12 of the Equity Definitions (any such amount, a “Payment Obligation”), then
JPMorgan shall satisfy the Payment Obligation by the Share Termination
Alternative (as defined below), unless (a) Counterparty gives irrevocable
telephonic notice to JPMorgan, confirmed in writing within one Scheduled Trading
Day, no later than 12:00 p.m. (New York City time) on the Merger Date, Tender
Offer Date, Announcement Date (in the case of a Nationalization, Insolvency or
Delisting), Early Termination Date or date of cancellation, as applicable, of
its election that the Share Termination Alternative shall not apply,
(b) Counterparty remakes the representation set forth in Section 8(f) as of the
date of such election and (c) JPMorgan agrees, in its sole discretion, to such
election, in which case the provisions of Section 12.7 or Section 12.9 of the
Equity Definitions, or the provisions of Section 6(d)(ii) of the Agreement, as
the case may be, shall apply.

 

  Share Termination Alternative:    If applicable, JPMorgan shall deliver to
Counterparty the Share Termination Delivery Property on, or as promptly as
practicable (in compliance with applicable laws, rules and regulations and
policies of Dealer and taking into account existing liquidity conditions) after,
the date when the relevant Payment Obligation would otherwise be due pursuant to
Section 12.7 or 12.9 of the Equity Definitions or Section 6(d)(ii) and 6(e) of
the Agreement, as applicable, in satisfaction of such Payment Obligation in the
manner reasonably requested by Counterparty free of payment.  
Share Termination Delivery Property:    A number of Share Termination Delivery
Units, as calculated by the Calculation Agent, equal to the Payment Obligation
divided by the Share Termination Unit Price. The Calculation Agent shall adjust
the Share Termination Delivery Property by replacing any fractional portion of a
security therein with an amount of cash equal to the value of such fractional
security based on the values used to calculate the Share Termination Unit Price.
  Share Termination Unit Price:    The value of property contained in one Share
Termination Delivery Unit, as determined by the Calculation Agent by
commercially reasonable means, in accordance with the following sentence, and
notified by the Calculation Agent to JPMorgan at the time of notification of the
Payment Obligation. The parties agree that in determining the Share

 

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     Termination Delivery Unit Price the Calculation Agent shall, to the extent
practicable, consider only objectively verifiable market data and/or the
purchase prices paid in connection with the purchase of Share Termination
Delivery Property, in each case, relating to transactions that are substantially
contemporaneous with the termination and settlement of the Transaction (or the
relevant portion thereof).   Share Termination Delivery Unit:    One Share or,
if the Shares have changed into cash or any other property or the right to
receive cash or any other property as the result of a Nationalization,
Insolvency or Merger Event (any such cash or other property, the “Exchange
Property”), a unit consisting of the type and amount of such Exchange Property
received by a holder of one Share (without consideration of any requirement to
pay cash or other consideration in lieu of fractional amounts of any securities)
in such Nationalization, Insolvency or Merger Event, as determined by the
Calculation Agent.   Failure to Deliver:    Applicable   Other applicable
provisions:    If Share Termination Alternative is applicable, the provisions of
Sections 9.8, 9.9 and 9.11 (as modified above) of the Equity Definitions and the
provisions set forth opposite the caption “Representation and Agreement” in
Section 2 will be applicable, except that all references in such provisions to
“Physically-settled” shall be read as references to “Share Termination Settled”
and all references to “Shares” shall be read as references to “Share Termination
Delivery Units”. “Share Termination Settled” in relation to the Transaction
means that the Share Termination Alternative is applicable to the Transaction.

 

  (n) Waiver of Jury Trial. Each party waives, to the fullest extent permitted
by applicable law, any right it may have to a trial by jury in respect of any
suit, action or proceeding relating to the Transaction. Each party (i) certifies
that no representative, agent or attorney of either party has represented,
expressly or otherwise, that such other party would not, in the event of such a
suit, action or proceeding, seek to enforce the foregoing waiver and
(ii) acknowledges that it and the other party have been induced to enter into
the Transaction, as applicable, by, among other things, the mutual waivers and
certifications provided herein.

 

  (o)

Registration. Counterparty hereby agrees that if, in the good faith reasonable
judgment of JPMorgan, the Shares (“Hedge Shares”) acquired by JPMorgan for the
purpose of hedging its obligations pursuant to the Transaction cannot be sold in
the public market by JPMorgan without registration under the Securities Act,
Counterparty shall, at its election, either (i) in order to allow JPMorgan to
sell the Hedge Shares in a registered offering, make available to JPMorgan an
effective registration statement under the Securities Act and enter into an
agreement, in form and substance reasonably satisfactory to JPMorgan,
substantially in the form of an underwriting agreement for a registered
secondary offering (but without any compensation to JPMorgan other than
reimbursement of expenses); provided, however, that if JPMorgan, in its sole
reasonable discretion, is not satisfied with access to due diligence materials,
the results of its due diligence investigation, or the procedures and
documentation for the registered offering referred to above,

 

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  then clause (ii) or clause (iii) of this paragraph shall apply at the election
of Counterparty, (ii) in order to allow JPMorgan to sell the Hedge Shares in a
private placement, enter into a private placement agreement substantially
similar to private placement purchase agreements customary for private
placements of equity securities (but without any compensation to JPMorgan other
than reimbursement of expenses), in form and substance reasonably satisfactory
to JPMorgan (in which case, the Calculation Agent shall make any adjustments to
the terms of the Transaction that are necessary, in its reasonable judgment, to
compensate JPMorgan for any discount from the public market price of the Shares
incurred on the sale of Hedge Shares in a private placement), or (iii) purchase
the Hedge Shares from JPMorgan at the Relevant Price on such Exchange Business
Days, and in the amounts, requested by JPMorgan.

 

  (p) Tax Disclosure. Effective from the date of commencement of discussions
concerning the Transaction, Counterparty and each of its employees,
representatives, or other agents may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the Transaction
and all materials of any kind (including opinions or other tax analyses) that
are provided to Counterparty relating to such tax treatment and tax structure.

 

  (q) Right to Extend. JPMorgan may postpone or add, in whole or in part, any
Valid Day or Valid Days during the Settlement Averaging Period or any other date
of valuation, payment or delivery by JPMorgan, with respect to some or all of
the Options hereunder, if JPMorgan reasonably determines, in its discretion,
that such action is reasonably necessary or appropriate to preserve JPMorgan’s
hedging or hedge unwind activity hereunder in light of existing liquidity
conditions or to enable JPMorgan to effect purchases of Shares in connection
with its hedging, hedge unwind or settlement activity hereunder in a manner that
would, if JPMorgan were Counterparty or an affiliated purchaser of Counterparty,
be in compliance with applicable legal, regulatory or self-regulatory
requirements, or with related policies and procedures applicable to JPMorgan;
provided that JPMorgan may not postpone or extend any such date by more than 50
Exchange Business Days.

 

  (r) Status of Claims in Bankruptcy. JPMorgan acknowledges and agrees that this
Confirmation is not intended to convey to JPMorgan rights against Counterparty
with respect to the Transaction that are senior to the claims of common
stockholders of Counterparty in any United States bankruptcy proceedings of
Counterparty; provided that nothing herein shall limit or shall be deemed to
limit JPMorgan’s right to pursue remedies in the event of a breach by
Counterparty of its obligations and agreements with respect to the Transaction;
provided, further, that nothing herein shall limit or shall be deemed to limit
JPMorgan’s rights in respect of any transactions other than the Transaction.

 

  (s) Securities Contract; Swap Agreement. The parties hereto intend for (i) the
Transaction to be a “securities contract” and a “swap agreement” as defined in
the Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy
Code”), and the parties hereto to be entitled to the protections afforded by,
among other Sections, Sections 362(b)(6), 362(b)(17), 546(e), 546(g), 555 and
560 of the Bankruptcy Code, (ii) a party’s right to liquidate the Transaction
and to exercise any other remedies upon the occurrence of any Event of Default
under the Agreement with respect to the other party to constitute a “contractual
right” as described in the Bankruptcy Code, and (iii) each payment and delivery
of cash, securities or other property hereunder to constitute a “settlement
payment” and a “transfer” as defined in the Bankruptcy Code.

 

  (t) Notice of Certain Other Events. Counterparty covenants and agrees that:

 

  (i) promptly following the public announcement of the results of any election
by the holders of Shares with respect to the consideration due upon consummation
of any Merger Event, Counterparty shall give JPMorgan written notice of (x) the
weighted average of the types and amounts of consideration that holders of
Shares have elected to receive upon consummation of such Merger Event or (y) if
no holders of Shares affirmatively make such election, the types and amounts of
consideration actually received by holders of Shares (the date of such
notification, the “Consideration Notification Date”); provided that in no event
shall the Consideration Notification Date be later than the date on which such
Merger Event is consummated; and

 

  (ii) promptly following any adjustment to the Convertible Notes in connection
with any Potential Adjustment Event, Merger Event or Tender Offer, Counterparty
shall give JPMorgan written notice of the details of such adjustment.

 

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  (u) Wall Street Transparency and Accountability Act. In connection with
Section 739 of the Wall Street Transparency and Accountability Act of 2010
(“WSTAA”), the parties hereby agree that neither the enactment of WSTAA or any
regulation under the WSTAA, nor any requirement under WSTAA or an amendment made
by WSTAA, shall limit or otherwise impair either party’s otherwise applicable
rights to terminate, renegotiate, modify, amend or supplement this Confirmation
or the Agreement, as applicable, arising from a termination event, force
majeure, illegality, increased costs, regulatory change or similar event under
this Confirmation, the Equity Definitions incorporated herein, or the Agreement
(including, but not limited to, rights arising from Change in Law, Hedging
Disruption, Increased Cost of Hedging, an Excess Ownership Position, or
Illegality (as defined in the Agreement)).

 

  (v) Agreements and Acknowledgements Regarding Hedging. Counterparty
understands, acknowledges and agrees that: (A) at any time on and prior to the
Expiration Date, JPMorgan and its affiliates may buy or sell Shares or other
securities or buy or sell options or futures contracts or enter into swaps or
other derivative securities in order to adjust its hedge position with respect
to the Transaction; (B) JPMorgan and its affiliates also may be active in the
market for Shares other than in connection with hedging activities in relation
to the Transaction; (C) JPMorgan shall make its own determination as to whether,
when or in what manner any hedging or market activities in securities of Issuer
shall be conducted and shall do so in a manner that it deems appropriate to
hedge its price and market risk with respect to the Relevant Prices; and (D) any
market activities of JPMorgan and its affiliates with respect to Shares may
affect the market price and volatility of Shares, as well as the Relevant
Prices, each in a manner that may be adverse to Counterparty.

 

  (w) Early Unwind. In the event the sale of the “Underwritten Securities” (as
defined in the Purchase Agreement) is not consummated with the Initial
Purchasers for any reason, or Counterparty fails to deliver to JPMorgan opinions
of counsel as required pursuant to Section 9(a), in each case by 5:00 p.m. (New
York City time) on the Premium Payment Date, or such later date as agreed upon
by the parties (the Premium Payment Date or such later date, the “Early Unwind
Date”), the Transaction shall automatically terminate (the “Early Unwind”) on
the Early Unwind Date and (i) the Transaction and all of the respective rights
and obligations of JPMorgan and Counterparty under the Transaction shall be
cancelled and terminated and (ii) each party shall be released and discharged by
the other party from and agrees not to make any claim against the other party
with respect to any obligations or liabilities of the other party arising out of
and to be performed in connection with the Transaction either prior to or after
the Early Unwind Date. Each of JPMorgan and Counterparty represents and
acknowledges to the other that, upon an Early Unwind, all obligations with
respect to the Transaction shall be deemed fully and finally discharged.

 

  (x) Payment by Counterparty. In the event that, following payment of the
Premium, (i) an Early Termination Date occurs or is designated with respect to
the Transaction as a result of a Termination Event or an Event of Default (other
than an Event of Default arising under Section 5(a)(ii) or 5(a)(iv) of the
Agreement) and, as a result, Counterparty owes to JPMorgan an amount calculated
under Section 6(e) of the Agreement, or (ii) Counterparty owes to JPMorgan,
pursuant to Section 12.7 or Section 12.9 of the Equity Definitions, an amount
calculated under Section 12.8 of the Equity Definitions, such amount shall be
deemed to be zero.

 

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LOGO [g742417logo_jpmorgan.jpg]

 

Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing this Confirmation and returning it to J.P. Morgan
Securities LLC, 383 Madison Ave, New York, NY 10179, and by email to
EDG_Notices@jpmorgan.com and EDG_NY_Corporate_Sales_Support@jpmorgan.com.

Very truly yours,

 

J.P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National
Association By:  

/s/ Santosh Sreenivasan

Authorized Signatory Name:   Santosh Sreenivasan

Accepted and confirmed

as of the Trade Date:

 

ARIAD Pharmaceuticals, Inc. By:  

/s/ Edward M. Fitzgerald

Authorized Signatory Name:   Edward M. Fitzgerald   Executive Vice President,
CFO

 

JPMorgan Chase Bank, National Association

Organised under the laws of the United States as a National Banking Association.

Main Office 1111 Polaris Parkway, Columbus, Ohio 43240

Registered as a branch in England & Wales branch No. BR000746

Registered Branch Office 25 Bank Street, Canary Wharf, London E14 5JP

Authorised by the Office of the Comptroller of the Currency in the jurisdiction
of the USA.

Authorised by the Prudential Regulation Authority. Subject to regulation by the
Financial Conduct

Authority and to limited regulation by the Prudential Regulation Authority.
Details about the

extent of our regulation by the Prudential Regulation Authority are available
from us on request.