Exhibit 10.6

 

DIRECTOR COMPENSATION PLAN

 

1.              Applicable Persons

 

·                  Each director of Ironwood Pharmaceuticals, Inc. (the
“Company”) who is not an employee of the Company (each, an “Outside Director”).

 

2.              Restricted Stock Grant for Board Service

 

·                  For the period of service from January 1, 2014 to the 2014
Annual Meeting Date (the “2014 Service Period”), on January 2, 2014, the Company
shall grant to each Outside Director a number of restricted shares of the
Company’s Class A common stock equal to the Peer Group Amount (i) multiplied by
the number of days in the 2014 Service Period divided by 365, and (ii) divided
by the Average Stock Price.  Beginning with the 2014 Annual Meeting of
Stockholders, on each Annual Meeting Date the Company shall grant to each
Outside Director a number of restricted shares of the Company’s Class A common
stock equal to the Peer Group Amount divided by the Average Stock Price.

 

·                  The shares of restricted stock granted with respect to the
2014 Service Period shall vest in two equal installments, on March 31, 2014 and
on the day before the 2014 Annual Meeting Date.  Beginning with the shares of
restricted stock granted at the 2014 Annual Meeting of Stockholders, such shares
shall vest in four equal installments commencing on the Annual Meeting Date, as
follows: 25% of the shares shall vest on each three-month anniversary of the
Annual Meeting Date over a nine-month period and the remaining 25% of the shares
shall vest on the day before the Annual Meeting Date for the next calendar
year.  In each case, vesting is contingent on such Outside Director continuing
to serve as a member of the Board of Directors on the last day of each
applicable vesting period.

 

·                  If such Outside Director ceases serving as a member of the
Board of Directors at any time during the vesting period, unvested shares will
be forfeited on the date of such Outside Director’s termination of service.

 

·                  Unless otherwise established by the Compensation and HR
Committee, if an Outside Director is elected as a member of the Board of
Directors other than at an annual meeting of stockholders, on the start date of
such Outside Director’s service on the Board of Directors (the “Start Date”),
the Company shall grant such Outside Director a number of restricted shares of
the Company’s Class A common stock equal to the number of restricted shares
granted to Outside Directors on the last Annual Meeting Date preceding the Start
Date multiplied by the Ratio. Such shares shall vest equally over the number of
vesting periods remaining for the restricted shares granted to Outside Directors
on the last Annual Meeting Date preceding the Start Date.

 

·                  In each case, the number of restricted shares granted shall
be rounded down to the nearest whole number so that no fractional shares shall
be issued.

 

·                  For purposes of this section, the following definitions
apply:

 

·                  “Annual Meeting Date” is the date of the annual meeting of
stockholders of the Company for a calendar year.

 

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·                  “Average Stock Price” is the average closing price of the
Company’s Class A common stock on the NASDAQ Global Select Market (or the stock
exchange on which the Company’s Class A common stock is being actively traded)
for the six months preceding the month in which the annual meeting of
stockholders or a Start Date occurs, as applicable (or, in the case of the 2014
Service Period, for the period July 1, 2013 — December 31, 2013).  For example,
if the Annual Meeting Date is June 3, 2014, the Average Stock Price is the
average closing price of the Company’s Class A common stock on the NASDAQ Global
Select Market (or the stock exchange on which the Company’s Class A common stock
is being actively traded) from December 1, 2013 — May 31, 2014.

 

·                  “Peer Group Amount” shall mean the dollar amount for total
director compensation approximating the 25th percentile of the Company’s current
peer group (i.e., the Company’s peer group as of the date of grant of the
restricted shares of the Company’s Class A common stock), as determined by the
Compensation and HR Committee.

 

·                  “Ratio” equals (i) 365 minus the number of days elapsed
between the last Annual Meeting Date preceding the Start Date and the Start
Date, (ii) divided by 365.

 

3.              Purchase Price and Other Provisions Applicable to All Stock
Grants

 

·                  Shares issued shall be issued at no cash cost and shall be
subject to the terms and conditions of the Company’s stock plan then in effect
(which, at the time of implementation of this Director Compensation Plan, is the
Company’s Amended and Restated 2010 Employee, Director and Consultant Equity
Incentive Plan).

 

·                  The terms of each such grant shall be evidenced by a
restricted stock agreement.  Such restricted stock agreement shall contain a
restriction on the transfer of any shares during the term that the director
serves on the Board of Directors with the following exceptions: (i) shares sold
to cover tax liabilities; (ii) vested shares transferred to immediate family
members or trusts for their benefit, (iii) vested shares transferred or sold
upon a change of control, or (iv) as otherwise approved by the Board of
Directors or Compensation and HR Committee.

 

·                  Directors will be responsible for payment of any state or
federal income taxes resulting from the award.

 

·                  The Compensation and HR Committee shall have the authority to
accelerate all or a portion of any unvested restricted shares in the event that
an Outside Director’s service to the Board of Directors ends prior to completion
of a vesting period.  In making this decision, the Compensation and HR Committee
shall take into account the following factors: (i) the cumulative contributions
made by the Outside Director to the Company, (ii) his or her length of service
on the Board of Directors, and (iii) all the facts and circumstances associated
with the Outside Director’s departure including the economic consequences of
early departure.

 

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4.              Annual Board Chairman and Board Committee Compensation

 

·                  Each Outside Director shall also receive an additional
$10,000 annually for his or her service as Chairman of the Board of Directors
and/or as Chairman of a committee of the Board of Directors, commencing on
January 1, 2014; provided that, if an Outside Director ceases or commences
service as Chairman of the Board of Directors and/or as Chairman of a committee
of the Board of Directors, the amount of such fee shall be prorated through
(i) the date the Outside Director ceases to hold such chairperson position, or
(ii) from the date the Outside Director begins serving in such chairperson
position, respectively.

 

·                  Payment of such fees shall be made in cash or a grant of
Class A common stock at the election of such Outside Director, quarterly in
arrears as follows:  March 15, June 15, September 15 and December 15 (or if such
date is not a trading day, the last trading day preceding such date) (each, a
“Grant Date”).  If stock is elected, the shares shall automatically be issued to
an Outside Director without further action of the Board of Directors as of the
applicable Grant Date, and the number of shares of stock to be issued shall be
calculated by dividing $2,500 (or a prorated amount thereof if an Outside
Director ceases or commences holding a chairperson position during such period)
by the fair market value of a share of Class A common stock of the Company on
such Grant Date.  The number of such shares granted shall be rounded down to the
nearest whole number so that no fractional shares shall be issued.

 

·                  Each Outside Director shall make an election, indicating the
type of compensation to be received for such annual chairperson compensation,
prior to January 1 of each year.  In the event that an Outside Director has not
submitted his or her election for the applicable year by December 31, then the
election of such Outside Director shall be deemed to be the same as the election
made by such Outside Director for the prior year.  If an Outside Director has
never made an election, such fees shall be paid in cash.

 

The Board of Directors shall review this Director Compensation Plan from time to
time to assess whether any amendments in the type and amount of compensation
provided herein should be adjusted.

 

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