Exhibit 10.6

 

IRONWOOD PHARMACEUTICALS, INC.

 

[AMENDED & RESTATED]

EXECUTIVE SEVERANCE AGREEMENT

 

This [Amended & Restated] Executive Severance Agreement (this “Agreement”) is
made as of the day of [  ]1, (the “Effective Date”) by and between Ironwood
Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and [  ] (the
“Executive”).

 

WHEREAS the Executive currently serves as an employee of the Company;

 

[WHEREAS the Company previously provided for severance benefits for the
Executive in specified circumstances pursuant to an Executive Severance
Agreement, effective as of [  ]2, by and between the Company and the Executive
(the “Prior Agreement”);] and

 

WHEREAS the Company and the Executive [now] desire to [amend and restate the
Prior Agreement to] provide for [additional] severance benefits for the
Executive in specified circumstances that may arise on or after the Effective
Date;

 

NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Company and the Executive agree as follows:

 

1. Severance Benefits.

(a) If the Executive’s employment terminates by reason of an Involuntary
Termination or Constructive Termination (in either case, other than a Change of
Control Termination), (i) the Company will pay the Executive an amount equal to
[twelve (12)]3 months of his or her base salary, at the rate in effect as of the
Termination Date ([the “Initial Salary Payment”), plus an amount equal to a
maximum of six (6) months of his or her base salary for any period beginning as
of the first anniversary of the Termination Date during which the Executive has
not secured new, reasonably similar full-time employment (the “Additional Salary
Payment”, and together with the Initial Salary Payment,]4 the “Salary
Payment”)[, provided that the Executive seeks to obtain such new employment and
keep the Company informed thereof, consistent with the terms of the Separation
Agreement (as such term is defined in Section 4 below)]5, (ii) if the
termination occurs prior to the payment of an annual cash incentive award from
the prior completed year, the Company will pay the Executive such unpaid award
to the extent the Executive would have received such award should he or she have
been employed on the date such awards are paid to the rest of the Company (the
“Prior Year Bonus Payment”), (iii) the Company will pay the Executive a pro rata
amount of the Executive’s annual cash incentive award target for the current
year (pro-rated based on the percentage of the year worked prior to the
termination) (the “Current Year Bonus Payment”), (iv) the Company will pay the
Executive an additional amount equal to the Executive’s full annual cash
incentive award target for the current year6 (the “Additional Bonus Payment”)
(collectively, the Prior Year Bonus Payment, if any, the Current Year Bonus
Payment, and the Additional Bonus Payment are referred to as the “Aggregate
Bonus Payment”), (v) provided that the Executive timely elects continued medical
coverage pursuant to Part 6 of Subtitle B of Title I of the Employee Retirement
Income Security Act of 1974, as amended, the Company will permit the Executive
to continue to participate in its group medical plan for [twelve (12)]7 months
following the Termination Date[ (the

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1 Insert amendment and restatement date or effective date, as applicable.

2 Insert original effective date.

3 Revise to “eighteen (18)” for CEO agreement.

4 Delete for CEO agreement.

5 Delete for CEO agreement.

6 Add “, multiplied by 1.5” for CEO agreement.

7 Revise to “eighteen (18)” for CEO agreement.

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“Initial COBRA Coverage”), plus any additional period during which the Executive
is not eligible to participate in a group medical plan of another employer other
than the Company’s group medical plan, for up to six (6) months following the
first anniversary of the Termination Date]8, at the same rate that the Executive
would be required to contribute toward such coverage if he or she were actively
employed ([the “Additional COBRA Coverage,” and together with the Initial COBRA
Coverage, ]9the “COBRA Coverage”), and (vi) the Executive will be eligible for
outplacement assistance, consistent with industry standards for similarly
situated executive officers in the pharmaceutical industry, as determined by the
Compensation Committee in its discretion (the “Outplacement Assistance”,
collectively with the Salary Payment, the Aggregate Bonus Payment, and the COBRA
Coverage, the “Cash Severance Benefits”). [For the avoidance of doubt, the
Additional Salary Payment and the Additional COBRA Coverage will only be
provided to the Executive if he or she has not secured new, reasonably similar
full-time employment following the Termination Date.]10

(b) If as of immediately prior to the time of the Involuntary Termination or
Constructive Termination, as applicable, the Executive has any outstanding
unvested stock options, restricted stock, restricted stock units or other equity
awards granted by the Company and that are subject to vesting solely based on
time (“Time-Based Company Equity Awards”) then, immediately prior to the
Termination Date, with respect to each Time-Based Company Equity Award, the
Executive will vest in (i) the portion of the Time-Based Company Equity Award
that would otherwise have vested had the Executive remained employed with the
Company through the date that is [eighteen (18)]11 months following the
Termination Date (the “Extended Vesting Date”) and (ii) an additional portion of
the Time-Based Company Equity Award equal to the portion that would have vested
on the next regular vesting date of such Time-Based Company Equity Award after
the Extended Vesting Date (the “Additional Awards”) as if the Additional Awards
vested on a daily basis from the last regular award vesting date occurring prior
to the Extended Vesting Date (or, if no prior vesting date has occurred, from
the grant date of such Additional Awards) through the Extended Vesting Date
(rounded down to the nearest whole number of shares). Any Time-Based Company
Equity Awards that do not vest in accordance with the immediately preceding
sentence of this Section 1(b) shall remain outstanding following the Termination
Date (but shall not continue to vest in accordance with the terms of the
applicable award agreement) and eligible to vest in accordance with Section 2(b)
below, with any such vesting to become effective on the date of the Change of
Control. Any Time-Based Company Equity Awards that do not vest pursuant to the
first sentence of this Section 1(b) or pursuant to Section 2(b) shall terminate
with no consideration due to the Executive. Notwithstanding anything to the
contrary in the plan or award agreement under which the Company Equity Awards
(as defined below) were issued, any outstanding vested stock options held by the
Executive as of the Termination Date (after taking into account the accelerated
vesting provided in this Section 1(b)), including any outstanding vested stock
options held by the Executive that are granted in connection with the Planned
Separation in substitution for or replacement of vested stock options originally
granted by the Company, may be exercised by the Executive until the date that is
the earlier of (1) [twenty-four (24)]12 months after the Termination Date (or,
in the event that a Public Announcement is made or a Definitive Agreement is
entered into during such [twenty-four (24)] 13 month period, the later of (i)
the expiration of such [twenty-four (24)] 14 month period or (ii) the first to
occur of the date that is three (3) months following the Change of Control and
thirty (30) days following the date on which the Company announces that such
Definitive Agreement has been terminated or that the Company’s efforts to
consummate the Change of Control contemplated by such Public Announcement or
such Definitive Agreement have been abandoned) and (2) the originally prescribed
term of such stock option (together with the accelerated vesting described
above, the “Equity Severance Benefits” and together with the Cash Severance
Benefits, the “Severance Benefits”). To the extent any Time-Based Company Equity
Awards are subject to Section 409A of the Code (“Section 409A”), vesting will be
accelerated only to the extent the acceleration does not cause additional taxes
or penalties under Section 409A. The acceleration, if any, of any vesting of any
outstanding unvested stock options, restricted stock, restricted stock units or
other equity awards

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8  Delete for CEO agreement.

9  Delete for CEO agreement.

10 Delete for CEO agreement.

11 Revise to “twenty-four (24)” for CEO agreement.

12 Revise to “thirty-six (36)” for CEO agreement.

13 Revise to “thirty-six (36)” for CEO agreement.

14 Revise to “thirty-six (36)” for CEO agreement.

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granted by the Company to the Executive subject to (a) both time- and
performance-based vesting criteria or (b) solely performance-based vesting
criteria (clauses (a) and (b), collectively, “Performance-Based Company Equity
Awards”, and together with the Time-Based Company Equity Awards, “Company Equity
Awards”) shall be determined in accordance with the terms of the plan and award
agreement under which the Performance-Based Company Equity Award was issued.

(c) Subject to Section 8 below, any [Initial]15 Salary Payment and Aggregate
Bonus Payment to which the Executive is entitled hereunder will be paid in a
lump sum on the first regular payroll date of the Company following the
thirty-fifth (35th) calendar day following the Termination Date (except in the
event of any group termination to which a forty-five (45)-day release of claims
consideration period is required under applicable law, in which case such
lump-sum payment will be made on the first regular payroll date of the Company
following the sixtieth (60th) calendar day following the Termination Date)[, and
any Additional Salary Payment to which the Executive is entitled hereunder will
be paid in the form of salary continuation in accordance with the Company’s
regular payroll practices, with the first payment being made on the first
regular payroll date of the Company following the date that is twelve (12)
months following the Termination Date]16. In no event will any Outplacement
Assistance provided to the Executive hereunder extend beyond the December 31 of
the second year following the calendar year in which the Termination Date
occurs, and any reimbursement by the Company of Outplacement Assistance expenses
paid by the Executive will be paid no later than December 31 of the third year
following the calendar year in which the Termination Date occurs.

2. Change of Control Severance Benefits.  

(a) If the Executive’s employment terminates by reason of a Change of Control
Termination, in lieu of any amounts payable pursuant to Section 1(a) above, (i)
the Company will pay the Executive an amount equal to [eighteen (18)]17 months
of his or her base salary, at the rate in effect as of the Termination Date (the
“COC Salary Payment”), (ii) if the termination occurs prior to the payment of an
annual cash incentive award from the prior completed year, the Company will pay
the Executive the Prior Year Bonus Payment, (iii) the Company will pay the
Executive the Current Year Bonus Payment, (iv) the Company will pay the
Executive [the Additional Bonus Payment, multiplied by 1.5]18 (the “COC
Additional Bonus Payment”) (collectively, the Prior Year Bonus Payment, if any,
the Current Year Bonus Payment, and the COC Additional Bonus Payment are
referred to as the “COC Aggregate Bonus Payment”), (v) provided that the
Executive timely elects continued medical coverage pursuant to Part 6 of
Subtitle B of Title I of the Employee Retirement Income Security Act of 1974, as
amended, the Company will permit the Executive to continue to participate in its
group medical plan for [eighteen (18)]19 months following the Termination Date,
at the same rate that the Executive would be required to contribute toward such
coverage if he or she were actively employed (the “COC COBRA Coverage”), and
(vi) the Executive will be eligible for Outplacement Assistance (collectively
the Outplacement Assistance, the COC Salary Payment, the COC Aggregate Bonus
Payment and the COC COBRA Coverage are referred to as the “COC Cash Severance
Benefits”).  

(b) If as of immediately prior to the time of the Change of Control Termination,
the Executive has any Time-Based Company Equity Awards, then, as of the later of
(i) the date of the Change of Control or (ii) the Termination Date, all
Time-Based Company Equity Awards shall have their vesting fully accelerated so
as to be 100% vested and exercisable. Notwithstanding anything to the contrary
in the plan or award agreement under which the Company Equity Awards were
issued, any outstanding vested stock options held by the Executive as of the
Termination Date (after taking into account the accelerated vesting provided in
this Section 2(b)), including any outstanding vested stock options held by the
Executive that are granted in connection with the Planned Separation in
substitution for or replacement of vested stock options originally granted by
the Company, may be exercised by the Executive until the date that is the
earlier of (1) [twenty-four (24)]20 months after the Termination Date (or, if

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15 Delete for CEO agreement.

16 Delete for CEO agreement.

17 Revise to “twenty-four (24)” for CEO agreement.

18 Revise to “an additional amount equal to the Executive’s full annual cash
incentive award target for the current year, multiplied by 2.0” for CEO
agreement.

19 Revise to “twenty-four (24)” for CEO agreement.

20 Revise to “thirty-six (36)” for CEO agreement.

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later, the date that is three (3) months following the Change of Control) and
(2) the originally prescribed term of such stock option (such extended exercise
window, together with the accelerated vesting described above, the “COC Equity
Severance Benefits” and together with the COC Cash Severance Benefits, the “COC
Severance Benefits”). To the extent any Time-Based Company Equity Awards are
subject to Section 409A, vesting will be accelerated only to the extent the
acceleration does not cause additional taxes or penalties under
Section 409A. The acceleration, if any, of any vesting of any Performance-Based
Company Equity Awards shall be determined in accordance with the terms of the
plan and award agreement under which the Performance-Based Company Equity Award
was issued.

(c) Subject to Section 8 below, any COC Cash Severance Benefits that become
payable will be paid as set forth in this Section 2(c).  An amount equal to the
[Initial]21 Salary Payment and the Aggregate Bonus Payment will be paid in
accordance with the timing set forth in Section 1(c) above.  Any severance
amounts determined with reference to the Executive’s base salary or annual cash
incentive award to which the Executive is entitled pursuant to Section 2(a)
above in excess of the [Initial]22 Salary Payment and the Aggregate Bonus
Payment will be paid in a lump sum on the later of (i) the date of the Change of
Control or (ii) within ten (10) calendar days following the Executive’s Change
of Control Termination. In no event will any Outplacement Assistance provided to
the Executive hereunder extend beyond the December 31 of the second year
following the calendar year in which the Termination Date occurs, and any
reimbursement by the Company of Outplacement Assistance expenses paid by the
Executive will be paid no later than December 31 of the third year following the
calendar year in which the Termination Date occurs.

(d) For the avoidance of doubt, the Executive shall only be entitled to the COC
Severance Benefits in connection with a Change of Control occurring (i) within
twenty-four (24) months prior to the Termination Date or (ii) after the
Termination Date as a result of a Public Announcement or a Definitive Agreement,
which such Public Announcement is made or Definitive Agreement is entered into
no later than that date that is six (6) months following the Termination
Date.  Upon the occurrence of a Change of Control Termination and a Change of
Control described in the preceding sentence, the COC Severance Benefits shall be
the exclusive benefits to which the Executive is entitled, and the Executive
shall not be eligible to receive the Severance Benefits set forth in Section 1
hereof or any severance payments or benefits under the Company’s Change of
Control Severance Benefit Plan, as amended and restated on April 26, 2014, and
as may be further amended from time to time (the “Severance Plan”).  Further,
upon the occurrence of an Involuntary Termination or Constructive Termination
that does not qualify as a Change of Control Termination, the Severance Benefits
shall be the exclusive benefits to which the Executive is entitled, and the
Executive shall not be eligible to receive the COC Severance Benefits set forth
in Section 2 hereof or any severance payments or benefits under the Severance
Plan.

3. Tax Matters.  

(a) Withholding. All payments made by the Company hereunder shall be reduced by
any tax or other amounts required to be withheld by the Company under applicable
law.

(b) Section 105(h). In the event that, in the determination of the Company, the
Company’s provision of the COBRA Coverage as described in Section 1(a)(v) above
or the COC COBRA Coverage as described in Section 2(a)(v) above could reasonably
be expected to subject the Company to any tax or penalty under the Patient
Protection and Affordable Care Act (as amended from time to time, the “ACA”) or
could reasonably be expected to subject any highly compensated individual
employed or formerly employed by the Company to adverse tax consequences under
Section 105(h) of the Code, or applicable regulations or guidance issued under
the ACA or Section 105(h) of the Code, the Company and the Executive will work
together in good faith, consistent with the requirements for compliance with, or
exemption from, Section 409A, to restructure such benefit in a manner intended
to result in a benefit that is or remains exempt from Section 409A.

4. Separation Agreement. Notwithstanding anything herein to the contrary, the
Executive acknowledges and agrees that any obligation of the Company to provide
the Severance Benefits or the COC Severance Benefits is conditioned on the
Executive’s (i) continuing through the Termination Date to perform his or

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21 Delete for CEO agreement.

22 Delete for CEO agreement.

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her job duties satisfactorily and otherwise complying with the Company’s rules
and policies, (ii) continuing to comply with his or her obligations to the
Company and its affiliates that survive termination of the Executive’s
employment, including without limitation pursuant to the Proprietary Information
and Inventions and Noncompetition Agreement between the Executive and the
Company (the “Restrictive Covenants Agreement”), and (iii) signing a separation
agreement on terms and conditions satisfactory to the Company (the “Separation
Agreement”), which will (a) contain among other terms a general release of
claims, an acknowledgement of the Executive’s continuing obligations to the
Company under the Restrictive Covenants Agreement, and, in the Company’s sole
discretion, a one-year post-employment noncompetition and nonsolicitation
agreement, and (b) provide that if the Executive breaches any of his or her
continuing obligations to the Company under the Restrictive Covenants Agreement
or as set forth in the Separation Agreement, all payments of the Severance
Benefits or the COC Severance Benefits will cease, and the Executive will be
required to disgorge any Severance Benefits or COC Severance Benefits that he or
she previously received.  The Executive shall have seven (7) business days to
revoke the Separation Agreement after signing it. The Executive’s timely
execution and non-revocation of the Separation Agreement within sixty (60) days
after the Termination Date (or such shorter period as set forth in the
Separation Agreement) is a condition precedent to the Executive’s right to
receive the Severance Benefits or the COC Severance Benefits. The Separation
Agreement will create legally binding obligations on the part of the Executive,
and the Company therefore advises the Executive to seek the advice of an
attorney before signing the Separation Agreement.  For the avoidance of doubt,
in the event the Executive is entitled to any payments pursuant to the
Restrictive Covenants Agreement, the Severance Benefits or the COC Severance
Benefits received in any calendar year will be reduced by the amount the
Executive is paid in the same such calendar year pursuant to the Restrictive
Covenants Agreement.  In no event will the Executive receive duplicate benefits
pursuant to the Restrictive Covenants Agreement and this Agreement. 

5. Effect on Employment. Nothing contained herein limits the Company’s right to
terminate the Executive’s employment at any time.

6. Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the Commonwealth of Massachusetts,
without giving effect to the conflict of law principles thereof. Any action
brought by any party to this Agreement shall be brought and maintained in a
court of competent jurisdiction in Middlesex or Suffolk Counties in the
Commonwealth of Massachusetts, and each party hereby consents to the exclusive
jurisdiction of such courts.

7. Assignment. Neither the Company nor the Executive may make any assignment of
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other; provided, however, that (a) the
Executive’s economic rights hereunder will automatically be assigned by the
Executive to his or her estate or beneficiaries upon the death of the Executive
and (b) the Company will assign its rights and obligations under this Agreement
without the consent of the Executive in the event that the Company is a party to
a reorganization, consolidation, merger, or sale of all or substantially all of
its stock, and (c) the Company will cause an acquirer of all or substantially
all of its assets to assume this Agreement. This Agreement shall inure to the
benefit of and be binding upon the Company and the Executive, and their
respective successors, executors, administrators, heirs and permitted assigns.

8. Section 409A.

(a) Notwithstanding anything to the contrary in this Agreement, if at the time
of the termination of the Executive’s employment, the Executive is a “specified
employee,” as defined below, any and all amounts, if any, payable under this
Agreement on account of such termination of employment that constitute deferred
compensation and would (but for this provision) be payable within six (6) months
following the date of termination, shall instead be paid, without interest, on
the next business day following the expiration of such six (6) month period or,
if earlier, upon the Executive’s death.

(b) For purposes of this Agreement, all references to “termination of
employment” and correlative phrases shall be construed to require a “separation
from service” (as defined in Section 1.409A-1(h) of the Treasury regulations
after giving effect to the presumptions contained therein), and the term
“specified employee”

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means an individual determined by the Company to be a specified employee under
Treasury regulation Section 1.409A-1(i).

(c) Each payment made under this Agreement shall be treated as a separate
payment and the right to a series of installment payments, if any, under this
Agreement is to be treated as a right to a series of separate payments.

(d) The parties agree that their intent is that payments and benefits under this
Agreement be exempt from Section 409A to the greatest extent applicable. This
Agreement shall be interpreted accordingly to be exempt from Section 409A, and
all provisions of this Agreement shall be construed in a manner consistent with
this intention. In the event that any payments or benefits under this Agreement
are subject to Section 409A, this Agreement shall be construed in a manner
consistent with the requirements for compliance with Section 409A and for
avoiding taxes or penalties under Section 409A. Notwithstanding the foregoing,
neither the Executive nor any beneficiary shall have any claim or right against
the Company or any of its directors, officers, employees, advisers or agents by
reason of any failure or asserted failure of this Agreement, in form or as
administered, to comply with or qualify for exemption from Section 409A.

9. Section 4999. In the event it is determined that the Executive is entitled to
payments and/or benefits provided by this Agreement or any other amounts in the
“nature of compensation” (whether pursuant to the terms of this Agreement or any
other plan, arrangement, or agreement with the Company or any affiliate, any
person whose actions result in a change of ownership or effective control of the
Company covered by Section 280G(b)(2) of the Code or any person affiliated with
the Company or such person) as a result of such change of ownership or effective
control of the Company (“Payments”) would be subject to the excise tax imposed
by Section 4999 of the Code (the “280G Excise Tax”), the Company shall cause to
be determined, before any amounts of the Payments are paid to the Executive,
which of the following two alternative forms of payment would maximize the
Executive’s after-tax proceeds: (a) payment in full of the entire amount of the
Payments, or (b) payment of only a part of the Payments so that the Executive
receives the largest payment possible without the imposition of the 280G Excise
Tax (“Reduced Payments”). If it is determined that Reduced Payments will
maximize the Executive’s after-tax benefit, then (i) cash compensation subject
to Section 409A shall be reduced first, cash payments not subject to Section
409A shall be reduced second, non-cash compensation subject to Section 409A
shall be reduced third, and then non-cash compensation not subject to Section
409A shall be reduced fourth, (ii) the Payments shall be paid only to the extent
permitted under the Reduced Payments alternative, and (iii) the Executive shall
have no rights to any additional payments and/or benefits constituting the
Payments. Unless the Company and the Executive otherwise agree in writing, any
determination required under this Section 9 shall be made in writing by
independent public accountants agreed to by the Company and the Executive (the
“Accountants”), whose determination shall be conclusive and binding upon the
Executive and the Company for all purposes. For purposes of making the
calculations required by this Section 9, the Accountants may rely on reasonable,
good faith interpretations concerning the application of Sections 280G and 4999
of the Code. The Company and the Executive shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make the required determinations. The Company shall bear all fees and expenses
the Accountants may reasonably charge in connection with the services
contemplated by this Section 9. Notwithstanding the foregoing, the calculations
and adjustments set forth above shall not result in any delay in payment of
benefits under this Agreement.

10. Amendment. This Agreement may be amended, modified or supplemented, and any
obligation hereunder may be waived, only by a written instrument executed by the
parties hereto; provided, that nothing herein shall be construed as limiting the
Company’s ability to amend the Severance Plan. The waiver by any party hereto of
a breach of any provision of this Agreement shall not operate as a waiver of any
subsequent breach. No failure on the part of any party to exercise, and no delay
in exercising, any right or remedy hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or remedy by such
party preclude any other or further exercise thereof or the exercise of any
other right or remedy. All rights and remedies hereunder are cumulative, and are
in addition to all other rights and remedies provided by law, agreement or
otherwise.

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11. Definitions.

(a) “Cause” has the same definition as is set forth in the Company’s Amended and
Restated 2010 Employee, Director and Consultant Equity Incentive Plan, as in
effect at the time of the Executive’s employment termination; if such plan is no
longer in effect at the time of such termination, Cause shall have the same
definition as is set forth in the last version of such plan in effect prior to
such termination.

(b) “Change of Control” means:

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended), becomes the “Beneficial Owner” (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended),
directly or indirectly, of securities of the Company representing more than 50%
of the total voting power represented by the Company’s then outstanding voting
securities (excluding for this purpose any such voting securities held by the
Company, or any affiliate, parent or subsidiary of the Company or any employee
benefit plan of the Company) pursuant to a transaction or a series of
transactions which the Company’s Board of Directors does not approve;

(ii) a merger or consolidation of the Company, whether or not approved by the
Company’s Board of Directors, which results in the securities of the Company
outstanding immediately prior thereto failing to continue to represent (either
by remaining outstanding or by being converted into securities of the surviving
entity) at least 50% of either (i) the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (ii) the total fair market value of the
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation;

(iii) the sale or disposition of all or substantially all of the Company’s
assets (or consummation of any transaction having similar effect) provided that
the sale or disposition is of more than two-thirds (2/3) of the assets of the
Company; or

(iv) the date a majority of the members of the Company’s Board of Directors is
replaced during any 12-month period by directors whose appointment or election
is not endorsed by a majority of the members of the Company’s Board of Directors
before the date of the appointment or election; provided, however, that no
individual initially appointed or elected to the Company’s Board of Directors as
a result of an actual or threatened election contest with respect to the
Company’s Board of Directors or as a result of any other actual or threatened
solicitation of proxies by or on behalf of any person other than the Company’s
Board of Directors shall be deemed to be endorsed by a majority of the members
of the Company’s Board of Directors.

In any case, a Change of Control under this Section 11(b) must also meet the
requirements of a change in ownership or effective control, or a sale of a
substantial portion of the Company’s assets in accordance with Section
409A(a)(2)(A)(v) of the Code and the applicable provisions of Treasury
Regulation § 1.409A-3.

(c) “Change of Control Termination” means an Involuntary Termination or
Constructive Termination, in either event during the period commencing six (6)
months prior to the earlier of (i) the date that the Company first publicly
announces it is conducting negotiations leading to a Change of Control (a
“Public Announcement”), or (ii) the date that the Company enters into a
definitive agreement that would result in a Change of Control (even though still
subject to approval by the Company’s stockholders and other conditions and
contingencies (a “Definitive Agreement”); and ending on the earlier of (x) the
date on which the Company announces that the Definitive Agreement described in
clause (ii) above has been terminated or that the Company’s efforts to
consummate the Change of Control contemplated by the Public Announcement or the
Definitive Agreement have been abandoned or (y) the date which is twenty-four
months after the Change of Control.

(d) “Code” means the Internal Revenue Code of 1986, as amended.

(e) “Constructive Termination” means a termination of employment by the
Executive for Good Reason; provided, that, “Constructive Termination” shall not
include any termination of the employment of

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the Executive (i) by the Company for Cause, (ii) as a result of the Permanent
Disability of the Executive, (iii) as a result of the death of the Executive or
(iv) as a result of the voluntary termination of employment by the Executive for
reasons other than Good Reason.  For the avoidance of doubt, (A) if the
Executive is offered reasonably similar employment by a current or former
subsidiary of the Company or his or her employment is transferred to a current
or former subsidiary of the Company with the resulting role being reasonably
similar to his or her role immediately prior to such transfer, in either case,
in connection with the Planned Separation, the termination of the Executive’s
employment with the Company in connection with such Planned Separation shall not
constitute a Constructive Termination, and (B) an offer of employment by, or the
Executive’s transfer of employment to, a current or former subsidiary of the
Company in connection with the Planned Separation for a position similar to any
position set forth on Schedule A shall not constitute a Constructive
Termination.

(f) “Good Reason” means the occurrence of any of the following conditions
without the Executive’s express consent: (i) a material diminution in, or
material interference with, the Executive’s authority, duties or
responsibilities, (ii) a material diminution in the Executive’s total target
cash compensation unless such material diminution is in connection with a
proportional reduction in compensation for all or substantially all of the
Company’s executive officers, or (iii) the relocation of the Executive’s work
place for the Company to a location more than twenty-five (25) miles from the
location of the work place prior to the Constructive Termination. The Executive
may terminate his or her employment hereunder for Good Reason by (A) providing
notice to the Company, specifying in reasonable detail the condition giving rise
to the Good Reason, no later than the sixtieth (60th) day following the date
that the Executive knew or should have known (after reasonable inquiry) of the
occurrence of that condition, (B) providing the Company a period of sixty (60)
days to remedy the condition so specified in the notice, and (C) terminating his
or her employment for Good Reason within thirty (30) days following the
expiration of the period to remedy if the Company fails to remedy the condition.

(g) “Involuntary Termination” means a termination of the Executive’s employment
by the Company without Cause; provided, that, “Involuntary Termination” shall
not include a termination of the employment of the Executive (i) in connection
with the sale of some or all of the assets of the Company, including the sale of
a facility, division, or subsidiary of the Company, pursuant to which the
purchaser offers the Executive substantially equivalent employment, the terms of
which would not give rise to Good Reason, (ii) by the Company for Cause, (iii)
as a result of the Permanent Disability of the Executive, (iv) as a result of
the death of the Executive or (v) as a result of the voluntary termination of
employment by the Executive for reasons other than Good Reason.  For the
avoidance of doubt, (A) if the Executive is offered reasonably similar
employment by a current or former subsidiary of the Company or his or her
employment is transferred to a current or former subsidiary of the Company with
the resulting role being reasonably similar to his or her role immediately prior
to such transfer, in either case, in connection with the Planned Separation, the
Company’s termination of the Executive’s employment with the Company in
connection with such Planned Separation shall not constitute an Involuntary
Termination, and (B) an offer of employment by, or the Executive’s transfer of
employment to, a current or former subsidiary of the Company in connection with
the Planned Separation for a position similar to any position set forth on
Schedule A shall not constitute an Involuntary Termination.

(h) “Permanent Disability” means that (i) the Executive has been incapacitated
by bodily injury, illness or disease so as to be prevented thereby from engaging
in the performance of his or her duties, (ii) such total incapacity shall have
continued for a period of six consecutive months and (iii) such incapacity will,
in the opinion of a qualified physician, be permanent and continuous during the
remainder of the Executive’s life.

(i) “Planned Separation” means any separation of the Company’s soluble guanylate
cyclase business from the Company.

(j) “Termination Date” means the date of the termination of the Executive’s
employment by reason of an Involuntary Termination, a Constructive Termination
or a Change of Control Termination.

12. Entire Agreement. This Agreement constitutes the entire agreement between
the parties, and terminates and supersedes any and all prior agreements and
understandings (whether written or oral) between the parties with respect to the
subject matter of this Agreement, [including, without limitation, the Prior
Agreement,

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but] excluding the Restrictive Covenants Agreement, which shall continue in
effect in accordance with its terms. The Executive acknowledges and agrees that
neither the Company nor anyone acting on its behalf has made, and in executing
this Agreement the Executive has not relied upon, any representations, promises
or inducements except to the extent the same is expressly set forth herein.

 

 

 

 

 

 

 

IRONWOOD PHARMACEUTICALS, INC.

 

 

 

 

By:

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

 

ACKNOWLEDGED AND ACCEPTED:

 

 

 

 

 

 

Signature:

 

 

 

 

 

[Name of Executive]

 

 

 

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Schedule A

 

[_______]

 

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