**Exhibit 10.4**

**SETTLEMENT AGREEMENT**

This**SETTLEMENT AGREEMENT**isentered into as of the latest of the dated signatures below (“Effective Date”)by and among **Mark L. Kozam d/b/a MLKSoftware and Datasci, LLC** (collectively “**Datasci**”),**Phase Forward Incorporated** (“**Phase Forward**”),and **Quintiles, Inc.** (“**Quintiles**”).

IN CONSIDERATIONOF THE MUTUAL COVENANTS AND PROMISES CONTAINED HEREIN, THE SUFFICIENCY OF WHICHTHE PARTIES IRREVOCABLY ACKNOWLEDGE, THE PARTIES AGREE AS FOLLOWS:

**ARTICLE 1**

**DEFINITIONS**

The following termsshall have the meaning set forth below when used herein:

1.1            “Settled Patent” means U.S. Patent No. 6,496,827B2 entitled “Methods and Apparatus for the Centralized Collection andValidation of Geographically Distributed Clinical Study Data with Verificationof Input Data to the Distributed System”, including all foreign counterparts,divisional, continuation, reissued, reexamined and continuation in-part patentsthereof.

1.2            “License Agreement” means theLicense Agreement attached hereto as Appendix A.

1.3            “Settlement Agreement” means thisSettlement Agreement.

1.4            “Party” or “Parties” means any partyor parties to this Settlement Agreement, including affiliate companies andparent companies, as the case may be.

1.5            “Phase Forward Products” means all productsand services of Phase Forward, and of its affiliates, parents, andsubsidiaries, whether sold by Phase Forward directly, or through itsaffiliates, parents, subsidiaries, manufacturers, partners, distributors,resellers, or vendors. Phase Forward Products include, without limitation,InForm, Clintrial, Clintrial Integration Solution (CIS), and any other productthat Phase Forward (i) may develop in the future or (ii) may acquirein the future from entities other than those identified in Appendix D. PhaseForward Products shall not include any products or services of any third partythat acquires Phase Forward or any of Phase Forward’s subsidiaries oraffiliates, where such products or services (A) were in existence at thetime of the acquisition or (B) are new products or services developed bysaid third party subsequent to said acquisition.

1.6            “Stipulation of Dismissal WithPrejudice” means the Stipulation of Dismissal with Prejudice attached hereto asAppendix B.

1.7            “Subject Products” means (i) allPhase Forward Products and (ii) all third-party products when used inconnection with Phase Forward Products where such third party products wouldnot infringe the Settled Patent when made, used or sold alone.

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# **ARTICLE 2**

**BACKGROUND**

2.1            Datasci is the owner of the entireright, title and interest in and to the Settled Patent.

2.2            Datasci filed an action againstPhase Forward and Quintiles, Inc. in the United States District Court forthe District of Maryland alleging that Phase Forward and Quintiles, Inc.had infringed the Settled Patent, Civil Action No. 04-CV-1787(the “Action”). Phase Forward and Quintiles asserted several affirmativedefenses and counterclaims, alleging, among other things, that it did notinfringe the Settled Patent and that the Settled Patent is invalid.

2.3            The parties to this SettlementAgreement now desire to settle the Action, and to settle and resolve all issuesset forth herein which they may have against each other arising out of or inconnection with the Settled Patent.

# **ARTICLE 3**

**PAYMENTS AND ROYALTIES TO DATASCI**

3.1            In accordance with section 3.1 ofthe License Agreement, Phase Forward shall pay Datasci a one-time, lump sum,fully paid up royalty in the amount of Eight Million Five Hundred Thousand andNo/100 Dollars ($8,500,000.00).

3.2            Neither this Settlement Agreementnor the License Agreement shall be effective until Datasci has received thepayment required to be made by the Effective Date in accordance with thisSettlement Agreement and the License Agreement.

3.3            The payment required to be madepursuant to this Settlement Agreement shall be made in United States dollars bywire transfer of immediately available funds as follows:

| Bank Name:    |   | Wachovia Bank, NA                                           |
|---------------|--------|-------------------------------------------------------------|
| City/State:   |   | Washington, D.C.                                            |
| Account No.:  |   | [Redacted]                                                  |
| ABA No.:      |   | [Redacted]                                                  |
| Swift Code:   |   | [Redacted]                                                  |
| Account Name: |   | Reed Smith LLP, Attorneys for                               |
|          |   | Dr. Marc L. Kozam, d/b/a MLK Software and  Datasci LLC |

 

3.4            Time shall be of the essence withrespect to the payment required to be made pursuant to this SettlementAgreement.

3.5            Notwithstanding anything to thecontrary in this Settlement Agreement or the License Agreement, but withoutlimiting the representations and warranties made by Datasci in this SettlementAgreement, the payment required to be made pursuant to this SettlementAgreement shall not be refundable to Phase Forward if there is any subsequentfinding(s) that the Settled Patent, or any or all of the claims therein,are invalid or unenforceable.

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# **ARTICLE 4**

**LICENSE AGREEMENT**

4.1            The Parties shall, on or before theEffective Date, enter into and deliver the License Agreement.

4.2            Except where Datasci threatens orbrings suit under the Settled Patent against any entity resulting from a mergeror acquisition involving Phase Forward or Quintiles or where Datasci seeks toinvalidate the license provided under this Settlement Agreement and the LicenseAgreement, Phase Forward shall not challenge the validity or enforceability ofthe Settled Patent, or any claims therein, by any proceeding before any court,agency, commission or patent office.

# **ARTICLE 5**

**DISMISSAL OF THE ACTION**

5.1            Immediately upon the completeexecution and delivery of this Settlement Agreement and the License Agreementand Datasci’s confirmation that it has received the payment required to be madeto Datasci by the Effective Date, Datasci and Phase Forward shall cause theirrespective counsel to endorse and file the Stipulation of Dismissal WithPrejudice attached hereto as Appendix B to cause all of their claims andcounterclaims in the Action with respect to each other to be dismissed withprejudice.

5.2            Immediately upon the completeexecution and delivery of this Settlement Agreement and the License Agreementand Datasci’s confirmation that it has received the payment required to be madeto Datasci by the Effective Date, Datasci and Quintiles shall cause theirrespective counsel to endorse and file the Stipulation of Dismissal WithoutPrejudice attached hereto as Appendix B1 to cause all of their claims andcounterclaims in the Action with respect to each other to be dismissed withoutprejudice.

# **ARTICLE 6**

**MUTUAL RELEASES**

6.1            Datasci hereby releases and foreverdischarges Phase Forward and all of its respective directors, officers,stockholders, affiliate companies, subsidiaries, acquired companies (other thanthe entities identified in Appendix D), employees, attorneys, and agents(collectively, “Phase Forward Entities”), their permitted successors andassigns, and Quintiles, Quintiles Transnational Corporation, and theirdirectors, officers, stockholders, affiliate companies, subsidiaries, acquiredcompanies (other than the entities identified in Appendix D), employees,attorneys, and agents (collectively, “Quintiles Entities”), and their permittedsuccessors and assigns, from any and all claims, demands, obligations, losses,causes of action, damages, penalties, costs, expenses, attorney fees,liabilities, compensation, and indemnities of any nature, whether based oncontract, tort, statute or other legal or equitable theory of recovery, whetherknown or unknown, which as of the Effective Date of this Settlement AgreementDatasci had, now has, or claims to have against Phase Forward Entities orQuintiles Entities, including but not limited to any arising out of or inconnection with claims that were made or that could have been made in any formwith respect to the Settled Patent, and except for any breach of thisSettlement Agreement or the License Agreement. This release shall apply to 

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Phase Forward’scustomers, manufacturers, partners, distributors, re-sellers, vendors, andtheir respective end users, regarding all products and services at any timemade by, provided by, purchased from, or licensed from Phase Forward Entities.

6.2            Each of Phase Forward and Quintileshereby releases and forever discharges Datasci, and all of its directors,officers, stockholders, members, affiliate companies, subsidiaries, acquiredcompanies, acquirors, parent companies, employees, attorneys, and agents fromany and all claims, demands, obligations, losses, causes of action, damages,penalties, costs, expenses, attorney fees, liabilities, compensation, andindemnities of any nature, whether based on contract, tort, statute or otherlegal or equitable theory of recovery, whether known or unknown, which as ofthe Effective Date of this Settlement Agreement Phase Forward and Quintiles,and their respective affiliate and parent companies, had, now has, or claims tohave against Datasci, including but not limited to any arising out of or inconnection with claims that were made or that could have been made in any formwith respect to the Settled Patent, and except for any breach of thisSettlement Agreement or the License Agreement; provided, however, that nothingin this Section 6.2 or otherwise in this Settlement Agreement shall or maypreclude any of the Quintiles Entities and their permitted successors andassigns from, in the event of any subsequent legal action by Datasci,challenging the validity or enforceability of the Settled Patent, or any claimstherein, by any proceeding before any court, agency, commission or patentoffice.

# **ARTICLE 7**

**FEES AND COSTS**

7.1            The Parties shall pay all of theirown fees and expenses, including court costs, legal fees and expert fees,incurred in the prosecution or defense of the Action, and in the preparation ofthis Settlement Agreement and the License Agreement.

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**ARTICLE 8**

**REPRESENTATIONS AND WARRANTIES**

8.1            Each Party represents and warrantsthat it has the right to enter into this Settlement Agreement and the LicenseAgreement.

8.2            The Parties’ representatives, bytheir signatures below, represent and warrant that they are duly authorized toexecute and deliver this Settlement Agreement and the License Agreement onbehalf of the respective Party.

8.3            Datasci hereby represents,covenants, and warrants that it will not assert against Phase Forward Entitiesor their permitted successors and assigns, or any of Phase Forward’s customers,manufacturers, partners, distributors, re-sellers, vendors, or any otherpermitted user of Phase Forward Products (whether such permission is granteddirectly by Phase Forward or another licensee of Phase Forward) (collectivelytogether with Phase Forward Entities, “Phase Forward Users”) any claim ofinfringement based upon the Settled Patent arising out of or in connection withthe use, sale, or distribution of the Subject Products.

8.4            Datasci hereby represents,covenants, and warrants that it will not assert against Quintiles Entities ortheir permitted successors and assigns any claim of infringement based upon theSettled Patent arising out of or in connection with the use, sale, ordistribution of (i) the Subject Products or (ii) any third partyproduct (a) in use by Quintiles as of the Effective Date and (b) disclosedby Quintiles in its discovery provided in the Action. Nothing in this Section 8.4shall affect in any way Datasci’s rights to take action against any supplier toQuintiles other than Phase Forward Entities.

8.5            Datasci hereby represents and warrantsthat, to its knowledge, the Settled Patent is valid and enforceable.

8.6            Datasci hereby represents andwarrants that it is considering licensing or otherwise enforcing its rights inthe Settled Patent with respect to other parties.

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**ARTICLE 9**

**CONFIDENTIALITY**

9.1            The Parties shall keep the terms ofthis Settlement Agreement and the License Agreement confidential and shall notnow or hereafter divulge these terms to any third party except:

9.1.1         with the prior written consent of theother Party; or

9.1.2         to any governmental body havingjurisdiction to call therefor; or

9.1.3         as otherwise may be required by law orlegal process, including to legal and financial advisors in their capacity ofadvising a Party in such matters; or

9.1.4         during the course of litigation so longas the disclosure of such terms and conditions are restricted in the samemanner as is the confidential information of other litigating parties and solong as (a) the restrictions are embodied in a court-entered ProtectiveOrder and (b) the disclosing Party informs the other Party in writing atleast ten (10) days in advance of the disclosure; or

9.1.5         in confidence to legal counsel,accountants, banks, financing sources and their advisors solely in connectionwith complying with financial transactions or legal reporting requirements; or

9.1.6         any disclosure pursuant to anyapplicable securities regulations, including Phase Forward’s disclosure inpublic SEC filings of the existence, amount, terms and copies of thisSettlement Agreement; or

9.1.7         the Parties may disclose the terms ofthis Settlement Agreement and the License Agreement and the settlement of theAction to the extent provided, or in the form provided, in Appendix C to thisSettlement Agreement; Phase Forward may also issue a press release updating its2005 financial results, including disclosure of the amount of settlement. Datasciagrees not to issue any public statement or communication (including that setforth in Appendix C) until the earlier of (i) Phase Forward’s release of astatement concerning the settlement or (ii) March 1, 2006.

**ARTICLE 10**

**GENERAL PROVISIONS**

10.1          Assignment. This SettlementAgreement and any rights, licenses or privileges under this SettlementAgreement including, but not limited to, the License Agreement or any rightsthereunder, shall be freely assignable to (i) any affiliate, parent, orsubsidiary of a Party or (ii) an acquiror of a Party or of any portion ofa Party’s business to which this Settlement Agreement applies (whether by wayof an asset or stock transaction). Phase Forward represents that it is notcurrently engaged in any active negotiations in connection with its acquisitionby any third party.

10.2          Legal Fees. The prevailingParty or Parties in any proceeding or legal action to enforce this SettlementAgreement shall be entitled to recover reasonable attorney fees and costsincurred in connection with such proceeding or legal action.

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10.3          Waiver. The waiver by any Partyof a breach of any provision of this Settlement Agreement shall not operate orbe construed as a waiver of any other or any subsequent breach of the same or adifferent kind.

10.4          Amendments. Any changes to thisSettlement Agreement must be in writing specifically stating an intention tomodify this Settlement Agreement signed by the Party or Parties to be bound.

10.5          Survival of Representations,Covenant and Warranties. The representations, covenants and warrantiescontained in this Settlement Agreement shall survive the execution and deliveryof this Settlement Agreement.

10.6          Relationship of Parties. Nothingin this Settlement Agreement shall create or be deemed to create anyrelationship of agency, partnership, or joint venture between Datasci, on theone hand, and Phase Forward and Quintiles, on the other.

10.7          No Third Party Beneficiaries. Exceptwith respect to the Phase Forward Users, this Settlement Agreement is made andentered into for the sole protection and benefit of the Parties, and no otherperson or entity shall be a direct or indirect beneficiary of or shall have anydirect or indirect cause of action or claim in connection with this SettlementAgreement.

10.8          Notices. Any notice or othercommunication required or permitted under this Settlement Agreement shall begiven in writing and shall be conclusively deemed to have been duly given onthe date delivered if delivered personally, or five (5) days after depositin the United States mail, by registered or certified mail, postage prepaid,addressed as follows:

10.8.1       Noticesto Datasci shall be addressed to:

Stanley P. Fisher, Esq.Reed Smith LLP3110 Fairview Park DriveSuite 1400Falls Church, Virginia  22042

10.8.2      Noticesto Phase Forward shall be addressed to:

D. Ari Buchler, Esq.General CounselPhase Forward Incorporated880 Winter StreetWaltham, Massachusetts  02451

John J. Cotter, Esq.Kirkpatrick & Lockhart Nicholson Graham LLP75 State StreetBoston, Massachusetts  02109

10.8.3      Noticesto Quintiles shall beaddressed to:

Hayden J. Silver III, Esq.Kilpatrick Stockton LLPSuite 4003737 Glenwood AvenueRaleigh, NC 27612

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10.9          Headings. All headings in thisSettlement Agreement are used for convenience only and shall not affect theinterpretation of this Settlement Agreement.

10.10        Applicable Law; Choice of Forum;Jurisdiction. This Settlement Agreement shall be governed by and construedunder the laws of the State of Maryland, without regard to its conflict of lawsprovisions. It is further agreed that all disputes and matters whatsoeverarising under, in connection with or incident to this Settlement Agreementshall be litigated, if at all, in and before the United States District Courtfor the District of Maryland, to the exclusion of the Courts of any otherstate, locality or country. The Parties irrevocably consent to personaljurisdiction in such court for such purposes.

10.11        No Strict Construction. EachParty and counsel for each Party have reviewed this Settlement Agreement, and,accordingly, the normal rule of construction to the effect that anyambiguities are to be resolved against the drafting party shall not be employedin the interpretation of this Settlement Agreement.

10.12        Entire Agreement. This SettlementAgreement, together with the License Agreement, contains the entireunderstanding among Datasci, on the one hand, and Phase Forward and Quintiles,on the other, superseding all prior or contemporaneous communications,negotiations, discussions, agreements, and understandings among the Partieswith respect to the subject matter of this Settlement Agreement and the LicenseAgreement.

10.13        Counterparts. This SettlementAgreement may be executed in any number of counterparts, including thosetransmitted to and among the Parties via facsimile, with the same effect as ifthe signatures on each counterpart were upon a single instrument. All counterparts,taken together, shall constitute this Settlement Agreement.

10.14        Partial Invalidity. If any of theprovisions herein shall be invalid, illegal or unenforceable in any respect,this Settlement Agreement shall be construed without the term or provision sothat this Settlement Agreement will remain binding on the Parties.

10.15        Non-Disparagement. Each Partywill instruct its executive officers and board members not to disparage anyother Party with respect to the matters at issue in the Action.

10.16        No Prejudice. Inclusion of anentity on Appendix D shall not create any evidence or presumption (i) thatsuch entity had, has, may develop, or may acquire any products or services thatinfringe any valid enforceable claim of the Settled Patent or (ii) withrespect to any intention of any Party to this Agreement to engage in anytransaction with any such entity.

10.17.       No Admission. Nothing in thisSettlement Agreement or the License Agreement shall constitute an admission ofliability by any Party.

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IN WITNESSWHEREOF, intending to be legally bound, the Parties hereto have caused thisSettlement Agreement to be executed by their duly authorized representatives asof the dates set forth below.
| DR. MARC L. KOZAM, d/b/a  MLK SOFTWARE |          | PHASE FORWARD INCORPORATED |
|----------------------------------------|---------------|----------------------------|
| /s/ Marc L.  Kozam                     |          | /s/ Rodger  Weismann       |
| Name:                                  | Marc L. Kozam |                       | Name: | Rodger Weismann |
|                                   |          |                       | Title: | Senior Vice  President and |
|                                   |          |                       |   | Chief Financial  Officer |
| Date:                                  | 2-15-06       |                       | Date: | February 15,  2006 |
| DATASCI, LLC                           |          | QUINTILES, INC.            |
|                                   |          | /s/ Beverly L.  Rubin      |
| /s/ Marc L.  Kozam                     |          |                       |
|                                   |          |                       | Name: | Beverly L. Rubin |
| Name:                                  | Marc L. Kozam |                       |   |   |
|                                   |          |                       | Title: | Director |
| Title:                                 |          |                       |   |   |
|                                   |          |                       | Date: | 15  February 2006 |
| Date:                                  | 2-15-06       |                       |   |   |

 

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