Exhibit 4.1


 


IRONWOOD PHARMACEUTICALS, INC.


 


2010 EMPLOYEE STOCK PURCHASE PLAN


 


The following constitute the provisions of the 2010 Employee Stock
Purchase Plan (the “Plan”) of Ironwood Pharmaceuticals, Inc. (the “Company”).


 


1.             Purpose.  The purpose of the Plan is to provide
Employees of the Company and its Designated Subsidiaries with an opportunity to
purchase Common Stock of the Company.  It
is the intention of the Company to have the Plan qualify as an “Employee Stock
Purchase Plan” under Section 423 of the Code.  The provisions of the Plan shall,
accordingly, be construed so as to extend and limit participation in a manner
consistent with the requirements of that section of the Code.


 


2.             Definitions.


 


(a)           “Board” shall
mean the Board of Directors of the Company, or a committee of the Board of
Directors named by the Board to administer the Plan.


 


(b)           “Code” shall
mean the Internal Revenue Code of 1986, as amended.


 


(c)           “Common Stock”
shall mean the Class A Common Stock, $0.001 par value per share, of the
Company.


 


(d)           “Company”
shall mean Ironwood Pharmaceuticals, Inc., a Delaware corporation.


 


(e)           “Compensation”
shall mean total cash compensation received by the Employee from the Company or
a Designated Subsidiary that is taxable income for federal income tax purposes,
including, payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses, commissions and other compensation received from
the Company or a Designated Subsidiary, but excluding relocation, expense
reimbursements, tuition or other reimbursements and income realized as a result
of participation in any stock option, stock purchase or similar plan of the
Company or a Designated Subsidiary.


 


(f)            “Continuous
Status as an Employee” shall mean the absence of any interruption or
termination of service as an Employee. 
Continuous Status as an Employee shall not be considered interrupted in
the case of a leave of absence agreed to in writing by the Company, provided
that such leave is for a period of not more than 90 days or reemployment upon
the expiration of such leave is guaranteed by contract or statute.


 


(g)           “Contributions”
shall mean all amounts credited to the account of a participant pursuant to the
Plan.


 

















 


(h)           “Designated
Subsidiaries” shall mean the Subsidiaries which have been designated by the
Board from time to time in its sole discretion as eligible to participate in
the Plan.


 


(i)            “Employee”
shall mean any person who is employed by the Company or one of its Designated
Subsidiaries for tax purposes and who is customarily employed for at least 20 hours per week and more than five months in a calendar year by the
Company or one of its Designated Subsidiaries.


 


(j)            “Exercise Date”
shall mean the last business day of each Offering Period of the Plan.


 


(k)           “Exercise Price”
shall mean with respect to an Offering Period, an amount equal to 85% of the
fair market value (as defined in paragraph 7(b)) of a share of Common Stock on
the Offering Date or on the Exercise Date, whichever is lower.


 


(l)            “Offering Date”
shall mean the first business day of each Offering Period of the Plan.


 


(m)          “Offering Period”
shall mean a period of six months as set forth in paragraph 4 of the Plan.


 


(n)           “Plan” shall
mean this Ironwood Pharmaceuticals, Inc. 2010 Employee Stock Purchase
Plan.


 


(o)           “Subsidiary”
shall mean a corporation, domestic or foreign, of which not less than 50% of
the voting shares are held by the Company or a Subsidiary, whether or not such
corporation now exists or is hereafter organized or acquired by the Company or
a Subsidiary.


 


3.             Eligibility.


 


(a)           Any person who has
been continuously employed as an Employee for three months as of the Offering Date of a given Offering Period
shall be eligible to participate in such Offering Period under the Plan and
further, subject to the requirements of paragraph 5(a) and the limitations
imposed by Section 423(b) of the Code.  All Employees granted options under the Plan
with respect to any Offering Period will have the same rights and privileges.


 


(b)           Any provisions of
the Plan to the contrary notwithstanding, no Employee shall be granted an
option under the Plan (i) if, immediately after the grant, such Employee
(or any other person whose stock would be attributed to such Employee pursuant
to Section 424(d) of the Code) would own stock and/or hold
outstanding options to purchase stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of the Company
or of any Subsidiary of the Company, (ii) which permits his or her rights
to purchase stock under all employee stock purchase plans (described in Section 423
of the Code) of the Company and its Subsidiaries to accrue at a rate which
exceeds $25,000 of fair market value of such stock as defined in paragraph 7(b) (determined
at the time such option is granted) for each


 


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calendar
year in which such option is outstanding at any time, or (iii) to purchase more than 2,500 shares
(subject to any adjustment pursuant to paragraph 18) of Common Stock in any one
Offering Period.  Any option
granted under the Plan shall be deemed to be modified to the extent necessary
to satisfy this paragraph 3(b).


 


4.             Offering Periods.  The Plan shall be implemented by a series of
Offering Periods, with a new Offering Period commencing on January 1 and July 1
of each year or the first business day thereafter (or at such other time or
times as may be determined by the Board).  The initial Offering Period shall commence July 1,
2010, or on such later date as determined by the Board.


 


5.             Participation.


 


(a)           An  eligible Employee may become a participant
in the Plan by completing an Enrollment Form provided by the Company and
filing it with the Company or its designee prior to the applicable Offering
Date, unless a later time for filing the Enrollment Form is set by the
Board for all eligible Employees with respect to a given Offering Period.  The Enrollment Form and its submission
may be electronic as directed by the Company. 
The Enrollment Form shall set forth the percentage of the
participant’s Compensation (which shall be not less than 1% and not more than 15%) to be paid as Contributions
pursuant to the Plan.


 


(b)           Payroll deductions
shall commence with the first payroll following the Offering Date, unless a
later time is set by the Board with respect to a given Offering Period, and
shall end on the last payroll paid on or prior to the Exercise Date of the
Offering Period to which the Enrollment Form is applicable, unless sooner
terminated as provided in paragraph 10.


 


6.             Method of
Payment of Contributions.


 


(a)           Each participant
shall elect to have payroll deductions made on each payroll during the Offering
Period in an amount not less than 1% and not more than 15% of such participant’s Compensation on each such payroll;
provided that the aggregate of such payroll deductions during the Offering
Period shall not exceed 15% of
the participant’s aggregate Compensation during said Offering Period (or such
other percentage as the Board may establish from time to time before an
Offering Date).  All payroll deductions
made by a participant shall be credited to his or her account under the
Plan.  A participant may not make any
additional payments into such account.


 


(b)           A participant may
discontinue his or her participation in the Plan as provided in paragraph 10,
or, on one occasion only during the Offering Period, may decrease, but may not
increase, the rate of his or her Contributions during the Offering Period by
completing and filing with the Company a new Enrollment Form authorizing a
change in the deduction rate.  The change
in rate shall be effective as of the beginning of the next payroll period
following the date of filing of the new Enrollment Form, if the Enrollment Form is
completed at least ten business days prior to such date, and, if not, as of the
beginning of the next succeeding payroll period.


 


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(c)           Notwithstanding the
foregoing, to the extent necessary to comply with Section 423(b)(8) of
the Code and paragraph 3(b), a participant’s payroll deductions may be
decreased to 0% at such time during any Offering Period which is scheduled to
end during the current calendar year that the aggregate of all payroll
deductions accumulated with respect to such Offering Period and any other
Offering Period ending within the same calendar year equals $21,250.  Payroll deductions shall recommence at the
rate provided in such participant’s Enrollment Form at the beginning of
the first Offering Period which is scheduled to end in the following calendar
year, unless terminated by the participant as provided in paragraph 10.


 


7.             Grant of Option.


 


(a)           On the Offering Date
of each Offering Period, each eligible Employee participating in such Offering
Period shall be granted an option to purchase on the Exercise Date of such
Offering Period a number of shares of the Common Stock determined by dividing
such Employee’s Contributions accumulated prior to such Exercise Date and
retained in the participant’s account as of the Exercise Date by the applicable
Exercise Price; provided however, that such purchase shall be subject to the
limitations set forth in paragraphs 3(b) and 12.  The fair market value of a share of the
Common Stock shall be determined as provided in paragraph 7(b).


 


(b)           The fair market
value of the Common Stock on a given date shall be determined by the Board
based on (i) if the Common Stock is listed on a national securities
exchange or traded in the over-the-counter market and sales prices are
regularly reported for the Common Stock, the closing or last sale price of the
Common Stock for such date (or, in the event that the Common Stock is not
traded on such date, on the immediately preceding trading date), on the
composite tape or other comparable reporting system or (ii) if the Common
Stock is not listed on a national securities exchange and such price is not
regularly reported, the mean between the bid and asked prices per share of the
Common Stock at the close of trading in the over-the-counter market.


 


8.             Exercise of
Option.  Unless a participant
withdraws from the Plan as provided in paragraph 10, his or her option for the
purchase of shares will be exercised automatically on the Exercise Date of the
Offering Period, and the maximum number of full shares subject to the option
will be purchased for him or her at the applicable Exercise Price with the
accumulated Contributions in his or her account.  If a fractional number of shares results,
then such number shall be rounded down to the next whole number and any
unapplied cash shall be carried forward to the next Exercise Date, unless the
participant requests a cash payment.  The
shares purchased upon exercise of an option hereunder shall be deemed to be
transferred to the participant on the Exercise Date.  During a participant’s lifetime, a
participant’s option to purchase shares hereunder is exercisable only by him or
her.


 


9.             Delivery.  Upon the written request of a participant,
certificates representing the shares purchased upon exercise of an option will
be issued as promptly as practicable after the Exercise Date of each Offering
Period to participants who wish to hold their shares in certificate form.  Any payroll deductions accumulated in a
participant’s account which are not sufficient to purchase a full Share shall
be retained in the participant’s account for the subsequent Offering Period,
subject to earlier withdrawal by the participant as provided in paragraph 10
below.  Any


 


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other
amounts left over in a participant’s account after an Exercise Date shall be
returned to the participant.


 


10.           Withdrawal;
Termination of Employment.


 


(a)           A participant may
withdraw all but not less than all the Contributions credited to his or her
account under the Plan at any time prior to the Exercise Date of the Offering
Period by giving written notice to the Company or its designee.  All of the participant’s Contributions
credited to his or her account will be paid to him or her promptly after
receipt of his or her notice of withdrawal and his or her option for the
current period will be automatically terminated, and no further Contributions
for the purchase of shares will be made during the Offering Period.


 


(b)           Upon termination of
the participant’s Continuous Status as an Employee prior to the Exercise Date
of the Offering Period for any reason, including retirement or death, the
Contributions credited to his or her account will be returned to him or her or,
in the case of his or her death, to the person or persons entitled thereto
under paragraph 14, and his or her option will be automatically terminated.


 


(c)           In the event an
Employee fails to remain in Continuous Status as an Employee for at least 20
hours per week during the Offering Period in which the Employee is a
participant, he or she will be deemed to have elected to withdraw from the Plan
and the Contributions credited to his or her account will be returned to him or
her and his or her option terminated.


 


(d)           A participant’s
withdrawal from an Offering Period will not have any effect upon his or her
eligibility to participate in a succeeding offering or in any similar plan
which may hereafter be adopted by the Company.


 


11.           Interest.  No interest shall accrue on the Contributions
of a participant in the Plan.


 


12.           Stock.


 


(a)           The maximum number
of shares of Common Stock which shall be made available for sale under the Plan
shall be 400,000 shares, plus an annual increase on the first day of each of
the Company’s fiscal years beginning in 2011, equal to the lesser of (i) 1,000,000  shares, (ii) 1 % of the shares of Common Stock
outstanding on the last day of the immediately preceding fiscal year, or (iii) such
lesser number of shares as is determined by the Board, subject to adjustment
upon changes in capitalization of the Company as provided in paragraph 18.  The increase in the number of shares of
Common Stock available for sale under this Plan set forth in this paragraph 12(a) shall
be subject to the approval of the Board and shall be effective upon the first
day of each fiscal year; provided, however, that in the event the Board has not
approved an increase on or before the first day of the applicable fiscal year,
the number of shares of Common Stock available for sale under this Plan shall remain
the same until such time that the Board approves an increase pursuant to this
Subparagraph 12(a).


 


If the total number of shares which would otherwise be subject to
options granted pursuant to paragraph 7(a) on the Offering Date of an
Offering Period exceeds the number of


 


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shares
then available under the Plan (after deduction of all shares for which options
have been exercised), the Company shall make a pro rata allocation of the
shares remaining available for option grants in as uniform a manner as shall be
practicable and as it shall determine to be equitable.  Any amounts remaining in an Employee’s
account not applied to the purchase of shares pursuant to this paragraph 12
shall be refunded on or promptly after the Exercise Date.  In such event, the Company shall give written
notice of such reduction of the number of shares subject to the option to each
Employee affected thereby and shall similarly reduce the rate of Contributions,
if necessary.


 


(b)           The participant will
have no interest or voting right in shares covered by his or her option until
such option has been exercised.


 


13.           Administration.  The Board shall supervise and administer the
Plan and shall have full power to adopt, amend and rescind any rules deemed
desirable and appropriate for the administration of the Plan and not
inconsistent with the Plan, to construe and interpret the Plan, and to make all
other determinations necessary or advisable for the administration of the Plan.


 


14.           Designation of
Beneficiary.


 


(a)           A participant may
designate a beneficiary who is to receive any shares and cash, if any, from the
participant’s account under the Plan in the event of such participant’s death
subsequent to the end of the Offering Period but prior to delivery to him or
her of such shares and cash.  In
addition, a participant may designate a beneficiary who is to receive any cash
from the participant’s account under the Plan in the event of such participant’s
death prior to the Exercise Date of the Offering Period.  If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective. 
Beneficiary designations shall be made either in writing or by
electronic delivery as directed by the Company.


 


(b)           Such designation of
beneficiary may be changed by the participant (and his or her spouse, if any)
at any time by submission of the required notice, which may be electronic.  In the event of the death of a participant
and in the absence of a beneficiary validly designated under the Plan who is
living at the time of such participant’s death, the Company shall deliver such
shares and/or cash to the executor or administrator of the estate of the
participant, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its discretion, may deliver such
shares and/or cash to the spouse or to any one or more dependents or relatives
of the participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.


 


15.           Transferability.  Neither Contributions credited to a
participant’s account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in paragraph 14) by the participant.  Any such attempt at assignment, transfer,
pledge or other disposition shall be without effect, except that the Company
may treat such act as an election to withdraw funds in accordance with
paragraph 10.


 


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16.           Use of Funds.  All Contributions received or held by the
Company under the Plan may be used by the Company for any corporate purpose,
and the Company shall not be obligated to segregate such Contributions.


 


17.           Reports.  Individual accounts will be maintained for
each participant in the Plan.  Statements
of account will be given to participating Employees promptly following the
Exercise Date, which statements will set forth the amounts of Contributions,
the per share purchase price, the number of shares purchased and the remaining
cash balance, if any.


 


18.           Adjustments Upon
Changes in Capitalization.  Subject
to any required action by the stockholders of the Company, the number of shares
of Common Stock covered by unexercised options under the Plan and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but are not yet subject to options set forth in paragraph 12(a), the number of
shares of Common Stock set forth in paragraph 12(a)(i) (collectively, the “Reserves”),
the maximum number of shares of Common Stock that may be purchased by a
participant in an Offering Period set forth in paragraph 3(b), as well as the
price per share of Common Stock covered by each unexercised option under the
Plan, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock. Such adjustment shall be made by the Board, whose determination in that
respect shall be final, binding and conclusive.


 


In the event of the proposed dissolution or liquidation of the Company,
an Offering Period then in progress will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Board.  In the event of a proposed sale
of all or substantially all of the assets of the Company, or the merger,
consolidation or other capital reorganization of the Company with or into
another corporation, each option outstanding under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board
determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Exercise Date (the “New Exercise Date”).  If the Board shortens the Offering Period
then in progress in lieu of assumption or substitution in the event of a merger
or sale of assets, the Board shall notify each participant in writing, at least
ten days prior to the New Exercise Date, that the Exercise Date for his or her
option has been changed to the New Exercise Date and that his or her option
will be exercised automatically on the New Exercise Date, unless prior to such
date he or she has withdrawn from the Offering Period as provided in paragraph
10.  For purposes of this paragraph, an
option granted under the Plan shall be deemed to be assumed if, following the
sale of assets, merger or other reorganization, the option confers the right to
purchase, for each share of Common Stock subject to the option immediately
prior to the sale of assets, merger or other reorganization, the consideration
(whether stock, cash or other securities or property) received in the sale of
assets, merger or other reorganization by holders of Common Stock for each
share of Common Stock held on the effective date of such transaction (and if
such holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding shares of Common Stock);
provided, however, that if such consideration received in such transaction was
not solely common stock of the successor corporation or its parent (as defined
in


 


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Section 424(e) of
the Code), the Board may, with the consent of the successor corporation,
provide for the consideration to be received upon exercise of the option to be
solely common stock of the successor corporation or its parent equal in fair
market value to the per share consideration received by holders of Common Stock
in the sale of assets, merger or other reorganization.


 


The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the
price per share of Common Stock covered by each outstanding option, in the
event that the Company effects one or more reorganizations, recapitalizations,
rights offerings or other increases or reductions of shares of its outstanding
Common Stock, and in the event of the Company being consolidated with or merged
into any other corporation.


 


19.           Amendment or
Termination.


 


(a)           The Board may at any
time terminate or amend the Plan.  Except
as provided in paragraph 18, no such termination may affect options previously
granted, nor may an amendment make any change in any option theretofore granted
which adversely affects the rights of any participant provided that an Offering
Period may be terminated by the Board on an Exercise Date or by the Board’s
setting a new Exercise Date with respect to an Offering Period then in progress
if the Board determines that termination of the Offering Period is in the best
interests of the Company and the stockholders or if continuation of the
Offering Period would cause the Company to incur adverse accounting charges in
the generally-accepted accounting rules applicable to the Plan.  In addition, to the extent necessary to
comply with Section 423 of the Code (or any successor rule or
provision or any applicable law or regulation), the Company shall obtain stockholder
approval in such a manner and to such a degree as so required.


 


(b)           Without stockholder consent and
without regard to whether any participant rights may be considered to have been
adversely affected, the Board shall be entitled to change the Offering Periods,
limit the frequency and/or number of changes in the amount withheld during an
Offering Period, establish the exchange ratio applicable to amounts withheld in
a currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company’s processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant’s Compensation, and establish such other limitations or procedures
as the Board determines in its sole discretion advisable that are consistent
with the Plan.


 


20.           Notices.  All notices or other communications by a
participant to the Company under or in connection with the Plan shall be deemed
to have been duly given when received in the form specified by the Company at
the location, or by the person, designated by the Company for the receipt
thereof.


 


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21.           Conditions Upon
Issuance and Limitations on Dispositions of Shares.


 


(a)           Shares shall not be
issued with respect to an option unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.


 


(b)           As a condition to
the exercise of an option, the Company may require the person exercising such
option to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
applicable provisions of law.


 


(c)           Shares of Common
Stock purchased under the Plan shall be subject to a six-month holding period
from the Exercise Date upon which the shares were purchased.  During this time, the shares may not be sold,
transferred, withdrawn, or moved; provided, however, that such prohibition will
not apply following the death of a participant.


 


22.           Information
Regarding Disqualifying Dispositions. 
By electing to participate in the Plan, each participant agrees to
provide any information about any transfer of shares of Common Stock acquired
under the Plan that occurs within two years after the first business day of the
Offering Period in which such shares were acquired as may be requested by the
Company or any Subsidiaries in order to assist it in complying with the tax
laws.


 


23.           Right to
Terminate Employment.  Nothing in the
Plan or in any agreement entered into pursuant to the Plan shall confer upon
any Employee the right to continue in the employment of the Company or any
Subsidiary, or affect any right which the Company or any Subsidiary may have to
terminate the employment of such Employee.


 


24.           Rights as a
Stockholder.  Neither the granting of
an option nor a deduction from payroll shall constitute an Employee the owner
of shares covered by an option.  No
Employee shall have any right as a stockholder unless and until an option has
been exercised, and the shares underlying the option have been registered in
the Company’s share register.


 


25.           Term of Plan.  The Plan became effective upon its adoption by the Board on December 17,
2009 and shall continue in effect for a term of twenty  years unless sooner terminated under paragraph 19.


 


26.           Applicable Law.  This Plan shall be governed in accordance
with the laws of the State of Delaware, applied without giving effect to any
conflict-of-law principles.


 


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