Document:

Exhibit 10.9

 

COLLABORATION AGREEMENT

 

by and between

 

MICROBIA, INC.

 

and

 

 

FOREST LABORATORIES, INC.

 

 

September
12, 2007

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

 

TABLE OF CONTENTS

 

	
  1.

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  SCOPE OF COLLABORATION AND GRANT OF LICENSES

  	
  14

  
	
   

  	
  2.1.

  	
  Scope of Collaboration

  	
  14

  
	
   

  	
  2.2.

  	
  License to Forest

  	
  14

  
	
   

  	
  2.3.

  	
  License to Microbia

  	
  14

  
	
   

  	
  2.4.

  	
  Restrictions

  	
  15

  
	
   

  	
  2.5.

  	
  Joint Technology

  	
  15

  
	
   

  	
  2.6.

  	
  Sublicensing

  	
  15

  
	
   

  	
  2.7.

  	
  Right of Reference

  	
  15

  
	
   

  	
  2.8.

  	
  No Other Rights

  	
  16

  
	
   

  	
  2.9.

  	
  Section 365(n)

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  DECISION MAKING AND DISPUTE RESOLUTION

  	
  16

  
	
   

  	
  3.1.

  	
  Overview

  	
  16

  
	
   

  	
  3.2.

  	
  Joint Development Committee

  	
  17

  
	
   

  	
  3.3.

  	
  Joint Commercialization Committee

  	
  18

  
	
   

  	
  3.4.

  	
  Joint Responsibilities of the JDC and JCC

  	
  19

  
	
   

  	
  3.5.

  	
  Other Committees

  	
  19

  
	
   

  	
  3.6.

  	
  Elevation and Dispute Resolution

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  DEVELOPMENT, REGULATORY, COMMERCIALIZATION

  	
  20

  
	
   

  	
  4.1.

  	
  Development

  	
  20

  
	
   

  	
  4.2.

  	
  Regulatory Matters

  	
  22

  
	
   

  	
  4.3.

  	
  Adverse Events

  	
  22

  
	
   

  	
  4.4.

  	
  Manufacture and Supply of Products

  	
  23

  
	
   

  	
  4.5.

  	
  Commercialization in the Territory

  	
  23

  
	
   

  	
  4.6.

  	
  Phase IV and Publication Strategy

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  CONSIDERATION

  	
  26

  
	
   

  	
  5.1.

  	
  Upfront Payments

  	
  26

  

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

i

 

	
   

  	
  5.2.

  	
  Milestones

  	
  26

  
	
   

  	
  5.3.

  	
  Royalties

  	
  28

  
	
   

  	
  5.4.

  	
  Program Expenses

  	
  29

  
	
   

  	
  5.5.

  	
  Interest

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  MUTUAL COVENANTS

  	
  32

  
	
   

  	
  6.1.

  	
  Confidentiality

  	
  32

  
	
   

  	
  6.2.

  	
  Restrictions

  	
  34

  
	
   

  	
  6.3.

  	
  Compliance with Law

  	
  35

  
	
   

  	
  6.4.

  	
  Nonsolicitation of Employees

  	
  35

  
	
   

  	
  6.5.

  	
  Standstill Agreement

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  REPRESENTATIONS AND WARRANTIES

  	
  37

  
	
   

  	
  7.1.

  	
  Representations and Warranties of Each Party

  	
  37

  
	
   

  	
  7.2.

  	
  Additional Representations and Warranties of
  Microbia

  	
  38

  
	
   

  	
  7.3.

  	
  Additional Representations and Warranties of Forest

  	
  38

  
	
   

  	
  7.4.

  	
  Representation by Legal Counsel

  	
  39

  
	
   

  	
  7.5.

  	
  No Inconsistent Agreements

  	
  39

  
	
   

  	
  7.6.

  	
  Disclaimer

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  INTELLECTUAL PROPERTY

  	
  40

  
	
   

  	
  8.1.

  	
  Disclosure

  	
  40

  
	
   

  	
  8.2.

  	
  Ownership

  	
  40

  
	
   

  	
  8.3.

  	
  Intellectual Property Working Group

  	
  40

  
	
   

  	
  8.4.

  	
  Prosecution and Maintenance of Patent Rights

  	
  40

  
	
   

  	
  8.5.

  	
  Trademarks

  	
  42

  
	
   

  	
  8.6.

  	
  Enforcement of Technology Rights

  	
  42

  
	
   

  	
  8.7.

  	
  Third Party Claims

  	
  44

  
	
   

  	
  8.8.

  	
  Third Party Licenses

  	
  44

  
	
   

  	
  8.9.

  	
  Patent Marking

  	
  44

  
	
   

  	
  8.10.

  	
  Patent Certifications

  	
  44

  
	
   

  	
  8.11.

  	
  No Implied Licenses

  	
  45

  
	
   

  	
  8.12.

  	
  [**]

  	
  45

  

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

ii

 

	
  9.

  	
  INTENTIONALLY OMITTED

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  TERM AND TERMINATION

  	
  45

  
	
   

  	
  10.1.

  	
  Term

  	
  45

  
	
   

  	
  10.2.

  	
  Termination for Cause

  	
  45

  
	
   

  	
  10.3.

  	
  Change of Control

  	
  50

  
	
   

  	
  10.4.

  	
  Survival of Certain Obligations

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  PRODUCT LIABILITY, INDEMNIFICATION AND INSURANCE

  	
  51

  
	
   

  	
  11.1.

  	
  Sharing of Liability Expenses

  	
  51

  
	
   

  	
  11.2.

  	
  Indemnification by Microbia

  	
  52

  
	
   

  	
  11.3.

  	
  Indemnification by Forest

  	
  52

  
	
   

  	
  11.4.

  	
  Procedure

  	
  52

  
	
   

  	
  11.5.

  	
  Insurance

  	
  53

  
	
   

  	
  11.6.

  	
  Liability Limitations

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  MISCELLANEOUS

  	
  53

  
	
   

  	
  12.1.

  	
  Governing Law, Jurisdiction; Dispute Resolution

  	
  53

  
	
   

  	
  12.2.

  	
  Force Majeure

  	
  55

  
	
   

  	
  12.3.

  	
  Additional Approvals

  	
  56

  
	
   

  	
  12.4.

  	
  Waiver and Non-Exclusion of Remedies

  	
  56

  
	
   

  	
  12.5.

  	
  Notices

  	
  56

  
	
   

  	
  12.6.

  	
  Entire Agreement

  	
  57

  
	
   

  	
  12.7.

  	
  Amendment

  	
  57

  
	
   

  	
  12.8.

  	
  Assignment

  	
  58

  
	
   

  	
  12.9.

  	
  No Benefit to Others

  	
  58

  
	
   

  	
  12.10.

  	
  Counterparts

  	
  58

  
	
   

  	
  12.11.

  	
  Severability

  	
  58

  
	
   

  	
  12.12.

  	
  Further
  Assurance

  	
  58

  
	
   

  	
  12.13.

  	
  Publicity

  	
  58

  
	
   

  	
  12.14.

  	
  Relationship
  of the Parties

  	
  59

  

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

iii

 

MASTER COLLABORATION AGREEMENT

 

This MASTER COLLABORATION AGREEMENT (the “Agreement”)
is entered into on this 12th day of September, 2007 (the “Effective Date”),
by and among Microbia, Inc., a Delaware corporation (“Microbia”)
and Forest Laboratories, Inc. (“Forest”).  Microbia and Forest may each be referred to
herein individually as a “Party” and collectively as the “Parties.”

 

BACKGROUND

 

Microbia is developing certain pharmaceutical
compounds which have uses or potential uses in the treatment and prevention of
disease in humans.

 

Forest is engaged in the research, development and
commercialization of human pharmaceutical products.

 

Microbia and Forest desire to collaborate on the
development and commercialization of Microbia’s pharmaceutical compounds on the
terms and conditions set forth in this Agreement.

 

AGREEMENT

 

NOW THEREFORE, in consideration of the mutual promises
and covenants set forth below and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties agree as
follows:

 

1.                                      DEFINITIONS.

 

1.1.            “Affiliate(s)”  means, with respect to a
Person, any Person that controls, is controlled by, or is under common control with such first Person.  For purposes of this definition only, “control”
means (a) to possess, directly or indirectly, the power to direct the
management or policies of a Person, whether through ownership of voting
securities or by contract relating to voting rights or corporate governance, or
(b) to own, directly or indirectly, more than fifty percent (50%) of the
outstanding voting securities or other ownership interests of such Person.

 

1.2.            “Adjunctive
Product” has the meaning set forth in Section 6.2.1.

 

1.3.            “API Manufacturing” means the Manufacture and supply
of the active pharmaceutical ingredient of a Collaboration Compound that is
included in a Product Developed and Commercialized hereunder.

 

1.4.            “Applicable Laws”  means all applicable statutes, ordinances,
regulations, rules, or orders of any kind whatsoever of any Regulatory Authority, including, without limitation,
the FD&C Act, Prescription Drug Marketing Act, Generic Drug Enforcement Act
of 1992 (21 U.S.C. § 335a et seq.), and Anti-Kickback Statute (42 U.S.C.
§ 1320a-7b et seq.), all as amended from time to time in the Territory.

 

 

1.5.            [**]

 

1.6.            “Calendar
Quarter”  means each of
the three (3) consecutive month periods ending on March 31, June 30,
September 30, and December 31.

 

1.7.            “Change
of Control” means any
of the following: (a) the sale or disposition of all or substantially all
of the assets of a Party to a Third Party, (b) the acquisition by a Third
Party, other than an employee benefit plan (or related trust) sponsored or
maintained by a Party or any of its Affiliates, of more than fifty percent
(50%) of such Party’s outstanding shares of voting capital stock (e.g., capital stock entitled to vote generally for the
election of directors), (c) the appointment or election to the Board of
Directors of a Party of members constituting a majority of such Board who were
not appointed, approved or recommended for election by the Board of Directors
as constituted immediately prior to the appointment or election of such
majority, or (d) the merger or consolidation of a Party with or into
another corporation, other than, in the case of (b) or (c) of this
Section, an acquisition or a merger or consolidation of a Party in which
holders of shares of such Party’s voting capital stock immediately prior to the
acquisition, merger or consolidation have at least fifty percent (50%) of the
ownership of voting capital stock of the acquiring Third Party or the surviving
corporation in such merger or consolidation, as the case may be, immediately
after the merger or consolidation.  Notwithstanding
the foregoing, a Change of Control shall not be deemed to occur on account of
an initial public offering, the acquisition of securities of a Party by an
institutional investor, or Affiliate thereof, that acquires a Party’s
securities in a transaction or series of related transactions as a passive
investment which does not affect the management of such Party, or a sale of
assets, merger or other transaction effected exclusively for the purpose of
changing the corporate domicile of a Party.

 

1.8.            “CC” means  chronic constipation.

 

1.9.            “Collaboration
Compound” means (i) the
Initial Compound [**], in each case including any analogs, homologues,
derivatives, salts, metabolites, esters, isomers, enantiomers, polymorphs and
pro-drugs of such compound.  Forest’s
right to [**] hereunder will expire upon [**], provided, however, that (i) [**], then Forest’s right to [**], (ii) any compound that is [**], and (iii) with respect to a [**] which may reasonably be expected [**] for which a Collaboration Compound
is, at the time such [**], such right shall not expire until [**].

 

1.10.          “Collaboration
Know-How” means
Know-How that is invented, conceived or developed by or on behalf of either or
both Parties’ (or their Affiliates’) employees or Third Parties acting on such
Parties’ behalf, in each case in the course of such Party’s performance under
this Agreement.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

2

 

1.11.          “Collaboration Patent Rights” means Patent Rights claiming
Collaboration Know-How.

 

1.12.          “Collaboration
Technology”  means Collaboration
Know-How and Collaboration Patent Rights, and all other intellectual property
rights in any of the foregoing.

 

1.13.          “Commercial Launch” means the first commercial sale of
a Product in the United States following Regulatory Approval in the United
States.

 

1.14.          “Commercialization” means any and
all activities of using, importing, marketing, promoting, distributing,
offering for sale or selling a Product, including for example pre-commercial
launch market development activities conducted in anticipation of Regulatory
Approval of Product, seeking pricing and reimbursement approvals for Product, if
applicable, preparing advertising and promotional materials, sales force
training, all interactions and correspondence with a Regulatory Authority
regarding Phase IV clinical trials. 
Commercialization includes Promotion but does not include Development or
Manufacturing.  When used as a verb, “Commercialize”
means to engage in Commercialization.

 

1.15.          “Commercialization Budget” means the
budget approved by the JCC for conducting Commercialization pursuant to the
Commercialization Plan.

 

1.16.          “Commercialization Expenses” means all
costs and expenses associated with Commercialization activities pursuant to the
Commercialization Plan, including without limitation, FTE Costs, selling
expenses, or other direct and indirect costs and expenses associated with marketing,
shipping, packaging, storage and distribution of the Product for
Commercialization in the Field, costs of warehousing, transportation, order
entry, billing, shipping, credit and collection and other such activities in
connection with Product distribution; costs for preparing and reproducing
detailing aids, Product promotional materials and other promotional materials,
costs of professional education, product related public relations,
relationships with opinion leaders and professional societies, market research
(before and after product approval), healthcare economics studies, Phase IV
clinical trials, and other similar activities directly related to the Products
and, in each case, to the extent not previously deducted from gross invoiced
amounts in determining Net Sales hereunder, the cost of activities related to
obtaining reimbursement from payers, costs of sales and marketing data, costs
associated with sales representatives and training of the sales
representatives, sales meetings, details, samples, sales call reporting, work
on managed care accounts, in each case to the extent not included in FTE Costs,
costs related to customer service and other sales and customer service-related
expenses, in each case as included in the Commercialization Plan and
Commercialization Budget.  Such costs may
also include actual out-of-pocket costs for outside services and expenses (e.g.,

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

3

 

consultants, agency fees,
meeting costs, etc.).  For purposes of this definition,
FTE Costs shall be charged [**] and the
costs of sales representatives (other than the cost of acquiring samples) shall
be based entirely upon the [**].  Notwithstanding the foregoing,
Commercialization Expenses shall not include [**].  In furtherance of the Parties’ interest in
maximizing the profitability of the collaboration, the Parties agree that the
Commercialization Plan shall allocate activities to the Parties so as to avoid
duplicative costs and to maximize cost efficiency to the extent
practicable.   In furtherance of that
objective, the Commercialization Budget will include a separate amount for
Commercialization support expenses, which shall be for
Commercialization-related marketing, sales and administrative support costs and
associated overheads not specifically attributable to activities designated
under the Commercialization Plan (as used in this Section, the “Support
Expenses”).  Unless otherwise agreed by
the Parties, the Support Expenses shall not exceed [**]
of the total Commercialization Budget before Commercial Launch and [**] after Commercial Launch.  Each Party shall be allocated a portion of the
budgeted Support Expenses in proportion to its share of Promotional activities
being conducted pursuant to the Commercialization Plan (e.g.
35% to Microbia and 65% to Forest, if Microbia is performing 35% and Forest is
performing 65% of the Detailing). 
Commercialization Expenses will include each Party’s allocated portion
of the Support Expenses but, without the consent of the other Party (which may
be withheld in its sole discretion), Commercialization Expenses will not
include any Support Expenses of a Party that exceed such Party’s allocated
portion of the Support Expenses.

 

1.17.          “Commercialization Plan” has the
meaning set forth in Section 4.5.1.

 

1.18.          “Commercially Reasonable Efforts” means those
efforts and resources normally used by a Party for a product or compound owned
by it or to which it has rights of the type it has hereunder, which is of
similar market potential at a similar stage in its development or product life,
taking into account, without limitation, [**], and other
similar factors reasonably determined by the Party to be relevant.  Without limiting the foregoing, Commercially
Reasonable Efforts as it applies to the clinical development of the
Collaboration Compound and Product hereunder means [**],
as may be amended from time to time based on the results of studies conducted
with a Collaboration Compound and Product, and regulatory factors.  “Commercially Reasonable” as used herein
shall be interpreted in a corresponding manner.

 

1.19.          “Commercial Year” has the
meaning set forth in Section 5.2.3.

 

1.20.          “Confidential Information” means, with
respect to a Party, all information (and all tangible and intangible
embodiments thereof), which is Controlled by such Party, is disclosed by such
Party to the other Party pursuant to this Agreement, and is designated as
confidential in writing by the disclosing Party

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

4

 

whether by letter or by use
of an appropriate stamp or legend, prior to or at the time any such information
is disclosed by the disclosing Party to the other Party.  In addition, any information which is orally,
electronically or visually disclosed by a Party, or is disclosed in writing
without an appropriate letter, stamp or legend, shall constitute Confidential
Information if the disclosing Party, within [**]
after such disclosure, delivers to the receiving Party a written document or
documents describing the information disclosed and referencing the place and
date of such oral, visual, electronic or written disclosure and the names of
the person(s) to whom such disclosure was made, provided, however, that
any technical information disclosed at a meeting of the JDC, JCC or any other
committee established pursuant to this Agreement shall constitute Confidential
Information unless otherwise specified.

 

1.21.          “Control” or “Controlled” means, with
respect to any intellectual property right of a Party, that the Party or its
Affiliate owns or has a license to such intellectual property right and has the
ability to grant access, a license, or a sublicense to such intellectual
property right to the other Party as provided in this Agreement without
violating an agreement with or other rights of any Third Party.

 

1.22.          “Covered  Product” has the meaning set forth in Section 6.2.2.

 

1.23.          “Detail” means a
one-on-one, face-to-face meeting, in an individual or group practice setting,
between one or more physician prescribers and one Forest or Microbia sales
representative during which product information is communicated as either the
leading product (i.e., “first position”) or the second product (i.e., “second
position”).  When used as a verb, “Detail”
or “Detailing” shall mean to engage in a Detail.

 

1.24.          “Detail Election” has the
meaning set forth in Section 4.5.3.

 

1.25.          “Detail Rate” as applicable
to both Parties, means the [**].  The “Detail Rate” shall be established based
upon [**]. 
Each Detail shall be [**] as
follows: (i) during the [**], and (ii) after
the earlier of the [**].

 

1.26.          “Detail Reports” means a report
of Details performed by a Party during the quarter covered by such report
containing such information and in such format as determined by the JCC.

 

1.27.          “Development” means all
activities performed by or on behalf of either Party in the performance of any
Development Plan for the Product in the Field in the Territory.  Development shall include, without
limitation, all activities related to research (including, without limitation,
Post-Approval Research) preclinical testing, test method development and
stability testing, toxicology, formulation, process development, manufacturing scale-up,
quality assurance/quality control, clinical studies, seeking Regulatory
Approval and

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

5

 

otherwise handling
regulatory affairs, statistical analysis and report writing performed pursuant
to the Development Plan with respect to the Product.  Development shall not include Manufacturing
or Commercialization.  When used as a
verb, “Develop” means to engage in Development.

 

1.28.          “Development Budget” means the
budget approved by the JDC for conducting Development pursuant to the
Development Plan which budget will be updated and amended concurrently with the
Development Plan.

 

1.29.          “Development Expense” means the
costs incurred by a Party in connection with studies or activities performed
under the Development Plan in order to obtain, maintain or expand the relevant
Regulatory Approval to manufacture, use or sell Product in the Field in the
Territory to the extent included in the Development Budget.  Development Expense shall include, without
limitation, (a) all out-of-pocket costs and expenses actually incurred by
Forest or Microbia in conducting such studies or activities including without
limitation costs of studies on the toxicological, pharmacological, metabolic or
clinical aspects of a Product conducted internally or by individual
investigators or consultants and necessary for the purpose of obtaining,
maintaining and/or expanding Regulatory Approval of the Product, process
development, process improvement and scale-up costs, validation costs,
including qualification lots, (b) the costs of internal personnel engaged
in the performance of such studies or activities, including the activities
described below in this Section (such costs shall be included in the
Development Budget [**]), (c) all
costs of developing data for Regulatory Submissions and all costs associated
with making such submissions, (d) all costs related to pharmacovigilance
activities, and (e) any other costs that are designated as Development
Expenses herein, in each case as included in the Development Plan and the
Development Budget.

 

1.30.          “Development Plan” means  the plan for the Development of the Collaboration Compound
for Regulatory Approval prepared and approved by the JDC and as amended or
updated from time to time, but in no event less frequently than once a year, in
accordance with this Agreement.  The
initial Development Plan is attached hereto as Exhibit 1.30.

 

1.31.          “Effective Date” means the date
of this Agreement first set forth above.

 

1.32.          “Fair
Market Value” means with
respect to a valuation required by any provision hereof, [**].  In any case where Fair
Market Value must be determined but is not determined by good faith
negotiations between the Parties, pursuant to Section 10.3.2(b), [**].  In addition, as the Parties wish to assure
that Fair Market Value will be determined without regard to [**], Fair Market Value will be based upon [**] excluding any payment made pursuant to Section 5.1 this
Agreement.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

6

 

1.33.          “FD&C Act” means the
United States Federal Food, Drug, and Cosmetic Act, as amended, and the
regulations promulgated thereunder.

 

1.34.          “FDA” means the United States
Food and Drug Administration or any successor agency thereto, and in Canada and
Mexico shall mean regulatory authorities having similar jurisdiction.

 

1.35.          “Field” means all human diagnostic,
prophylactic, and therapeutic uses of a product in any oral formulation or oral
dosage form for any and all indications, including but not limited to IBS-C, CC
and OIC.

 

1.36.          “First Commercial Sale” means, with
respect to the Product and any country of the Territory, the first sale of such
Product under this Agreement for use in the Field to a Third Party in such
country, after such Product has been granted Regulatory Approval for use in the
Field by the competent Regulatory Authorities in such country.

 

1.37.          “Forest Know-How” means (i) Know-How
that Forest Controls as of the Effective Date or that comes into the Control of
Forest during the Term (other than Joint Know-How or Know-How which is Microbia
Know-How licensed to Forest pursuant to this Agreement) to the extent necessary
or useful in the Territory to Manufacture, Develop or Commercialize any
Collaboration Compound or Product, including without limitation any method of
making any Collaboration Compound or Product, any composition or formulations
of any Collaboration Compound or Products, or any method of using or
administering any Collaboration Compound or Product, and (ii) Collaboration
Know-How (other than Joint Know-How) that is invented, conceived or developed
by employees of Forest or its Affiliates, or Third Parties acting on behalf of
Forest or its Affiliates.

 

1.38.          “Forest Patent Rights” means any
Patent Right that Forest Controls as of the Effective Date or that come into
the Control of Forest during the Term (other than Joint Patent Rights or Patent
Rights which are Microbia Patent Rights licensed to Forest pursuant to this
Agreement) to the extent such rights cover or recite any Collaboration Compound
or Product, any method of making any
Collaboration Compound or Product, any composition or formulations of any
Collaboration Compound or Products, or any method of using or administering any
Collaboration Compound or Products.

 

1.39.          “Forest Technology” means Forest’s
interest in (a) the Forest Know-How, and (b) the Forest Patent
Rights, and all other intellectual property rights in any of the foregoing.

 

1.40.          “FTE Costs” means, (i) with respect to costs associated
with [**] in any Calendar Quarter pursuant
to this Agreement, the [**] pursuant
to this Agreement in any Calendar Quarter, the [**].

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

7

 

1.41.          “FTE Other Rate” means the [**].  The JDC and the JCC will arrange for the
finance departments of each Party to discuss and agree upon appropriate FTE Other
Rates for the various functional areas of this collaboration and to
periodically review the appropriateness of and to adjust such rates.

 

1.42.          “FTE Rate” means (i) [**] and (ii) [**], as
applied.

 

1.43.          “GAAP” means United States
generally accepted accounting principles, as in effect from time to time.

 

1.44.          “Good Clinical Practice” or “GCP” means the then
current standards for clinical trials for pharmaceuticals, as set forth in the
FD&C Act and applicable regulations promulgated thereunder, as amended from
time to time, and such standards of good clinical practice as are required by
other governmental agencies in countries in which the Products are intended to
be sold, to the extent such standards are not less stringent than United States
GCP.

 

1.45.          “Good Laboratory Practice” or “GLP” means the then
current standards for laboratory activities for pharmaceuticals, as set forth
in the FD&C Act and applicable regulations promulgated thereunder, as
amended from time to time, and such standards of good laboratory practice as
are required by other governmental agencies in countries in which the Products
are intended to be sold, to the extent such standards are not less stringent
than United States GLP.

 

1.46.          “Good Manufacturing Practice” or “GMP” means the then
current standards for manufacturing activities for pharmaceuticals, as set
forth in the FD&C Act and applicable regulations promulgated thereunder, as
amended from time to time, and such standards of good manufacturing practice as
are required by other governmental agencies in countries in which the Products
are intended to be manufactured or sold, to the extent such standards are not
less stringent than United States GMP.

 

1.47.          “Initial Compound” means
Microbia’s proprietary guanylate cyclase C agonist polypeptide known as
“Linaclotide Acetate,” having the chemical structure set forth on Schedule
1.47.

 

1.48.          “IBS-C” means  irritable bowel syndrome with the primary
manifestation of constipation.

 

1.49.          “Initial Development Plan”
has the meaning set forth in Section 4.1.1.

 

1.50.          “JCC” has the meaning set forth
in Section 3.3.

 

1.51.          “JDC” has the meaning set forth
in Section 3.2.

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

8

 

1.52.          “Joint
Know-How” means any Collaboration Know-How that is invented,
conceived or developed jointly by an employee of Microbia or its Affiliates (or
a Third Party acting on any of their behalf) and an employee of Forest or its
Affiliates (or a Third Party acting on any of their behalf).

 

1.53.          “Joint Patent Right” means any
Patent Right that claims Joint Know-How and names as the inventors one or more
employees or agents of Microbia or its Affiliates together with one or more
employees or agents of Forest or its Affiliates, as determined by U.S. law.

 

1.54.          “Joint Technology” means Joint
Know-How, Joint Patent Rights, and all other intellectual property rights
therein.

 

1.55.          “Know-How” means all
inventions, discoveries, data, information (including scientific, technical or
regulatory information), processes, methods, techniques, materials, technology,
results, analyses, laboratory, pre-clinical and clinical data, or other
know-how, whether or not patentable, including without limitation pharmacology,
toxicology, drug stability, manufacturing and formulation methodologies and
techniques, clinical and non-clinical safety and efficacy studies, marketing
studies, absorption, distribution, metabolism and excretion studies.

 

1.56.          “Manufacture,” “Manufactured” or
“Manufacturing” means all activities involved in the production of
a Collaboration Compound or Product to be Developed and/or Commercialized under
this Agreement.

 

1.57.          “Manufacturing Costs” means the cost to produce the Collaboration
Compound and the Product for use pursuant to the Development Plan and, as
applicable, the Commercialization Plan. 
Manufacturing Costs will include without limitation, [**].  Allocations
shall be made assuming [**].  For administrative efficiency, the Parties’
respective finance departments will meet from time to time to agree upon [**] shall be subject to periodic review and adjustment as
necessary to assure that it continues to approximate such costs.  For the avoidance of doubt, to the extent
that any costs described in the preceding sentence are included in the [**].  To the extent
Manufacturing Costs include a Party’s internal costs, such amounts shall
include [**]. 
All Manufacturing Costs will be determined in accordance with GAAP.

 

1.58.          “Microbia Know-How” means (i) Know-How
Microbia Controls as of the Effective Date or that comes into the Control of
Microbia during the Term (other than Joint Know-How and Know-How which is
Forest Know-How licensed to Microbia pursuant to this Agreement) to the extent
necessary or useful in the Territory to Manufacture, Develop or Commercialize
any Collaboration Compound or Product, including without limitation any method
of making any Collaboration Compound or Product, any composition or
formulations of any Collaboration Compound or Products, or any method of using
or administering any Collaboration 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

9

 

Compound or Product, and (ii) Collaboration Know-How (other than
Joint Know-How) that is invented, conceived or developed by employees of
Microbia or its Affiliates, or Third Parties acting on behalf of Microbia or
its Affiliates.

 

1.59.          “Microbia Patent Rights” means any
Patent Right that Microbia Controls as of the Effective Date or that comes into
the Control of Microbia during the term of this Agreement (other than Joint
Patent Rights and Patent Rights which are Forest Patent Rights licensed to
Microbia pursuant to this Agreement) to the extent such rights cover or recite
any Collaboration Compound or Product, any method of making the Collaboration
Compound or Product, any composition or formulations of the Collaboration
Compound or Products, or the method of using or administering the Collaboration
Compound or Product.

 

1.60.          “Microbia Technology” means
Microbia’s interest in (i) the Microbia Know-How, (ii) the Microbia
Patent Rights, and all other intellectual property rights in any of the
foregoing.

 

1.61.          “Net Loss”  means [**], where the result is a
negative number.

 

1.62.          “Net Profit”  means
[**], where the result is a positive
number.

 

1.63.          “Net Sales” means, on a
country-by-country basis, with respect to any period for each country in the
Territory, the gross amounts invoiced by Forest or its Affiliates, as
applicable, to unrelated Third Parties for sales of the Product in the Field in
such country, less the following deductions to the extent included in the gross
invoiced sales price for the Product or otherwise directly paid or incurred by
Forest or its Affiliates with respect to the sale of the Product in such
country: (i) trade, quantity or cash discounts credits, adjustments or
allowances, including without limitation, those granted on account of price
adjustments, billing errors, rejected goods, or damaged goods; (ii) rebates
and chargebacks allowed, given or accrued (including, but not limited to, cash,
governmental and managed care rebates, hospital or other buying group
chargebacks, and governmental taxes in the nature of a rebate based on usage
levels or sales of the Product); (iii) sales, excise, turnover, inventory,
value-added, and similar taxes assessed on the sale of the Product; (iv) bad
debts reserved for on the basis utilized by Forest in its branded
pharmaceutical business generally or, if greater, bad debts actually written
off, in each case which are attributable to sales of Product; (v) freight
and insurance charges; (vi) amounts paid or credited to customers for
inventory management services; and (vii) the portion of any management or
administrative fees paid during the relevant time period to group purchasing
organizations, wholesalers and managed care organizations to the extent
determined by sales or utilization of the Product.  Net Sales will be determined in accordance
with GAAP.  Without limiting the
generality of the foregoing, sales, transfers or dispositions of Product for
charitable, promotional (including samples), pre-clinical, clinical, or
regulatory 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

10

 

purposes will be excluded from Net Sales, as will sales or transfers of
Product among a Party and its Affiliates.

 

1.64.          “New Drug Application” or “NDA” means a New
Drug Application filed with the FDA as described in 21 CFR § 314, or any
corresponding application for Regulatory Approval (not including pricing and
reimbursement approval) in any country or regulatory jurisdiction other than
the U.S.

 

1.65.          “OIC” means opioid induced
constipation.

 

1.66.          “Operational Rights” means a
Party’s right to representation on the JDC and JCC, the Party’s decision-making
authority under the JCC and JDC, and its right to perform Detailing pursuant to
the Commercialization Plan.

 

1.67.          “Other Out-of-Pocket Costs” means (i) [**], costs incurred in [**] of this
Agreement, (ii) costs incurred in [**] of this
Agreement, and (iii) costs incurred by the Parties pursuant to Section [**].

 

1.68.          “P&L Statement” has the
meaning set forth in Section 5.4.2.

 

1.69.          “Patent Right” means any and
all (a) U.S. or foreign patent applications, including, without
limitation, all provisional applications, substitutions, continuations,
continuations-in-part, divisions, renewals, and all patents granted thereon, (b) all
U.S. or foreign patents, reissues, reexaminations and extensions or
restorations by existing or future extension or restoration mechanisms,
including, without limitation, supplementary protection certificates or the
equivalent thereof, and (c) any other form of government-issued right
substantially similar to any of the foregoing.

 

1.70.          “Phase II” in reference to a clinical
trial means a trial defined in 21 C.F.R. 312.21(b), as may be amended from time
to time, or any foreign equivalent thereto.

 

1.71.          “Phase III” in reference
to a clinical trial means a trial defined in 21 C.F.R. 312.21(c), as may be
amended from time to time, or any foreign equivalent thereto.

 

1.72.          “Phase IV” in reference
to a clinical trial means a trial conducted for purposes of further
characterizing and supporting the Product for marketing but not for purposes of
seeking Regulatory Approval or otherwise fulfilling a requirement of a
Regulatory Authority.

 

1.73.          “Post-Approval Research” means ongoing
research and development of a Product after such Product has received
Regulatory Approval in a country of the Territory, including, without
limitation, Phase IV clinical studies and 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

11

 

clinical studies in support of indications within the Field or labeling
changes for such Product within the field in such country during the term of
this Agreement.

 

1.74.          “Product” means any
pharmaceutical product in finished oral form that contains a Collaboration
Compound either
as the sole active ingredient or in combination with one or more other active
ingredients and all present and future oral formulations, oral dosages, and
oral dosage forms thereof.  For the
avoidance of doubt and unless otherwise mutually agreed by the Parties, each in
its sole discretion, “Product” excludes non-oral formulations, non-oral dosages
and non-oral dosage forms, including without limitation intravenous and
inhalable forms, including any such formulations that are combination products.

 

1.75.          “Program Expenses” means the
Commercialization Expenses, Development Expenses, Manufacturing Costs, and
Other Out of Pocket Costs.

 

1.76.          “Promotion” means those activities
normally undertaken by a pharmaceutical company’s sales force to implement
marketing plans and strategies aimed at encouraging the appropriate use of a
particular prescription or other pharmaceutical product, including
Detailing.  When used as a verb,
“Promote” means to engage in such activities.

 

1.77.          “Quality Agreement” means the agreement entered
into pursuant to Section 4.2.3.

 

1.78.          “Reconciliation Report” has the meaning set forth
in Section 5.4.4.

 

1.79.          “Regulatory
Approval” means the approval and authorization of a Regulatory
Authority in a country necessary to develop, manufacture, distribute, sell or
market a Product in that country, including pricing and reimbursement approval,
where required.

 

1.80.          “Regulatory
Authority” means any national (e.g., the FDA), regional, state
or local regulatory agency, department, bureau, commission, council or other
governmental entity in each country of the world involved in the granting of
Regulatory Approval for a Product in the Territory.

 

1.81.          “Regulatory Submissions” means applications for
Regulatory Approval, notification and other submissions made to or with a
Regulatory Authority that are necessary or reasonably desirable to Develop,
Manufacture or Commercialize the Product in the Field in a particular country,
whether obtained before or after a Regulatory Approval in the country.  Regulatory Submissions include, without
limitation, investigative new drug applications and NDAs, and amendments and
supplements to any of the foregoing and their foreign counterparts,
applications for pricing and reimbursement approvals, and all 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

12

 

proposed labels, labeling, package inserts, monographs and packaging
for the Product in the Territory.

 

1.82.          “Restricted Period” has the meaning set forth in
Section 6.2.1.

 

1.83.          “Right of Reference” has the meaning set forth in
Section 2.7.

 

1.84.          “Senior Management” of a Party includes, at a
minimum, each of the Chief Executive Officer, Head of Research and Development,
Head of Marketing, and President or Chief Operating Officer of the
pharmaceutical business or division.

 

1.85.          “Share Adjustment” has the meaning set forth
in Section 5.4.1.

 

1.86.          “Sublicensee” means an Affiliate or Third
Party that is granted a license, sublicense, covenant not to sue or other grant
of rights under this Agreement pursuant to Section 2.6 of this
Agreement.  “Sublicense” means an
agreement or arrangement pursuant to which such a sublicense or distribution right
has been granted.

 

1.87.          “Sublicense Income” means all payments that
Forest or an Affiliate receives from a Third Party Sublicensee in connection
with any grant of rights that includes the rights granted to Forest under Section 2.2,
including without limitation [**].

 

1.88.          “Target Party” has the meaning set forth
in Section 10.3.2(b).

 

1.89.          “Technology” means Know-How
and Patent Rights.

 

1.90.          “Term” is defined in Section 10.1.

 

1.91.          “Territory” means the
countries of North America, consisting of the United States, Canada and Mexico,
and their respective territories and possessions (including Puerto Rico,
irrespective of political status).

 

1.92.          “Third Part(y/ies)” means any
person(s) or entit(y/ies) other than Microbia and its Affiliates and
Forest and its Affiliates.

 

1.93.          “Trademark” means any
trademark under which the Product is sold, other than the Parties’ trade names
and trademarks used by the Parties to identify their companies generally.

 

1.94.          “United States” or “U.S.” means the United States of America, its territories
and possessions (including Puerto Rico, irrespective of political Status).

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

13

 

1.95.          “Valid Claim” means a claim
of an issued and unexpired Patent Right in the Territory, which claim has not
been revoked or held unenforceable, unpatentable or invalid by a decision of a
court or other governmental agency of competent jurisdiction, which is not
appealable or has not been appealed within the time allowed for appeal, and
which has not been abandoned, disclaimed, denied or admitted to be invalid or
unenforceable through reissue, re-examination or disclaimer or otherwise.

 

1.96.          “Valuation Panel” means a panel
of [**]. 
In the event the Parties are required by the terms hereof to select a
Valuation Panel, each Party shall [**].  Each Party shall [**].  The decision of [**]
entered into shall be deemed the decision of the Valuation Panel.  The Parties shall instruct the Valuation
Panel to reach its decision as promptly as practicable, and if possible within [**].  The costs of
this Valuation Panel shall be [**] by the
Parties.

 

1.97.          “Year” means each twelve (12) month
period ending December 31st.

 

2.                                      SCOPE OF
COLLABORATION AND GRANT OF LICENSES.

 

2.1.         Scope of Collaboration.  The Parties are
entering into this Agreement to co-Develop the Collaboration Compound and
Product in the Field and to co-Commercialize Products in the Field in the
Territory.

 

2.2.         License to Forest.  Subject to the
terms and conditions of the Agreement, Microbia hereby grants to Forest,
effective on the Effective Date, a co-exclusive license (i.e., an exclusive license subject only to
the rights reserved to the granting Party to the extent necessary to perform
its obligations or exercise its rights hereunder), with the right to sublicense
to its Affiliates or as expressly provided in Section 2.6, (i) under
the Microbia Technology to Develop pursuant to the Development Plan and
Manufacture the Product anywhere in the world solely for purposes of
Commercialization in the Field in the Territory and to Commercialize the
Product in the Field in the Territory, and (ii) under
Microbia’s interest in the Joint Technology to exploit any guanylate cyclase C
agonists in the Field in the Territory, all in accordance with the
terms of this Agreement.  Notwithstanding
the foregoing, Microbia reserves the right under the Microbia Technology to
develop and manufacture the Product in the Territory solely for
commercialization outside the Territory, provided that Microbia will disclose
plans for any  clinical development
undertaken pursuant to this sentence in the Territory to the JDC and may not
conduct any such clinical development activities in the Territory which Forest
reasonably believes may adversely affect the timely clinical Development of any
Product in the Territory.

 

2.3.         License to Microbia.  Subject to the
terms and conditions of the Agreement, Forest hereby grants to Microbia (i) a
royalty-free co-exclusive license (i.e., an exclusive license subject only to
the rights reserved to the granting Party to the extent necessary to perform
its obligations or exercise its rights hereunder), with the right to freely
sublicense subject to Section 2.6, under the Forest Technology and
Forest’s interest in the Joint Technology to the 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

14

 

extent
necessary for Microbia to Develop and Manufacture the Product anywhere in the
world and to Commercialize the Product in the Field in the Territory and to
otherwise exercise its rights and perform its obligations under this Agreement,
all in accordance with the terms of this Agreement, and (ii) a perpetual,
royalty-free, exclusive license, with the right to freely sublicense subject to
Section 2.6, (x) under Forest’s interest in the Forest Technology to
develop, manufacture and commercialize the Collaboration Compound and Product
in the Field outside of the Territory and to develop (subject to the proviso in
the final sentence of Section 2.2 above) and manufacture the Product in
the Territory for purposes of commercialization in the Field outside the
Territory and (y) under Forest’s interest in the Joint Technology to
exploit any guanylate cyclase C agonists (other than Collaboration Compounds)
outside the Field in the Territory and outside the Territory in any field of
use.

 

2.4.         Restrictions.  Microbia
will not exercise or otherwise exploit the Joint Technology or the Forest
Technology in the Field with respect to the Territory and Forest will not
exercise or otherwise exploit the Joint Technology or the Microbia Technology
in the Field with respect to the Territory, in each case except pursuant to
this Agreement.  In addition, neither
Party will [**], whether within or
outside the Territory, in each case including by means of licenses to or
collaborations with Third Parties, except pursuant to or as otherwise permitted
by the terms of this Agreement.

 

2.5.         Joint Technology.  Each  Party hereby grants the other Party a
world-wide, non-exclusive, perpetual, royalty-free, fully paid up, freely
sublicenseable right and license under its interest in the Joint Technology to
exploit compounds that are not guanylate cyclase C agonists
anywhere in the world, without compensating or accounting
to the other Party.

 

2.6.         Sublicensing.  Except as
provided in Section 2.5, Forest will have no right, except upon prior
written consent of Microbia, which consent may not be unreasonably withheld,  to grant sublicenses
to Third Parties under the rights granted to Forest under this Agreement, and provided
that [**] except upon prior written
consent of the other Party, which may be withheld in such Party’s sole
discretion.  Any sublicenses granted by
either Party hereunder shall be consistent with the terms of this
Agreement.  In addition, each Party shall
require any licensee or Sublicensee, whether within or outside the Territory,
of Technology with respect to the Collaboration Compound or the Product, to
cross-license or otherwise transfer or convey back to the granting Party all
Technology which such licensee or Sublicensee may develop or acquire so that
any of such Technology will be Controlled by the granting Party for purposes
and to the extent of the licenses to the other Party provided by Sections 2.2
and 2.3 above.

 

2.7.         Right of Reference. 
Microbia hereby grants to Forest a “Right of Reference,” as that term is
defined in 21 C.F.R. § 314.3(b) in the Field in the Territory to the data
included in the Collaboration Technology to the extent necessary or useful to
Manufacture, Develop or Commercialize a Collaboration Compound or Product, and
Forest hereby grants to Microbia (and Microbia’s partners) such a Right of
Reference to the data included in the Collaboration Technology to the extent
necessary or useful to Manufacture, Develop or Commercialize a Collaboration
Compound or Product in the Field throughout the world, in each case subject to 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

15

 

the
terms and conditions of this Agreement. 
Each Party shall provide a signed statement to this effect, if requested
by the other, in accordance with 21 C.F.R. § 314.50(g)(3) solely, in the
case of a request by either Party with respect to the Territory, for the
limited purpose of such Party exercising its rights or performing its
obligations under this Agreement.  In addition,
Microbia will provide Forest with [**].  Any such copies of [**] shall be Confidential Information of Microbia.  The Parties agree that Microbia may make
available to its collaborators and partners with respect to Collaboration
Compounds or Products outside the Territory any Regulatory Submissions made in
the Territory pursuant to this Agreement.

 

2.8.         No Other Rights.  No
rights, other than those expressly set forth in this Agreement are granted to
either Party hereunder, and no additional rights shall be deemed granted to
either Party by implication, estoppel or otherwise.  All rights not expressly granted by either
Party to the other hereunder are reserved.

 

2.9.         Section 365(n).  All rights and licenses granted under or pursuant
to this Agreement by Forest or Microbia are, and will otherwise be deemed to
be, for purposes of Section 365(n) of the U.S. Bankruptcy Code,
licenses of rights to “intellectual property” as defined under Section 101
of the U.S. Bankruptcy Code.  The Parties
agree that the Parties, as licensees of such rights under this Agreement, will
retain and may fully exercise all of their rights and elections under the U.S.
Bankruptcy Code.  The Parties further
agree that, in the event of the commencement of a bankruptcy proceeding by or
against either Party under the U.S. Bankruptcy Code, the Party hereto that is
not a party to such proceeding will be entitled to a complete duplicate of (or
complete access to, as appropriate) any such intellectual property and all
embodiments of such intellectual property, and same, if not already in their
possession, will be promptly delivered to them (i) upon any such
commencement of a bankruptcy proceeding upon their written request therefor,
unless the Party subject to such proceeding elects to continue to perform all
of its obligations under this Agreement, or (ii) if not delivered under (i) above,
following the rejection of this Agreement by or on behalf of the Party subject
to such proceeding upon written request therefor by the non-subject party.

 

3.                                      DECISION MAKING
AND DISPUTE RESOLUTION.

 

3.1.         Overview.  During the
Term, management and oversight for all of the activities of the Parties related
to the Development and Commercialization of the Product in the Field in the Territory
will be provided by the committees set forth below and elsewhere in this
Agreement.  The Parties anticipate that
the committees would perform the functions ascribed to them hereunder;
provided, however, that the functions and operations of the committees may be
altered from time to time during the Term by the mutual agreement of the
Parties to appropriately address ongoing requirements with respect to the
Development and Commercialization of the Product.  In addition to the committee meetings, the Parties
anticipate that members of Senior Management from Forest and Microbia will meet
periodically as necessary or appropriate during the Term (and in any event at
least once per Year) in order to review significant issues and developments in
the Development and Commercialization of a Collaboration Compound or the
Product.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

16

 

3.2.         Joint Development Committee.  The Parties
shall establish a joint development committee (“JDC”) that will be
responsible for overseeing the Development of the Product in the Field in the
Territory, and will serve as a forum for exchanging data, information and
Development strategy regarding the Product.

 

3.2.1.       Membership.  The JDC will consist of three (3) senior
representatives from each Party. 
Microbia and Forest will each designate a co-chair for the JDC.  The co-chairs will be responsible for calling
meetings and setting the agenda (which shall include a list of all participants
expected at a meeting) and circulating such agenda at least five (5) days
prior to each meeting and distributing minutes of the meetings within thirty
(30) days following such meeting, but will not otherwise have any greater power
or authority than any other member of the JDC. 
JDC members shall have such expertise as appropriate to the activities
of the JDC from time to time and the JDC shall invite personnel of the Parties
having formulation, manufacturing, commercial, marketing and other expertise to
participate in discussions of the JDC from time to time as appropriate to
assist in the activities of the JDC.

 

3.2.2.       Responsibilities.  The JDC’s responsibilities will include,
among others:  (i) preparing and
approving the Development Plan and Development Budget for the Product, and any
amendments to such plan, (ii) approving (or establishing procedures to
approve) protocols for pre-clinical or clinical studies, (iii) making
modifications to and performing quarterly monitoring of progress of
pre-clinical and clinical studies and proposing additional studies for the
Product, (iv) monitoring the Parties’ compliance with the budgets for
Development Expenses, (v) reviewing and commenting on Regulatory
Submissions relating to the Product, and (vi) facilitating the exchange of
all data, information, material or results relating to the development of the
Product.  The JDC may appoint additional
committees as desired.

 

3.2.3.       Meetings.  During Development, the JDC will meet at such
frequency as shall be established by the Parties (but not less frequently than
four (4) times per year).  Meetings
of the JDC shall alternate between the offices of the Parties, unless otherwise
agreed upon by the members of the JDC, or may be held telephonically or by
video conference.  Meetings of the JDC
shall be effective only if at least one representative of each Party is in
attendance or participating in the meeting. 
Members of the JDC shall have the right to participate in and vote at
meetings by telephone.  Each Party shall
be responsible for expenses incurred by its employees and its members of the
JDC in attending or otherwise participating in JDC meetings.  Each Party shall use reasonable efforts to
cause its representatives to attend the meetings of the JDC.  If a representative of a Party is unable to
attend a meeting, such Party may designate an alternate to attend such meeting
in place of the absent representative.

 

3.2.4.       Minutes and
Agendas.  The minutes of each JDC
meeting shall provide a description in reasonable detail of the discussions
held at the meeting and a list of any actions, decisions or determinations
approved by the JDC.  Minutes of each JDC
meeting shall be approved or disapproved, and revised as necessary, at the next
meeting.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

17

 

3.3.         Joint Commercialization Committee.  The Parties will establish a joint
commercialization committee (“JCC”) that will oversee the
Commercialization of the Product in the Field in the Territory.  The JCC will coordinate selling and marketing
efforts under the Commercialization Plan and will serve as a forum regarding
Product Commercialization in the Field in the Territory.

 

3.3.1.       Membership.  The JCC will consist of three (3) senior
representatives from each Party.  Microbia and Forest will each designate a
co-chair for the JCC.  The co-chairs will
be responsible for calling meetings and setting the agenda for and distributing
minutes of the meetings, but will not otherwise have any greater power or
authority than any other member of the JCC. 
JCC members shall have such expertise as appropriate to the activities
of the JCC from time to time and the JCC shall invite personnel of the Parties
having development, formulation, manufacturing, financial and other expertise to
participate in discussions of the JCC from time to time as appropriate to
assist in the activities of the JCC.

 

3.3.2.       Responsibilities.  The JCC will be responsible for, among other
things, (i) establishing the strategy for the Commercialization of the
Product in the Field in the Territory, (ii) developing and approving the
Commercialization Plan and Commercialization Budget for the Product in the
Field in the Territory, as well as updating the Commercialization Plan on an
annual basis to reflect materially changed circumstances, and amending the
Commercialization Plan from time to time as appropriate, (iii) subject to
the specific terms and conditions hereof, allocating responsibilities under the
Commercialization Plan to the Parties in accordance with the Parties’ abilities
to perform such activities in the most efficient and cost effective manner, (iv) overseeing
the implementation of the strategy for Commercializing the Product in the Field
in the Territory (including strategies related to regulatory approvals,
reimbursement, advertising and promotion, brand integrity, sales, and launch
sequence as set forth in the Commercialization Plan), (v) providing input
to the JDC regarding the target product profile for the Product and making
recommendations regarding changes to the same, (vi) developing, reviewing
and approving the annual marketing plans for the Product in the Field in the
Territory, (vii) reviewing the Parties’ marketing and promotional
activities to ensure that such activities are consistent with the
Commercialization Plan, (viii) preparing, approving and amending the
Commercialization Budget, (ix) establishing usage instructions for the
Trademarks and (x) monitoring the Parties’ compliance with the
Commercialization Budget.

 

3.3.3.       Meetings.  The JCC will meet at such frequency as shall
be established by the Parties (but not less frequently than four (4) times
per year prior to launch and during the first five years of
Commercialization).  Meetings of the JCC
shall alternate between the offices of the Parties, unless otherwise agreed
upon by the members of the JCC, or may be held telephonically or by video
conference.  Meetings of the JCC shall be
effective only if at least one representative of each Party is in attendance or
participating in the meeting.  Members of
the JCC shall have the right to participate in and vote at meetings by
telephone.  Each Party shall be
responsible for expenses incurred by its employees and its members of the JCC
in attending or otherwise participating in JCC meetings.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

18

 

3.3.4.       Minutes and
Agendas.  The minutes of each JCC
meeting shall provide a description in reasonable detail of the discussions
held at the meeting and a list of any actions, decisions or determinations
approved by the JCC.  Minutes of each JCC
meeting shall be approved or disapproved, and revised as necessary, at the next
meeting.

 

3.4.         Joint Responsibilities of the JDC and JCC.  In addition to the
independent JDC and JCC meetings, the JDC and the JCC shall coordinate to hold
joint meetings as appropriate to discuss issues which are relevant to both
Development and Commercialization, including without limitation, in order to: (i) establish
the target product profile for the Product (including [**] given the competitive environment, and
any other [**] for the Product), (ii) discuss
development of the Product for [**]
and (iii) discuss development of improvements in [**] of the Products throughout the
Territory.  Such joint meetings may be
held by videoconference, teleconference or in person and any decisions required
to be taken shall be submitted to the JDC or JCC for resolution in accordance
with the terms hereof.  Each Party shall
be responsible for expenses incurred by its employees and its Committee members
in attending or otherwise participating in joint meetings of the JDC and JCC.

 

3.5.         Other Committees.  The
Parties may establish other committees or sub-committees as the Parties deem
appropriate.

 

3.6.         Elevation and Dispute Resolution.  Each Party’s
representatives on any committee will collectively have one vote on all matters
that are within the responsibility of such committee.  The members of each committee will use
reasonable efforts to reach consensus on all decisions.  In the event of a deadlock regarding a
particular issue on which the members of a committee cannot reach consensus,
such issue will be resolved as follows:

 

In the event that the members of the JDC or JCC are unable to agree on
a particular issue, such issue shall be referred, in the case of a matter
governed by the JDC, to the Parties’ respective Chief Scientific Officers or
their designees, and in the case of a matter governed by the JCC, to the
Parties’ respective heads of marketing or their respective designees, for
attempted resolution of such matter.  In
the event such individuals are unable to resolve such issue within 30 days,
such issue shall be referred to the Chief Executive Officers of each Party or
their designees for resolution.  Subject
to the remaining provisions of this Section, (i) all matters relating to
Development, including, without limitation, amendments and modifications to the
Development Plan, must be determined by consensus of the Parties and (ii) [**]. 
The Parties will from time to time identify a panel of mutually agreed
consultants with expertise in pharmaceutical development to assist the JDC in
the resolution of development issues and, upon the request of either Party,
such experts shall be requested to advise as to Development issues where
consensus cannot be reached, with the advice of such experts not to be unreasonably
rejected.  Notwithstanding the
foregoing, if a matter for which consensus cannot be reached is addressed by
the then current Development Plan, then such Development Plan and the
activities required thereunder will control despite any inability of the
Parties to reach consensus. 
Finally, in connection with any Commercialization decisions [**] establishing or significantly
adjusting the Commercialization Budget, [**]
all supporting data and analyses [**]
and shall [**].

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

19

 

4.                                      DEVELOPMENT,
REGULATORY, COMMERCIALIZATION.

 

4.1.         Development

 

4.1.1.       Product
Development Plan.  The initial Development Plan for the Product
in the Field is set forth in Exhibit 1.30 (the “Initial
Development Plan”).  The JDC will
direct, coordinate and manage the Development of the Product in the Field,
according to the Development Plan.  The
following provisions shall apply with respect to the Development of Products:

 

(a)            The Development
Plan for the Product will include, among other things, the indications in the
Field for which the Product is to be Developed and other exploratory
indications in the Field for which the Product may be developed, critical
activities to be undertaken, certain timelines, Go/No Go decision points and
relevant decision criteria and certain allocations of responsibilities between
the Parties for the various activities to be undertaken under the Development
Plan.  The Development Plan will also
include a Development Budget, as mutually agreed by the Parties.  Neither Party will be required, in any
Calendar Quarter, to make any Development investment in excess of the [**] of the amount designated to such Party in the
Development Budget for such Calendar Quarter. 
During the Term, the JDC will amend the Development Plan on an ongoing
basis as necessary.

 

(b)           The JDC will oversee
the allocation and assignment of Development activities in the Development Plan
between the Parties.  Such allocations
and assignments shall be consistent with the more specific provisions set forth
in Schedule 4.1.1.

 

(c)            The Parties will
use Commercially Reasonable Efforts to implement and conduct the Development
activities assigned to them pursuant to the Development Plan, in accordance
with Applicable Laws.

 

4.1.2.       Future Development
Activities.  Recommendations
regarding whether to jointly Develop a Product for new indications or new
formulations shall be made by the JDC. 
Such approved additional joint Development activities shall become part
of the Development Plan.

 

4.1.3.       Non-Development
Plan Activities.  All
Development work proposed to be undertaken by a Party and not provided for in
the then current Development Plan shall be submitted for consideration by the
JDC.  In the event the JDC determines not
to include such proposed Development activities in the Development Plan, which
determination will be made within [**] days of its
receipt of such proposal, and neither Party has any reasonable objection from a
Development, Commercialization or regulatory point of view to the conduct of
such Development activities, the Party proposing such Development activities
shall have the right to conduct such activities [**].  In such event, the other Party [**] from such Development 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

20

 

activities and, [**].  Without limiting the generality of the
foregoing, incremental Commercialization Expense incurred by a Party in
connection with [**], as applicable, [**] shall be for the account of the Party [**], and the Party providing such [**]. 
Notwithstanding anything to the contrary in this Section, the Party [**] without the adjustment described above, provided it
agrees to [**].

 

4.1.4.       ESAs.  The Parties will, from time to time after the
Effective Date, agree on the level of activity of external scientist affairs
personnel needed to adequately educate physicians regarding the use of the
Product (each an “ESA”).  Upon at
least 60 days prior notice to Forest, Microbia may elect to provide up to
thirty-five percent (35%) of the ESA activity. 
The activities of ESAs shall comply with all Applicable Laws and ethical
policies, including all compliance and ethics policies maintained by Forest.

 

4.1.5.       Reports of
Development Activities.  Each Party
shall report on Development activities undertaken by such Party in accordance
with Development Plan in connection with meetings of the JDC, including by
providing a reasonably detailed summary of all results, data and material
inventions, if any, obtained from such activities.  In addition, each Party shall, at its own
expense, make appropriate scientific and regulatory personnel available to the
other Party, either by telephone or in person as the Parties may mutually
agree, as reasonably required to keep the other Party informed of Development
activities.

 

4.1.6.       [**].  From time to time pursuant to this Section 4.1.6,
Forest may request that Microbia [**].   Upon such request, Microbia will use Commercially
Reasonable Efforts to [**].  All costs incurred in such [**] will be included as [**]
hereunder.  Any such [**].  Forest’s
right to request the [**] pursuant to this Section 4.1.6
will expire upon [**], provided that if
such [**], then Forest’s right to
request the [**].  Notwithstanding the foregoing, Forest may not
request that [**] in a request made pursuant
to this Section 4.1.6 during any [**] period.  Upon the addition of any such [**], the JDC will determine the appropriate Development
activities, if any, to be undertaken with respect to such Collaboration
Compound, [**].  Subject to Section 4.1.1(c), neither
Party shall have any operational or financial obligations with respect to the [**] except to the extent set forth in a Development
Plan approved by the JDC.

 

4.1.7.       Third Party
Comparative Information.  In
the event either Party from time to time possesses objective Third Party
information (for example, from a qualified contract research organization)
which indicates that specific Development activities can be achieved in a more
cost-effective manner than as provided by the Development Plan or as such plan
is then being implemented, the JDC shall review and give due regard to such
information with the obligation of achieving such cost savings to the extent
attainable without negatively impacting conduct of the Development Plan,
including, without limitation, the timing and quality of Development
activities.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

21

 

4.2.         Regulatory Matters.

 

4.2.1.       Responsibility For
Regulatory Interactions.  Regulatory
strategy for the Product and all decision-making with respect thereto shall be
determined by the Parties through the JDC. 
The Parties shall use Commercially Reasonable Efforts to obtain in a
timely manner Regulatory Approvals with respect to the Product to the extent
contemplated by the Development Plan. 
Certain agreed [**] are set
forth on Schedule 4.1.1 hereto. 
The costs incurred by the Parties in carrying out their assigned
responsibilities pursuant this Section 4.2.1 [**].

 

4.2.2.       Regulatory
Cooperation.  The Party responsible
for carrying out a regulatory activity pursuant to this Agreement or having
primary FDA contact responsibility will keep the other Party reasonably
informed regarding the status and progress of such activity, including without
limitation, providing the other Party with advance notice of all meetings
scheduled with a Regulatory Authority (including notice within twenty-four (24)
hours of a request for a meeting received from a Regulatory Authority)
involving a Regulatory Submission, and an agenda and an invitation to attend
such meetings, providing the other Party with a copy of all substantive written
correspondence from a Regulatory Authority involving a Regulatory Submission,
notifying the other Party of all oral substantive correspondence from a
Regulatory Authority involving a Regulatory Submission, and providing such
other Party with an advance draft of each proposed Regulatory Submission
sufficiently in advance of providing the submission to the Regulatory Authority
(and in any event no less than seven days in advance) to enable the other Party
to have a meaningful opportunity to provide comments on the content of such
submission and no such submission (including any NDA) shall be submitted for
filing with the Regulatory Authority without the mutual agreement of the
Parties, such consent not to be unreasonably withheld or delayed.  Furthermore, the Parties shall agree in
advance on all substantive written communications with and, to the extent
permitted by Applicable Law, shall both have the right to participate in all
meetings and oral communications with Regulatory Authorities in the applicable
countries in the Territory to the extent related to the Product.  All costs and expenses incurred by the Parties
in carrying out its allocated regulatory activities pursuant to this Agreement
will be included as [**].

 

4.2.3.       Quality Agreement.  Within ninety (90) days after the Effective
Date, the Parties will enter into an agreement governing the quality standards
required under this Agreement or by Third Party vendors (including Third
Parties performing API Manufacturing).

 

4.2.4.       Clinical Trial
Data.  The JDC will coordinate the
maintenance of separate databases for clinical trial data being developed by
each Party, including the merger of such databases as may be appropriate, or
will assign responsibility for the maintenance of a master database for all
clinical trial data.  All costs to
maintain such databases (including internal FTE costs) will be included as Development
Expense.

 

4.3.         Adverse Events.  Within
ninety (90) days after the Effective Date, the Parties will enter into a
pharmacovigilence agreement, which upon such execution will be attached as an
exhibit hereto and hereby incorporated into this Agreement by reference (the “Pharmacovigilence
Agreement”).  The Parties will comply
with the provisions of such 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

22

 

agreement.  Forest will maintain and will be the
recognized holder of a global safety database for Adverse Event reports related
to Collaboration Compound and Product received by either Party.  Forest will respond to safety inquiries
regarding the Product in the Field in the Territory.  All costs incurred by the Parties in
performing its obligations under the Pharmacovigilence Agreement and
maintaining the Adverse Event database will be included as Development
Expenses.

 

4.4.         Manufacture and Supply of Products.  The Parties shall establish a manufacturing
and supply chain working group to oversee Manufacturing (including API
Manufacturing of the Collaboration Compound). 
The Parties shall collaborate through such working group (with Microbia
taking the lead) to oversee API Manufacturing of Collaboration Compound for
clinical supplies and for commercial distribution and sale as contemplated by
the Development Plan and Commercialization Plan.  All Manufacturing responsibilities for API
Manufacturing shall be allocated to the Parties or Third Parties as mutually
agreed by the Parties; provided, however, that nothing herein
shall prevent Microbia from contracting with any Third Parties for the supply
of API for commercialization outside the Territory.    Forest shall be responsible for all
Manufacturing other than for API Manufacturing for the Field with respect to
the Territory.  Unless otherwise mutually
agreed, any supply agreement (including agreements for process or scale-up
development) with a Third Party pertaining to the supply of Product for sale in
the Territory shall be [**] to the
extent such agreement pertains to supply of Product for commercialization in
the Territory.  The Parties will perform
all Manufacturing activities allocated to them in accordance with GCP, GLP and
GMP.

 

4.5.         Commercialization in the Territory.  Microbia and Forest shall commercialize the
Products in accordance with the Commercialization Plan as follows:

 

4.5.1.       Commercialization Plan.  The JCC shall approve a strategic
commercialization plan for the Product in the Field in the Territory (the “Commercialization
Plan”) which sets forth, among other things, (a) a multi-year [**], (b) a multi-year [**], (c) a multi-year [**] (d) a high level operating plan
for the implementation of such strategies on an annual basis, including without
limitation, information related to [**],
all as developed and approved by the JCC, (e) a level of [**], (f) a Commercialization Budget,
and (g) all other activities to be conducted in connection with the
Commercialization of the Product in the Field in the Territory.  The Commercialization Plan will be updated at
least once a year.

 

4.5.2.       Commercialization
Activities.  Forest will use
Commercially Reasonable Efforts to Commercialize Products in the Field
throughout the Territory, subject to compliance by Microbia with its
obligations hereunder to the extent such compliance would be material to
Forest’s performance of its Commercialization obligations hereunder.  In addition, the Parties will use
Commercially Reasonable Efforts to conduct the Commercialization activities
assigned to them by the JCC pursuant to the Commercialization Plan, including
the performance of Detailing in accordance therewith.  In conducting the Commercialization
activities the Parties will comply with all Applicable Laws, applicable
industry professional standards and compliance policies of Forest which have
been previously furnished to Microbia, as the same may be updated from time to
time and provided to Microbia.  Forest
will assist 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

23

 

Microbia in training sales representatives in such standards.  Neither Party shall make any claims or
statements with respect to the Product that are not strictly consistent with
the Product labeling and the sales and marketing materials approved for use
pursuant to the Commercialization Plan. 
As between the Parties, [**].

 

4.5.3.       Promotion
Participation.

 

(a)            Microbia
Detailing.  Microbia will have the right
to have a national sales force distributed geographically within the U.S. in a
manner similar to Forest’s sales representatives, [**].  Upon notice to Forest in accordance with this
Section 4.5.3, Microbia may elect to provide between twenty percent (20%)
and thirty-five percent (35%) of the aggregate annual number of weighted
Details (i.e., weighted in the same manner as set
forth in the definition of Detail Rate) to be provided pursuant to the
Commercialization Plan (“Detail Election”).  Microbia will provide its Detail Election
notice for each Product as follows:  For
the period beginning upon Commercial Launch of a Product and ending on the
completion of the then current Forest fiscal year, Microbia will provide notice
of its Detail Election [**] after
acceptance by the FDA of the NDA for the Product, and for each Forest fiscal
year thereafter, Microbia will provide its Detail Election at least [**] prior to the beginning of such Forest fiscal year.  The Details elected by Microbia pursuant to a
Detail Election will be included in the Commercialization Plan and will represent
the number of weighted Details allocated to Microbia during the applicable
year.

 

(b)           Detailing
Requirements. Each Party’s Detailing activities shall be governed by the terms
of this Agreement and the provisions set forth on Schedule 4.5.3 attached
hereto.  Each Party will promptly notify
the other Party [**].  Following any such notice, the Parties will
meet and confer in good faith to develop a plan to [**]
as promptly as practicable, including through the [**].  For the avoidance of doubt, but without
limiting either Parties remedies otherwise available under this Agreement, (i) if
Microbia elects not to provide Details or elects to provide less than
thirty-five percent (35%) of the Detailing [**], and (ii) if
Forest does not provide all of the Details it is required to provide pursuant
to the Commercialization Plan, then [**].  If one Party’s sales force personnel are [**] under the Commercialization Plan, the Parties will
cooperate to [**] to the other Party as
promptly as practicable in light of the need to assure a [**].  Except to the extent provided in Section 1.25,
each Party shall be [**].  As an example of the application of the
previous sentence:  If Microbia elects to
provide thirty-five percent (35%) of the total Details provided by both Parties
under the Commercialization Plan, Microbia will be allocated thirty-five
percent (35%) of the [**] provided
by both Parties and thirty-five percent (35%) of the [**]
provided by both Parties

 

4.5.4.       Termination of
Microbia Promotion Efforts.  Microbia
may terminate its promotional efforts under the Agreement at any time, [**]. If Microbia exercises the foregoing 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

24

 

right, Microbia shall provide such transition activities as and for
such period as Forest may reasonably request, including, without limitation,
arranging for meetings between members of the Microbia sales force and sales
representatives of Forest, to assure a smooth transition of marketing
efforts.  Forest may [**] as set forth in the Commercialization
Plan (as to [**]) for each such
Calendar Quarter, upon the [**] by
the Commercialization Plan (as to [**])
in the aggregate [**] Calendar
Quarters, or upon the [**] set forth herein and on Schedule
4.5.3, unless in any such case, during such [**] period [**].  Except to the extent of the remedies provided
by this Section, the failure of [**]
shall not be deemed a material breach under this Agreement and shall not give [**].

 

4.5.5.       Additional
Collaboration of Marketing Forces. 
From time to time upon reasonable advance notice by Microbia, Forest
will arrange for a reasonable number of Microbia’s marketing personnel to work
with Forest’s personnel for mutually agreed periods, taking into account space
availability and subject to reasonable restrictions on access and activities of
Microbia’s personnel while at Forest’s facilities.  Such arrangements shall be aimed at fostering
collaboration between the Parties marketing forces for the purpose of more
efficiently and effectively Commercializing the Product in the Field under this
Agreement.  Forest shall provide reasonable
advance notice to Microbia of any significant marketing events (e.g., annual brand team or Commercialization Plan meetings)
to enable Microbia to arrange for members of its staff to be available for such
meetings.

 

4.6.         Phase IV and Publication Strategy. 
Neither Party will undertake, or permit its Affiliates, licensees or
Sublicensees to undertake, whether within or outside the Territory, any
pre-clinical or clinical marketing studies of the Product, including, without
limitation, Phase IV Studies, but excluding any studies required for
registration or imposed by a Regulatory Authority in a country within the
Territory or, in the case of studies by Microbia, in any territory, without
consultation with both Parties and, in the case of studies by Forest,
consultation with Microbia and Microbia’s collaborators and partners, as
applicable, in the development and commercialization of the Product outside the
Territory, and in each case due consideration will be given to comments
received from the other Party or its collaborators and partners.  With respect to studies required for
registration purposes or imposed by a Regulatory Authority outside of the
Territory, [**] as provided by Section 2.7.

 

The
Parties will also coordinate worldwide publication strategy involving the
Product and activities involving the Product related to scientific conferences
inside and outside the Territory, including through delegation to appropriate
working groups of the Parties.  Each Party
shall be afforded the opportunity to review and approve any scientific paper or
presentation with respect to the Product proposed for publication, presentation
or distribution by the other Party or its Affiliates and licensees or
Sublicensees and shall have no more than [**] to
complete such review and approval or such shorter period as may reasonably be
required by applicable publication deadlines promptly communicated to such
Party.  The Party proposing publication
or presentation shall not unreasonably reject comments furnished by the other Party,
will comply with the other Party’s request to delete references to its
Confidential Information in any such publication or presentation and will delay
publication for such reasonable period requested by the other Party to permit
the filing of patent applications concerning any Forest Technology,

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

25

 

Microbia Technology or Joint
Technology disclosed in material proposed for such publication or
presentation.  In no event will
Confidential Information of a Party be published without the consent of such
Party.

 

The
Parties will coordinate the disclosure of the initiation and results of
clinical studies performed pursuant to the Development Plan or clinical studies
performed by either Party’s licensees or Sublicensees with respect to any
Collaboration Compound or Product, whether within or outside of the Territory,
to the extent required by law or best industry practices; provided that all
proposed disclosures and publications will be submitted for expeditious review
by the JDC and due regard will be given to the comments of each Party, the
maintenance of confidentiality of Confidential Information of each Party and
allowing time for intellectual property registrations.  Nothing set forth herein shall be deemed to
limit or restrict either Party from disclosing the results of clinical trials
(whether performed by the Parties or by Third Parties) to the extent required
by law or best industry practices.  The
Parties intend that the provisions of this Section 4.6 shall apply to the
Parties and their respective Affiliates, licensees and Sublicensees.

 

5.                                      CONSIDERATION.

 

5.1.         Upfront Payments.  ,
Forest shall make the following payments to Microbia: (i) Fifty Million
Dollars ($50,000,000) within fifteen (15) days after the Effective Date as an
upfront, non-creditable, non-refundable fee, and (ii) Twenty Million Dollars
($20,000,000)  within ten (10) days
following January 15, 2008 as a non-creditable, non-refundable license
fee.

 

5.2.         Milestones.

 

5.2.1.       Development
Milestones.  As additional
consideration for the rights granted to Forest pursuant to Section 2.2, Forest
will pay Microbia the following non-creditable, non-refundable amounts within [**] after the first occurrence of each of
the following events:

 

	
  EVENT

  	
   

  	
  MILESTONE
  PAYMENT

  
	
   

  	
   

  	
   

  
	
  Dosing
  the first patient in the first Phase III clinical trial for purposes of
  obtaining Regulatory Approval in the United States using a Product in
  treating or preventing IBS-C

  	
   

  	
  $[**]

   

  $25,000,000
  equity investment as further described in Section 5.2.2 below.

  
	
   

  	
   

  	
   

  
	
  Dosing
  the first patient in the first Phase III clinical trial for purposes of
  obtaining Regulatory Approval in the United States using a Product in
  treating or preventing CC

  	
   

  	
  $[**]

  
	
   

  	
   

  	
   

  
	
  Acceptance
  of the first NDA by a Regulatory Authority in the United States for use of a
  Product

  	
   

  	
  $[**]

  

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

26

 

	
  EVENT

  	
   

  	
  MILESTONE
  PAYMENT

  
	
   

  	
   

  	
   

  
	
  in
  treating or preventing IBS-C

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Acceptance
  of the first NDA by a Regulatory Authority in the United States for use of a
  Product in treating or preventing CC

  	
   

  	
  $[**]

  
	
   

  	
   

  	
   

  
	
  The
  first Regulatory Approval of an NDA by a Regulatory Authority in the United
  States for use of a Product in treating or preventing IBS-C

  	
   

  	
  $[**]

  
	
   

  	
   

  	
   

  
	
  The
  first Regulatory Approval of an NDA by a Regulatory Authority in the United
  States for use of a Product in treating or preventing CC

  	
   

  	
  $[**]

  

 

Notwithstanding the preceding, in the event Forest provides notice of
termination of this Agreement to Microbia pursuant to Section 10.2.2 prior
to the occurrence of  a milestone event
set forth above, Forest shall not be obligated to make any such or subsequent
Development Milestone payment (including the equity investment referred to
above and further described under 5.2.2 below), provided that if Forest
provides notice of termination within [**] days of
the achievement of the [**] as
contemplated by this Agreement, in lieu of paying the [**],
Forest shall be obligated to [**] within [**] days of such [**], unless
Microbia has determined at that time [**], in which
case no such payment or further payment shall be required pursuant to this
Section, and provided that notwithstanding the foregoing, Forest shall otherwise
continue to perform all of its obligations under this Agreement until any such
termination becomes effective in accordance with this Agreement.  [**].

 

5.2.2.       Equity Investment.  Subject to Microbia obtaining the necessary
consents and approvals by its shareholders, and notwithstanding the thirty (30)
day period for payment set forth in Section 5.2.1, within forty-five (45)
days of the initiation of the first Phase III clinical trial in the Territory
using a Product in treating or preventing IBS-C, Forest shall purchase from
Microbia for an aggregate purchase price of $25,000,000 pursuant to a Stock
Purchase Agreement (as defined below) two million, eighty three thousand, three
hundred and thirty four (2,083,334) shares of Series G Preferred Stock at
a per share purchase price equal to $12.00 per share.  The terms of such purchase shall be (i) for
a purchase prior to an initial public offering by Microbia, in accordance with
a stock purchase agreement in form and substance (including the associated charter
amendments and exhibits, the “Stock Purchase Agreement”) as  attached hereto at Schedule 5.2.2(i),  or (ii) for a purchase after an
initial public offering by Microbia, in accordance with a stock purchase
agreement having the terms set forth on the term sheet attached hereto as Schedule
5.2.2(ii) and prepared in customary form and having other customary
terms and conditions applicable to such investments.  Microbia will use reasonable efforts to seek
waivers of preemptive rights from other Microbia shareholders in connection
with the issuance of the shares, and in any event, will not sell or issue Series G

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

27

 

Preferred Stock to any person other than in connection with an exercise
by Microbia shareholders of such preemptive rights.  The number of shares of Microbia common stock
into which the Series G Preferred Stock is convertible (or the number of
shares of Microbia common stock which would be purchased pursuant to subsection
(ii) above) shall be subject to adjustment from and after the Effective
Date (x) in accordance with the provisions governing adjustment for stock
splits, stock dividends, reclassifications and reorganizations included in the
form of Stock Purchase Agreement set forth on Schedule 5.2.2(i), and (y) until
the closing of Microbia’s initial public offering in accordance with the terms
of all of the anti-dilution provisions included in the form of Stock Purchase
Agreement set forth on Schedule 5.2.2(i), notwithstanding that such
shares of Series G Preferred Stock will be issued at a date subsequent to
the Effective Date.

 

5.2.3.       Sales Milestones.  Forest will pay Microbia the following
non-creditable, non-refundable amount within [**]
after the first occurrence of the following event:

 

	
  EVENT

  	
   

  	
  MILESTONE
  PAYMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  End of first Commercial
  Year in which aggregate annual Net Sales of Products in the United States are
  at least $1,000,000,000, if such Commercial Year occurs within the first
  eight (8) Commercial Years of Commercialization.

  	
   

  	
  $[**]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  End of first Commercial
  Year in which aggregate annual Net Sales of Products in the United States are
  at least $1,000,000,000, if such Commercial Year occurs after the first eight
  Commercial Years but within the first ten (10) Commercial Years of
  Commercialization, provided that at such time, the Product is expected to
  have at least four (4) years of legal or regulatory market exclusivity
  in the United States.

  	
   

  	
  $[**]

  	
   

  

 

For purposes of this Section 5.2.3
and Section 5.4.1 below, a “Commercial Year” shall refer to the twelve
(12) month period beginning on the first day of the first full month following
the Commercial Launch of the Product and each consecutive twelve (12) month
period thereafter.

 

5.3.         Royalties.  Forest will
pay to Microbia royalties based on the aggregate annual Net Sales of Products
sold by Forest, its Affiliates or its Sublicensees in the Field in all
countries in the Territory other than the United States (the “Royalty
Territory”) at a rate of  [**] of such Net Sales; provided
that, for the purposes of determining Net Sales under this Section 5.3, Net
Sales shall be determined as the gross amounts invoiced by Forest, its
Affiliates or Sublicensees less the deductions and subject to the other
provisions set forth in the definition of “Net Sales” in this Agreement.  Within forty (45) days after the beginning of
each Calendar 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

28

 

Quarter
beginning with the Calendar Quarter in which the first sale is made in the
Royalty Territory following receipt of Regulatory Approval in such country,
Forest shall deliver to Microbia a report setting forth for the previous
Calendar Quarter the following information on a Product-by-Product and
country-by-country basis:  (a) the
gross sales and Net Sales of each Product in the Royalty Territory, (b) the
number of units sold by Forest, its Affiliates or Sublicensees, (c) the
basis for any adjustments to the royalty payable for the sale of each Product, (d) the
royalty due hereunder for the sales of each Licensed Product, and (e) the
applicable exchange rate as determined in accordance with this Agreement.  The total royalty due for the sale of Products
during such Calendar Quarter shall be remitted at the time such report is made.

 

5.4.         Program Expenses.

 

5.4.1.       Allocation of
Program Expenses and Net Profit. 
Each Party shall account for Program Expenses in accordance with GAAP
and its standard cost accounting practices, in each case as consistently
applied.  Each Party shall pay fifty
percent (50%) of all Program Expenses incurred by the Parties in connection
with Development and Commercialization of Products in the U.S. during the Term,
and each Party shall have the right to receive fifty percent (50%) of the Net
Profit and shall bear fifty percent (50%) of the Net Loss in the U.S., as
applicable; provided, however, that if a Party [**], such Party’s share of Net Profits will be reduced for
such year by [**] (the “Share
Adjustment”), provided, however, that [**].  Forest will bear all Program Expenses
incurred with respect to countries in the Royalty Territory.

 

5.4.2.       Payment of
Expenses:  Profit and Loss Statements.  Subject to reconciliation as provided in Section 5.4.4
and the handling of costs for Development and Commercialization outside the
U.S. pursuant to Section 5.4.1, the Party initially incurring Program
Expenses shall be responsible for and pay for all such Program Expenses so
incurred, in the case of Microbia, with respect to the U.S., and in the case of
Forest with respect to the Territory. 
Subject to the limitations set forth in Section 5.4.3, each Party
shall maintain the books and records referred to in Section 5.4.5 and
shall accrue all Program Expenses (and, in the case of Forest, Net Sales) in
accordance with the terms and conditions hereof and in accordance with GAAP and
each Party’s standard cost accounting, in each case as consistently
applied.  Within thirty (30) days of the
end of each Calendar Quarter each Party shall submit to the other a written
report reflecting the accrual of Program Expenses and Net Sales, which report
shall be accompanied by reasonable supporting documentation or description
(each a “P&L Statement”).  Upon
the request of either Party from time to time, the Parties’ respective finance
departments, coordinated by the JDC or JCC as appropriate, will discuss any
questions or issues arising from the P&L Statements, including the basis
for the accrual of specific Program Expenses.

 

5.4.3.       Expense
Limitations.  Additionally, the
Parties hereby agree that efforts of the employees of a Party or its Affiliates
in performing its activities hereunder shall be accrued and reported at the
applicable FTE Rate then in effect, provided, however, that only those efforts
that are contemplated by the applicable Development Plan or Commercialization 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

29

 

Plan, or are Manufacturing activities approved hereunder, shall be so
accrued and reported.  All payments made
by a Party to a Third Party in connection with the performance of its
activities under the Development Plan, the Commercialization Plan or its
Manufacturing shall be accrued and reported [**].  Expenses incurred by each Party for [**] in performing its activities under the
Development Plan or Commercialization Plan [**]
(with the prior written consent of the JDC or JCC, as applicable or as
expressly provided for in the Development Plan or Commercialization Plan), in
the [**] to the extent to be used [**], or Commercialization Plan or Manufacturing,
which expenses shall be accrued at such Party’s [**].

 

5.4.4.       Reconciliation.  As soon as practicable after the receipt by
Forest of  Microbia’s P&L Statement,
but in any event within thirty-nine (39) days after the end of each Calendar
Quarter, Forest shall prepare a reconciliation report, accompanied by
reasonable supporting documents and calculations, which reconciles the amounts
accrued and reported in each Party’s P&L Statement during such Calendar
Quarter pursuant to Section 5.4.1 (Allocation of Program Expenses),
including, without limitation, making any necessary adjustments for prior
period manufacturing cost variances allocable to Products utilized in
Development or Commercialization, and the share of the Parties’ aggregate
Program Expenses and their Net Profits and Net Losses (determined based on such
Program Expenses), to be allocated to each of the Parties for such Calendar
Quarter in accordance with Section 5.4.1 (the report setting forth the
foregoing reconciliation being the “Reconciliation Report”).  Based on the Reconciliation Report, there
shall be a cash settlement between the Parties no later than sixty (60) days
after the end of each Calendar Quarter. 
In the event any payment is made after the date specified in the
preceding sentence, the paying Party shall increase the amount otherwise due
and payable by adding interest as provided in Section 5.5 compounded
monthly from the date such additional amount should have first been paid,
provided however, no Party shall be charged interest hereunder to the extent it
is late in making payment as a result of the other Party’s delay in reporting
its Program Expenses or other information required to prepare such
reconciliation.  In the event a Party
fails to make payment as required pursuant to this Section 5.4.4, amounts
due may be offset against any which are payable to such Party hereunder,
provided, however, amounts being contested in good faith pursuant to
appropriate proceedings hereunder will not be subject to offset.

 

5.4.5.       Records and Audits.  During the term of this Agreement, each Party
shall keep and maintain accurate and complete records showing the expenses
incurred by it in performing its activities under the Development Plan and
Commercialization Plan and Manufacturing during the three preceding calendar
years, which books and records shall be in sufficient detail such that Program
Expenses, Net Profits, Net Losses and royalties can accurately be
determined.  Upon fifteen (15) days prior
written notice from a Party (the “Auditing Party”), the other Party (the
“Audited Party”) shall permit an independent certified public accounting
firm of nationally recognized standing, selected by the Auditing Party and
reasonably acceptable to the Audited Party, to examine the relevant books and
records of the Audited Party and its Affiliates as may be reasonably necessary
to verify the P&L Statement submitted by the Audited Party in accordance
with Section 5.4.2 and the accuracy of the reconciliation report prepared
in accordance with Section 5.4.4 (Reconciliation).  An examination by a Party under this Section 5.4.5
shall occur not more than once in any calendar 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

30

 

year and shall be limited to the pertinent books and records for any
calendar year ending not more than thirty-six (36) months before the date of
the request.  The accounting firm shall
be provided access to such books and records at the Audited Party’s
facility(ies) where such books and records are normally kept and such
examination shall be conducted during the Audited Party’s normal business
hours.  The Audited Party may require the
accounting firm to sign a standard non-disclosure agreement before providing
the accounting firm access to the Audited Party’s facilities or records.  Upon completion of the audit, the accounting
firm shall provide both Microbia and Forest a written report disclosing whether
the reports submitted by the Audited Party are correct or incorrect and the
specific details concerning any discrepancies. 
No other information shall be provided to the Auditing Party.  If the accountant determines that, based on
errors in the reports so submitted, the Reconciliation Report is incorrect, the
Parties shall promptly revise the Reconciliation Report and any additional
amount owed by one Party to the other shall be paid within thirty (30) days
after receipt of the accountant’s report, along with interest at the annual
interest rate as provided in Section 5.5, compounded monthly from the date
of the audit report, provided, however, that no such interest shall be payable
if the errors leading to the Reconciliation Report being incorrect were in the
P&L Statement provided by the Party to receive such additional amount.  Additionally, if the accountant determines
that the P&L Statement submitted by the Audited Party overstate the Audited
Party’s expenses by more than ten percent (10%), the Audited Party shall
reimburse the Auditing Party for the expenses incurred by the Auditing Party in
conducting the audit.

 

5.4.6.       Taxes and
Withholding.  All payments under this
Agreement shall be made without any deduction or withholding for or on account
of any tax unless such deduction or withholding is required by applicable laws
or regulations.  As of the Effective
Date, the Parties believe that, under applicable laws and regulations,
withholding of taxes on payments made under this Section 5.4 is not
required provided, however, that if due to any change in the applicable laws or
regulations, or either Party’s interpretation thereof, withholding is required,
the provisions of this Section shall govern.  If the paying Party is so required to deduct
or withhold, such Party shall (i) promptly notify the other Party of such
requirement, (ii) pay to the relevant authorities the full amount required
to be deducted or withheld promptly upon the earlier of determining that such
deduction or withholding is required or receiving notice that such amount has
been assessed against the other Party, (iii) promptly forward to the other
Party an official receipt (or certified copy) or other documentation reasonably
acceptable to the other Party evidencing such payment to such authorities and
cooperate in any other manner as reasonably necessary to assist the other Party
in obtaining any refund it is entitled to in connection therewith.

 

5.4.7.       Currency.  All amounts payable and calculations
hereunder shall be in United States dollars. 
As applicable, Net Sales and any Development Expenses incurred by either
Party shall be translated into United States dollars in accordance with the
paying Party’s customary and usual currency conversion procedures, consistently
applied.  If, due to restrictions or
prohibitions imposed by national or international authority, payments cannot be
made as provided in this Section 5, the Parties shall consult with a view
to finding a prompt and acceptable solution, and the paying Party shall deal
with such monies as the other Party may lawfully direct at no additional
out-of-pocket expense to the paying Party.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

31

 

5.4.8.       Confidentiality.  All financial information of a Party which is
subject to review under this Section 5.4 shall be deemed to be
Confidential Information subject to the provisions of Section 6.1, and
such Confidential Information shall not be disclosed to any Third Party or used
for any purpose other than verifying payments to be made by one Party to the
other hereunder, provided, however, that such Confidential Information may be
disclosed to Third Parties only to the extent necessary to enforce a Party’s
rights under this Agreement.

 

5.5.         Interest.  Any payment
under this Section 5 that is more than [**]
days past due shall be subject to interest at an annual percentage rate of [**] (as published in the “Money Rates”
table of the Eastern Edition of The Wall Street Journal during period such
amount is overdue) [**] if a Party
does not make payment within thirty (30) days of its receipt of notice that
such amount is past due.  Likewise, any
overpayment that is not refunded within [**]
days after the date such overpayment was made shall thereafter be subject to
interest at an annual percentage rate of [**]
(as published in the “Money Rates” table of the Eastern Edition of The Wall
Street Journal during period such amount is overdue) [**], provided, however, that if the overpayment is due to
errors in reports provided by the overpaid Party, such interest shall accrue
from the date the overpayment was made. 
Notwithstanding the preceding, if a Party contests any amounts due
hereunder in good faith and promptly notifies the other Party of such dispute,
interest shall not accrue as to amounts being so contested until [**] days following the presentation of
such notice to the other Party.

 

6.                                      MUTUAL
COVENANTS.

 

6.1.         Confidentiality.

 

6.1.1.       Confidential
Information.  Except to the extent
expressly permitted by this Agreement and subject to the provisions of
Sections 6.1.2 and 6.1.3, at all times during the Term and for [**] years following the expiration or
termination hereof, the Receiving Party (a) shall keep completely
confidential and shall not publish or otherwise disclose any Confidential
Information furnished to it by the Disclosing Party, except to those of the
Receiving Party’s employees, Affiliates, consultants or representatives who
have a need to know such information (collectively, “Recipients”) to
perform such Party’s obligations hereunder and (b) shall not use Confidential
Information of the Disclosing Party directly or indirectly for any purpose
other than performing its obligations hereunder.  The Receiving Party shall be liable for any
breach by any of its Recipients of the restrictions set forth in this Agreement.

 

6.1.2.       Exceptions to
Confidentiality.  The Receiving
Party’s obligations set forth in this Agreement shall not extend to any
Confidential Information of the Disclosing Party:

 

(a)            that is or
hereafter becomes part of the public domain through no wrongful act, fault or
negligence on the part of a Receiving Party or its Recipients;

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

32

 

(b)           that is received
from a Third Party without restriction and without breach of any agreement or
fiduciary duty between such Third Party and the Disclosing Party;

 

(c)            that the Receiving
Party can demonstrate by competent evidence was already in its possession
without any limitation or restriction on use or disclosure prior to its receipt
from the Disclosing Party;

 

(d)           that is generally
made available to Third Parties by the Disclosing Party without any restriction
imposed by the Disclosing Party on disclosure, whether such restriction is by
contract, fiduciary duty or by operation of law; or

 

(e)            that the Receiving
Party can demonstrate by competent evidence was independently developed by the
Receiving Party without any reference to Confidential Information.

 

6.1.3.       Authorized
Disclosure.  Each Party and its
Recipients may disclose Confidential Information to the extent that such
disclosure is made in response to a valid order, governmental inquiry or
request (each an “order”) of a court of competent jurisdiction or other Agency,
as applicable; provided, however, that the Receiving Party shall first have
given notice to the Disclosing Party and given the Disclosing Party a
reasonable opportunity to quash such order or to obtain a protective order
requiring that the Confidential Information and/or documents that are the
subject of such order be held in confidence by such court or Agency or, if
disclosed, be used only for the purposes for which the order was issued; and
provided further that if a disclosure order is not quashed or a protective
order is not obtained, the Confidential Information disclosed in response to
such court or governmental order shall be limited to that information that is
legally required to be disclosed in such response to such court or governmental
order.

 

6.1.4.       Notification.  The Receiving Party shall notify the
Disclosing Party immediately, and cooperate with the Disclosing Party as the
Disclosing Party may reasonably request, upon the Receiving Party’s discovery
of any loss or compromise of the Disclosing Party’s Confidential Information.

 

6.1.5.       Destruction of
Confidential Information.  Upon the
expiration or earlier termination of this Agreement, the Receiving Party shall (a) destroy
all tangible embodiments of Confidential Information of the Disclosing Party,
including any and all copies thereof, and those portions of any documents,
memoranda, notes, studies and analyses prepared by the Receiving Party or its
Recipients that contain, incorporate or are derived from such Confidential
Information and provide written certification of such destruction to the
Disclosing Party in a form reasonably acceptable to the Disclosing Party,
provided that the legal department of the Receiving Party shall have the right
to retain one copy of any such tangible embodiments for archival purposes,
provided such copy shall continue to be maintained on a confidential basis
subject to the terms of this Agreement, and (b) immediately cease, and shall

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

33

 

cause its Recipients to cease, use of such Confidential Information as
well as any information or materials that contain, incorporate or are derived
from such Confidential Information.

 

6.1.6.       Use of Name and
Disclosure of Terms.  Each Party
shall keep the existence of, the terms of and the transactions covered by this
Agreement confidential and shall not disclose such information to any other
Person through a press release or otherwise, or mention or otherwise use the
name, insignia, symbol, trademark, trade name or logotype of the other Party or
its Affiliates in any manner without the prior written consent of the other
Party in each instance (which shall not be unreasonably withheld).  The restrictions imposed by this Section shall
not prohibit either Party from making any disclosure that is required by
Applicable Law, rule or regulation or the requirements of a national
securities exchange or another similar regulatory body including disclosing
such information in any clinical trial database maintained by or on behalf of a
Party.  Further, the restrictions imposed
on each Party under this Section 6.1.6 are not intended, and shall not be
construed, to prohibit a Party from identifying the other Party in its internal
business communications, provided that any Confidential Information in such
communications remains subject to this Section 6.1.6.

 

6.1.7.       Remedies.  The Parties acknowledge and agree that the
restrictions set forth in Section 6.1 are reasonable and necessary to
protect the legitimate interests of the Parties and that neither Party would
have entered into this Agreement in the absence of such restrictions, and that
any breach or threatened breach of any provision of Section 6.1 will
result in irreparable injury to the other Party for which there will be no
adequate remedy at law.  In the event of
a breach or threatened breach of any provision of Section 6.1 by a Party,
the other Party shall be authorized and entitled to obtain from any court of
competent jurisdiction injunctive relief, whether preliminary or permanent,
specific performance and an equitable accounting of all earnings, profits and
other benefits arising from such breach, which rights shall be cumulative and
in addition to any other rights or remedies to which such Party may be entitled
in law or equity.  The breaching Party
agrees to waive any requirement that the non-breaching Party (i) post a
bond or other security as a condition for obtaining any such relief and (ii) show
irreparable harm, balancing of harms, consideration of the public interest or
inadequacy of monetary damages as a remedy. 
Nothing in this Section 6.1.7 is intended, or shall be construed,
to limit the Parties’ rights to equitable relief or any other remedy for a
breach of any provision of this Agreement.

 

6.2.         Restrictions.

 

6.2.1.       [**]. 
From the date of [**], neither Party
will [**] in accordance with the
terms of this Agreement.  After the [**] pursuant to this Agreement, it shall
do so [**].  In addition, except to the extent provided by
the following sentence and [**].  Notwithstanding the preceding, [**] shall not be limited or restricted by
any of the provisions of this Section. 
In addition, nothing in this Section 6.2.1 or 6.2.2 shall [**]. 
A Party proposing to [**].

 

6.2.2.       [**]. 
In the event that either Party or any of its Affiliates [**], then such Party shall, within [**] from the [**], and during such [**].  Notwithstanding the preceding, [**].

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of this
exhibit has been filed separately with the Commission.

 

34

 

6.3.         Compliance with Law.  Each Party hereby covenants and agrees to
comply with all Applicable Laws applicable to its activities connected with the
Development, Manufacture and Commercialization (as applicable) of
Products.  Without limiting the
generality of the foregoing:

 

6.3.1.       Patient
Information.  Each Party agrees to
abide by all laws, rules, regulations, and orders of all applicable supranational,
national, federal, state, provincial, and local governmental entities
concerning the confidentiality or protection of patient identifiable
information and/or patients’ protected health information, as defined by U.S.
C.F.R. Part 160 or any other applicable legislation, in the course of
their performance under this Agreement.

 

6.3.2.       Export Controls.  This Agreement is made subject to any
restrictions concerning the export of products or technical information from
the United States or other countries which may be imposed upon or related to
Microbia or Forest from time to time. 
Each Party agrees that it shall not export, directly or indirectly, any
technical information acquired from the other Party pursuant to this Agreement
or any Products using such technical information to a location or in a manner
that at the time of export requires an export license or other governmental
approval, without first obtaining the written consent to do so from the
appropriate agency or other governmental entity.

 

6.3.3.       Debarment.  Each Party agrees that it shall not use, in
any capacity, in connection with any of its obligations to be performed under
this Agreement any individual who has been debarred under the FD&C Act or
the Generic Drug Enforcement Act.

 

6.4.         Nonsolicitation of Employees.  During the Term of this Agreement and for a
period of [**] thereafter, each
Party agrees that neither it nor any of its Affiliates shall recruit, solicit
or induce any employee of the other Party that is involved in the activities
conducted pursuant to this Agreement to terminate his or her employment with
such other Party and become employed by or consult for such other Party,
whether or not such employee is a full-time employee of such other Party, and
whether or not such employment is pursuant to a written agreement or is
at-will.  For purposes of the foregoing,
“recruit”, “solicit” or “induce” shall not be deemed to mean (a) circumstances
where an employee of one Party initiates contact with the other Party or any of
is Affiliates with regard to possible employment, or (b) general
solicitations of employment not specifically targeted at employees of a Party
or any of its Affiliates, including responses to general advertisements.  In addition, during the Term of this
Agreement and for a period of [**]
thereafter, neither Party shall hire or employ any such employee of the other
Party (including personnel who were employees of such other Party within a
period of [**] or less from the
date of the proposed hiring or employment) without the prior written consent of
such other Party, unless such other Party had previously terminated the
employment of such former employee.

 

6.5.         Standstill Agreement.  Except as
provided in Section 5.2.2, during the Term (the “Standstill Period”),
neither Forest nor any of its Representatives (as defined below) (collectively
the “Forest Related Parties”) will, in any manner, directly or
indirectly:

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

35

 

6.5.1.       make, effect,
initiate, directly participate in or cause

 

(a)            any acquisition of
beneficial ownership of any securities of Microbia or any securities of any
Affiliate of Microbia, if, after such acquisition, the Forest Related Parties
would beneficially own more than ten percent (10%) of the outstanding common
stock of Microbia; or

 

(b)           any acquisition of
all or substantially all of the assets of Microbia or of any Affiliate of
Microbia; provided this subsection (b) shall not apply to the acquisition
by the Forest Related Parties of a license or other rights to Microbia assets
or technology under terms negotiated by the Parties; or

 

(c)            any tender offer,
exchange offer, merger, business combination, recapitalization, restructuring,
liquidation, dissolution or extraordinary transaction involving Microbia or any
Affiliate of Microbia, or involving any securities or assets of Microbia or any
securities or assets of any Affiliate of Microbia; or

 

(d)           any “solicitation”
of “proxies” (as those terms are used in the proxy rules of the Securities
and Exchange Commission) or consents with respect to any securities of
Microbia; or

 

6.5.2.       form, join or
participate in a Group with respect to the beneficial ownership of any
securities of Microbia; or

 

6.5.3.       act, alone or
in concert with others, to seek to control the management, board of directors
or policies of Microbia; or

 

6.5.4.       take any action
that might require Microbia to make a public announcement regarding any of the
types of matters set forth in clause “(a)” of this sentence; or

 

6.5.5.       agree or offer
to take, or encourage or propose (publicly or otherwise) the taking of, any action
referred to in clause “(a)”, “(b)”, “(c)” or “(d)” of this sentence; or

 

6.5.6.       assist, induce
or encourage any other person to take any action of the type referred to in
clause “(a)”, “(b)”, “(c)” or “(d)” of this sentence; or

 

6.5.7.       enter into any
discussions, negotiations, arrangement or agreement with any other person
relating to any of the foregoing; or

 

6.5.8.       request or
propose, publicly or to shareholders (except in a shareholder’s capacity as
Chief Executive Officer of Microbia)  of
Microbia or its Affiliates, that Microbia or any of Microbia’s Representatives
(as defined below) amend, waive or consider the amendment or waiver of any
provision set forth in this Section 6.5.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

36

 

Notwithstanding the foregoing, the provisions of
this Section 6.5 shall not apply to (i) the exercise by any of the
Forest Related Parties of any rights available to shareholders generally
pursuant to any transaction described in Section 6.5.1(a) above, provided
that such Forest Related Party has not then either directly or as a member of a
Group made, effected, initiated or caused such transaction to occur, or (ii) any
activity by any of the Forest Related Parties after Microbia or any other Third
Party unrelated to any of the Forest Related Parties has made any public
announcement of its intent to solicit or engage in any transaction of the type
referred to in this Section 6.5.1(a) above, provided however, with
respect to subpart (ii), if any of the Forest Related Parties or such Third
Party terminates or announces its intent to terminate such transaction and such
Forest Related Party (A) has not previously made any public announcement
of its intent to solicit or engage in any transaction of the type referred to
in this Section 6.5.1(a) above, or (B) in the event that such
public announcement has been made by any of the Forest Related Parties, such
Forest Related Party has terminated or announced its intent to terminate such
transaction, then the provisions of this Section 6.5 shall again be
applicable.

 

For
purposes of this Section, “Representatives” of a Party will be deemed to
include each person or entity that is or becomes (i) an Affiliate of such
Party, or (ii) an officer, director, employee, partner, attorney, advisor,
accountant, agent or representative of such Party or of any of such Party’s
Affiliates, provided such person is acting on behalf of such Party or such
Party’s Affiliate.  “Group” means
two or more persons acting as a partnership, limited partnership, syndicate or
other group for the purpose of acquiring, holding or disposing of securities of
Microbia.

 

7.                                      REPRESENTATIONS
AND WARRANTIES.

 

7.1.         Representations and Warranties of Each Party.  As of the Effective Date, each of Forest and
Microbia hereby represents and warrants to the other Party hereto as follows:

 

(a)            it is a corporation
or entity duly organized and validly existing under the laws of the state or
other jurisdiction of its incorporation or formation;

 

(b)           the execution,
delivery and performance of this Agreement by such Party has been duly
authorized by all requisite corporate action and does not require any
shareholder action or approval;

 

(c)            it has the power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder;

 

(d)           the execution,
delivery and performance by such Party of this Agreement and its compliance
with the terms and provisions does not and shall not conflict with or result in
a breach of any of the terms and provisions of or constitute a default under (i) a
loan agreement, guaranty, financing agreement, agreement affecting a product or
other agreement or instrument binding or affecting it or its property; (ii) the
provisions of its charter or operative documents or bylaws; or (iii) any
order, writ, injunction or decree of any court or 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

37

 

governmental
authority entered against it or by which any of its property is bound; and

 

(e)            it has the full
right, power and authority to grant all of the right, title and interest in the
licenses granted to the other Party under this Agreement.

 

7.2.         Additional Representations and Warranties of Microbia.  Microbia hereby represents and warrants to
Forest that as of the Effective Date:

 

(a)            Microbia has the
sole right, title and interest in and to the Microbia Patent Rights listed in Schedule
7.2(a) to this Agreement

 

(b)           Microbia is not
subject to any agreement with a Third Party that includes a royalty or similar
payment obligation to, or other restriction or limitation in favor of, such
Third Party (including, for this purpose, to current or former officers,
directors, employees, consultants or personnel of Microbia or any predecessor)
with respect to its rights to practice the Microbia Technology;

 

(c)            No Microbia Patent
Rights are subject to, or were developed pursuant to any funding agreement with
any government or government agency, except as provided in Schedule 7.2(c) to
this Agreement;

 

(d)           Microbia is not in
breach of any material provisions of any agreements with Third Parties relating
to the Microbia Patent Rights and all of such agreements are set forth on Schedule
7.2(d);

 

(e)            To its Knowledge,
the manufacture, use, sale, offer for sale and import of the Initial Compound
in the Field in the Territory does not infringe any Valid Claim of a Third
Party; and

 

(f)            Microbia has not
received any written or oral claim of ownership, inventorship or patent
infringement from any Third Party (including without limitation, by current or
former officers, directors, employees, consultants, or personnel of Microbia or
any predecessor) with respect to the Microbia Technology, and Microbia is not
aware of any reasonable basis for any such claim.

 

7.3.         Additional Representations and Warranties of Forest.  Forest hereby represents and warrants to
Microbia that, as of the Effective Date:

 

(a)            Forest has the sole
right, title and interest in and to the Forest Patent Rights listed in Schedule
7.3(a) to this Agreement;

 

(b)           Forest is not
subject to any agreement with a Third Party that includes a royalty or similar
payment obligation to, or other restriction or limitation in favor of, such
Third Party (including, for this purpose, to current or 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

38

 

former
officers, directors, employees, consultants or personnel of Forest or any
predecessor) with respect to its rights to practice the Forest Technology;

 

(c)            No Forest Patent
Rights are subject to, or were developed pursuant to any funding agreement with
any government or government agency, except as provided in Schedule 7.3(c) to
this Agreement;

 

(d)           Forest is not in
breach of any material provisions of any agreements with Third Parties relating
to the Forest Patent Rights;

 

(e)            Forest has no
products currently under Development or Commercialization for diagnostic,
prophylactic or therapeutic uses in IBS-C, CC or OIC indications, except as
provided in Schedule 7.3(e); and

 

(f)            Forest has not
received any written or oral claim of ownership, inventorship or patent
infringement from any Third Party (including without limitation, by current or
former officers, directors, employees, consultants, or personnel of Forest or
any predecessor) with respect to the Forest Technology, and Forest is not aware
of any reasonable basis for any such claim.

 

7.4.         Representation by Legal Counsel.  Each Party hereto represents that it has been
represented by legal counsel in connection with this Agreement and acknowledges
that it has participated in the drafting. 
In interpreting and applying the terms and provisions of this Agreement,
the Parties agree that no presumption shall exist or be implied against the
Party which drafted such terms and provisions.

 

7.5.         No Inconsistent Agreements.  Neither Party has in effect and after the
Effective Date neither Party shall enter into any oral or written agreement or
arrangement that would be inconsistent with its obligations under this Agreement
or limit the ability of either Party to grant the licenses set forth in Section 2
of this Agreement.

 

7.6.         Disclaimer.  THE
FOREGOING WARRANTIES OF EACH PARTY ARE IN LIEU OF ANY OTHER WARRANTIES, EXPRESS
OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
NONINFRINGEMENT, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR ANY IMPLIED
WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE ALL OF WHICH ARE HEREBY
SPECIFICALLY EXCLUDED AND DISCLAIMED. EACH PARTY HEREBY DISCLAIMS ANY
REPRESENTATION OR WARRANTY THAT THE DEVELOPMENT, MANUFACTURE OR
COMMERCIALIZATION OF ANY PRODUCT UNDER THIS AGREEMENT WILL BE SUCCESSFUL.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

39

 

8.                                      INTELLECTUAL
PROPERTY.

 

8.1.         Disclosure.  During the
Term, the Parties shall promptly disclose to one another all Collaboration
Know-How (whether patentable or not).

 

8.2.         Ownership.

 

8.2.1.       Ownership of
Technology.  Determinations as to
which Party has invented any Patent Right or Know-How shall be made in
accordance with the standards of inventorship under U.S. patent law.  Subject to the license grants under Section 2
of this  Agreement, as between the
Parties, Microbia shall own all Microbia Technology and Forest shall own all
Forest Technology.   Each Party shall own an undivided one-half
interest in and to the Joint Technology. 
In the event inventorship and ownership of any Collaboration Technology
cannot be resolved by the Parties with advice of their respective intellectual
property counsel, such dispute shall be resolved through arbitration pursuant
to Section 12.1.2, provided such arbitration panel shall include at least
one arbitrator who is a specialist in U.S. patent law and in chemical and
pharmaceutical patents.

 

8.2.2.       Employee Assignment.  To the extent permissible under Applicable
Laws, each Party will cause each employee and contractor conducting work on
such Party’s behalf under this Agreement to sign a contract that (i) compels
prompt disclosure to the Party of all Microbia Technology, Forest Technology,
Joint Technology, as applicable, conceived or reduced to practice by such
employee or contractor during any performance under this Agreement, (ii) automatically
assigns to the Party all right, title and interest in and to all such
Technology and all Patent Rights disclosing or claiming such Technology, and (iii) obligates
such persons to similar obligations of confidentiality as set forth in this
Agreement.  Each Party will require each
employee and contractor conducting work on such Party’s behalf under this
Agreement to maintain records in sufficient detail and in a good scientific
manner appropriate for patent purposes to properly reflect all work done.

 

8.3.         Intellectual Property Working Group. 
The Parties shall promptly establish an intellectual property working
group comprised of at least one senior patent attorney from each Party, together
with business development personnel and such other representatives of the
Parties as the Parties may determine to be appropriate from time to time, to
manage and review the patent strategy for inventions made in the course of the
Development and to determine patent strategy relating to the Collaboration
Patent Rights, to the extent such Collaboration Patent rights are necessary or
useful in the Territory to Manufacture, Develop or Commercialize a
Collaboration Compound or Product.

 

8.4.         Prosecution
and Maintenance of Patent Rights.

 

8.4.1.       Patent Prosecution
and Maintenance.  Each of Microbia
and Forest will be primarily responsible for the preparation, filing,
prosecution and maintenance of the Microbia Patent Rights and the Forest Patent
Rights, respectively; provided that, each Party shall provide the other with
advance copies of, and a reasonable opportunity to comment upon, 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

40

 

proposed patent filings, related prosecution strategies and proposed
correspondence with patent officials or other Third Parties relating to any
such patents and will consider comments received in good faith and will not
unreasonably reject such comments; provided further, that correspondence or
other communications or actions which relate to the validity of Collaboration
Patent Rights, to the extent such Collaboration Patent Rights are necessary or
useful in the Territory to Manufacture, Develop or Commercialize a
Collaboration Compound or Product, that are made during the course of an action
before a Federal Court, or before the U.S. Patent and Trademark Office in a
patent re-examination, re-issuance or interference proceeding shall require the
mutual approval of both Parties.  A Party
providing comments in accordance with this Section shall provide such
comments expeditiously and in any event in reasonably sufficient time to meet
any filing deadline communicated to it by the other Party.  The Party receiving any such patent
application and correspondence shall maintain such information in confidence,
except for patent applications that have been published and official
correspondence that is publicly available.

 

8.4.2.       Joint Patent
Rights.  The intellectual property
working group will designate which Party will be responsible for preparing,
filing, prosecuting and maintaining Joint Patent Rights.  Irrespective of which Party
is responsible for filing, prosecuting and maintaining Joint Patent Rights,
Forest and Microbia shall equally share the costs for filing, prosecuting and
maintaining Joint Patent Rights in the Territory.

 

8.4.3.       Reversion Rights.  If a Party decides not to file, prosecute or
maintain a Patent Right covering, as applicable, Microbia Technology or Forest
Technology, to the extent such Technology is necessary or useful to
Manufacture, Develop or Commercialize a Collaboration Compound or Product, with
respect to Microbia Technology within the Territory and with respect to Forest
Technology whether within or outside of the Territory, it shall give the other
Party reasonable notice to that effect sufficiently in advance of any deadline
for any filing with respect to such Patent Right to permit the other Party to
carry out such activity.  After such
notice, the other Party may file, prosecute and maintain the Patent Right, and
perform such acts as may be reasonably necessary for the other Party to file,
prosecute or maintain such Patent Right, at its sole cost and expense.  If such other Party does so
elect, then the Party which has elected not to pursue such filing, prosecution
or maintenance shall provide such cooperation to the other Party, including the
execution and filing of appropriate instruments, as may reasonably be requested
to facilitate the transition of such patent activities, and shall assign all of
its right, title and interest to such patent, other than its rights thereto provided
by this Agreement, to the Party electing to pursue such patent activities.

 

8.4.4.       Patent Term
Extensions.  The Parties agree to cooperate in the selection of the appropriate
Microbia Patent Rights, Forest Patent Rights or Joint Patent Rights as listed
in the patent information section of the Product NDA for filing to obtain a
Patent Term Extension pursuant to all applicable laws and regulations (“PTE”),
including without limitation supplementary protection certificates and any
other extensions that are now or become available in the future wherever
applicable to Patent Rights that are applicable to the Product.  In addition, the Parties agree to timely
compile and file the necessary documentation for a PTE request within sixty
days of approval by the FDA of the U.S. NDA for the first indication.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

41

 

8.4.5.       Costs and Expenses.  Costs and expenses of filing, prosecuting,
maintaining, and extending the Collaboration Patent Rights will be included as
Development Expense.

 

8.5.         Trademarks.

 

8.5.1.       Product Trademark.  Until such time as the
Parties determine that the launch by a Third Party of a generic equivalent of
the Product is imminent in the Territory (on a country-by-country basis, and
based upon objective evidence shared and discussed by both Parties), all Products
shall be sold in the Territory under the Trademarks selected by the JCC with
advice from the Parties’ intellectual property counsel.  No such Trademark shall be used outside of
the country as to which it has been approved for use by the JCC or outside the
Territory, unless otherwise agreed by the Parties in writing.  Microbia shall own such Trademarks subject to
the license granted to Forest herein, and shall be responsible for the filing,
prosecution and maintenance of such Trademarks in the applicable country or
countries within the Territory.  If
Microbia decides not to file, prosecute or maintain a Trademark in a country of
the Territory, it shall give Forest reasonable notice to that effect
sufficiently in advance of any deadline for any filing with respect to such
Trademark in such country to permit Forest to carry out such activity.  After such notice, Forest may file, prosecute
and maintain such Trademark in such country. 
The expenses of the selection, filing, prosecution and maintenance of
the Trademark shall be included as Commercialization Expense.

 

8.5.2.       Trademark Use.  The manner of use of the
Trademarks shall be subject to periodic review by the JCC.  Neither Party shall use the Trademarks in a
way that is inconsistent with the usage instructions approved by the JCC, and
neither Party shall use a trademark confusingly similar to one of the
Trademarks with any of its other products or, except as otherwise provided
herein, use the Trademarks in combination with its other trademarks in a manner
which would create combination marks. 
The Parties shall utilize the Trademarks within the Territory only in
accordance with this Agreement.

 

8.5.3.       Party Name on
Product Promotional Material. 
Subject to Applicable Laws, all Product promotional material in the U.S.
will include Microbia’s trade name, trademark, and other logos requested by
Microbia (the “Microbia House Marks”) in a manner that has equal
prominence with Forest’s marks.  To
effectuate the purposes of this Agreement, Microbia hereby grants to Forest a
royalty free license (with right of sublicense to its Affiliates or as
expressly provided in Section 2.6), to use and display the Trademarks, and
the Microbia House Marks in connection with the Commercialization of a Product
in the Field, with respect to the Trademarks in the Territory, and with respect
to the Microbia House Marks in the U.S., and all in accordance with this
Agreement.  All goodwill arising from the
use of such Trademarks and Microbia House Marks shall inure to the benefit of
Microbia.

 

8.6.         Enforcement of Technology Rights.

 

8.6.1.       Notice.  If Microbia or Forest becomes aware that any
Microbia Technology, Forest Technology, in each such case, which Technology is
necessary or useful in 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

42

 

the Territory to Manufacture, Develop or Commercialize a Collaboration
Compound or Product, or Joint Technology is infringed or misappropriated by a
Third Party in the Territory in the Field or is subject to a declaratory
judgment action arising from such infringement (collectively, an “Infringement”),
Microbia or Forest, as the case may be, shall promptly notify the other Party.

 

8.6.2.       Enforcement.  The Party that owns the Technology which is
the subject of the Infringement shall have the first right (but not the
obligation), to enforce such Technology against such Infringement, provided
that in the event Technology owned by both Parties is the subject of the
Infringement, the Parties shall cooperate and act in concert to enforce their
Technology against such Infringement; provided, further, that (i) Forest shall
have the first right to bring and control any action or proceeding in
connection with an ANDA filed by a Third Party with respect to a Product, as
further provided in Section 8.10 below (an “ANDA Proceeding”)
related to Microbia Technology, Forest Technology or Joint Technology in the
Territory or any other proceeding to enforce any of such intellectual property
rights against distributors or proposed distributors of generic equivalents or
counterfeits of the Product in the Territory, (ii) the other Party
shall have the right to join such proceeding at any time at its own expense and
shall do so at any time (subject to Section 8.6.3) if it is deemed to be a
necessary Party by the tribunal in which the Infringement is being prosecuted,
and (iii) neither Party shall admit the invalidity or unenforceability of
any Collaboration Technology which Collaboration Technology is necessary or
useful in the Territory to Manufacture, Develop or Commercialize a
Collaboration Compound or Product or other Technology owned solely by or jointly
with the other Party without the other Party’s prior written consent.  In the event the Party with
the first right to control an action or proceeding pursuant to this Section declines
to prosecute the infringing technology or to defend such claim within ninety
(90) days (or such shorter period as may be required to comply with legal or
regulatory deadlines which relate to such infringement, including, without
limitation, in connection with ANDA Proceedings) of becoming aware thereof, the
other Party shall have the right to so enforce or defend.  Irrespective of which Party controls an
action pursuant to this Section, the Parties will collaborate in the choice of
counsel with respect to such action and the comments of the other Party shall
not be unreasonably rejected with respect to strategic decisions and their
implementation with respect to such action. 
In furtherance of the foregoing, the Party responsible for any
such action shall keep the other Party reasonably informed, in person or by
telephone, regarding the status and costs of such action or proceeding prior to
and during any such enforcement.  Neither
Party shall settle any such action without the written consent of the other
Party, such consent not to be unreasonably withheld.  Neither Party shall incur any liability to
the other as a consequence of such litigation or any unfavorable decision
resulting therefrom, including any decision holding any of the Microbia
Technology, Forest Technology, or Joint Technology invalid, not infringed, not misappropriated
or unenforceable.

 

8.6.3.       Costs and
Recoveries.  The Parties
agree that, irrespective of which Party prosecutes the action, the costs of
such prosecution or defense of validity, and the proceeds of any awards,
judgments or settlements obtained in connection with an Infringement in the
Territory shall be [**].

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

43

 

8.7.         Third Party Claims.

 

8.7.1.       Third Party Claims
- Course of Action.  If the
Development, Commercialization or Manufacture of a Product under this Agreement
is alleged by a Third Party to infringe a Third Party’s patent right(s) or
misappropriate a Third Party’s trade secret, the Party becoming aware of such
allegation shall promptly notify the other Party thereof, in writing,
reasonably detailing the claim.

 

8.7.2.       Third Party Suit.  If a Third Party sues a Party (the “Sued
Party”) alleging that the Sued Party’s or the Sued Party’s Sublicensees’,
Development, Manufacture or Commercialization of any Collaboration Compound of
the Product infringes or shall infringe said Third Party’s patent right(s) or
misappropriates said Third Party’s trade secret, then upon the Sued Party’s
request and in connection with the Sued Party’s defense of any such Third Party
suit, the other Party shall provide reasonable assistance to the Sued Party for
such defense and shall join such suit if deemed a necessary party.  The Sued Party shall keep the other Party, if
such other Party has not joined in such suit, reasonably informed on a
quarterly basis, in person or by telephone, prior to and during the pendency of
any such suit.  The Sued Party shall not
admit the invalidity of any patent within the Microbia Patent Rights, the
Forest Patent Rights or the Joint Patent Rights, nor settle any such suit,
without written consent of the other Party, such consent not to be unreasonably
withheld.  Subject to the Parties’
respective indemnity obligations pursuant to Section 11.2 and 11.3, all
litigation expenses, including settlement costs, royalties paid in settlement
of any such suit, and the payment of any damages to the Third Party, [**].

 

8.8.         Third Party Licenses.  Subject to Section 8.7.2,
the Parties, on the recommendation of their respective intellectual property
counsel and members of their business development groups shall determine
whether it is advisable at any time to obtain a license to any intellectual
property owned or controlled by a Third Party, and if so, on what terms
(economic or otherwise), and by which Party. 
Any such license agreement shall be on terms mutually agreed by the Parties.  For all Third Party Patent Rights licensed
pursuant to this Section 8.8, all license fees, royalties, and milestone
payments paid to the Third Party [**].

 

8.9.         Patent Marking.  Each Party
agrees to mark and have its Affiliates and all Sublicensees mark all Products
(or their containers or labels) sold pursuant to this Agreement in accordance
with the applicable statutes or regulations in the country or countries of
manufacture and sale thereof.

 

8.10.       Patent Certifications.  Each Party shall immediately give written
notice to the other of any certification of which it becomes aware has been
filed pursuant to 21 U.S.C. § 355(b)(2)(A), or § 355(j)(2)(A)(vii) (or
any amendment or successor statute thereto) claiming that the Microbia Patent
Rights, Forest Patent Rights, or Collaboration Patent Rights covering the
Product are invalid or that infringement shall not arise from the manufacture,
use or sale of such Third Party product by a Third Party.  Forest shall have the right, in the first
instance, to commence an ANDA Proceeding in connection with any such
certification.  If Forest decides not to bring infringement proceedings against
the Third Party making such a certification with 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

44

 

respect to any Product, Forest will give
notice to Microbia of its decision not to bring suit within ten (10) business
days after receipt of notice of such certification (or, if the time period
permitted by law is less than twenty (20) business days, within half of the
time period permitted by law for Forest to commence such action) and Microbia
may then, but shall not be obligated to, bring suit against the Third Party
that filed the certification.  Any suit
by either Party may be in the name of either or both Parties, as may be
required by law.  For this purpose, the
Party not bringing suit will execute such legal papers necessary for the
prosecution of such suit as may be reasonably requested by the Party bringing
suit.

 

8.11.       No Implied Licenses.  Except as
expressly set forth in this Agreement, no right or license under any Microbia
Technology or Forest Technology is granted or shall be granted by implication
as a result of the respective rights of the Parties under this Agreement.  All such rights or licenses are or shall be
granted only as expressly provided in this Agreement.

 

8.12.       [**].  In furtherance
of this Agreement, it is expected that Forest and Microbia will, from time to
time, [**].  Such disclosures are made with the
understanding that they shall [**].

 

9.                                      INTENTIONALLY
OMITTED.

 

10.                               TERM AND
TERMINATION.

 

10.1.       Term.  The term of
this Agreement shall commence on the Effective Date and, unless earlier
terminated as provided in this Section 10 shall continue in full force and
effect on a country-by-country basis as long as any Product is being Developed
or Commercialized for use in the Field (the “Term”).

 

10.2.       Termination for Cause.

 

10.2.1.     Termination for
Material Breach.  This Agreement may
be terminated effective immediately on a country-by-country basis by written
notice by either Party at any time during the Term if the other Party
materially breaches this Agreement, which breach remains uncured for [**] measured from the date written notice
of such breach is given to the breaching Party, which notice shall specify the
nature of the breach and demand its cure, provided, however,
that if such breach is not capable of being cured within the stated period and
the breaching Party uses Commercially Reasonable Efforts to cure such breach
during such period and presents a mutually agreeable remediation plan for such
breach, this Agreement shall not terminate and the cure period shall be
extended for such period provided in the remediation plan as long as the
breaching party continues to use Commercially Reasonable Efforts to pursue the
cure as provided in such remediation plan. 
In the event the Parties dispute in good faith the existence of a material breach
or a Party’s diligence in attempting to cure a material breach, termination of
this Agreement shall not be deemed to occur unless and until such dispute has
been referred for resolution in accordance with Section 12.1.2 hereof,
material breach of the Agreement or failure to make diligent efforts to cure
such breach has been established by an arbitration thereunder and, if such
breach can be 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

45

 

cured by the payment of money or the taking of specific remedial
actions, the breaching party does not pay the amount so determined to be due
within [**] of receipt of the
arbitration decision or otherwise diligently undertake and complete such
remedial actions within the timeframe established by such arbitration
decision.  In the event a material breach
affects only certain but not all countries in the Territory, the remedy of
termination shall only be effective, on a country-by-country basis  with respect to the countries as to which
such material breach occurred.  In the case of any uncured
material breach by Microbia, in lieu of termination of this Agreement, Forest
may terminate Microbia’s Operational Rights hereunder.  Notwithstanding anything to the contrary set
forth herein but subject to the limitations set forth in Section 11.6,
termination shall not be deemed to relieve a defaulting party from any
liability arising from such default.

 

10.2.2.     Forest Right of
Termination.  Prior to its
expiration, this Agreement may be terminated in its entirety at any time by
Forest effective upon at least [**] prior written
notice to Microbia for any reason.  If
Forest terminates for a material safety issue, Forest will provide all
assistance reasonably requested by Microbia for at least [**] after such termination to identify, further
characterize and fully document such safety issue and, subject to the last
sentence of this Section 10.2.2, provide such other assistance as might be
reasonably useful or necessary for Microbia to continue with the development or
commercialization of the Colloboration Compounds or Product, but shall not be
required to undertake any studies or other Development not then provided by the
Development Plan.  In addition, Forest
shall not be required to undertake any Development, Manufacturing or Commercialization
activities or any other activities, in each case which implicate a material
safety issue during such [**] period.

 

10.2.3.     Violation of Law.  This Agreement may be terminated by either
Party on giving thirty (30) days’ written notice to the other, which shall be
effective on the expiration date of such thirty (30) day period in the event
that the other Party (the “Violating Party”) is  convicted of a felony for violating, or a
final, non-appealable order is issued by a court of competent jurisdiction
finding that the Violating Party violated, any Applicable Laws, the Federal
Foreign Corrupt Practices Act or any securities laws or regulations
(collectively, the “Relevant Laws”), which are of such a nature that the
Violating Party’s violation of such Relevant Laws would prevent or substantially
diminish a Party from performing or having the ability to perform its
obligation pursuant to this Agreement, except, however, this clause shall have
no application in the case of civil or criminal proceedings that either Party
has disclosed to the other Party in writing prior to the Effective Date or that
are otherwise disclosed in either Party’s reports or statements filed pursuant
to the Securities Exchange Act of 1934 prior to the Effective Date.  Such notice of termination must be given
within thirty (30) days of the terminating Party becoming aware of the
circumstances described in this Section 10.2.3.

 

10.2.4.     Effects of
Termination by Forest without Cause or by Microbia with Cause.  If this Agreement is terminated by Forest
pursuant to Section 10.2.2, or by Microbia pursuant to
Sections 10.2.1, 10.2.3 or 10.2.6:

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

46

 

(a)            All licenses
granted by Microbia to Forest hereunder shall automatically terminate;

 

(b)           All licenses
granted by Forest to Microbia shall become fully paid up, irrevocable,
perpetual, royalty-free licenses;

 

(c)            Forest shall
assign to Microbia all right, title and interest in and to: (i) all
Regulatory Submissions and Regulatory Approvals pertaining to any Collaboration
Compound or Product Controlled by Forest, (ii) all of Forest’s interest in
any Trademark (including, without limitation, the goodwill symbolized by such
Trademark) used to brand the Product, and (iii) all of Forest’s interest
in any copyrights to the extent necessary or useful for Commercializing the
Product;

 

(d)           Forest shall
grant, and hereby grants, to Microbia a worldwide, exclusive (even as to
Forest), royalty-free and fully sublicensable license to practice any invention
claimed in the Forest Patent Rights or Joint Patent Rights, and to practice the
Forest Know-How and Joint Know-How for purposes of Development and
Commercialization of the Collaboration Compound or the Product in the Field;
and

 

(e)            Forest shall
furnish Microbia with reasonable cooperation to assure a smooth transition of
any clinical or other studies in progress related to a Collaboration Compound
or Product which Microbia determines to continue in compliance with Applicable
Laws and ethical guidelines applicable to the transfer or termination of any
such studies.  In the event that Microbia
informs Forest that it does not intend to continue specific development activities
then in progress, costs incurred in closing out such activities shall be
allocated in accordance with the allocation of the applicable Development
Expense responsibilities provided hereunder. 
In addition, Forest will return all Microbia Confidential Information to
Microbia.  Except as provided by this
Section, Forest shall have no further obligation to Microbia in respect of the
termination of this Agreement pursuant to this Section, including, without
limitation, the payment of any Development Milestones or Sales Milestones, the
obligation of payment of which has accrued following the furnishing by Forest
of notice of termination.

 

(f)            Microbia will
have the immediate right to terminate Forest’s Operational Rights except that
Forest will continue to provide Detailing in accordance with its obligations
hereunder until the effective date of termination.

 

(g)           Until
termination is effective, Forest shall continue to perform its obligations
under the Development Plan and Commercialization Plan then in effect and pay
all costs allocated for it to pay in accordance with any budgets then in
effect, except with respect to activities that Microbia elects to discontinue.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

47

 

(h)           Forest will
make the payment referred to under Section 5.1(ii) if unpaid as of
the effective date of termination.

 

Subsection (a) above will be effective upon any such termination,
and subsections (b), (c), (d), (e) and (f) above shall be effective
upon termination, or if such termination is by Forest pursuant to Section 10.2.2,
upon the earlier of such termination or Microbia’s earlier election.

 

10.2.5.     Effects of
Termination by Forest.  If
Forest is entitled to terminate this Agreement pursuant to Section 10.2.1,
Section 10.2.3 or Section 10.2.6, Forest may elect to either
terminate the agreement (in which case all licenses granted by either Party to
the other shall terminate and neither Party shall have any further liability to
the other except to the extent of provisions which survive the termination of
this Agreement by their respective terms and obligations accrued but remaining
outstanding as of the effectiveness of termination) or elect to continue the
Agreement, subject to the following provisions which shall be effective upon
Forest’s notice of such election:

 

(a)            Microbia’s
Operational Rights shall terminate; provided that in any event Forest will
continue to periodically provide information to Microbia with respect to
manufacturing, development and commercialization matters to the extent
reasonably related to Microbia’s continuing rights under the Agreement.

 

(b)           The license
granted by Forest to Microbia pursuant to Section 2.3(ii) shall
terminate with respect to any Forest Technology developed or acquired from and
after the exercise by Forest of its rights pursuant to this Section.

 

(c)            Microbia shall
furnish Forest with reasonable cooperation to assure a smooth transition of any
Development or Commercialization activities then being conducted or performed
by Microbia which Forest determines to continue in compliance with Applicable
Laws and ethical guidelines applicable to the transfer or termination of any
such activities.  In the event Forest
informs Microbia that it does not intend to continue specific Development or
Commercialization activities then in progress, costs incurred in closing out
such activities shall be allocated in accordance with the allocation of the
applicable Development Expense or Commercialization Expense responsibilities
provided hereunder. Except to the extent provided in this Section, the
Agreement shall remain in full force and effect (i.e.,
Forest and Microbia shall continue to share Net Profits and Net Losses as
provided herein).

 

(d)           Forest will
make the payment referred to under Section 5.1(ii) if unpaid as of
the effective date of termination.

 

10.2.6.     Effects of
termination for Change of Control.   If this Agreement is terminated by either
Party pursuant to Section 10.3.2:

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

48

 

(a)            All licenses
granted by the terminating Party to the Target Party hereunder shall
automatically terminate;

 

(b)           All licenses
granted by the Target Party to the terminating Party shall become fully paid
up, irrevocable, perpetual, royalty-free licenses;

 

(c)            The Target
Party shall assign to the terminating Party all right, title and interest in
and to: (i) all Regulatory Submissions and Regulatory Approvals pertaining
to any Collaboration Compound or Product Controlled by the Target Party, (ii) all
of the Target Party’s interest in any Trademark (including, without limitation,
the goodwill symbolized by such Trademark) used to brand the Product, and (iii) all
of the Target Party’s interest in any copyrights to the extent necessary or
useful for Commercializing the Product;

 

(d)           The Target
Party shall grant, and hereby grants, to the terminating Party a worldwide,
exclusive (even as to the Target Party), royalty-free and fully sublicensable
license (i) to practice any invention claimed in the Joint Patent Rights
and to practice the Joint Know-How, (ii) to practice, in the case of
termination by Microbia, any invention claimed in the Forest Patent Rights and
to practice the Forest Know-How, and (iii) to practice, in the case of
termination by Forest, any inventions claimed in the Microbia Patent Rights and
to practice the Microbia Know-How, in each case to develop, manufacture and
commercialize the Collaboration Compound and the Product in the Field and, in
the case of termination by Forest, in the Territory and, in the case of
termination by Microbia, in any territory;

 

(e)            The Target
Party shall furnish the terminating Party with reasonable cooperation to assure
a smooth transition of any clinical or other studies in progress related to a
Collaboration Compound or Product which the terminating Party determines to
continue in compliance with Applicable Laws and ethical guidelines applicable
to the transfer or termination of any such studies.  In the event that the terminating Party
informs the Target Party that it does not intend to continue specific
development activities then in progress, costs incurred in closing out such
activities shall be allocated in accordance with the allocation of the
applicable Development Expense responsibilities provided hereunder.  In addition, the Target Party will return all
the terminating Party Confidential Information to the terminating Party.  Except as provided by this Section, the
Target Party shall have no further obligation to the terminating Party in
respect of the termination of this Agreement pursuant to this Section,
including, without limitation, the payment of any Development Milestones or
Sales Milestones, the obligation of payment of which has accrued following the
furnishing by the Target Party of notice of termination;

 

(f)            The terminating
Party will have the immediate right to terminate the Target Party’s Operational
Rights except that the Target Party will continue to 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

49

 

provide
Detailing in accordance with its obligations hereunder until the effective date
of termination; and

 

(g)           Until
termination is effective, the Target Party shall continue to perform its
obligations under the Development Plan and Commercialization Plan then in
effect and pay all costs allocated for it to pay in accordance with any budgets
then in effect, except with respect to activities that the terminating Party
elects to discontinue.

 

(h)           In the case of
termination by either Party, Forest will make the payment referred to under Section 5.1(ii) if
unpaid as of the effective date of termination.

 

Subsection (a) above will be effective upon any such termination,
and subsections (b), (c), (d), (e) and (f) above shall be effective
upon such termination or the terminating Party’s earlier election.

 

10.2.7.     Bankruptcy.  This Agreement may be terminated by written
notice by either Party at any time during the term of this Agreement if the
other Party shall file in any court or Agency, pursuant to any statute or
regulation of any state or country, a petition in bankruptcy or insolvency or
for reorganization or for an arrangement or for the appointment of a receiver
or trustee of that Party or of its assets, or if the other Party proposes a
written agreement of composition or extension of its debts, or if the other
Party shall be served with an involuntary petition against it, filed in any
insolvency proceeding, and such petition shall not be dismissed within sixty
(60) days after the filing thereof, or if the other Party shall propose or be a
Party to any dissolution or liquidation, or if the other Party shall make an
assignment for the benefit of its creditors.

 

10.3.       Change of
Control.

 

10.3.1.     Change of
Control Notice.  Each Party
shall notify the other Party in writing, referencing this Section of the
Agreement, immediately upon any Change of Control, and shall provide such
notice where possible at least sixty (60) days prior to the Change of Control.

 

10.3.2.     Consequences of
a Change of Control.

 

(a)            In the event
that a Party is subject to a Change of Control which was approved or
recommended by the Board of Directors of such Party as constituted immediately
prior to such Change of Control and which does not involve an Impairment (as
defined below), but in connection therewith [**],
then this Agreement shall continue in effect in accordance with its terms,
except that, in the event of a Change of Control of [**].

 

(b)           In the event
that a Party (the “Target Party”) is subject to a Change of Control which was
not approved or recommended by the Board of 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

50

 

Directors
of the Target Party as constituted immediately prior to such Change of Control,
or if so approved or recommended, could reasonably be expected to lead to an
Impairment (as defined below), the Target Party will notify the other Party at
least [**] prior to the closing of such
transaction, and such other Party may elect, in its sole discretion, to (i) continue
the Agreement in accordance with its terms, (ii) terminate the Agreement
on [**] notice, during which period the
Agreement would continue in effect in accordance with its terms, [**], or (iii) terminate the Agreement effective upon [**] written notice of termination, in each of cases (ii) and
(iii) such notice to be delivered within [**]
after the [**] is determined pursuant to this Section (b).
 Within [**]
following a Party’s receipt of notice from the Target Party of a Change of
Control, such Party shall provide notice to the Target Party requesting a
determination of [**] subject to acquisition by
such Party upon a termination pursuant to this Section, and the failure to so
request [**] shall be deemed the election to
continue the Agreement in accordance with its terms.  Such determination shall be made by the
Parties in good faith, and if such determination is not made within [**] of the request, then as determined by [[**].  Upon any
termination of this Agreement pursuant to this Section, the terminating Party
shall be entitled to receive the assignments and transitional activities
described in Section 10.2.6.  In
connection with such termination, the terminating Party shall be required to [**] of the effective date of the termination.

 

(c)            For purposes of
this Section, an “Impairment” shall only be deemed to occur if (a) it
is reasonably anticipated that the entity resulting from such Change of Control
will be unable to perform its obligations in accordance with the terms of the
Agreement, [**], (b) the product line of
the entity which results from the Change of Control includes [**]

 

10.4.       Survival of
Certain Obligations.  Expiration
or termination of this Agreement shall not relieve the Parties of any
obligation accruing before such expiration or termination.  The provisions of this Agreement that must,
by their nature, survive expiration or termination of this Agreement to give
effect to their intent, shall so survive, including without limitation Section 2.5;
Section 2.7; Section 5.4.5; Section 6; Section 10 and Section 11.  Any expiration or early termination of this
Agreement shall be without prejudice to the rights of either Party against the
other accrued or accruing under this Agreement before termination.

 

11.          PRODUCT LIABILITY,
INDEMNIFICATION AND INSURANCE.

 

11.1.       Sharing of
Liability Expenses.  Except
where caused by the gross negligence or willful misconduct of a Party seeking
reimbursement, the Parties shall share equally all losses, damages,
liabilities, settlements, penalties, fines and expenses (including, without
limitation, reasonable attorneys’ fees and expenses) (collectively, “Liability”)
arising out of or caused by (a) the Manufacture, Development or
Commercialization of the Product; (b) the death or bodily injury of any
person on account of the use of the Product; and/or (c) any recall or
withdrawal of 

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

 

51

 

the
Product (collectively, “Shared Liability Claims”), other than to the
extent the responsibility for any such Liabilities is covered by the
indemnification provisions of Sections 11.2 or 11.3.

 

11.2.       Indemnification
by Microbia.  Microbia
shall indemnify, defend and hold harmless Forest, its Affiliates, and each of
its and their respective employees, officers, directors agents and permitted
Sublicensees (each, an “Forest Indemnified Party”) from and against any
and all Liabilities that the Forest Indemnified Party may be required to pay to
one or more Third Parties to the extent resulting from or arising out of:

 

(a)            any Microbia
representation or warranty set forth herein being untrue in any material
respect when made or any material breach by Microbia of any of its covenants or
obligations hereunder; or

 

(b)           any Shared
Liability Claims relating to the Product caused by the gross negligence or
willful misconduct of Microbia;

 

except in each case, to
the extent caused by the gross negligence or willful misconduct of Forest or
any Forest Indemnified Party, or by breach of this Agreement by Forest.

 

11.3.       Indemnification
by Forest.  Forest shall
indemnify, defend and hold harmless Microbia, its Affiliates, Sublicensees,
distributors and each of its and their respective employees, officers,
directors and agents (each, a “Microbia Indemnified Party”) from and
against any and all Liabilities that the Microbia Indemnified Party may be
required to pay to one or more Third Parties to the extent resulting from or
arising out of:

 

(a)            any Forest
representation or warranty set forth herein being untrue in any material
respect when made or a material breach by Forest of any of its covenants or
obligations hereunder; or

 

(b)           any Shared
Liability Claims relating to a Product caused by the gross negligence or
willful misconduct of Forest; or

 

(c)            any claims
arising from or related to Forest’s Commercialization activities in the Royalty
Territory;

 

except in each case, to
the extent caused by the gross negligence or willful misconduct of Microbia or
any Microbia Indemnified Party, or by breach of this Agreement by Microbia.

 

11.4.       Procedure.  Each Party shall notify the other in the
event it becomes aware of a claim for which indemnification may be sought
hereunder or for which Liability is shared pursuant to this Section 11.  In case any proceeding (including any governmental
investigation) shall be instituted involving any Party in respect of which
indemnity may be sought pursuant to this Section 11, such Party (the “Indemnified
Party”) shall promptly notify the other Party (the “Indemnifying Party”)
in writing and the Indemnifying Party and Indemnified Party shall meet to
discuss how to respond to any claims that are the subject matter of such
proceeding.  The 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

52

 

Indemnifying
Party, upon request of the Indemnified Party, shall retain counsel reasonably
satisfactory to the Indemnified Party to represent the Indemnified Party and
shall pay the fees and expenses of such counsel related to such
proceeding.  In any such proceeding, the
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of the Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have
mutually agreed to the retention of such counsel or (ii) the named parties
to any such proceeding (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party and representation of both Parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them.  All such fees
and expenses incurred pursuant to Section 11.2 or 11.3 shall be reimbursed
as they are incurred, and all such fees and expenses incurred pursuant to Section 11.1
shall be reimbursed in accordance with Section 5.4.  The Indemnifying Party shall not be liable
for any settlement of any proceeding unless effected with its written
consent.  The Indemnifying Party shall
not, without the written consent of the Indemnified Party, effect any
settlement of any pending or threatened proceeding in respect of which the Indemnified
Party is, or arising out of the same set of facts could have been, a party and
indemnity could have been sought hereunder by the Indemnified Party, unless
such settlement includes an unconditional release of the Indemnified Party from
all liability on claims to which the indemnity relates that are the subject
matter of such proceeding.

 

11.5.       Insurance.  Each Party further agrees to use its
reasonable efforts to obtain and maintain, during the term of this Agreement,
Commercial General Liability Insurance, including Products Liability Insurance,
with reputable and financially secure insurance carriers to cover its
indemnification obligations under Sections 11.2 or 11.3, as applicable, or
self-insurance, with limits of not less than $[**]
million per occurrence and $[**]
million in the aggregate ($[**]
million in the aggregate from and after Commercial Launch).

 

11.6.       Liability
Limitations.  NOTWITHSTANDING
THE FOREGOING, IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY
CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES
UNDER ANY COLLABORATION AGREEMENT, EXCEPT TO THE EXTENT THE DAMAGES RESULT FROM
A PARTY’S WILLFUL MISCONDUCT OR ARISE FROM A PARTY’S INDEMNIFICATION
OBLIGATIONS UNDER THIS SECTION 11.

 

12.          MISCELLANEOUS.

 

12.1.       Governing
Law, Jurisdiction; Dispute Resolution.

 

12.1.1.     Governing Law.  The interpretation and construction of this
Agreement shall be governed by the laws of the State of New York, excluding any
conflicts or choice of law rule or principle that might otherwise refer
construction or interpretation of this Agreement to the substantive law of
another jurisdiction.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

53

 

12.1.2.     Arbitration.

 

(a)            Claims.  Any claim, dispute, or controversy of
whatever nature arising between the Parties out of or relating to this
Agreement that is not resolved under Section 12.1.3 within the required
thirty (30) day time period, including without limitation, any action or claim
based on tort, contract, or statute (including any claims of breach or
violation of statutory or common law protections from discrimination,
harassment and hostile working environment), or concerning the interpretation,
effect, termination, validity, performance and/or breach of this Agreement (“Claim”),
shall be resolved by final and binding arbitration before a panel of three
experts with relevant industry experience (the “Arbitrators”).  One Arbitrator shall be chosen by Microbia
and one Arbitrator shall be chosen by Forest within fifteen (15) days from the
notice of initiation of arbitration. The third Arbitrator shall be chosen by
mutual agreement of the Arbitrator chosen by Microbia and the Arbitrator chosen
by Forest within fifteen (15) days of the date that the last of such
Arbitrators were appointed.  The
Arbitrators shall be administered by the International Chamber of Commerce (the
“Administrator”) in accordance with its then existing arbitration rules or
procedures regarding commercial or business disputes.  The arbitration shall be held in Boston,
Massachusetts if requested by Forest and in New York, New York if requested by
Microbia. The arbitrators shall be instructed by the Parties to complete the
arbitration within ninety (90) days after selection of the final Arbitrator.

 

(b)           Arbitrators’
Award.  The Arbitrators shall, within
fifteen (15) calendar days after the conclusion of the arbitration hearing,
issue a written award and statement of decision describing the essential
findings and conclusions on which the award is based, including the calculation
of any damages awarded.  The decision or
award rendered by the Arbitrators shall be final and non-appealable, and
judgment may be entered upon it in accordance with applicable law in the State
of New York or Massachusetts, as applicable, or any other court of competent
jurisdiction.  The Arbitrators shall be authorized
to award compensatory damages, but shall NOT be authorized (i) to award
non-economic damages, such as for emotional distress, pain and suffering or
loss of consortium, (ii) to award punitive damages, or (iii) to
reform, modify or materially change this Agreement or any other agreements
contemplated hereunder; provided, however, that the damage limitations
described in parts (i) and (ii) of this sentence will not apply if
such damages are statutorily imposed.

 

(c)            Costs.  Each Party shall bear its own attorney’s
fees, costs, and disbursements arising out of the arbitration and the costs of
the arbitrator selected by it, and shall pay an equal share of the fees and
costs of the third arbitrator; provided, however, the Arbitrators shall be
authorized to determine whether a party is the prevailing party, and if so, to
award to that prevailing party reimbursement for its reasonable attorneys’
fees, costs and disbursements (including, for example, expert witness fees and
expenses, photocopy charges, 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

54

 

travel
expenses, etc.), and/or the fees and costs of the Administrator and the
Arbitrators.

 

(d)           Compliance with
this Agreement.  Unless the
Parties otherwise agree in writing, during the period of time that any
arbitration proceeding is pending under this Agreement, the Parties shall
continue to comply with all those terms and provisions of this Agreement that
are not the subject of the pending arbitration proceeding.

 

(e)            Injunctive or
Other Equity Relief.  Nothing
contained in this Agreement shall deny any Party the right to seek injunctive
or other equitable relief from a court of competent jurisdiction in the context
of a bona fide emergency or prospective irreparable harm, and such an action
may be filed and maintained notwithstanding any ongoing arbitration proceeding.

 

12.1.3.     Dispute
Resolution.  In the
event of a dispute arising out of or
relating to this Agreement either Party shall provide written notice of
the dispute to the other, in which event the dispute shall be referred to the
executive officers designated below or their successors, for attempted resolution
by good faith negotiations within thirty (30) days after such notice is
received.  Said designated officers are
initially as follows:

 

For Microbia:                        its Chief
Executive Officer or his designate

For Forest:                             its Chief
Executive Officer or his designate

 

In
the event the designated executive officers do not resolve such dispute within
the allotted thirty (30) days, either Party may, after the expiration of the
thirty (30) day period, seek to resolve the dispute through arbitration in
accordance with this Section 12.1.2.  Notwithstanding the preceding, the
Parties acknowledge that the failure of the JCC or JDC to reach consensus as to
any matter, which failure does not involve a breach by a Party of its
obligations hereunder, shall not be deemed a dispute which may be referred for
resolution by arbitration hereunder.

 

12.2.       Force
Majeure.  No liability shall result
from, and no right to terminate shall arise, in whole or in part, based upon
any delay in performance or non-performance, in whole or in part, by either of
the Parties to this Agreement to the extent that such delay or non-performance
is caused by an event of Force Majeure. 
“Force Majeure” means an event that is beyond a non-performing
Party’s reasonable control, including an act of God, act of the other Party,
strike, lock-out or other industrial/labor dispute, war, riot, civil commotion,
terrorist act, malicious damage, epidemic, quarantine, fire, flood, storm,
natural disaster or compliance with any law or governmental order, rule,
regulation or direction, whether or not it is later held to be invalid or
inapplicable.  The Force Majeure Party
shall within ten (10) days of the occurrence of the Force Majeure event,
give written notice to the other Party stating the nature of the Force Majeure
event, its anticipated duration and any action being taken to avoid or minimize
its effect.  Any suspension of
performance shall be of no greater scope and of no longer duration than is
reasonably required and the Force Majeure Party shall use reasonable effort to
remedy its inability to perform; provided, however, if the suspension of
performance continues or is 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

55

 

anticipated
to continue for thirty (30) days after the date of the occurrence, the
unaffected Party shall have the right but not the obligation to perform on
behalf of the Force Majeure Party for a period of such Force Majeure and such
additional period as may be reasonably required to assure a smooth and
uninterrupted transition of such activities. 
If such failure to perform would constitute a material breach of this Agreement
in the absence of such event of Force Majeure, and continues for one (1) year
from the date of the occurrence and the Parties are not able to agree on
appropriate amendments within such period, such other Party shall have the
right, notwithstanding the first sentence of this Section 12.2, to
terminate this Agreement (including the right to elect to terminate the other
Party’s Operational Rights under this Agreement in lieu of termination, as
provided by and subject to the provisions of Section 10.2.4 and 10.2.5)
immediately by written notice to the Force Majeure Party, in which case neither
Party shall have any liability to the other except for those rights and
liabilities that accrued prior to the date of termination and the consequences
of termination pursuant to Sections 10.2.4 or 10.2.5, as applicable, as if such
termination was a termination as to which such consequences applied.

 

12.3.       Additional
Approvals.  Forest and
Microbia shall cooperate and use respectively all reasonable efforts to make
all other registrations, filings and applications, to give all notices and to
obtain as soon as practicable all governmental or other consents, transfers,
approvals, orders, qualifications authorizations, permits and waivers, if any,
and to do all other things necessary or desirable for the consummation of the
transactions as contemplated hereby. 
Neither Party shall be required, however, to divest or out-license
products or assets or materially change its business if doing so is a condition
of obtaining any governmental approvals of the transactions contemplated by
this Agreement.

 

12.4.       Waiver and
Non-Exclusion of Remedies.  Party’s failure
to enforce, at any time or for any period of time, any provision of this
Agreement, or to exercise any right or remedy shall not constitute a waiver of
that provision, right or remedy or prevent such Party from enforcing any or all
provisions of this Agreement and exercising any rights or remedies.  To be effective any waiver must be in
writing.  The rights and remedies
provided herein are cumulative and do not exclude any other right or remedy
provided by law or otherwise available except as expressly set forth herein.

 

12.5.       Notices.

 

12.5.1.     Notice
Requirements.  Any notice,
request, demand, waiver, consent, approval or other communication permitted or
required under this Agreement shall be in writing, shall refer specifically to
this Agreement and shall be deemed given only if delivered by hand or sent by
facsimile transmission (with transmission confirmed) or by internationally
recognized overnight delivery service that maintains records of delivery,
addressed to the Parties at their respective addresses specified in Section 12.5.2
or to such other address as the Party to whom notice is to be given may have
provided to the other Party in accordance with this Section 12.5.1.  Such Notice shall be deemed to have been
given as of the date delivered by hand or transmitted by facsimile (with
transmission confirmed) or on the second Business Day (at the place of
delivery) after deposit with an internationally recognized overnight delivery
service.  This Section is not
intended to govern the day-to-day business 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

56

 

communications necessary between the Parties in performing their
obligations under the terms of this Agreement.

 

12.5.2.     Address for Notice.

 

For:         Microbia, Inc.

320 Bent Street

Cambridge, MA 02141

Fax:         617-494-0908

Attn:       Vice President, Business
Development

 

With a
copy to:

 

Ropes & Gray LLP

One International Place

Boston, MA 02110

Fax:         617-951-7050

Attn:       Marc
Rubenstein

 

For:         Forest Laboratories, Inc.

909 Third Avenue

New York, NY 10022

Fax:         212-224-6740

Attn:       Chief
Executive Officer

 

With a copy to:

 

Forest Laboratories, Inc.

909 Third Avenue

New York, NY 10022

Fax:         212-224-6740

Attn:       General
Counsel

 

12.6.       Entire
Agreement.  This Agreement,
constitutes the entire agreement between the Parties with respect to the
subject matter of the Agreement.  This
Agreement supersedes all prior agreements, whether written or oral, with
respect to the subject matter hereof. 
Each Party confirms that it is not relying on any representations,
warranties or covenants of the other Party except as specifically set out in
this Agreement.  Nothing in this
Agreement is intended to limit or exclude any liability for fraud.  All Schedules or Exhibits referred to in this
Agreement are intended to be and are hereby specifically incorporated into and
made a part of this Agreement.  In the
event of any inconsistency between any such Schedules or Exhibits and this
Agreement, the terms of this Agreement shall govern.

 

12.7.       Amendment.  Any amendment or modification of this
Agreement must be in writing and signed by authorized representatives of both
Parties.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

57

 

12.8.       Assignment.  Neither Party may assign its rights or
delegate its obligations under this Agreement, in whole or in part without the
prior written consent of the other Party, except that each Party shall always
have the right, without such consent, (a) to perform any or all of its
obligations and exercise any or all of its rights under this Agreement through
any of its Affiliates, and (b) on written notice to the other Party,
assign any or all of its rights and delegate or subcontract any or all of its
obligations hereunder to any of its Affiliates. 
Notwithstanding the foregoing, each Party shall remain responsible for
any failure to perform on the part of any such Affiliates.  Any attempted assignment or delegation in
violation of this Section shall be void.

 

12.9.       No Benefit
to Others.  The
provisions of this Agreement are for the sole benefit of the Parties and their
successors and permitted assigns, and they shall not be construed as conferring
any rights in any other persons except as otherwise expressly provided in this
Agreement.

 

12.10.     Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original and all of which
taken together shall be deemed to constitute one and the same instrument.  An executed signature page of this
Agreement delivered by facsimile transmission shall be as effective as an
original executed signature page.

 

12.11.     Severability.  To the fullest extent permitted by applicable
law, the Parties waive any provision of law that would render any provision in
this Agreement invalid, illegal or unenforceable in any respect.  If any provision of this Agreement is held to
be invalid, illegal or unenforceable, in any respect, then such provision will
be given no effect by the Parties and shall not form part of this
Agreement.  To the fullest extent
permitted by applicable law and if the rights or obligations of any Party will
not be materially and adversely affected, all other provisions of this
Agreement shall remain in full force and effect and the Parties will use their
best efforts to negotiate a provision in replacement of the provision held
invalid, illegal or unenforceable that is consistent with applicable law and
achieves, as nearly as possible, the original intention of the Parties.

 

12.12.     Further
Assurance.  Each Party
shall perform all further acts and things and execute and deliver such further
documents as may be necessary or as the other Party may reasonably require to
implement or give effect to this Agreement.

 

12.13.     Publicity.  Notwithstanding Section 6.1.6, it is understood that the Parties
will issue a press release announcing the execution of this Agreement in such
form as the Parties shall mutually agree. 
The Parties agree to consult with each other reasonably and in good
faith with respect to the text and timing of any subsequent press releases
relating to the Agreement or the activity hereunder prior to the issuance
thereof, provided that a Party may not unreasonably withhold consent to such
releases, and that either Party may issue such press releases as it determines,
based on advice of counsel, are reasonably necessary to comply with laws or
regulations or for appropriate market disclosure or which are consistent with
information disclosed in prior releases properly made hereunder.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

58

 

12.14.     Relationship
of the Parties.  The status of a
Party under this Agreement shall be that of an independent contractor. Nothing
contained in this Agreement shall be construed as creating a partnership, joint
venture, or agency relationship between the Parties or, except as otherwise
expressly provided in this Agreement, as granting either Party the authority to
bind or contract any obligation in the name of or on the account of the other
Party or to make any statements, representations, warranties, or commitments on
behalf of the other Party.  All Persons
employed by a Party or any of its Affiliates shall be employees of such Party
or its Affiliates and not of the other Party or such other Party’s Affiliates
and all costs and obligations incurred by reason of any such employment shall
be for the account and expense of such Party or its Affiliates, as applicable.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

59

 

IN
WITNESS WHEREOF, duly authorized representatives of the Parties have duly
executed this Agreement to be effective as of the Effective Date.

 

	
  FOREST
  LABORATORIES, INC.

  	
   

  	
  MICROBIA,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Howard Solomon

  	
   

  	
  By:

  	
  /s/
  Peter Hecht

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name: 

  	
  Howard
  Solomon

  	
   

  	
  Name: 

  	
  Peter
  Hecht

  
	
  Title:

  	
  Chairman

  	
   

  	
  Title:

  	
  CEO

  

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

EXHIBIT 1.30

 

Development Plan

 

[**]

 

 

SCHEDULE 1.5

 

[**]

 

 

SCHEDULE 1.47

 

Initial Compound

 

[**]

 

 

SCHEDULE 4.1.1

 

[**]

 

 

SCHEDULE 4.5.3

 

[**]

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

SCHEDULE 5.2.2(i)

 

Stock Purchase Agreement

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

FORM OF SERIES G CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT

 

BY AND AMONG

 

MICROBIA, INC.

 

AND

 

THE SEVERAL PURCHASERS NAMED IN EXHIBIT A

 

 

[Date]

 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

SERIES G CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT

 

This
SERIES G CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT (this “Agreement”) is made and entered into as of [Date], by
and among MICROBIA, INC., a
Delaware corporation (the “Company”),
and each of those persons and entities, severally and not jointly, whose names
are set forth on the Schedule of Purchasers attached hereto as Exhibit A (which persons and entities
are hereinafter collectively referred to as “Purchasers” and each individually as a “Purchaser”).

 

RECITALS

 

WHEREAS, the Company has authorized
the sale and issuance of an aggregate of up to [·] shares of its Series G Convertible Preferred Stock (the “Series G Stock”);

 

WHEREAS, the Purchasers desire to
purchase the Shares on the terms and conditions set forth herein; and

 

WHEREAS, the Company desires to
issue and sell such Shares to Purchasers on the terms and conditions set forth
herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the
foregoing recitals and the mutual promises hereinafter set forth, the parties
hereto agree as follows:

 

1.             AGREEMENT
TO SELL AND PURCHASE.

 

1.1          Authorization of Shares.  On or prior to
the Initial Closing (as defined in Section 2.1 below), the Company shall
have duly authorized (a) the sale and issuance to Purchasers of up to [·] shares of its Series G
Stock (the “Shares”)
and (b) the issuance of such shares of Common Stock to be issued upon
conversion of the Shares (the “Conversion Shares”). 
The Shares and the Conversion Shares shall have the rights, preferences,
privileges and restrictions set forth in the Eighth Amended and Restated
Certificate of Incorporation of the Company, in the form attached hereto as Exhibit B (the “Restated Charter”).  The Company has, or prior to the Initial
Closing will have, adopted and filed the Restated Charter with the Secretary of
State of the State of Delaware.

 

1.2          Sale and Purchase.

 

(a)           Initial Shares.  Subject to the
terms and conditions hereof, at the Initial Closing (as defined in Section 2.1)
the Company hereby agrees to issue and sell to each Purchaser listed in Part I
of Exhibit A (the “Initial Purchasers”),
severally and not jointly, and each such Purchaser agrees to purchase from the
Company, severally and not jointly, the number of Shares (the “Initial Shares”) set
forth opposite such Purchaser’s name on Exhibit A,
at a purchase price of [twelve dollars] ($[12.00]) per share.  The Company’s agreement with each of the
Purchasers is a separate agreement, and the sale of Shares to each of the
Purchasers is a separate sale.

 

(b)           Additional Shares.  If less than
all of the authorized number of shares of Series G Stock are sold at the
Initial Closing, then, subject to the terms of this Agreement, at one or more
Additional Closings (as defined in Section 2.2), the Company may 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

1

 

issue
and sell up to the balance of the authorized but unissued shares of Series G
Stock (the “Additional
Shares”) at a purchase price of [twelve dollars] ($[12.00]) per
share to such additional purchasers (the “Additional Purchasers”) as the majority of
the Board of Directors may approve. The Company and each Additional Purchaser
shall execute the counterpart signature page for Additional Closings
attached hereto, and upon such execution and delivery, each such counterpart
shall be deemed a part of this Agreement and Exhibit A
shall automatically be amended to reflect the Additional Shares purchased in
such Additional Closing.

 

The
Initial Shares and the Additional Shares are collectively referred to
hereinafter as the “Shares.”  The Initial Purchasers and the Additional
Purchasers are collectively referred to hereinafter as the “Purchasers.”

 

2.             CLOSING, DELIVERY AND PAYMENT.

 

2.1          Initial Closing.  The closing of
the sale and purchase of the Initial Shares under this Agreement (the “Initial Closing”)
shall take place at 10:00 a.m. on the date hereof, upon the satisfaction
of the closing conditions set forth in Section 5.1 below, at the offices
of Ropes & Gray LLP, One International Place, Boston, Massachusetts
02110, or at such other time or place as the Company and Purchasers may
mutually agree (such date is hereinafter referred to as the “Initial Closing Date”).  If at the Initial Closing any of the
conditions specified in Section 5.1 shall not have been fulfilled, each of
the Initial Purchasers shall, at his, her or its election, be relieved of all
of his, her or its obligations under this Agreement without thereby waiving any
other rights such Initial Purchaser may have by reason of such failure or such
non-fulfillment.

 

2.2          Additional Closings. The closing of the sale and purchase of any
Additional Shares under this Agreement (each, an “Additional Closing”), shall take place at such time, date, and place as
the Company and each Additional
Purchaser may mutually agree (each such date is hereinafter referred to
as an “Additional Closing Date”); provided, however,
that any Additional Closings under the terms of this Agreement shall occur no
later than sixty days after the date of the Initial Closing (the “Additional Closing Deadline”),
provided further that, the
Additional Closing Deadline may be extended by mutual agreement between the
Company and the holders of a majority of the then outstanding shares of Series G
Stock with respect to the issuance of any Additional Shares under this
Agreement or otherwise.  If at any
Additional Closing any of the conditions specified in Section 5.1 shall
not have been fulfilled, each of the Additional Purchasers shall, at his, her
or its election, be relieved of all of his, her or its obligations under this
Agreement without thereby waiving any other rights such Additional Purchaser
may have by reason of such failure or such non-fulfillment.

 

2.3          Delivery.  At the
Initial Closing and each Additional Closing (the Initial Closing and each
Additional Closing, a “Closing”),
subject to the terms and conditions hereof, the Company will deliver to each
Purchaser a certificate representing the number of Shares to be purchased at
such Closing by such Purchaser, against payment of the purchase price therefor
by check, wire transfer made payable to the order of the Company, or any
combination of the foregoing.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

2

 

2.4          Use of Proceeds.  The Company
shall use the proceeds from the sale of the Shares for product development and
for general working capital purposes.

 

3.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

Except
as set forth in the Schedule of Exceptions attached hereto as Exhibit E delivered by the Company to
the Purchasers at the Initial Closing and at any Additional Closing, the
Company hereby represents and warrants to each Purchaser as of the date of this
Agreement as follows:

 

3.1          Organization, Good Standing and Qualification.  The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.  The Company has all
requisite corporate power and authority to own and operate its properties and
assets, to carry on its business as presently conducted and as presently
proposed to be conducted, to execute and deliver this Agreement, the Seventh
Amended and Restated Investors’ Rights Agreement in the form attached hereto as
Exhibit C (the “Investors’ Rights Agreement”),
the Fourth Amended and Restated Voting Agreement in the form attached hereto as
Exhibit D (the “Voting Agreement” and
together with the Investors’ Rights Agreement, the “Related Agreements”),
to issue and sell the Shares and the Conversion Shares, and to carry out the
provisions of this Agreement, the Related Agreements and the Restated
Charter.  The Company is duly qualified
and is authorized to do business as a foreign corporation and is in good
standing in all jurisdictions listed in the Schedule of Exceptions in which the
nature of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure
to so qualify would not have a material adverse effect on the business, assets,
properties, operations, prospects or financial condition of the Company (a “Material Adverse Effect”).  The Company has furnished to each Purchaser
who has so requested in writing, true and complete copies of its Seventh
Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”)
and By-Laws as presently in effect.

 

3.2          Subsidiaries.  Except as set
forth in the Schedule of Exceptions, the Company has no subsidiaries and does
not own or control, directly or indirectly, any equity security of any
corporation or any other interest in any other corporation, general or limited
partnership, joint venture association, business trust or other business
entity.  The Company is not a participant
in any joint venture, partnership or similar arrangement.

 

3.3          Capitalization; Voting Rights.(1)

 

The
authorized capital stock of the Company, immediately prior to the Initial
Closing after giving effect to the Restated Charter, will consist of
[80,932,230] shares of Common Stock, par value $0.001 per share, 6,934,807
shares of which are issued and outstanding and 9,677,915 shares of which are
reserved for future issuance to employees pursuant to the Company’s 1998

 

(1) Capitalization figures are current as of the date of the Master
Collaboration Agreement between the Company and Forest Laboratories.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

3

 

Stock
Option Plan, 2002 Stock Incentive Plan, 2002 California Stock Incentive Plan
and 2005 Stock Incentive Plan (collectively, the “Stock Incentive Plans”) and [63,843,741]
shares of Preferred Stock, par value $0.001 per share, 8,904,567 of which are
designated Series A Preferred Stock, all of which are issued and
outstanding 7,419,355 of which are designated Series B Preferred Stock,
all of which are issued and outstanding, 6,401,523 of which are designated Series C
Stock, all of which are issued and outstanding, 12,618,296 of which are
designated as Series D Stock, all of which are issued and outstanding,
20,500,000 of which are designated as Series E Stock, 19,633,531 of which
are issued and outstanding, 8,000,000 of which are designated as Series F
Stock, 8,000,000 of which are issued and outstanding, and [·] of which are designated as
Series G Stock, none of which are issued and outstanding (collectively,
the “Preferred Stock”).  All issued and outstanding shares of the
Company’s capital stock  (a) have
been duly authorized and validly issued, (b) are fully paid and
non-assessable, and (c) were offered, issued, sold and delivered in
compliance with all applicable federal and state securities laws.  The rights, preferences, privileges and
restrictions of the Shares are as stated in the Restated Charter.  Each series of Preferred Stock is convertible
into Common Stock on a one-for-one basis. 
The Conversion Shares have been duly and validly reserved for issuance.

 

(a)           Other than the
9,677,915 shares reserved for issuance under the Company’s Stock Incentive
Plans, and except as provided in the Restated Charter and the Investors’ Rights
Agreement or as set forth in the Schedule of Exceptions, (i) no
subscriptions, warrants, options, convertible securities or other rights
(contingent or otherwise) to purchase or acquire (including conversion or
preemptive rights and rights of first refusal) any shares of capital stock of
the Company are authorized or outstanding, (ii) the Company has no
obligation (contingent or otherwise) to issue any subscription, warrant,
option, convertible security or other such right (including conversion or
preemptive rights and rights of first refusal) or to issue or distribute to
holders of any shares of its capital stock any evidences of indebtedness or
assets of the Company, and (iii) the Company has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof, and (iv) no stock appreciation, phantom
stock or similar rights with respect to the Company are authorized or
outstanding.  Except as contemplated by
this Agreement, the Related Agreements or in the Schedule of Exceptions, there
are no agreements or proxies, written or oral, between the Company and any
holder of its capital stock, or, to the best knowledge of the Company, among
any holders of its capital stock, relating to the acquisition, disposition or
voting of the capital stock of the Company.

 

(b)           When issued in
compliance with the provisions of this Agreement and the Restated Charter, the
Shares and the Conversion Shares will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances (other than liens
and encumbrances created by the Purchasers); provided,
however, that the Shares and the Conversion Shares may be subject to
restrictions on transfer under state and/or federal securities laws as set
forth herein or as otherwise required by such laws at the time a transfer is
proposed.  The sale of the Shares and the
subsequent conversion of the Shares into Conversion Shares are not and will not
be subject to any preemptive rights or rights of first refusal that have not
been properly waived or complied with on or prior to the Initial Closing.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

4

 

(c)           Attached as Exhibit G hereto is a true and
complete list of the securityholders of the Company, showing the number of
shares of Common Stock, Preferred Stock or other securities of the Company held
by each securityholder as of the date of this Agreement and, in the case of
options, warrants and other convertible securities, the exercise price thereof
and the number and type of securities issuable thereunder.

 

3.4          Authorization; Binding Obligations. 
All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization of this Agreement
and the Related Agreements, the performance of all obligations of the Company
hereunder and thereunder at each Closing and the authorization, sale, issuance
and delivery of the Shares pursuant hereto and the Conversion Shares pursuant
to the Restated Charter has been taken or will be taken prior to the Initial
Closing.  This Agreement and the Related
Agreements have been duly executed and delivered by the Company and constitute
the valid and binding obligations of the Company enforceable in accordance with
their respective terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors’ rights, (b) general principles of
equity that restrict the availability of equitable remedies, and (c) to
the extent that the enforceability of the indemnification provisions in Section 2.9
of the Investors’ Rights Agreement may be limited by applicable laws.

 

3.5          Financial Statements.  The Company has
made available to each Purchaser a complete and correct copy of (i) the
audited balance sheet of the Company as of December 31, 200  ,
and the related, audited statements of income, changes in stockholders’ equity
and cash flows for the fiscal year then ended, and (ii) the unaudited
balance sheet of the Company as of
                    
(the “Statement Date”),
and the related, unaudited statements of income and cash flows for the fiscal
year then ended (collectively, the “Financial Statements”). The Financial
Statements, together with the notes thereto, were prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
prior periods, are complete and correct in all material respects and present
fairly the financial condition and position of the Company as of their
respective dates; provided, however,
that the unaudited Financial Statements are subject to normal recurring
year-end audit adjustments (which will not be material), and do not contain all
footnotes required under generally accepted accounting principles.

 

3.6          Liabilities.  Except as set
forth in the Schedule of Exceptions, the Company has no material liabilities
and, to the best of its knowledge, knows of no material contingent liabilities
not disclosed in the Financial Statements, except current liabilities incurred
in the ordinary course of business which are not, either individually or in the
aggregate, material to the business, assets, properties, operations, prospects
or financial condition of the Company.

 

3.7          Absence of Changes. 
Except as set forth in the Schedule of Exceptions, since the Statement
Date, there has not been:

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

 

5

 

(a)           any change in
the business, assets, properties, operations, prospects or financial condition
of the Company, except changes in ordinary course of business that have not
been, either individually or in the aggregate, materially adverse;

 

(b)           any change
(individually or in the aggregate) in the contingent obligations of the Company
by way of guaranty, endorsement (other than endorsement of drafts in the
ordinary course of business for the purpose of collection), indemnity, warranty
(other than in the ordinary course of business), or otherwise.

 

(c)           any material
loss, destruction or damage to any property of the Company, whether or not
insured;

 

(d)           any waiver by
the Company of any valuable right or of any material debt or claim owed to it;

 

(e)           any
satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company, except in the ordinary course of business or that is
not material to the business, assets, properties, operations, prospects or
financial condition of the Company;

 

(f)            any material
change or amendment to a material contract or arrangement by which the Company
or any of its assets or properties is bound;

 

(g)           any change in
the compensation paid or payable to any officer, director, employee,
consultant, agent or stockholder of the Company (other than compensation
increases in the ordinary course of business consistent with past practice,
which, individually and in the aggregate, are not material);

 

(h)           any resignation
or termination of any executive officer or other key employee of the Company or
material change in the terms and conditions of their employment;

 

(i)            any loans or
advances made to any person, other than ordinary advances for travel expenses;

 

(j)            any direct or
indirect redemption or acquisition of, any capital stock in the Company;

 

(k)           declared or
paid any dividends, or authorized or made any distribution in cash or in kind
upon or with respect to any class or series of its capital stock;

 

(l)            to the
Company’s knowledge, any other event or condition of any character that has
affected, or may affect, materially and adversely, the Company’s business or
prospects; or

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

6

 

(m)          any agreement
or understanding, whether in writing or otherwise, for the Company to take or
become subject to any of the actions specified in paragraphs (a) through
(l).

 

3.8          Agreements;
Action.

 

(a)           Except for
agreements explicitly contemplated hereby, agreements between the Company and
its employees with respect to the sale of the Company’s Common Stock under the
Stock Incentive Plans, and except as set forth in the Schedule of Exceptions,
there are no agreements, understandings or proposed transactions between the
Company and any of its officers, directors, affiliates or any affiliate
thereof.

 

(b)           The Schedule of
Exceptions sets forth a list of all agreements, or commitments of any nature
(whether written or oral) to which the Company is a party by which it is bound,
including without limitation (i) any agreement which requires future
expenditures by the Company in excess of $1,000,000, (ii) the transfer or
license of any patent, trademark, copyright, trade secret or other proprietary
right to or from the Company (other than licenses arising from the purchase of
“off the shelf”
or other standard products), (iii) any employment or consulting agreement
in excess of $100,000, employee benefit, bonus, pension, profit-sharing, stock
option, stock purchase or similar plan or arrangement, (iv) any
distributor, sales representative or similar agreement, (v) any agreement
with any current or former stockholder, officer or director of the Company, or
any “affiliate” or “associate” of such persons (as such terms are defined in
the rules and regulations promulgated under the Securities Act of 1933, as
amended (the “Securities Act”),
including without limitation any agreement or other arrangement providing for
the furnishing of services by, rental of real or personal property from, or
otherwise requiring payments to, any such person or entity, (vi) provisions
restricting the development, manufacture or distribution of the Company’s
products or services, or (vii) indemnification by the Company with respect
to infringements of proprietary rights (other than indemnification obligations
arising from purchase or sale or license agreements entered into in the
ordinary course of business), (viii) provisions restricting the
development, manufacture or distribution of the Company’s products or services,
(ix) any agreement relating to indebtedness for borrowed money, (x) any
agreement for the disposition of a material portion of the Company’s assets
(other than in the ordinary course of business) and (xi) any agreement for the
acquisition of the business or shares of another party.

 

(c)           Except as set
forth in the Schedule of Exceptions, the Company has not (i) declared or
paid any dividends, or authorized or made any distribution upon or with respect
to any class or series of its capital stock or (ii) made any loans or
advances to any person, other than ordinary advances for travel expenses.

 

(d)           For the
purposes of subsection (b) above, all indebtedness, liabilities,
agreements, understandings, instruments, contracts and proposed transactions
involving the same person or entity (including persons or entities the Company
has reason to 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

7

 

believe
are affiliated therewith) shall be aggregated for the purpose of meeting the
individual minimum dollar amounts of such subsection.

 

(e)           All of the contracts,
agreements and instruments to which the Company is a party are valid, binding
and enforceable in accordance with their respective terms, except for those
contracts, agreements and instruments the lack of validity, binding effect or
enforceability of which would not have a Material Adverse Effect. The Company
has performed all obligations required to be performed by it and is not in
default under, or in breach of, nor in receipt of any claim of default or
breach under any contract, agreement or instrument, except for such breaches or
defaults, which either individually or in the aggregate, would not have a
Material Adverse Effect, and the Company does not have any present expectation
or intention of not fully performing all such obligations.  To the Company’s knowledge, no event has
occurred which with the passage of time or the giving of notice or both would
reasonably be expected to result in a default, breach or event of noncompliance
by the Company under any contract, agreement or instrument.  The Company has no knowledge of any breach or
anticipated breach by the other parties to any contract, agreement or
instrument.

 

(f)            Each Purchaser
who has so requested in writing has been supplied with a true and correct copy
of each of the written instruments, plans, contracts and agreements and an
accurate description of each of the oral arrangements, contracts and agreements
that are referred to on the Schedule of Exceptions pursuant to this Section 3.8,
together with all amendments, waivers or other changes thereto.

 

(g)           The Company is
not a party to and is not bound by any contract, agreement or instrument, or
subject to any restriction under its Certificate of Incorporation or By-laws
that, to its knowledge, adversely affects in any material respect, its business
as currently conducted or as proposed to be conducted, or its properties or its
financial condition.

 

(h)           The Company has
not engaged in the past three months in any discussion (i) with any
representative of any corporation or entity regarding the consolidation or
merger of the Company with or into any such corporation or entity or the sale,
conveyance or disposition of all or substantially all of the assets of the
Company or a transaction or series of related transactions in which  more than fifty percent of the voting power
of the Company would be disposed of, or (ii) regarding any other form of
acquisition, liquidation, dissolution or winding up to the Company.

 

3.9          Obligations to Related Parties.  There are no
obligations of the Company to officers, directors, stockholders, or employees
of the Company other than (a) for payment of salary for services rendered,
(b) reimbursement for reasonable expenses incurred on behalf of the
Company, and (c) for other standard employee benefits made generally available
to all employees (including stock option agreements outstanding under any Stock
Incentive Plans).  The Company is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

8

 

3.10        Title to Properties and Assets; Liens, etc.  Except as set forth in the
Schedule of Exceptions, the Company has good and marketable title to its
properties and assets and good title to its leasehold estates, in each case
subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those
resulting from taxes which have not yet become delinquent, (b) minor liens
and encumbrances which do not materially detract from the value of the property
subject thereto or materially impair the operations of the Company, and (c) those
that have otherwise arisen in the ordinary course of business.  The Company is in compliance with all
material terms of each lease to which it is a party or is otherwise bound.

 

3.11        Patents and Trademarks.

 

(a)           As used in this Agreement, the term “Intellectual Property Rights” with respect to
a party means all: (i) patents, patent applications, inventions and
designs, and any registration thereof with any agency or authority; (ii) trademarks,
service marks, trade names, franchises and copyrights and all registrations and
applications to register any of the foregoing with any agency or authority; (iii) trade
secrets including all formulae, processes, know-how, technical data, shop
rights, and any media or other tangible embodiment thereof and all descriptions
thereof; (iv) all other technology and intangible property, including
without limitation computer programs in object code or source code form,
databases, and documentation and flow charts; and (v) with respect to the
Company, any licenses and other rights granted to or by the Company with
respect to any of the foregoing, excluding
licenses or agreements arising from the purchase of “off the shelf” or
standard products.

 

(b)           The Schedule of
Exceptions contains a complete and accurate list of all (i) patents,
patent applications, trademarks, copyrights and service marks owned by the
Company, identifying the title, name(s) of inventors or author(s), if
applicable, filing dates, issue dates, docket or serial numbers, status and
countries of issuance, and (ii) licenses granted to or by the Company with
respect to any of the Intellectual
Property Rights owned or used by the Company. 
The  Company owns or
possesses sufficient legal rights to all Intellectual Property Rights necessary
for its business as now conducted and as presently proposed to be
conducted.  To the Company’s knowledge,
none of the activities conducted by the Company or proposed to be conducted by
the Company infringes, violates or constitutes a misappropriation of the
Intellectual Property Rights of any other person or entity.  In addition, to the Company’s knowledge, no
other person or entity is infringing, violating or misappropriating any of the
Intellectual Property Rights that the Company owns or has licensed.  The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as presently conducted and as proposed to be conducted, would violate
any of the Intellectual Property Rights of any other person or entity.  To the Company’s knowledge, no directors,
officers or employees are obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with their duties to the Company or that would conflict with the
Company’s business as presently conducted and as proposed to be conducted.  Neither the execution nor delivery of this
Agreement or the Related Agreements, nor the carrying on of the Company’s
business by the employees of the Company, nor the conduct of 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

9

 

the
Company’s business as presently conducted and as proposed to be conducted,
will, to the Company’s knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any
contract, covenant or instrument under which any director, officer or employee,
is now obligated.  The Company does not
believe it is or will be necessary to utilize any inventions, trade secrets or proprietary
information of any of its employees made prior to their employment by the
Company, except for inventions, trade secrets or proprietary information that
have been assigned to the Company and which are disclosed in the Schedule of
Exceptions hereto.

 

(c)           The Company has
taken commercially reasonable precautions (i) to protect its rights in its
Intellectual Property Rights, and (ii) to maintain the confidentiality of
its trade secrets, know-how and other confidential Intellectual Property
Rights, and to the Company’s knowledge, there have been no acts or omissions by
the officers, directors, stockholders, employees, consultants and advisors of
the Company the result of which would be to materially compromise the rights of
the Company to apply for, enforce and otherwise ensure the Company’s legal and
equitable rights to all its Intellectual Property.  Each employee and officer of the Company has
executed the Proprietary Information and Inventions Agreement, substantially in
the form attached hereto as Exhibit H (the “Proprietary Information and
Inventions Agreement”).  Each of the
Company’s consultants has executed a consulting agreement containing provisions
relating to proprietary information and inventions substantially similar to
those contained in the Proprietary Information and Inventions Agreement.

 

3.12        Compliance with Other Instruments. 
The Company is not in violation or default of any term of its
Certificate of Incorporation  or Bylaws, or
of any provision of any mortgage, indenture, agreement, instrument or contract
to which it is party or by which it is bound or of any judgment, decree, order,
writ.  The execution of and performance
of the transactions contemplated by this Agreement and the Related Agreements,
and compliance with their respective provisions by the Company, will not (a) conflict
with or violate any provision of the Certificate of Incorporation or By-laws of
the Company; (b) require on the part of the Company any filing with, or
any permit, authorization, consent or approval of, any court, arbitrational
tribunal, administrative agency or commission or other governmental or
regulatory authority or agency (each of the foregoing is hereafter referred to
as a “Governmental
Entity”);
(c) conflict with, result in a breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel,
or require any notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, or other arrangement to which the
Company is a party or by which the Company is bound or to which its assets are
subject; (d) result in the imposition of any mortgage, pledge, security
interest, encumbrance, charge, or other lien (whether arising by contract or by
operation of law) upon any assets of the Company; or (e) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
the Company or any of its properties or assets.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

10

 

3.13        Litigation.  There is no
action, suit, proceeding or investigation pending or, to the Company’s
knowledge, currently threatened against the Company that questions the validity
of this Agreement, the Related Agreements or the right of the Company to enter
into any of such agreements, or to consummate the transactions contemplated
hereby or thereby, or which might result, either individually or in the
aggregate, in any material adverse change in the business, assets, properties,
operations, prospects or financial condition of the Company, financially or
otherwise, or any change in the current equity ownership of the Company, nor is
the Company aware that there is any basis for any of the foregoing.  The foregoing includes, without limitation,
actions pending or threatened (or any basis therefor known to the Company)
involving the prior employment of any of the Company’s employees, their use in
connection with the Company’s business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. 
The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality.  There is no action,
suit, proceeding or investigation by the Company currently pending or which the
Company intends to initiate.

 

3.14        Tax Returns and Payments.  The Company has timely filed all foreign,
federal, state, county and local income, excise or franchise tax returns, real
estate and personal property tax returns, sales and use tax returns and other
tax returns and reports required to be filed by it and such returns and reports
are true and correct in all material respects. 
All taxes shown to be due and payable on such returns, any assessments
imposed, and to the Company’s knowledge all other taxes due and payable by the
Company on or before the Closing, have been paid or will be paid prior to the
time they become delinquent.  The Company
has no knowledge of any liability of any tax to be imposed upon its properties
or assets as of the date of this Agreement that is not adequately provided for
in the Financial Statements.  With regard
to the income tax returns of the Company, the Company has not received notice
of any audit or of any proposed deficiencies from any taxing authority, and no
controversy with respect to taxes of any type is pending or, to the knowledge
of the Company, threatened.  There are in
effect no waivers of applicable statutes of limitations with respect to any
taxes owed by the Company for any year. 
There is no tax lien (other than for current taxes not yet due and
payable), whether imposed by any federal, state or other taxing authority,
outstanding against the assets, properties or business of the Company.  The Company has not elected pursuant to the
Internal Revenue Code of 1986, as amended (the “Code”) to be treated as an S corporation
pursuant to Section 1362(a) of the Code or a collapsible corporation
pursuant to Section 341(f) of the Code, nor has it made any other
elections pursuant to the Code (other than elections that relate solely to
methods of accounting, depreciation, or amortization) that would have a
Material Adverse Effect.

 

3.15        Employees.  The Company
has no collective bargaining agreements with any of its employees.  There is no labor union organizing activity
pending or, to the Company’s knowledge, threatened with respect to the
Company.  To the Company’s knowledge, no
employee of the Company, nor any consultant with whom the Company has
contracted, is in violation of any term of any employment contract, proprietary
information agreement or any other agreement relating to the right of any such
individual to be employed by, or to contract 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

11

 

with,
the Company because of the nature of the business to be conducted by the
Company; and to the Company’s knowledge the continued employment by the Company
of its present employees, and the performance of the Company’s contracts with
its independent contractors, will not result in any such violation.  The Company has not received any notice
alleging that any such violation has occurred. 
No employee of the Company has been granted the right to continued
employment by the Company or to any severance or other material compensation
following termination of employment with the Company.  The Company is not aware that any officer or
key employee, or that any group of key employees, intends to terminate his, her
or their employment with the Company, nor does the Company have a present
intention to terminate the employment of any officer, key employee or group of
key employees.  The Company has complied
in all material respects with all applicable laws relating to the employment of
its personnel, including provisions relating to hours worked, wages, equal
opportunity, collective bargaining and the payment of social security and other
taxes.

 

3.16        Scientific Advisory Board.  Each member of the Company’s Scientific
Advisory Board has executed a Consulting Agreement, substantially in the form
attached hereto as Exhibit I.

 

3.17        Registration Rights.  Except as required pursuant to the Investors’
Rights Agreement, the Company is presently not under any obligation, and has
not granted or agreed to grant any rights, to register (as defined in Section 1.1
of the Investors’ Rights Agreement) any of the Company’s presently outstanding
securities or any of its securities that may hereafter be issued.

 

3.18        Compliance with Laws; Permits.  The Company is not in violation of any
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof (including, without
limitation, laws relating to the environment, ERISA and occupational health and
safety) in respect of the conduct of its business or the ownership of its
properties which violation would have a Material Adverse Effect.  No governmental orders, permissions,
consents, approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in connection with the
execution and delivery of this Agreement and the issuance of the Shares or the
Conversion Shares, except such as have been duly and validly obtained or filed,
or with respect to any filings that must be made after the Closing, as will be
filed in a timely manner.  The Company
has all franchises, permits, licenses and any similar authorizations necessary
for the conduct of its business as now being conducted by it, except for those
franchises, permits, licenses or authorizations the lack of which could not
have a Material Adverse Effect and which the Company believes it can obtain,
without undue burden or expense.

 

3.19        Environment and Safety Laws.  To its
knowledge, the Company is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety, and
no material expenditures are required in order to comply with any such existing
statute, law or regulation with respect to the operations of the Company as
presently conducted.  To the Company’s
knowledge, no Hazardous Materials (as defined below) are used 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

12

 

or
have been used, stored, or disposed of by the Company in violation of
applicable law.  For purposes of the
preceding sentence, “Hazardous Materials” shall mean (a) materials which
are listed or otherwise defined as “hazardous” or “toxic” under any applicable
local, state, federal and/or foreign laws and regulations that govern the
existence and/or remedy of contamination on property, the protection of the
environment from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building materials, or (b) any
petroleum products or nuclear materials.

 

3.20        Offering Valid.  Assuming the accuracy of the representations
and warranties of the Purchasers contained in Section 4.2 hereof, the
offer, sale and issuance of the Shares and the Conversion Shares will be exempt
from the registration requirements of the Securities Act of 1933, as amended
(the “Securities Act”),
and will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws. 
Neither the Company nor any agent on its behalf has solicited or will
solicit any offers to sell or has offered to sell or will offer to sell all or
any part of the Shares to any person or persons so as to bring the sale of such
Shares by the Company within the registration provisions of the Securities Act.

 

3.21        Insurance.  The Company
maintains valid policies of workers’ compensation insurance and of insurance
with respect to its properties and business of the kinds and in the amounts
customarily maintained by companies engaged in the same or similar business and
similarly situated, including, without limitation, insurance against loss,
damage, fire, casualty, theft, general public liability and other risks.

 

3.22        Brokerage.  There are
no claims for brokerage commissions, finders fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of the Company.

 

3.23        Disclosure.  Neither this Agreement nor any exhibits
hereto, nor any report, certificate, or instrument furnished to any of the Purchasers
or their special counsel in connection with the transactions contemplated by
this Agreement, when read together, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statement
contained herein or therein, in light of the circumstances under which they
were made, not misleading.  Each
projection and budget furnished to the Purchasers by the Company was prepared
in good faith based on assumptions believed by the Company to be reasonable and
represents the Company’s good faith estimate of future results based on
information available as of the respective dates of the presentations and the
budget; provided that no representation is made as to whether the
financial results reflected in such projections or budget will in fact be
achieved.

 

3.24        ERISA.  Except as
set forth on the Schedule of Exceptions, the Company does not maintain any
employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”)).  To the extent that the Company does maintain
any such employee benefit plans, each plan complies in all material 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

13

 

respects
with (i) all applicable requirements of ERISA, and (ii) all
applicable requirements of the Code.

 

3.25        Books and Records.  The minute
books of the Company contain complete and accurate records of all meetings and
other corporate actions of its stockholders and its Board of Directors and
committees thereof.  The stock ledger of
the Company is complete and reflects all issuances, transfers, repurchases and
cancellations of shares of capital stock of the Company.

 

3.26        Qualified Small Business.  The Company represents and warrants to the
Purchasers that, to the best of its knowledge, the Company is a “qualified small  business” within the meaning of Section 1202(d) of
the Code, as of the date hereof and the Shares should qualify as “qualified  small
business stock” as defined in Section 1202(c) of the Code
as of the date hereof.  The Company
further represents and warrants that, as of the date hereof, it meets the “active  business
requirement” of Section 1202(e) of the Code, and it has
made no “significant  redemptions” within the meaning of Section 1202(c)(3)(B) of
the Code.

 

3.27        Real Property Holding Company.  The Company is
not a real property holding company within the meaning of Section 897 of
the Code.

 

3.28        Investment Company.  The
Company is not an “investment company” within the meaning of the Investment
Company Act of 1940, as amended, and will not, as a result of the transactions
contemplated hereby, become an “investment company”.

 

4.             REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.

 

Each
Purchaser severally and not jointly hereby represents and warrants to the
Company as follows (such representations and warranties do not lessen or
obviate the representations and warranties of the Company set forth in this
Agreement):

 

4.1          Requisite Power and Authority.  Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements and to carry out their respective
provisions.  All action on such
Purchaser’s part required for the lawful execution and delivery of this
Agreement and the Related Agreements have been or will be effectively taken
prior to the Closing.  Upon their
execution and delivery, this Agreement and the Related Agreements will be valid
and binding obligations of such Purchaser, enforceable in accordance with their
respective terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors’ rights, (b) general principles of
equity that restrict the availability of equitable remedies, and (c) to
the extent that the enforceability of the indemnification provisions of Section 2.9
of the Investors’ Rights Agreement may be limited by applicable laws.

 

4.2          Investment Representations.  Purchaser understands that neither the Shares
nor the Conversion Shares have been registered under the Securities Act.  Purchaser also understands that the Shares
are being offered and sold pursuant to an exemption from registration 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

14

 

contained
in the Securities Act based in part upon such Purchaser’s representations
contained in this Agreement.  Purchaser
hereby represents and warrants as follows:

 

(a)           Purchaser Bears Economic Risk.  Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that he, she
or it is capable of evaluating the merits and risks of the investment in the
Company and has the capacity to protect his, her or its own interests.  Purchaser must bear the economic risk of this
investment indefinitely unless the Shares (or the Conversion Shares) are
registered pursuant to the Securities Act, or an exemption from registration is
available.  Purchaser understands that
the Company has no present intention of registering the Shares, the Conversion
Shares or any shares of its Common Stock. 
Purchaser also understands that there is no assurance that any exemption
from registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any
portion of the Shares or the Conversion Shares under the circumstances, in the
amounts or at the times Purchaser might propose.

 

(b)           Acquisition for Own Account.  Purchaser is
acquiring the Shares and the Conversion Shares for Purchaser’s own account for
investment only, and not with a view towards their distribution.

 

(c)           Purchaser Can Protect Its Interest. 
Purchaser has, by reason of its, or of its management’s, business or
financial experience, the capacity to protect his, her or its own interests in
connection with the transactions contemplated in this Agreement and the Related
Agreements.  Further, Purchaser is aware
of no publication of any advertisement in connection with the transactions
contemplated in this Agreement.

 

(d)           Accredited Investor.  Purchaser is an
accredited investor within the meaning of Regulation D under the Securities
Act.

 

(e)           Company Information.  Purchaser has
had an opportunity to discuss the Company’s business, management and financial
affairs with directors, officers and management of the Company and has had the
opportunity to review the Company’s operations and facilities.  Purchaser has also had the opportunity to ask
questions of and receive answers from, the Company and its management regarding
the terms and conditions of this investment.

 

(f)            Rule 144.  Purchaser
acknowledges and agrees that the Shares, and, if issued, the Conversion Shares,
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available.

 

(g)           Residence.  If the
Purchaser is an individual, then the Purchaser resides in the state or province
identified in the address of the Purchaser set forth on Exhibit A; if the Purchaser is a
partnership, corporation, limited liability company or other entity, then the
office or offices of the Purchaser in which its investment decision was made is
located at the address or addresses of such Purchaser as set forth on Exhibit A.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

15

 

4.3          Transfer Restrictions.  Each Purchaser acknowledges and agrees that
the Shares and, if issued, the Conversion Shares are subject to restrictions on
transfer as set forth in the Investors’ Rights Agreement.

 

4.4          Brokerage.  There are no claims for brokerage
commissions, finders fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of the Purchaser.

 

5.             CONDITIONS TO CLOSING.

 

5.1          Conditions to Purchasers’ Obligations at Each Closing.  Purchasers’ obligations to purchase the Shares
at the Initial Closing and at any Additional Closing are subject to the
satisfaction or waiver, at or prior to such Closing Date, of the following
conditions:

 

(a)           Representations and Warranties True. 
The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all material respects (except for those
representations and warranties that are qualified as to materiality,  Material Adverse Effect or any similar
materiality qualifier which shall be true and correct in all respects) on and
as of the Initial Closing Date with the same force and effect as if they had
been made on and as of such Closing Date, except for the representations and
warranties that are made as of a certain date which shall be true and correct
as of that certain date.

 

(b)           Performance of Obligations.  The Company
shall have performed and complied with all agreements, obligations and
conditions contained herein required to be performed or complied with by it on
or prior to such Closing.

 

(c)           Consents, Permits, and Waivers.  The Company
shall have obtained any and all consents, permits and waivers necessary or
appropriate for consummation of the transactions contemplated by this Agreement
and the Related Agreements (except for such as may be properly obtained
subsequent to such Closing).

 

(d)           Filing of Restated Charter.  The Restated
Charter shall have been filed with the Secretary of State of the State of
Delaware and shall continue to be in full force and effect as of such Closing
Date.

 

(e)           Corporate Documents.  The Company
shall have delivered to Purchasers or their counsel, copies of all corporate
documents of the Company as Purchasers shall reasonably request.

 

(f)            Reservation of Conversion Shares.  The Conversion
Shares issuable upon conversion of the Shares shall have been duly authorized
and reserved for issuance upon such conversion.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

16

 

(g)           Certificates and Documents.  Prior to the Initial Closing, and at each
Additional Closing upon the request of an Additional Purchaser, the Company
shall have delivered to each of the Purchasers:

 

(i)            Certificates,
dated no more than five days prior to the date of such Closing, as to the
corporate good standing of the Company issued by the Secretary of State of
Delaware and the Secretary of the Commonwealth of Massachusetts;

 

(ii)           Compliance
Certificate executed by the Chief Executive Officer of the Company, dated as of
the date of such Closing, certifying as to the fulfillment of the conditions
specified in Sections 5.1(a) through 5.1(f) of this Agreement.

 

(iii)         Certificate of
the Secretary of the Company, dated as of the date of such Closing certifying
as to (A) the incumbency of the Company’s principal officers, (B) a
copy of the Certificate of Incorporation, certified by the Secretary of State
of the State of Delaware, as in effect immediately prior to such Closing Date, (C) a
copy of the By-laws of the Company, as in effect on and as of such Closing
Date, and (D) a copy of the resolutions of the Board of Directors and the
stockholders of the Company, authorizing and approving all matters in
connection with this Agreement, the Related Agreements and the transactions
contemplated hereby and thereby.

 

(h)           Investors’ Rights Agreement.  A Seventh
Amended and Restated Investors’ Rights Agreement substantially in the form
attached hereto as Exhibit C
shall have been executed and delivered by the Company and the parties thereto.

 

(i)            Voting Agreement.  A Fourth
Amended and Restated Voting Agreement substantially in the form attached hereto
as Exhibit D shall have been
executed and delivered by the Company and the parties thereto.

 

(j)            Proceedings and Documents.  All corporate
and other proceedings in connection with the transactions contemplated at the
Initial Closing hereby and all documents and instruments incident to such
transactions shall be reasonably satisfactory in substance and form to the
Purchasers and their special counsel, and the Purchasers and their special
counsel shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.

 

(k)           Legal Opinion.  The Purchasers
shall have received from Company counsel an opinion addressed to them, dated as
of the Initial Closing Date, in substantially the form attached hereto as Exhibit F.

 

(l)            Minimum Investment. The Initial Purchasers
identified on Exhibit A shall
purchase at least $25,000,000 in shares of Series G Stock at the Initial
Closing.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

17

 

5.2          Conditions to Obligations of the Company.  The Company’s obligation to issue and sell
the Shares at the Initial Closing and at any Additional Closing is subject to
the satisfaction, on or prior to such Closing, of the following conditions:

 

(a)           Representations and Warranties True. 
The representations and warranties made by such Purchasers in Section 4
hereof shall be true and correct on and as of such Closing, with the same force
and effect as if they had been made on and as of such Closing Date.

 

(b)           Performance of Obligations. Such Purchasers shall have
performed and complied with all agreements, obligations and conditions
contained herein required to be performed or complied with by such Purchasers
on or prior to such Closing.

 

(c)           Investors’ Rights Agreement.  A Seventh
Amended and Restated Investors’ Rights Agreement substantially in the form
attached hereto as Exhibit C
shall have been executed and delivered by the Purchasers.

 

(d)           Voting Agreement.  A Fourth
Amended and Restated Voting Agreement substantially in the form attached hereto
as Exhibit D shall have been
executed and delivered by the Investors named therein.

 

(e)           Consents, Permits, and Waivers.  The Company
shall have obtained any and all consents, permits and waivers necessary or
appropriate for consummation of the transactions contemplated by this Agreement
and the Related Agreements (except for such as may be properly obtained
subsequent to the Closing).

 

6.             MISCELLANEOUS.

 

6.1          Governing Law.  Except to
the extent that any provision of this Agreement is contrary to any mandatory
provision of the Delaware General Corporation Law (in which case such mandatory
statutory provision shall apply), this Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts and
the laws of the United States applicable therein (without giving effect to any
choice or conflict of laws provision or rule that would cause the
application of the laws of any other jurisdiction) and shall be treated in all
respects as a Massachusetts contract. 
Any action, suit or proceeding arising out of or relating to this
Agreement shall be brought in the courts of the Commonwealth of Massachusetts
and each of the parties hereto hereby irrevocably submits (i) in the case of
a suit or proceeding to which the Company is a party, to the exclusive
jurisdiction of such courts and (ii) in the case of a suit or proceeding
to which the Company is not a party, to the non-exclusive jurisdiction of such
courts.

 

6.2          Survival.  The representations,
warranties, covenants and agreements made herein shall survive any
investigation made by any Purchaser and the execution and delivery of this
Agreement and the closing of the transactions contemplated hereby for a period
of three (3) years following the Initial Closing.  All statements as to factual matters
contained in 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

18

 

any
certificate or other instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions contemplated hereby shall
be deemed to be representations and warranties by the Company hereunder solely
as of the date of such certificate or instrument.

 

6.3          Successors and Assigns.  Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.  Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

 

6.4          Entire Agreement.  This
Agreement, the Exhibits and Schedules hereto, the Related Agreements and the
other documents delivered pursuant hereto or thereto constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and supersede all prior agreements and understandings among the
parties, written or oral, with respect thereto. 
No party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically
set forth herein and therein.

 

6.5          Severability.  In case any
provision of this Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

 

6.6          Amendment and Waiver.

 

(a)           This Agreement
may be amended or modified only upon the written consent of the Company and
holders of at least a majority of the then outstanding Shares (treated as if
converted and including any Conversion Shares into which the Shares have been
converted that have not been sold to the public).

 

(b)           The obligations
of the Company and the rights of the holders of the Shares and the Conversion
Shares under this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the holders of at least a majority of the then outstanding Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public); provided, however,
that no condition set forth in Section 5 may be waived with respect to any
Purchaser who does not consent thereto. 
No waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such term, condition or provision.

 

6.7          Delays or Omissions.  It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Related
Agreements or the Restated Charter, shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

19

 

breach,
default or noncompliance, or any acquiescence therein, or of or in any similar
breach, default or noncompliance thereafter occurring.  It is further agreed that any waiver, permit,
consent or approval of any kind or character on any Purchaser’s part of any
breach, default or noncompliance under this Agreement, the Related Agreements
or under the Restated Charter or any waiver on such party’s part of any
provisions or conditions of this Agreement, the Related Agreements or the
Restated Charter must be in writing and shall be effective only to the extent
specifically set forth in such writing. 
All remedies, either under this Agreement, the Related Agreements and
the Restated Charter, by law, or otherwise afforded to any party, shall be
cumulative and not alternative.

 

6.8          Notices.  All notices
required or permitted hereunder shall be in writing and shall be deemed
effectively given:  (a) upon
personal delivery to the party to be notified, (b) when sent by confirmed
telex or facsimile if sent during normal business hours of the recipient, if not,
then on the next business day, (c) five (5) days after having been
sent by registered or certified mail, return receipt requested, postage
prepaid, or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt.  All
communications shall be sent to the party at such party’s address as set forth
below or as subsequently modified by ten (10) days advance written notice
to the other parties hereto, as follows:

 

(i)            if to the
Company, to:

 

Microbia, Inc.

320 Bent Street

Cambridge, MA 02141

Telephone:      (617) 621-7722

Facsimile:        (617) 494-0908

 

or
at such other address or addresses as may have been furnished in writing by the
Company to the Purchasers,

 

(ii)           if to any
Purchaser, at such Purchaser’s respective address set forth on Exhibit A.

 

6.9          Expenses.   Each party shall pay all costs and
expenses that it incurs with respect to the negotiation, execution, delivery
and performance of this Agreement; provided,
however, that the Company shall,
at the Initial Closing, reimburse the reasonable fees of and expenses of one (1) counsel
for the Purchasers, not to exceed $25,000.

 

6.10        Attorneys’ Fees.  In the
event that any suit or action is instituted to enforce any provision in this Agreement,
the prevailing party in such dispute shall be entitled to recover from the
losing party all fees, costs and expenses of enforcing any right of such
prevailing party under or with respect to this Agreement, including without
limitation, such reasonable fees and expenses of attorneys and accountants,
which shall include, without limitation, all fees, costs and expenses of
appeals.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

20

 

6.11        Titles and Subtitles.  The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

 

6.12        Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one instrument.  This Agreement may be executed by facsimile
signatures.

 

6.13        Exculpation Among Purchasers.  Each Purchaser acknowledges that it is not
relying upon any person, firm, or corporation, other than the Company, in
making its investment or decision to invest in the Company.  Each Purchaser agrees that no Purchaser nor
the respective controlling persons, officers, directors, partners, agents, or
employees of any Purchaser shall be liable to any other Purchaser for any
action heretofore or hereafter taken or omitted to be taken by any of them in
connection with the Shares and Conversion Shares.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

21

 

6.14        Confidentiality.  Each
party hereto agrees that, except with the prior written consent of the other
party, it shall at all times keep confidential and not divulge, furnish or make
accessible to anyone any confidential information, knowledge or data concerning
or relating to the business or financial affairs of the other parties to which
such party has been or shall become privy by reason of this Agreement or the
Related Agreements, discussions or negotiations relating to this Agreement or
the Related Agreements, the performance of its obligations hereunder or the
ownership of the Shares purchased hereunder; provided,
however, that a Purchaser may
disclose confidential information, knowledge or data concerning or relating to
the business or financial affairs of the Company (i) to its attorneys,
accountants and consultants, to the extent necessary to obtain their services
in connection with monitoring its investment in the Company, provided that such
attorney, accountant or consultant is legally obligated not to use or disclose
any such information, knowledge or data or (ii) as may otherwise be
required by law, provided that the Purchaser takes reasonable steps to minimize
the extent of any such required disclosure. 
The provisions of this Section 6.14 shall be in addition to, and
not in substitution for, the provisions of any separate nondisclosure agreement
executed by the parties hereto.

 

6.15        Pronouns.  All pronouns
contained herein, and any variations thereof, shall be deemed to refer to the
masculine, feminine or neutral, singular or plural, as the identity of the
parties hereto may require.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

22

 

IN WITNESS WHEREOF, the parties hereto have
executed the SERIES G CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.

 

	
   

  	
  Company:

  
	
   

  	
  MICROBIA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Peter
  M. Hecht

  
	
   

  	
   

  	
  Chief
  Executive Officer

  

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

i

 

MICROBIA, INC.

PURCHASER
SIGNATURE PAGE

(for
Designated Offering Investors)

 

Initial
Closing

 

By his, her or its execution and delivery of this signature page, the
undersigned Purchaser hereby joins in and agrees to be bound by the terms and
conditions of the:

(i)            Series G Convertible
Preferred Stock Purchase Agreement dated as of the date set forth in the first
paragraph thereof (the “Purchase
Agreement”) by and among Microbia, Inc. (the “Company”) and the
Purchasers listed on Exhibit A
thereto, as to the number of shares of Series G Stock set forth below;

(ii)           Seventh Amended and Restated
Investors’ Rights Agreement dated as of the date set forth in the first
paragraph thereof, by and among the Company and the Investors listed on Exhibit A thereto (the “Investors’ Rights Agreement”),
as an “Investor”
thereunder;

(iii)          Fourth Amended and Restated
Voting Agreement dated as of the date set forth in the first paragraph thereof,
by and among the Company and the Stockholders listed on Exhibit A thereto (the “Voting Agreement”),
as a “Stockholder”
thereunder; and

authorizes
this signature page to be attached to the Purchase Agreement, the
Investors’ Rights Agreement and the Voting Agreement, or counterparts thereof.

 

	
   

  	
   

  
	
   

  	
  Print
  Name of Purchaser

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Record
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone
  No.:

  	
   

  
	
   

  	
  Facsimile
  No.:

  	
   

  
	
   

  	
  E-mail
  Address:

  	
   

  
	
   

  	
  Number
  of Shares of

  
	
   

  	
  Series G Stock:

  	
   

  
				

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

ii

 

MICROBIA, INC.

 

PURCHASER
SIGNATURE PAGE

(for
Non-Designated Offering Investors)

 

Initial
Closing

 

By his, her or its execution and delivery of this signature page, the
undersigned Purchaser hereby joins in and agrees to be bound by the terms and
conditions of the:

(i)            Series G Convertible
Preferred Stock Purchase Agreement dated as of the date set forth in the first
paragraph thereof (the “Purchase
Agreement”) by and among Microbia, Inc. (the “Company”) and the
Purchasers listed on Exhibit A
thereto, as to the number of shares of Series G Stock set forth below;

(ii)           Seventh Amended and Restated
Investors’ Rights Agreement dated as of the date set forth in the first
paragraph thereof, by and among the Company and the Investors listed on Exhibit A thereto (the “Investors’ Rights Agreement”),
as an “Investor”
thereunder; and

(iii)          Fourth Amended and Restated
Voting Agreement dated as of the date set forth in the first paragraph thereof,
by and among the Company and the Stockholders listed on Exhibit A thereto (the “Voting Agreement”),
as a “Stockholder”
thereunder; and

authorizes
this signature page to be attached to the Purchase Agreement, the
Investors’ Rights Agreement and the Voting Agreement, or counterparts thereof.

 

	
   

  	
   

  
	
   

  	
  Print
  Name of Purchaser

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Record
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone
  No.:

  	
   

  
	
   

  	
  Facsimile
  No.:

  	
   

  
	
   

  	
  E-mail
  Address:

  	
   

  
	
   

  	
  Number
  of Shares of

  
	
   

  	
  Series G Stock:

  	
   

  
				

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

iii

 

MICROBIA, INC.

PURCHASER
SIGNATURE PAGE

(for Designated
Offering Investors)

Additional
Closing

 

By his, her or its execution and delivery of this signature page, the
undersigned Purchaser hereby joins in and agrees to be bound by the terms and
conditions of the:

(i)            Series G Convertible
Preferred Stock Purchase Agreement dated as of [·] (the “Purchase
Agreement”) by and among Microbia, Inc. (the “Company”) and the
Purchasers listed on Part II of Exhibit A
thereto, as to the number of shares of Series G Stock set forth below;

(ii)           Seventh Amended and Restated
Investors’ Rights Agreement dated as of  [·], by and among the Company and the Investors
listed on Exhibit A thereto
(the “Investors’ Rights
Agreement”), as an “Investor” thereunder; and

(iii)          Fourth Amended and Restated
Voting Agreement dated as of [·], by and among
the Company and the Stockholders listed on Exhibit A
thereto (the “Voting
Agreement”), as an “Stockholder” thereunder; and

authorizes
this signature page to be attached to the Purchase Agreement, the
Investors’ Rights Agreement and the Voting Agreement, or counterparts thereof.

 

	
   

  	
   

  
	
   

  	
  Print
  Name of Purchaser

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Record
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone
  No.:

  	
   

  
	
   

  	
  Facsimile
  No.:

  	
   

  
	
   

  	
  E-mail
  Address:

  	
   

  
	
   

  	
  Number
  of Shares of

  
	
   

  	
  Series G Stock:

  	
   

  
				

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

iv

 

MICROBIA, INC.

PURCHASER
SIGNATURE PAGE

(for
Non-Designated Offering Investors)

Additional
Closing

 

By his, her or its execution and delivery of this signature page, the
undersigned Purchaser hereby joins in and agrees to be bound by the terms and
conditions of the:

(i)            Series G Convertible
Preferred Stock Purchase Agreement dated as of [·] (the “Purchase
Agreement”) by and among Microbia, Inc. (the “Company”) and the
Purchasers listed on Exhibit A
thereto, as to the number of shares of Series G Stock set forth below;

(ii)           Seventh Amended and Restated
Investors’ Rights Agreement dated as of [·], by and among the Company and the Investors listed on Exhibit A thereto (the “Investors’ Rights Agreement”),
as an “Investor”
thereunder;

(iii)          Fourth Amended and Restated
Voting Agreement dated as of [·], by and among
the Company and the Stockholders listed on Exhibit A
thereto (the “Voting
Agreement”), as a “Stockholder” thereunder; and

authorizes
this signature page to be attached to the Purchase Agreement, the
Investors’ Rights Agreement and the Voting Agreement, or counterparts thereof.

 

 

	
   

  	
   

  
	
   

  	
  Print
  Name of Purchaser

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Record
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone
  No.:

  	
   

  
	
   

  	
  Facsimile
  No.:

  	
   

  
	
   

  	
  E-mail
  Address:

  	
   

  
	
   

  	
  Number
  of Shares of

  
	
   

  	
  Series G Stock:

  	
   

  
				

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

v

 

SCHEDULE 5.2.2(ii)

 

PIPE Term Sheet

 

MICROBIA, INC.

 

FOREST LABORATORIES, INC. $25M PRIVATE PLACEMENT

TERM SHEET

 

	
  Issuer:

  	
   

  	
  Microbia, Inc.,
  a Delaware corporation (the “Company”).

  
	
   

  	
   

  	
   

  
	
  Purchaser:

  	
   

  	
  Forest
  Laboratories, Inc., a Delaware corporation (the “Purchaser”).

  
	
   

  	
   

  	
   

  
	
  Type of Securities:

  	
   

  	
  2,083,334
  shares of the Company’s common stock, at $12.00 per share, as may be adjusted
  pursuant to Section 5.2.2 of the Collaboration Agreement dated
  September 12, 2007, by and between the Company and the Purchaser, the “Collaboration Agreement”).

  
	
   

  	
   

  	
   

  
	
  Amount of Offering:

  	
   

  	
  $25
  million

  
	
   

  	
   

  	
   

  
	
  Closing Date:

  	
   

  	
  The
  date described in Section 5.2.2 of the Collaboration Agreement.

  
	
   

  	
   

  	
   

  
	
  Use of Proceeds:

  	
   

  	
  The
  Company will use the proceeds it receives from the sale of the Common Stock
  for general corporate purposes.

  
	
   

  	
   

  	
   

  
	
  Registration Rights:

  	
   

  	
  The
  Company shall file a shelf registration statement for the shares of Common
  Stock on Form S-3 or such other form as the Company is eligible to use
  (the “Registration Statement”). Such
  Registration Statement shall be filed as soon as practicable but in any event
  within 30 days of the Closing Date. The Company shall use commercially
  reasonable efforts to cause the Registration Statement to be declared
  effective by the Securities and Exchange Commission (the “SEC”) as soon as practicable and, in any event, within 90
  days after the Closing Date, or, in the event of a review of the Registration
  Statement by the SEC, within 120 days after the Closing Date. Should the
  Registration Statement not be filed within 30 days of the Closing Date or
  declared effective within the 90-day or 120-day period, as applicable,
  following the Closing Date, the Company shall pay each Purchaser liquidated
  damages of 1.25% per month for a maximum of 12 months, in cash, based on the
  principal amount invested by each such Purchaser. Such Registration Statement
  shall remain effective until the earlier of (i) the date all securities
  registered have been sold or (ii) the date when all shares held by the
  Purchaser can be sold under Rule 144 in a 90 day period. The
  Registration Statement will be effected pursuant to an agreement with registration
  rights terms substantially in the form of those in the form of Investors’
  Rights Agreement attached to the form of Stock Purchase Agreement.

  

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

6

 

	
  Confidentiality:

  	
   

  	
  This
  document and the documents associated with the transaction (and the subject
  matter hereof and thereof) will not be disclosed to any persons other than
  the Company, the Purchaser and their respective advisors without the prior
  written consent of the non-disclosing parties, except as may be required by
  law or regulation.

  
	
   

  	
   

  	
   

  
	
  Nature of Document:

  	
   

  	
  The
  closing of the transactions contemplated by this Term Sheet will be subject
  to a number of standard conditions. Accordingly, except as provided above
  under the caption “Confidentiality,” this Term Sheet does not constitute a
  legally binding obligation of the parties hereto.

  

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

7

 

SCHEDULE 7.2(a)

 

Microbia
Patent Rights

 

[**]

 

 

SCHEDULE 7.2(c)

 

Microbia Patent Rights developed with Government Funding

 

 

None

 

 

SCHEDULE 7.2(d)

 

Microbia Agreements with Third Parties Relating to Microbia Patent
Rights

 

 

None

 

 

SCHEDULE 7.3(a)

 

Forest Patent Rights

 

None

 

 

SCHEDULE 7.3(c)

 

Forest Patent Rights developed with Government Funding

 

None

 

 

SCHEDULE 7.3(e)

 

Forest Products in Development

 

[**]

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

8

 

AMENDMENT NO. 1 TO MASTER
COLLABORATION AGREEMENT

 

This
AMENDMENT NO. 1 TO MASTER COLLABORATION AGREEMENT (the “Amendment”) is
entered into on this 3rd day of November, 2009 (the “Amendment Effective
Date”), by and among Ironwood Pharmaceuticals, a Delaware corporation
(formerly Microbia, Inc.) (“Ironwood”) and Forest Laboratories, Inc.
(“Forest”).  Ironwood and Forest
may each be referred to herein individually as a “Party” and
collectively as the “Parties.”

 

BACKGROUND

 

Ironwood
and Forest entered into a Master Collaboration Agreement dated as of September 12,
2007 (the “Agreement”).

 

Ironwood
and Forest now desire to make certain clarifying changes to the Agreement in
order to better reflect the intent of the Parties.

 

AGREEMENT

 

NOW
THEREFORE, in consideration of the mutual promises and covenants set forth
below and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Parties agree as follows:

 

1.                                       License Amendment.

 

A.                                   Section 2.2(i) of the Agreement
is hereby deleted in its entirety and replaced with the following:

 

“(i) under
Microbia’s interest in the Microbia Technology and the Joint Technology to
Develop pursuant to the Development Plan and Manufacture the Product anywhere
in the world solely for purposes of Commercialization in the Field in the
Territory and to Commercialize the Product in the Field in the Territory, and”

 

B.                                     Section 2.3(ii)(x) of the
Agreement is hereby deleted in its entirety and replaced with the following:

 

“(x) under
Forest’s interest in the Forest Technology and the Joint Technology to develop,
manufacture and commercialize the Collaboration Compound and Product in the
Field outside of the Territory and to develop (subject to the proviso in the
final sentence of Section 2.2 above) and manufacture the Product in the
Territory for purposes of commercialization in the Field outside the Territory and”

 

 

2.                                       General.

 

A.                                   Except as amended by this Amendment, the
Agreement shall remain in full force and effect in accordance with the terms
thereof. Amendments made pursuant to this Amendment shall be effective as of
the Effective Date.

 

B.                                     This Amendment may be executed in any
number of counterparts, each of which shall be deemed an original and all of
which taken together shall be deemed to constitute one and the same
instrument.  An executed signature page of
this Amendment delivered by facsimile transmission shall be as effective as an
original executed signature page.

 

[The remainder of this page has
been intentionally left blank.]

 

IN
WITNESS WHEREOF, duly authorized representatives of the Parties have duly
executed this Amendment to be effective as of the Effective Date.

 

	
  FOREST
  LABORATORIES, INC.

  	
   

  	
  IRONWOOD
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  David Solomon

  	
   

  	
  By:

  	
  /s/
  James O’Mara

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:
  David Solomon

  	
   

  	
  Name:
  James O’Mara

  
	
  Title:
  Vice President

  	
   

  	
  Title:
  Vice PresidentExhibit
10.10

 

LICENSE AGREEMENT

 

 

by and between

 

 

IRONWOOD PHARMACEUTICALS, INC.

 

 

and

 

 

LABORATORIOS ALMIRALL, S.A.

 

 

April 30, 2009

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

 

LICENSE
AGREEMENT

 

THIS LICENSE AGREEMENT (the “Agreement”) is
entered into on this 30th day of April, 2009 (the “Effective Date”), by
and among Ironwood Pharmaceuticals, Inc., a Delaware corporation (“Ironwood”)
and Laboratorios Almirall, S.A., a corporation organized under the laws of
Spain (“Partner”). Ironwood and Partner may be referred to in this
Agreement individually as a “Party” and collectively as the “Parties.”

 

RECITALS

 

A.            Ironwood is developing the
Licensed Compound (as defined below) which has uses or potential uses in the
treatment and prevention of disease in humans.

 

B.            Ironwood (formerly Microbia, Inc.)
has entered into a Collaboration Agreement with Forest Laboratories, Inc.
(“Forest”), effective as of September 12, 2007 (the “Forest
Agreement”), under which Ironwood exclusively licensed to Forest certain
rights to the Licensed Compound in the Forest Territory (each, as defined
below) and Ironwood and Forest agreed to collaborate on the development and
commercialization of such compound in the Forest Territory.

 

C.            Partner is engaged in the
research, development, and commercialization of human pharmaceutical products.

 

D.            Ironwood desires to grant to
Partner and Partner desires to receive an exclusive license to develop, market,
and distribute the Licensed Compound in certain territories outside of North
America on the terms and conditions set forth in this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual
promises and covenants set forth below and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties agree as follows:

 

1.             DEFINITIONS

 

For
purposes of this Agreement, the following terms, when used in this Agreement,
have the meanings assigned to them in this Section 1.

 

1.1.          “Administrator” is defined
in Section 10.1.3(a).

 

1.2.          “Affiliate” means, with
respect to a Person, any Person that controls, is controlled by, or is under
common control with such first Person. For purposes of this definition only,
“control” means (a) to possess, directly or indirectly, the power to
direct the management or policies of a Person, whether through ownership of
voting securities or by contract relating to voting rights or corporate
governance, or (b) to own, directly or 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

 

indirectly,
more than 50% of the outstanding voting securities or other ownership interests
of such Person.

 

1.3.          “Agreement” is defined in
the Introduction.

 

1.4.          “API Manufacturing” means
the Manufacture and supply of the Licensed Compound that is included in a Product
for Commercialization hereunder.

 

1.5.          “Applicable Law” means all
applicable statutes, ordinances, regulations, rules, or orders of any kind
whatsoever of any Regulatory Authority, as amended from time to time in the
Territory.

 

1.6.          “Applicable Period” is
defined in Section 4.6.4.

 

1.7.          “Arbitrator” is defined in Section 10.1.3(a).

 

1.8.          “Authorized Recipient” is
defined in Section 5.1.1.

 

1.9.          “Calendar Quarter” means
each of the three consecutive month periods ending on March 31, June 30,
September 30, and December 31.

 

1.10.        “CC” means chronic
constipation.

 

1.11.        “Change of Control” means
any of the following: (i) the sale or disposition of all or substantially
all of the assets of a Party to a Third Party, (ii) the acquisition by a
Third Party, other than an employee benefit plan (or related trust) sponsored
or maintained by a Party or any of its Affiliates, of more than 50% of such
Party’s outstanding shares of voting capital stock (e.g., capital stock
entitled to vote generally for the election of directors), (iii) the
appointment or election to the board of directors of a Party of members
constituting a majority of such board who were not appointed, approved or
recommended for election by the board of directors as constituted immediately
prior to the appointment or election of such majority, or (iv) the merger
or consolidation of a Party with or into another corporation, other than, in
the case of (ii) or (iii) of this Section 1.11, an acquisition
or a merger or consolidation of a Party in which holders of shares of such
Party’s voting capital stock immediately prior to the acquisition, merger or
consolidation have at least 50% of the ownership of voting capital stock of the
acquiring Third Party or the surviving corporation in such merger or consolidation,
as the case may be, immediately after the merger or consolidation.
Notwithstanding the foregoing, a Change of Control will not be deemed to occur
on account of an initial public offering, the acquisition of securities of a
Party by an institutional investor, or Affiliate thereof, that acquires a
Party’s securities in a transaction or series of related transactions as a
passive investment which does not affect the management of such Party, or a
sale of assets, merger or other transaction effected exclusively for the
purpose of changing the corporate domicile of a Party.

 

1.12.        “Claim” is defined in Section 10.1.3(a).

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

1

 

1.13.        “Clinical Trial Material”
means the Licensed Compound in finished dosage form that is used in clinical
trials, but not for Commercial sale.

 

1.14.        “Collaboration Know-How”
means Know-How that is invented, conceived, or developed by or on behalf of
either or both Parties’ (or their Affiliates’) employees or Third Parties
acting on such Parties’ behalf, in each case in the course of such Party’s
performance under this Agreement.

 

1.15.        “Collaboration Patent Rights”
means Patent Rights claiming Collaboration Know-How.

 

1.16.        “Collaboration Technology”
means Collaboration Know-How and Collaboration Patent Rights, and all other
intellectual property rights in any of the foregoing.

 

1.17.        “Commercial Launch” means
the initial First Commercial Sale of a Product in the Territory.

 

1.18.        “Commercialization
Plan” means the strategic commercialization plan for the
Product in the Field in the Territory which sets forth, among other things, (a) a
multi-year marketing strategy that includes plans for market research, health
economics, pricing and reimbursement, medical affairs and value added
initiatives, (b) a multi-year communications strategy that includes plans
for public relations, conferences and exhibitions and other external meetings,
internal meetings and communications, publications and symposia, internet
activities and core brand package, (c) a multi-year strategy for Phase IV
studies and lifecycle management activities, (d) a high level operating
plan for the implementation of such strategies on an annual basis, including
without limitation, information related to product positioning, core messages
to be communicated, share of voice requirements and pricing strategies, (e) a
level of detailing activity that would be Commercially Reasonable for a company
comparable to Partner for a product having similar market potential in the
Territory, (f) a commercialization budget, and (g) all other
activities to be conducted in connection with the Commercialization of the
Product in the Field in the Territory. The Commercialization Plan will be
updated at least once a year.

 

1.19.        “Commercialization” means
any and all activities of importing, marketing, promoting, distributing,
offering for sale, or selling a Product, including for example pre-Commercial
Launch market development activities conducted in anticipation of Regulatory
Approval of Product, seeking pricing and reimbursement approvals for Product,
if applicable, preparing advertising and promotional materials, sales force
training, all interactions and correspondence with a Regulatory Authority
regarding Phase IV clinical trials. Commercialization does not include
Development or Manufacturing. When used as a verb, “Commercialize” means
to engage in Commercialization.

 

1.20.        “Commercially Reasonable Efforts”
means those efforts and resources normally used by a Third Party similarly
situated to a Party hereunder for a product or compound 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

2

 

owned by
such Third Party or to which such Third Party has rights of the type such Party
has hereunder, taking into account, without limitation, [**], and other similar
factors reasonably determined by the Third Party to be relevant. Without
limiting the foregoing, Commercially Reasonable Efforts as it applies to the
clinical development of the Licensed Compound and Product hereunder means [**],
as may be amended from time to time based on the results of studies conducted
with the Licensed Compound and Product, [**], as may be amended from time to
time, and regulatory factors. “Commercially Reasonable” as used in this
Agreement will be interpreted in a corresponding manner.

 

1.21.        “Confidential Information”
means, with respect to a Party, all information (and all tangible and
intangible embodiments thereof), which is Controlled by such Party, is
disclosed by such Party to the other Party pursuant to this Agreement, and is
designated as confidential in writing by the disclosing Party whether by letter
or by use of an appropriate stamp or legend, prior to or at the time any such
information is disclosed by the disclosing Party to the other Party. In
addition, any information which is orally, electronically or visually disclosed
by a Party, or is disclosed in writing without an appropriate letter, stamp or
legend, will constitute Confidential Information if the disclosing Party,
within [**] after such disclosure, delivers to the receiving Party a written
document or documents describing the information disclosed and referencing the
place and date of such oral, visual, electronic or written disclosure and the
names of the Person(s) to whom such disclosure was made; provided,
however, that any information disclosed at a meeting of the JDC or JCC will
constitute Confidential Information unless otherwise specified.

 

1.22.        “Control” or “Controlled”
means, with respect to any intellectual property right of a Party, that the
Party or its Affiliate owns or has a license to such intellectual property
right and has the ability to grant access, a license, or a sublicense to such
intellectual property right to the other Party as provided in this Agreement
without violating an agreement with or other rights of any Third Party.

 

1.23.        “Development Material” means
the Licensed Compound in bulk form or Clinical Trial Material that is intended
to be used solely for Development purposes.

 

1.24.        “Development Plan” means the
plan for the Development of the Licensed Compound for Regulatory Approval and Post-Approval Research prepared and approved by the JDC and
as amended or updated from time to time, but in no event less frequently than
once a Year, in accordance with this Agreement.

 

1.25.        “Development” means all
activities performed by or on behalf of either Party in the performance of any
Development Plan for the Product in the Field in the Territory. Development
will include, without limitation, all activities related to research
(including, without limitation, Post-Approval Research), preclinical testing,
test method development and stability testing, toxicology, formulation, process
development, manufacturing scale-up, quality assurance/quality control,
clinical studies including Phase II, Phase III and pricing studies, seeking
Regulatory Approval and otherwise handling regulatory affairs, 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

3

 

statistical
analysis and report writing performed pursuant to the Development Plan with
respect to the Product. Development will not include Manufacturing or
Commercialization. When used as a verb, “Develop” means to engage in
Development.

 

1.26.        “Direct Costs” means mean the costs of [**]
in Manufacturing the Development Material and Licensed Compound, as applicable,
as well as [**]
in connection with such Manufacturing Activities.

 

1.27.        “Disclosing Party” is
defined in Section 5.1.1.

 

1.28.        “Effective Date” is defined
in the Introduction.

 

1.29.        “Fair Market Value” means
with respect to a valuation required by any provision of this Agreement, [**].
In any case where Fair Market Value must be determined but is not determined by
good faith negotiations between the Parties, pursuant to Section 8.4.2(a),
[**]. In addition, as the Parties wish to assure that Fair Market Value will be
determined without regard to [**], Fair Market Value will be based upon [**]
excluding any payment made pursuant to Section 4.1 of this Agreement.

 

1.30.        “Field” means all human
prophylactic and therapeutic uses of a product in all Oral Formulations and
dosage forms for any and all indications, including but not limited to IBS-C,
CC, OIC, and other lower gastrointestinal disorders.

 

1.31.        “First Commercial Sale”
means, with respect to the Product and any country of the Territory, the first
sale of such Product under this Agreement for use in the Field to a Third Party
in such country, after such Product has been granted Regulatory Approval for
use in the Field by the competent Regulatory Authorities in such country.

 

1.32.        “Force Majeure” is defined
in Section 10.2.

 

1.33.        “Forest Agreement” is
defined in Section B of the Recitals.

 

1.34.        “Forest Patent Rights” means
any Patent Rights that are included in the rights granted by Forest to Ironwood
pursuant to the Forest Agreement.

 

1.35.        “Forest Territory” means the
countries of North America, consisting of the United States, Canada, and
Mexico, and their respective territories and possessions (including Puerto
Rico, irrespective of political status).

 

1.36.        “Forest” is defined in Section B
of the Recitals.

 

1.37.        “Fully
Absorbed Cost” means Ironwood’s costs to Manufacture the
Development Material and Licensed Compound, as applicable, consisting of [**], all determined in accordance with
GAAP.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

4

 

1.38.        “GAAP” means United States
generally accepted accounting principles, as in effect from time to time.

 

1.39.        “Good Clinical Practice” or
“GCP” means the standards of good clinical practice as are required by
governmental agencies in countries in which the Products are intended to be
sold.

 

1.40.        “Good Laboratory Practice”
or “GLP” means the standards of good laboratory practice as are required
by governmental agencies in countries in which the Products are intended to be
sold.

 

1.41.        “Good Manufacturing Practice”
or “GMP” means the standards of good manufacturing practice as are
required by governmental agencies in countries in which the Products are
intended to be Manufactured or sold.

 

1.42.        “Group” is defined in Section 5.5.

 

1.43.        “IBS-C” means irritable
bowel syndrome with the primary manifestation of constipation.

 

1.44.        “Impairment” is defined in Section 8.4.2(b).

 

1.45.        “Indemnified Party” is
defined in Section 9.3.

 

1.46.        “Indemnifying Party” is
defined in Section 9.3.

 

1.47.        “Indirect Costs” means the costs of [**],
all to the extent directly related to the Manufacture of the Development
Materials and Licensed Compound, as applicable.

 

1.48.        “Infringement” is defined in
Section 7.6.1.

 

1.49.        “Initial Development Plan”
is defined in Section 3.1.2.

 

1.50.        “Initiating Party” is
defined in Section 7.6.3.

 

1.51.        “Investment” is defined in Section 4.7.

 

1.52.        “Ironwood House Marks” is
defined in Section 7.5.3.

 

1.53.        “Ironwood Indemnified Party”
is defined in Section 9.2.

 

1.54.        “Ironwood Know-How” means (i) Know-How
Ironwood Controls as of the Effective Date, including Know-How that has arisen
or arises under the Forest Agreement, or that comes into the Control of
Ironwood during the Term (other than Joint Know-How) to the extent necessary or
useful in the Territory to Develop or Commercialize the Licensed Compound or
Product, including without limitation any 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

5

 

method of
making the Licensed Compound or Product, any composition or formulation of the
Licensed Compound or Product, or any method of using or administering the
Licensed Compound or Product, and (ii) Collaboration Know-How (other than
Joint Know-How) that is invented, conceived or developed by solely employees of
Ironwood or its Affiliates, or Third Parties acting on behalf of Ironwood or
its Affiliates.

 

1.55.        “Ironwood Patent Rights”
means (i) any Patent Rights claiming Ironwood Know-How, and (ii) any
other Patent Rights that Ironwood Controls as of the Effective Date, including
Patent Rights under the Forest Agreement, or that come into the Control of
Ironwood during the Term (other than Joint Patent Rights and Patent Rights
which are Partner Patent Rights licensed to Ironwood pursuant to this
Agreement) to the extent such rights cover or recite the License Compound or
Product, any method of making the Licensed Compound or Product, any composition
or formulation of the Licensed Compound or Product in the Territory.

 

1.56.        “Ironwood Technology” means
Ironwood’s interest in (i) the Ironwood Know-How, (ii) the Ironwood
Patent Rights, and all other intellectual property rights in any of the foregoing

 

1.57.        “Ironwood” is defined in the
Introduction.

 

1.58.        “JCC” is defined in Section 3.4.1(a).

 

1.59.        “JDC” is defined in Section 3.1.1(a).

 

1.60.        “Joint Know-How” means any
Collaboration Know-How that is invented, conceived or developed jointly by an
employee of Ironwood or its Affiliates (or a Third Party acting on any of their
behalf) and an employee of Partner or its Affiliates (or a Third Party acting
on any of their behalf).

 

1.61.        “Joint Patent Right” means
any Patent Right that claims Joint Know-How and names as the inventors one or
more employees or agents of Ironwood or its Affiliates together with one or
more employees or agents of Partner or its Affiliates, as determined by U.S.
law.

 

1.62.        “Joint Technology” means
Joint Know-How, Joint Patent Rights, and all other intellectual property rights
therein.

 

1.63.       “Know-How” means all
inventions, discoveries, data, information (including scientific, technical or
regulatory information), processes, methods, techniques, materials, technology,
results, analyses, laboratory, pre-clinical and clinical data, or other
know-how, whether or not patentable, including without limitation pharmacology,
toxicology, drug stability, manufacturing and formulation methodologies and
techniques, clinical and non-clinical safety and efficacy studies, marketing
studies, absorption, distribution, metabolism and excretion studies.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

6

 

1.64.        “Launch Plan” means the plan
regarding the Commercial Launch of the Product in the Territory attached hereto
as Exhibit A.

 

1.65.        “Liability” is defined in Section 9.1.

 

1.66.        “Licensed Compound” means
Ironwood’s proprietary guanylate cyclase C agonist polypeptide having the
chemical structure set forth on Schedule 1.66.

 

1.67.        “Major Country” means any of
the United Kingdom, France, Germany, Spain and Italy.

 

1.68.        “Manufacture,” “Manufactured”
or “Manufacturing” means all activities involved in the production,
packaging, and labeling of the Licensed Compound or Product to be Developed
and/or Commercialized under this Agreement.

 

1.69.        “Net Sales” means, on a country-by-country
basis, with respect to any period for each country in the Territory, the gross
amounts invoiced by Partner or its Affiliates, as applicable, to unrelated
Third Parties for sales of the Product in the Field in such country, less the
following deductions to the extent included in the gross invoiced sales price
for the Product or otherwise directly paid or incurred by Partner or its
Affiliates with respect to the sale of the Product in such country: (i) trade,
quantity or cash discounts credits, adjustments or allowances, including
without limitation, those granted on account of price adjustments, billing
errors, rejected goods, or damaged goods; (ii) rebates and chargebacks
allowed, given or accrued (including, but not limited to, cash, governmental
and managed care rebates, hospital or other buying group chargebacks, and
governmental taxes in the nature of a rebate based on usage levels or sales of
the Product); (iii) sales, excise, turnover, inventory, and similar taxes
(not offset or refunded, except in the case of value added taxes) assessed on
the sale of the Product; (iv) bad debts reserved for on the basis utilized
by Partner in its branded pharmaceutical business generally or, if greater, bad
debts actually written off, in each case which are attributable to sales of
Product; (v) freight and insurance charges; and (vi) amounts paid or
credited to customers for inventory management services. Net Sales will be
determined in accordance with International Financial Reporting Standards (as set
by the International Accounting Standards Board). Without limiting the
generality of the foregoing, sales, transfers, or dispositions of Product for
charitable, promotional (including samples), pre-clinical, clinical, or
regulatory purposes will be excluded from Net Sales, as will sales or transfers
of Product among a Party and its Affiliates.

 

1.70.        “New Drug Application” or “NDA”
means a new drug application filed with a Regulatory Authority (not including
pricing and reimbursement approval), that is analogous to the new drug
application with the United States Food and Drug Administration described in 21
C.F.R. § 314.

 

1.71.        “Non-Initiating Party” is
defined in Section 7.6.3.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

7

 

1.72.        “Non-Required Studies” is
defined in Section 3.2.6.

 

1.73.        “OIC” means opioid induced
constipation.

 

1.74.        “Oral Formulation” means a
finished dosage form that is taken by mouth and has no greater systemic
exposure than the Clinical Trial Material supplied to support Phase III
clinical trials in the Territory.

 

1.75.        “Order” is defined in Section 5.1.3.

 

1.76.        “Partner Indemnified Party”
is defined in Section 9.1.

 

1.77.        “Partner Know-How” means (i) Know-How
that Partner Controls as of the Effective Date or that comes into the Control
of Partner during the Term (other than Joint Know-How or Know-How which is
Ironwood Know-How licensed to Partner pursuant to this Agreement) to the extent
necessary or useful in the Territory to Manufacture, Develop, or Commercialize
the Licensed Compound or Product, including without limitation any method of
making the Licensed Compound or Product, any composition or formulations of the
Licensed Compound or Products, or any method of using or administering the
Licensed Compound or Product, and (ii) Collaboration Know-How (other than
Joint Know-How) that is invented, conceived, or developed solely by employees
of Partner or its Affiliates, or Third Parties acting on behalf of Partner or
its Affiliates.

 

1.78.        “Partner Patent Rights”
means (i) any Patent Rights claiming Partner Know-How, and (ii) any
other Patent Right that Partner Controls as of the Effective Date or that come
into the Control of Partner during the Term (other than Joint Patent Rights or
Patent Rights which are Ironwood Patent Rights licensed to Partner pursuant to
this Agreement) to the extent such rights cover or recite the Licensed Compound
or Product, any method of making the Licensed Compound or Product, any
composition or formulations of the Licensed Compound or Products, or any method
of using or administering the Licensed Compound or Products.

 

1.79.        “Partner Related Party” is
defined in Section 5.5.

 

1.80.        “Partner Technology” means
Partner’s interest in (a) the Partner Know-How, and (b) the Partner
Patent Rights, and all other intellectual property rights in any of the
foregoing.

 

1.81.        “Partner” is defined in the
Introduction.

 

1.82.        “Party” and “Parties”
is defined in the Introduction.

 

1.83.        “Patent Right” means any and
all (a) U.S. or foreign patent applications, including, without
limitation, all provisional applications, substitutions, continuations,
continuations-in-part, divisions, renewals, and all patents granted thereon, (b) all
U.S. or 

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

8

 

foreign
patents, reissues, reexaminations and extensions or restorations by existing or
future extension or restoration mechanisms, including, without limitation,
supplementary protection certificates or the equivalent thereof, and (c) any
other form of government-issued right substantially similar to any of the
foregoing.

 

1.84.        “Patent Term Extension” is
defined in Section 7.4.4.

 

1.85.        “Person” means any
individual, corporation, company, limited liability company, partnership,
limited liability partnership, trust, estate, proprietorship, joint venture,
association, organization, or entity.

 

1.86.        “Pharmacovigilance Agreement”
is defined in Section 3.2.5.

 

1.87.        “Phase II” in reference to a clinical trial
means a trial defined in 21 C.F.R. 312.21(b), as may be amended from time to
time, or any foreign equivalent thereto.

 

1.88.        “Phase III” in reference to
a clinical trial means a trial defined in 21 C.F.R. 312.21(c), as may be
amended from time to time, or any foreign equivalent thereto.

 

1.89.        “Phase IV” in reference to a
clinical trial means a trial conducted for purposes of further characterizing
and supporting the Product for marketing but not for purposes of seeking Regulatory
Approval or otherwise fulfilling a requirement of a Regulatory Authority.

 

1.90.        “Post-Approval Research”
means ongoing research and development of a Product after such Product has
received Regulatory Approval in a country of the Territory, including, without
limitation, Phase IV clinical studies and clinical studies in support of
indications within the Field or labeling changes for such Product within the
Field in such country during the Term of this Agreement.

 

1.91.        “Product” means any
pharmaceutical product in finished form that contains the Licensed Compound
either as the sole active ingredient or in combination with one or more other
active ingredients and all present and future formulations, dosages, and dosage
forms thereof.

 

1.92.        “Receiving Party” is defined
in Section 5.1.1.

 

1.93.        “Regulatory Approval” means
the approval and authorization of a Regulatory Authority in a country necessary
to develop, manufacture, distribute, sell, or market a Product in that country,
including pricing and reimbursement approval.

 

1.94.        “Regulatory Authority” means
any international, national (e.g., the U.S. Food and Drug Administration),
regional, state, or local regulatory agency, department, bureau, commission,
council, or other governmental entity in each country of the world involved in
the granting of Regulatory Approval for a Product in the Territory.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

9

 

1.95.        “Regulatory Submission” means
applications for Regulatory Approval, notification, and other submissions made
to or with a Regulatory Authority that are necessary or reasonably desirable to
Develop, Manufacture, or Commercialize the Product in the Field in a particular
country, whether obtained before or after a Regulatory Approval in the country.
Regulatory Submissions include, without limitation, investigative new drug
applications and NDAs, and amendments and supplements to any of the foregoing and
their foreign counterparts, applications for pricing and reimbursement
approvals, and all proposed labels, labeling, package inserts, monographs, and
packaging for the Product in the Territory.

 

1.96.        “Relevant Laws” is defined in Section 8.2.2.

 

1.97.        “Representative” is defined in Section 5.5.

 

1.98.        “Right of Reference” is defined
in Section 2.4.

 

1.99.        “Senior Management” of a Party includes, at a minimum, each of the
Chief Executive Officer, Head of Research and Development, Head of Marketing,
and President or Chief Operating Officer of the pharmaceutical business or
division.

 

1.100.      “Standstill Period” is defined in Section 5.5.

 

1.101.      “Sublicense Income” means any [**].

 

1.102.      “Sublicense” means an agreement or
arrangement pursuant to which such a sublicense or distribution right has been
granted.

 

1.103.      “Sublicensee” means an Affiliate or
Third Party that is granted a license, sublicense, covenant not to sue, or
other grant of rights under this Agreement pursuant to Section 2.2 of this
Agreement.

 

1.104.      “Successful Phase III”
means the earlier of (i) achievement of clinically relevant and
statistically significant efficacy in the primary endpoint(s) of Phase III
studies as agreed with the European Regulatory Agency(ies) (including
definition, assessment, predefined differences versus placebo, and statistical
analysis plan ) with consistent overall efficacy in the secondary endpoints and
safety data sufficient (i.e. unexpected findings compared to previous trials
that could prevent Regulatory Approval or adversely impact product labeling)
for use as pivotal trials for filing an NDA with a reasonable likelihood of
receiving European Agency(ies) approval, or (ii) a public announcement by
Partner of a successful Phase III study or of an intent to submit an
application for Regulatory Approval based on the results of a Phase III study.

 

1.105.      “Successful U.S. Phase
III” means the earlier of (i) achievement of clinically relevant and
statistically significant efficacy in the primary endpoint(s) of the Phase
III studies for CC pursuant to a protocol agreed with the United States Food
and Drug Administration with consistent overall efficacy in the secondary
endpoints and safety 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

10

 

data sufficient (i.e. unexpected findings compared to previous trials
that could prevent Regulatory Approval or adversely impact product labeling)
for use as pivotal trials for filing an NDA with a reasonable likelihood of
receiving marketing approval from the United States Food and Drug
Administration or (ii) a public announcement by Forest of a successful
Phase III or of an intent to submit an application for Regulatory Approval
based on the results of a Phase III study.

 

1.106.      “Sued Party” is defined in Section 7.7.2.

 

1.107.      “Target Party” is defined in Section 8.4.2(a).

 

1.108.      “Tax” is defined in Section 4.6.1.

 

1.109.      “Tax Benefit Amount” is defined in Section 4.6.3.

 

1.110.      “Technology” means Know-How and
Patent Rights.

 

1.111.      “Term” is defined in Section 8.1.

 

1.112.      “Territory” means the current and
any future member states of the European Union (consisting of the following
countries as of the Effective Date: Austria, Belgium, Bulgaria, Cyprus, the
Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary,
Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland,
Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom),
Albania, Andorra, Lichtenstein, Iceland, San Marino, Switzerland, Turkey,
Norway and Russia, as well as other countries of the former Yugoslavia and
those other countries forming the Commonwealth of Independent States.

 

1.113.      “Third Party” means any Person
other than Ironwood, Partner and their respective Affiliates.

 

1.114.      “Trademark” means all trade names,
logos, common law trademarks, common law service marks, trademark and service
mark registrations, and applications therefore and all other rights
corresponding thereto throughout the world.

 

1.115.      “Transfer Price” means, (i) for
Clinical Trial Material, [**], and (ii) for Licensed Compound provided in
bulk or finished form for samples that are provided by Partner to third parties
without charge and Licensed Compound provided for Commercial supply, in each
case, that meets the specifications set forth in Exhibit B, [**]. For the
avoidance of doubt, the Transfer Price does not include any value added tax,
the payment of which will be made by Partner to the extent required under
Applicable Law.

 

1.116.      “United States” or “U.S.”
means the United States of America, its territories and possessions (including
Puerto Rico, irrespective of political status).

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

11

 

1.117.      “Valid Claim” means a claim of an
issued and unexpired Patent Right in the Territory, which claim has not been
revoked or held unenforceable, unpatentable or invalid by a decision of a court
or other governmental agency of competent jurisdiction, which is not appealable
or has not been appealed within the time allowed for appeal, and which has not
been abandoned, disclaimed, denied or admitted to be invalid or unenforceable
through reissue, re-examination, or disclaimer or otherwise.

 

1.118.      “Valuation Panel” means a panel of
[**]. In the event the Parties are required by the terms of this Agreement to
select a Valuation Panel, each Party will [**]. Each Party will [**] of the
panel entered into will be deemed the decision of the Valuation Panel. The
Parties will instruct the Valuation Panel to reach its decision as promptly as
practicable, and if possible within [**]. The costs of this Valuation Panel
will be [**] by the Parties.

 

1.119.      “Violating Party” is defined in Section 8.2.2.

 

1.120.      “Year” means each 12 month period
ending December 31st.

 

2.                                      LICENSE
GRANT

 

2.1.          License to
Partner. Subject to the terms and conditions of this Agreement, Ironwood
hereby grants to Partner, effective on the Effective Date, an exclusive license
subject only to the rights reserved to Ironwood to the extent necessary to
perform its obligations or exercise its rights hereunder, with the right to
sublicense as expressly provided in Section 2.5, under the Ironwood
Technology and Ironwood’s interest in the Joint Technology to Develop the
Product pursuant to the Development Plan and to Commercialize the Product in
the Field in the Territory. Notwithstanding the foregoing, Ironwood reserves
the right under the Ironwood Technology to develop and manufacture the Product
inside or outside of the Territory.

 

2.2.          License to
Ironwood. Subject to the terms and
conditions of this Agreement, Partner hereby grants to Ironwood (i) a
royalty-free co-exclusive license (i.e., an exclusive license subject only to
the rights reserved to the granting Party to the extent necessary to perform
its obligations or exercise its rights hereunder), with the right to freely
sublicense without any duty to account or compensate, under the Partner
Technology and Partner’s interest in the Joint Technology to the extent
necessary for Ironwood to Develop and Manufacture the Product anywhere in the
world and to otherwise exercise its rights and perform its obligations under
this Agreement, all in accordance with the terms of this Agreement, and (ii) a
perpetual, royalty-free, exclusive license, with the right to freely sublicense
without any duty to account or compensate (x) under Partner’s interest in
the Partner Technology to develop, manufacture, and commercialize the Licensed
Compound and Product in the Field outside of the Territory and to develop and
manufacture the Product in the Territory for purposes of commercialization in
the Field outside the Territory and (y) under Partner’s interest in the
Joint Technology to exploit any guanylate cyclase C agonists (other than the
Licensed 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

12

 

Compound and Product) outside the Field in the Territory and to exploit
any guanylate cyclase C agonists (including the Licensed Compound and Product)
outside the Territory in any field of use.

 

2.3.          Joint Technology.
Each  Party hereby grants the other Party a
world-wide, non-exclusive, perpetual, royalty-free, fully paid up, freely
sublicenseable right and license under its interest in the Joint Technology to
exploit compounds that are not guanylate cyclase C agonists anywhere in the
world, without compensating or accounting to the other Party.

 

2.4.          Right of
Reference. Ironwood hereby grants to Partner a “Right of Reference,”
as that term is defined in 21 C.F.R. § 314.3(b) and any foreign
counterpart to such regulation in the Field in the Territory to the data
included in the Collaboration Technology to the extent necessary or useful to
Develop the Licensed Compound or Product solely for IBS-C or CC, and Partner
hereby grants to Ironwood (and Ironwood’s partners) such a Right of Reference
to the data included in the Collaboration Technology to the extent necessary or
useful to Manufacture, Develop or Commercialize the Licensed Compound or
Product in the Field throughout the world solely for IBS-C or CC, in each case
subject to the terms and conditions of this Agreement. Each Party will provide
a signed statement to this effect, if requested by the other, in accordance
with 21 C.F.R. § 314.50(g)(3) or any foreign counterpart to such
regulation, in the case of a request by either Party, for the limited purpose
of such Party exercising its rights or performing its obligations under this
Agreement. For the avoidance of doubt, neither Party may publish or otherwise
publicly disclose any data to which a Right or Reference is granted under this
Section, and each Party will treat such data as the Confidential Information of
the other Party in accordance with the terms hereof.

 

2.5.          Sublicensing.
Partner may sublicense the rights granted under Section 2.1 to Third
Parties provided that (i) Ironwood consents in writing to the proposed
sublicense prior to execution, which consent Ironwood may not unreasonably
withhold, (ii) Partner provides Ironwood a copy of such proposed
sublicense prior to execution thereof, and (iii) the terms of such sublicense
are consistent with the terms of this Agreement. Notwithstanding the foregoing,
Partner will not under any circumstances grant a sublicense of the rights
granted under Section 2.1 in any Major Country, other than to contract
sales organizations under agreements pursuant to which Partner records all
sales of Product derived from the efforts of such contract sales
organization(s). Partner will notify Ironwood of the execution of each
sublicense hereunder and provide a copy of any such executed sublicense to
Ironwood promptly following execution thereof. In addition, each Party will
require any licensee or Sublicensee, whether within or outside the Territory,
of Technology with respect to the Licensed Compound or the Product, to
cross-license or otherwise transfer or convey back to the granting Party all
Technology which such licensee or Sublicensee may develop or acquire so that
any of such Technology will be Controlled by the granting Party for purposes
and to the extent of the licenses to the other Party provided by Sections 2.1,
2.2, and 2.3 above and to transfer ownership of all Regulatory Submissions and
Regulatory Approvals pertaining to the Licensed Compound 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

13

 

or Product to Partner upon a termination of this Agreement to the
extent necessary for Partner to assign to Ironwood such Regulatory Submissions
and Regulatory Approvals under Section 8.2.3(c) hereof.

 

2.6.          No Other Rights.
No rights, other than those expressly set forth in this Agreement are granted
to either Party hereunder, and no additional rights will be deemed granted to
either Party by implication, estoppel, or otherwise. All rights not expressly
granted by either Party to the other hereunder are reserved.

 

3.                                      DEVELOPMENT,
REGULATORY, AND COMMERCIALIZATION

 

3.1.          Development.

 

3.1.1.           Joint
Development Committee.

 

(a)           Overview. The
Parties will establish a joint development committee (“JDC”) that will
be responsible for overseeing the Development of Products in the Field in the
Territory, and will serve as a forum for exchanging data, information, and
Development strategy regarding the Product. The Parties anticipate that the JDC
will perform the functions ascribed to it in this Section 3.1.1; provided,
however, that the functions and operations of the JDC may be altered from time
to time during the Term by the mutual agreement of the Parties to appropriately
address ongoing requirements with respect to the Development and
Commercialization of the Product. In addition to the committee meetings, the
Parties anticipate that members of Senior Management from Ironwood and Partner
will meet periodically as necessary or appropriate during the Term (and in any
event at least once per Year) in order to review significant issues and
developments in the Development and Commercialization of the Licensed Compound
or Product.

 

(b)           Membership.
The JDC will consist of three senior representatives from each Party. Ironwood
and Partner will each designate a co-chair for the JDC. The co-chairs will be
responsible for calling meetings and setting the agenda (which will include a
list of all participants expected at a meeting) and circulating such agenda at
least ten days prior to each meeting and distributing minutes of the meetings
within 30 days following such meeting (which minutes will be in the English
language), but will not otherwise have any greater power or authority than any
other member of the JDC. JDC members must have such expertise as appropriate to
the activities of the JDC, and from time to time the JDC may invite personnel
of the Parties having formulation, manufacturing, commercial, marketing, and
other expertise to participate in discussions of the JDC as appropriate to
assist in the activities of the JDC.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

14

 

(c)           Responsibilities.
The JDC’s responsibilities will include, among others: (i) preparing and
approving the Development Plan and any amendments to such plan, (ii) approving
(or establishing procedures to approve) protocols for pre-clinical or clinical
studies (including Post- Approval Research), (iii) making modifications to and performing
quarterly monitoring of progress of pre-clinical and clinical studies and
proposing additional studies for the Product, (iv) reviewing Partner’s
budget for Developing the Product, (v) reviewing and commenting on
Regulatory Submissions relating to the Product, and (vi) facilitating the
exchange of all data, information, material or results relating to the
development of the Product. The JDC may appoint additional committees as
desired. Notwithstanding the foregoing, Partner acknowledges and agrees that
any Development Plan approved by the JDC will be subject to review by the Joint
Development Committee constituted under the Forest Agreement, and that no
clinical Development of the Product may be conducted in the Forest Territory
which Forest reasonably believes may adversely affect the timely Development of
any Product in the Forest Territory.

 

(d)           Meetings.
During Development, the JDC will meet at such frequency as will be established
by the Parties (but not less frequently than four times per Year prior to
receipt of the first Regulatory Approval and as mutually agreed thereafter).
Meetings of the JDC will alternate between the offices of the Parties, unless
otherwise agreed upon by the members of the JDC, or may be held telephonically
or by video conference. Meetings of the JDC will be effective only if at least
one representative of each Party is in attendance or participating in the
meeting. Members of the JDC may participate in and vote at meetings by
telephone. Each Party will be responsible for expenses incurred by its
employees and its members of the JDC in attending or otherwise participating in
JDC meetings. Each Party will use reasonable efforts to cause its
representatives to attend the meetings of the JDC. If a representative of a
Party is unable to attend a meeting, such Party may designate an alternate with
equivalent experience and authority as such representative to attend such
meeting in place of the absent representative.

 

(e)           Minutes. The
minutes of each JDC meeting must provide a description in reasonable detail of
the discussions held at the meeting and a list of any actions, decisions or
determinations approved by the JDC. Minutes of each JDC meeting will be
approved or disapproved, and revised as necessary, at the next meeting.

 

(f)            Elevation and
Dispute Resolution. Each Party’s representatives on the JDC will
collectively have one vote on all matters that are within the responsibility of
such committee. The members of each committee will 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

15

 

use reasonable efforts to reach consensus on all decisions. In the
event that the members of the JDC are unable to agree on a particular issue,
such issue will be referred to the Parties’ respective Chief Scientific
Officers or equivalent or their designees. In the event such individuals are
unable to resolve such issue within 15 days, such issue will be referred to the
Chief Executive Officers of each Party or their designees for resolution.
Subject to the remaining provisions of this Section 3.1.1(f), all matters
relating to Development, including, without limitation, amendments and
modifications to the Development Plan, must be determined by consensus of the
Parties. The Parties will from time to time identify a panel of mutually agreed
consultants with expertise in pharmaceutical development to assist the JDC in
the resolution of development issues and, upon the request of either Party,
such experts will be requested to advise as to Development issues where
consensus cannot be reached, with the advice of such experts not to be
unreasonably rejected. Notwithstanding the foregoing, if a matter for which
consensus cannot be reached is addressed by the then current Development Plan,
then such Development Plan and the activities required thereunder will control
despite any inability of the Parties to reach consensus.

 

3.1.2.           Product
Development Plan. The initial Development Plan for the Product in the Field
is set forth in Exhibit C (the “Initial Development Plan”).
The JDC will direct, coordinate, and manage the Development of the Product in
the Field, according to the Development Plan. The Development Plan for the
Product will include, among other things, the indications in the Field for
which the Product is to be Developed and other exploratory indications in the
Field for which the Product may be developed, critical activities to be
undertaken, certain timelines, go/no go decision points and relevant decision
criteria and certain allocations of responsibilities between the Parties for
the various activities to be undertaken under the Development Plan. During the
Term, the JDC will amend the Development Plan on an ongoing basis as necessary.

 

3.1.3.           Responsibility.
Partner will implement and conduct the Development activities in accordance
with the Development Plan and Applicable Law.

 

3.1.4.           Development
Expenses. Partner will be responsible for the payment of all of the expenses
incurred after the Effective Date in connection with the Development of the
Product exclusively for the Territory and pursuant to the Development Plan.

 

3.1.5.           Future
Development Activities. The JDC will make recommendations regarding whether
to Develop a Product for new indications or new formulations. Such approved
additional Development activities will become part of the Development Plan.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

16

 

3.1.6.           Non-Development
Plan Activities. All Development work proposed to be undertaken and not
provided for in the then current Development Plan will be submitted for
consideration by the JDC. In the event the JDC determines not to include such
proposed Development activities in the Development Plan, which determination
will be made within 120 days of its receipt of such proposal, and neither Party
has any reasonable objection from a Development, Commercialization or
regulatory point of view to the conduct of such Development activities, the
Party proposing such Development activities has the right to conduct such
activities [**].

 

3.1.7.           Reports of
Development Activities. Partner will report on Development activities
undertaken by it in accordance with Development Plan in connection with
meetings of the JDC, including by providing a reasonably detailed summary of
all results, data, and material inventions, if any, obtained from such
activities. In addition, Partner will, at its own expense, make appropriate
scientific and regulatory personnel available to Ironwood, either by telephone
or in person as the Parties may mutually agree, as reasonably required to keep
Ironwood informed of Development activities.

 

3.1.8.           Third Party
Comparative Information. In the event either Party from time to time
possesses objective Third Party information (for example, from a qualified
contract research organization) which indicates that specific Development
activities can be achieved in a more cost-effective manner than as provided by
the Development Plan or as such plan is then being implemented, the JDC will
review and give due regard to such information with the obligation of achieving
such cost savings to the extent attainable without negatively impacting conduct
of the Development Plan, including, without limitation, the timing and quality
of Development activities.

 

3.2.          Regulatory
Matters.

 

3.2.1.           Responsibility
For Regulatory Interactions. Regulatory strategy for the Product and all
decision-making with respect thereto will be determined by the Parties through
the JDC. Partner will use Commercially Reasonable Efforts to obtain in a timely
manner Regulatory Approvals with respect to the Product to the extent
contemplated by the Development Plan. Partner will be solely responsible for
conducting all activities relating to obtaining Regulatory Approvals with
respect to the Product, including without limitation, preparing and submitting
Regulatory Submissions and attending meetings with Regulatory Authorities.
Notwithstanding anything contained in this Agreement to the contrary, Partner
acknowledges and agrees that Ironwood is required to [**]. Partner
will provide Ironwood with advanced copies of any substantive Regulatory
Submissions made in the Territory reasonably in advance of submission to a
Regulatory Authority, and will not [**] to the extent they are
related to issues potentially affecting [**]. Partner will not submit any

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

17

 

Regulatory Submissions unless the Parties have complied with the
preceding two sentences with respect to such Regulatory Submissions. Ironwood
will make available to Partner with respect to the Licensed Compound or
Products any Regulatory Submissions made pursuant to the Forest Agreement.
Partner will own all right, title, and interest in all Regulatory Submissions
and Regulatory Approvals for Products in the Territory.

 

3.2.2.           Regulatory
Cooperation. Partner will keep Ironwood reasonably informed regarding the
status and progress of Development activity, including without limitation,
providing Ironwood with advance notice of all meetings scheduled with a
Regulatory Authority (including notice within 24 hours of a request for a
meeting received from a Regulatory Authority) related to the Licensed Compound,
and an agenda and an invitation to attend such meetings, providing Ironwood
with a copy of all substantive written correspondence from a Regulatory
Authority involving a Regulatory Submission, notifying Ironwood of all oral
substantive correspondence from a Regulatory Authority involving a Regulatory
Submission, and providing Ironwood with an advance draft of each proposed
Regulatory Submission sufficiently in advance of providing the submission to the
Regulatory Authority (and in any event no less than 15 days in advance) to
enable Ironwood to comply with the provisions of Section 3.2.1 and to have
a meaningful opportunity to provide comments on the content of such submission
and no such submission (including any NDA) may be submitted for filing with the
Regulatory Authority without the mutual agreement of the Parties, such consent
of Ironwood not to be unreasonably withheld or delayed. Furthermore, the
Parties will agree in advance on all substantive written communications with
and, to the extent permitted by Applicable Law, will both have the right to
participate in all meetings and oral communications with Regulatory Authorities
in the applicable countries in the Territory to the extent related to the
Product. Partner will also provide to Ironwood copies of all Regulatory
Submissions in the form actually submitted to Regulatory Authorities.

 

3.2.3.           Quality
Agreement. Within 90 days after the Effective Date, the Parties will enter
into an agreement governing the quality standards required under this Agreement
or by Third Party vendors (including Third Parties performing API
Manufacturing).

 

3.2.4.           Clinical Trial
Data. The JDC will coordinate the maintenance of separate databases for
clinical trial data being developed by each Party, including the merger of such
databases as may be appropriate, or will assign responsibility for the
maintenance of a master database for all clinical trial data. All costs to
maintain such databases will be borne by Partner.

 

3.2.5.           Adverse Events.
Within 90 days after the Effective Date, the Parties will enter into a
pharmacovigilance agreement, which upon such 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

18

 

execution will be attached as Exhibit D hereto and hereby
incorporated into this Agreement by reference (the “Pharmacovigilance
Agreement”). The Parties will comply with the provisions of such agreement.
The Parties acknowledge and agree that Forest maintains and will be the
recognized holder of a global safety database for adverse event reports related
to the Licensed Compound and Product received by either Party. Partner will be
responsible for responding to all safety inquiries regarding the Product in the
Field in the Territory.

 

3.2.6.           Non-Required
Studies. Partner will not undertake, or permit its Affiliates, licensees or
Sublicensees to undertake, whether within or outside the Territory, any
pre-clinical or clinical marketing studies of the Product, including, without
limitation, Phase IV Studies, but excluding any studies required for
registration or imposed by a Regulatory Authority in any country (“Non-Required
Studies”), without consultation with Ironwood and Forest, and due
consideration will be given to comments received from Ironwood or Forest.
Ironwood will ensure that Forest will (i) consult with Ironwood and
Partner regarding any Non-Required Studies intended to be undertaken by Forest
and (ii) give due consideration to comments received from Partner on such
Non-Required Studies. For the avoidance of doubt, any Non-Required Studies
constitute Post-Approval Research under the Development Plan.

 

3.3.          Manufacture of
Products. Ironwood will be responsible for Manufacture of Development
Materials in finished form and API Manufacturing; provided, however, that
nothing in this Agreement will prevent Ironwood from contracting with any Third
Parties to Manufacture Development Materials or to conduct API Manufacturing.
Ironwood will perform all such Manufacturing activities in accordance with GCP,
GLP and GMP. Ironwood will supply Development Material in finished, packaged
form ready for labeling. For Commercial supply, Ironwood will supply the
Licensed Compound to Partner in bulk form ready for formulation, packaging and
labeling. Ironwood will be responsible for shipping the bulk Licensed Compound
to the locations designated by Partner for final Manufacture of Product. Partner
will be responsible, at its sole cost and expense, to complete the drug product
manufacturing, packaging, and labeling of Commercial supply of the Product in
the Territory. In furtherance of the foregoing, the Parties will execute a
manufacturing and supply agreement promptly following the Effective Date, under
which Partner will pay Ironwood [**] for supplying Development
Material and Commercial supply of the Licensed Compound for the Product to
Partner, [**].

 

3.4.          Commercialization
in the Territory.

 

3.4.1.           Joint
Commercialization Committee.

 

(a)           General. The
Parties will establish a joint commercialization committee (“JCC”) that
will oversee the Commercialization of the Product in the Field in the
Territory. The JCC will coordinate selling and 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

19

 

marketing efforts under the Commercialization Plan and will serve as a
forum regarding Product Commercialization in the Field in the Territory.

 

(b)           Membership.
The JCC will consist of three senior representatives from each Party. Ironwood
and Partner will each designate a co-chair for the JCC. The co-chairs will be
responsible for calling meetings and setting the agenda (which will include a
list of all participants expected at a meeting) and circulating such agenda at
least ten days prior to each meeting and distributing minutes of the meetings
(which minutes will be in the English language), but will not otherwise have
any greater power or authority than any other member of the JCC. JCC members
must have such expertise as appropriate to the activities of the JCC from time
to time and the JCC will invite personnel of the Parties having development,
formulation, manufacturing, financial and other expertise to participate in
discussions of the JCC from time to time as appropriate to assist in the
activities of the JCC.

 

(c)           Responsibilities.
The JCC will be responsible for, among other things, (i) reviewing
Partner’s strategy for the Commercialization of the Product in the Field in the
Territory, (ii) reviewing and approving the Commercialization Plan
proposed by Partner, (iii) overseeing the implementation of the strategy
for Commercializing the Product in the Field in the Territory (including
strategies related to regulatory approvals, reimbursement, advertising and
promotion, brand integrity, sales, and launch sequence), (iv) providing
input to the JDC regarding the target product profile for the Product and
making recommendations regarding changes to the same, (v) developing and
reviewing the annual marketing plans for the Product in the Field in the
Territory, (vi) reviewing Partner’s marketing and promotional activities, (vii) reviewing
Partner’s budget for Commercializing the Product, and (viii) establishing
usage instructions for the Trademarks.

 

(d)           Meetings. The
JCC will meet at such frequency as will be established by the Parties (but not
less frequently than four times per year prior to launch and during the first
five years of Commercialization). Meetings of the JCC will alternate between
the offices of the Parties, unless otherwise agreed upon by the members of the
JCC, or may be held telephonically or by video conference. Meetings of the JCC
will be effective only if at least one representative of each Party is in
attendance or participating in the meeting. Members of the JCC will have the
right to participate in and vote at meetings by telephone. Each Party will be
responsible for expenses incurred by its employees and its members of the JCC
in attending or otherwise participating in JCC meetings.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

20

 

(e)           Minutes and
Agendas. The minutes of each JCC meeting will provide a description in
reasonable detail of the discussions held at the meeting and a list of any
actions, decisions or determinations approved by the JCC. Minutes of each JCC
meeting will be approved or disapproved, and revised as necessary, at the next
meeting.

 

(f)            Elevation and
Dispute Resolution. Each Party’s representatives on the JCC will
collectively have one vote on all matters that are within the responsibility of
such committee. The members of each committee will use reasonable efforts to
reach consensus on all decisions. In the event that the members of the JCC are
unable to agree on a particular issue, such issue will resolved by Partner
giving good faith consideration to Ironwood’s views on the issue.
Notwithstanding the foregoing, all Commercialization Plans approved by the JCC
under this Agreement will be consistent with the provisions of the Launch Plan
unless Partner demonstrates, to Ironwood’s reasonable satisfaction, that it is
not Commercially Reasonable to continue with the activities and timeline set
forth in the Launch Plan due to the actual or anticipated pricing for the
Product as approved or to be approved by the relevant Regulatory Authority
where such pricing approval is required for Commercial Launch.

 

3.4.2.           Responsibility.
Partner is solely responsible for, and will bear all costs relating to,
Commercializing the Products in the Field in the Territory.

 

3.4.3.           Commercialization
Activities. Subject to the provisions of Section 3.4.4, Partner will
Commercialize the Product in each country in the Territory, subject to
compliance by Ironwood with its obligations hereunder to the extent such
compliance would be material to Partner’s performance of its Commercialization
obligations hereunder. In conducting the Commercialization activities, Partner
will comply with all Applicable Law, applicable industry professional
standards, and compliance policies of Partner which have been previously
furnished to Ironwood, as the same may be updated from time to time and
provided to Ironwood.

 

3.4.4.           Diligence. Partner will
achieve the Commercial Launch of the Product in each country in the Territory
within [**] of receiving the first Regulatory Approval in such country;
provided, however, that Partner will not be required to achieve the Commercial
Launch of the Product in a particular country in the Territory if Partner
demonstrates, to Ironwood’s reasonable satisfaction, that it is not
Commercially Reasonable to launch the Product in such country [**]. Partner
will use Commercially Reasonable Efforts to Commercialize the Product in each
country in the Territory in which Regulatory Approval has been received with
the goal of obtaining the maximum possible sales in each such country.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

21

 

3.4.5.           Commercialization
Expenses. As between the Parties, Partner will book (directly itself or
indirectly through any of its Affiliates and Sublicensees) all sales of
Products and will have the sole responsibility for the sale, invoicing,
promotion, and distribution of the Product in the Territory. Partner will be
solely responsible for all Commercialization expenses, including without
limitation, selling expenses, or other direct and indirect costs and expenses
associated with marketing, shipping, packaging, storage and distribution of the
Product for Commercialization in the Field, costs of warehousing,
transportation, order entry, billing, shipping, credit and collection and other
such activities in connection with Product distribution; costs for preparing
and reproducing detailing aids, Product promotional materials and other
promotional materials, costs of professional education, product related public
relations, relationships with opinion leaders and professional societies,
market research (before and after product approval), healthcare economics
studies, Phase IV clinical trials, and other similar activities directly
related to the Products and, in each case, the cost of activities related to
obtaining reimbursement from payers, costs of sales and marketing data, costs associated
with sales representatives and training of the sales representatives, sales
meetings, details, samples, sales call reporting, work on managed care
accounts, in each case to the extent not included in costs related to customer
service and other sales and customer service-related expenses. Such costs may
also include actual out-of-pocket costs for outside services and expenses (e.g., consultants, agency fees,
meeting costs, etc.).

 

3.4.6.           Co-Promotion.
At any time after the earlier of (i) the occurrence of a Change of Control
of Partner or (ii) [**], if Ironwood is, at such
time, promoting any product in any country in the Territory, then the Parties
will, upon notice of an election by Ironwood, negotiate in good faith for a
period of [**]
(or less if an agreement is reached earlier) a co-promotion agreement under
which Ironwood may provide [**] of the detailing activity
for the Product in the Territory or any portion of the Territory. In the event
that the Parties are unable to reach an agreement on the terms of any such
co-promotion despite good faith efforts within such [**] period,
then Ironwood will have no further rights to co-promote the Product under this
Agreement.

 

3.5.          Other Committee
Issues.

 

3.5.1.           Joint
Responsibilities of the JDC and JCC. In addition to the independent JDC and
JCC meetings, the JDC and the JCC will coordinate to hold joint meetings as
appropriate to discuss issues which are relevant to both Development and
Commercialization, including without limitation, in order to: (i) establish
the target product profile for the Product (including [**] given the
competitive environment, and any other [**] for the Product), (ii) discuss
development of the Product for [**] and (iii) discuss
development of [**]
throughout the Territory. Such joint meetings may be held by videoconference, 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

22

 

teleconference, or in person and any decisions required to be taken
will be submitted to the JDC or JCC for resolution in accordance with the terms
hereof. Each Party will be responsible for expenses incurred by its employees
and its committee members in attending or otherwise participating in joint
meetings of the JDC and JCC.

 

3.5.2.           Other
Committees. The Parties may establish other committees or sub-committees as
the Parties deem appropriate.

 

3.6.          Publication
Strategy. Subject to Ironwood’s obligations to coordinate worldwide
publication strategy with Forest under the Forest Agreement, the Parties will
coordinate worldwide publication strategy involving the Product and activities
involving the Product related to scientific conferences inside and outside the
Territory, including through delegation to appropriate working groups of the
Parties. The Parties intend that the provisions of this Section 3.6 apply
to the Parties and their respective Affiliates, licensees and Sublicensees. For
the avoidance of doubt, no Sublicensee will be permitted to publish or present
materials regarding the Product, and any sublicense agreement hereunder will
contain a provision prohibiting such activities.

 

3.6.1.           Prior Review.
Ironwood and Forest will be afforded the opportunity to review and approve any
scientific paper or presentation with respect to the Product proposed for
publication, presentation, or distribution by Partner or its Affiliates and
will have no more than 30 days to complete such review and approval or such
shorter period as may reasonably be required by applicable publication
deadlines promptly communicated to such Party. Partner will not unreasonably
reject comments furnished by Ironwood, will comply with Ironwood’s request to
delete references to its Confidential Information in any such publication or
presentation and will delay publication for such reasonable period requested by
Ironwood to permit the filing of patent applications concerning any Ironwood
Technology disclosed in material proposed for such publication or presentation.
In no event will Confidential Information of either Party be published without
the consent of that Party.

 

3.6.2.           Clinical Study
Results. Subject to the right of the Joint Development Committee as constituted
under the Forest Agreement to review proposed disclosures, the Parties,
together with Forest, will coordinate the disclosure of the initiation and
results of clinical studies performed pursuant to the Development Plan or
clinical studies performed by either Party’s approved licensees or Sublicensees
with respect to the Licensed Compound or Product, whether within or outside of
the Territory, to the extent required by law or best industry practices;
provided that all proposed disclosures and publications will be submitted for
expeditious review by the JDC and the Joint Development Committee constituted
under the Forest Agreement and due regard will be given to the comments of each
Party, the maintenance of confidentiality of Confidential Information of each
Party and allowing time for intellectual 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

23

 

property registrations. Nothing set forth in this Agreement will be
deemed to limit or restrict either Party from disclosing the results of
clinical trials (whether performed by the Parties or by Third Parties) to the
extent required by law.

 

4.                                      CONSIDERATION

 

4.1.          Upfront Payment. Partner will
pay to Ironwood $40,000,000 on the Effective Date as an upfront,
non-creditable, non-refundable fee.

 

4.2.          Milestones.
As additional consideration for the rights granted to Partner pursuant to Section 2.1,
Partner will pay to Ironwood the following one-time milestone payments:

 

4.2.1.           $[**]
upon the earlier of (i) Successful Phase III, or (ii) the filing of
an NDA for a Product in any country in the Territory; and

 

4.2.2.           $[**]
upon the first Commercial Launch that occurs in each of the Major Countries,
totaling up to a maximum of $[**].

 

Once
Partner has made any particular milestone payment under Section 4.2.1 or
4.2.2, Partner will not be obligated to make any payment with respect to the
re-occurrence of the same milestone.

 

4.3.          Royalties and
Other Payments.

 

4.3.1.           Minimum Annual
Royalty. Commencing with the fourth full Year following the earlier of (i) the
Year in which Partner has first achieved Commercial Launch of the Product in
three Major Countries or (ii) the second Year following the Year in which
Partner has first achieved Commercial Launch of the Product in any Major
Country and ending
in (and including) the last Year in which there is at least one Valid Claim
included in the Ironwood Patent Rights covering the manufacture, use or sale of
the Product in the Territory, Partner will pay to Ironwood annual minimum
royalties of $[**],
which payments will be made no later than February 15th of each year for
the preceding year and which amounts will be fully creditable against royalties
owed to Ironwood pursuant to Section 4.3.2 for the preceding Year.

 

4.3.2.           Royalty.
Partner will pay to Ironwood royalties based on the aggregate annual Net Sales
of Products sold by Partner or its Affiliates in the Field in the Territory at
the rates set forth in the table below.

 

	
  Aggregate
  annual Net Sales in the Territory

  	
   

  	
  Royalty rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Euros 0 to 100,000,000

  	
   

  	
  [**]

  	
  %

  
	
  Euros 100,000,001 to 250,000,000

  	
   

  	
  [**]

  	
  %

  
	
  Euros 250,000,001 to 500,000,000

  	
   

  	
  [**]

  	
  %

  
	
  Euros 500,000,001 to 750,000,000

  	
   

  	
  [**]

  	
  %

  
	
  Euros 750,000,001 and above

  	
   

  	
  [**]

  	
  %

  

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

24

 

For the avoidance of doubt, the above
rates are incremental rates that apply to the Net Sales indicated for each
applicable rate only. For example, if Partner receives Euro 40 million of Net
Sales of Products in each Calendar Quarter in a given Year, then Partner will
pay a royalty of Euro [**] of 40 million) in each of the first two Calendar
Quarters, a royalty of Euro [**] of 20 million plus [**] of 20, million) in the
third Calendar Quarter, and a royalty of Euro [**] of 40 million) in the fourth
Calendar Quarter.

 

4.3.3.           Sublicense Income. Partner will pay to Ironwood [**] of all Sublicense Income
received by Partner, except any Sublicense Income received from its
wholly-owned Affiliates.

 

4.3.4.           Royalty Credit. Partner may deduct from the royalties owed for a particular Calendar
Quarter pursuant to Section 4.3.1 or Section 4.3.2 the following
amounts:

 

(a)           [**]
by Partner for [**] pursuant to Section 3.3 to the extent [**] in such Calendar
Quarter and such [**] of such Product;

 

(b)           [**]
in such Calendar Quarter, and which Partner [**]; and

 

(c)           [**].

 

In case that the [**].

 

4.3.5.           Calculation of Royalties at End of Year. At the end
of each Year, promptly after the royalty calculation of the royalty owed
pursuant to Section 4.3.2 for the fourth Calendar Quarter of the preceding
Year, the royalties owed to Ironwood for such Year (the “Annual Royalties”)
will be equal to (i) [**] less (ii) [**]. The amount of royalties paid
with the Quarterly Report provided pursuant to Section 4.4 relating to the fourth Calendar
Quarter of each Year will be equal to the Annual Royalties for such Year less
the royalties paid for the first three Calendar Quarters of such Year.

 

However, Partner will in no event be
obliged to pay to Ironwood any royalties under Sections 4.3.1 and/or 4.3.2 in
any Year in which [**] that would otherwise be owed to Ironwood in such Year;
provided that, in no event will Ironwood be obligated to [**] paid pursuant to
this Agreement.

 

4.4.          Quarterly Reports. Within 45 days after the beginning of each Calendar Quarter
beginning with the Calendar Quarter in which the First Commercial Sale
following 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

25

 

receipt of
Regulatory Approval, Partner will deliver to Ironwood a report setting forth
for the previous Calendar Quarter the following information on a
Product-by-Product and country-by-country basis: (a) the gross sales and
Net Sales of each Product in the Territory, (b) the number of units sold
by Partner, its Affiliates or Sublicensees and provided as samples without
charge to any Third Party, (c) the basis for any adjustments to the
royalty payable for the sale of each Product, (d) the royalty due
hereunder for the sales of each Product, (e) all Sublicense Income
received by Partner and the portion of any Sublicense Income due under Section 4.3.3,
and (f) the applicable exchange rate as determined in accordance with this
Agreement. The total royalty due for the sale of Products during such Calendar
Quarter will be remitted at the time such report is made.

 

4.5.          Records and
Audits. During the Term of this Agreement, Partner will keep and maintain
accurate and complete records regarding Net Sales and Sublicense Income during
the three preceding Years. Upon 15 days prior written notice from Ironwood,
Partner will permit an independent certified public accounting firm of
internationally recognized standing, selected by Ironwood and reasonably
acceptable to Partner, to examine the relevant books and records of Partner and
its Affiliates, as may be reasonably necessary to verify the royalty reports
submitted by Partner in accordance with Section 4.4. An examination by
Ironwood under this Section 4.5 will occur not more than once in any Year
and will be limited to the pertinent books and records for any Year ending not
more than 36 months before the date of the request. The accounting firm will be
provided access to such books and records at Partner’s facility or facilities
where such books and records are normally kept and such examination will be
conducted during Partner’s normal business hours. Partner may require the
accounting firm to sign a standard non-disclosure agreement before providing
the accounting firm access to Partner’s facilities or records. Upon completion
of the audit, the accounting firm will provide both Ironwood and Partner a
written report disclosing whether the reports submitted by Partner are correct
or incorrect and the specific details concerning any discrepancies. No other
information will be provided to Ironwood. If the accountant determines that the
royalty report submitted by Partner understated the amount due to Ironwood,
then Partner will promptly pay such understated amount, and, if the amount
understated by Partner in such royalty reports is more than five percent of the
amount that was owed to Ironwood, Partner will reimburse Ironwood for the
expense incurred by Ironwood in connection with the audit.

 

4.6.          Taxes and
Withholding.

 

4.6.1.           Withholding
and Reporting of Tax. Notwithstanding anything else in this Agreement, the
Parties agree that all payments under this Agreement will be made free and
clear of any withholding tax (including interest, penalties, and additions
thereto) (a “Tax”) unless any such deduction or withholding of a Tax is
required by any applicable law. If any such deduction or withholding of a Tax
is required by any applicable law, then the paying Party will promptly (i) notify
the other Party of such requirement; (ii) pay to the relevant authorities
the full amount required to be deducted or withheld (including the full amount 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

26

 

required to be deducted or withheld from any additional amount paid to
Ironwood under Section 4.6.2) promptly upon the earlier of determining
that such deduction or withholding is required or receiving notice that such
amount has been assessed; and (iii) forward to the other Party an official
receipt (or a certified copy), or other documentation reasonably acceptable to
the other Party evidencing such payment to such authorities. The paying Party
is solely responsible for any Tax that might be required and any related tax
information reporting with respect to any payments under the Agreement that may
be deemed to arise in the Territory.

 

4.6.2.           Gross-Up for
Taxes Paid.

 

(a)           If a deduction or
withholding of Tax on a payment to Ironwood under Section 4.1 of this Agreement
is required by any applicable law, Partner (including its successors,
transferees, and assigns) will pay (or authorize payment) to Ironwood such
additional amount as is necessary to ensure that the amount received by
Ironwood will equal the payment described in Section 4.1 of this Agreement
less [**]
of the corresponding deduction or withholding to be applied to said payment. If
the U.S. federal income tax liability of Ironwood imposed for any taxable year
ending within the Applicable Period (as defined in Section 4.6.4 of this
Agreement) for any Tax described in this paragraph is not reduced as a result
of a foreign tax credit attributable to such Tax, Partner will pay (or
authorize payment) to Ironwood the remaining [**] of such
corresponding deduction or withholding as is necessary to ensure that the sum
of all payments received by Ironwood pursuant to Section 4.1 and this
paragraph will equal [**] Ironwood would have received
under Section 4.1 had no such deduction or withholding been required.

 

(b)           If any deduction or
withholding of Tax on payments to Ironwood under Sections 4.2 or 4.3 of this
Agreement is required by any applicable law, Partner (including its successors,
transferees, and assigns) will pay (or authorize payment) to Ironwood such additional
amount as is necessary to ensure that the amounts received by Ironwood will
equal the amounts described in Sections 4.2 and 4.3 less [**] of the
corresponding withholding to be applied to said amounts.

 

(c)           Notwithstanding any
other provision in this Section 4.6.2, if the U.S. federal income tax
liability of Ironwood is actually reduced as a result of a foreign tax credit
claimed by Ironwood with respect to any deduction or withholding by Partner of
any Tax under Section 4.6.1., then Partner will not be subject to any
further obligation to pay additional amounts under Sections 4.6.2(a) or
4.6.2(b) to the extent that such payment obligation arises on or after the
date which is two years after the 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

27

 

day on which Ironwood files the income tax return claiming such tax
reduction.

 

4.6.3.           Tax Benefit
Amount. In the event that Partner (including its successors, transferees,
and assigns) makes an additional payment to Ironwood under either Section 4.6.2(a) or
4.6.2(b) and Ironwood notifies Partner of a Tax Benefit Amount (as defined
below), Partner may deduct the Tax Benefit Amount once from the royalties owed
for a particular Calendar Quarter pursuant to Section 4.3.2. The Tax
Benefit Amount will be deducted from the amount of royalties owed to Ironwood
in accordance with Section 4.3.4 following the notification to Partner by
Ironwood. The Tax Benefit Amount will be available to Partner only to the
extent that royalties are owed by Partner to Ironwood after the date of such
notification and in no event will Ironwood be required to refund to Partner any
Tax Benefit Amount. Partner agrees to pay back any Tax Benefit Amount, in whole
or in part, that it deducted from royalties owed to Ironwood promptly upon
Ironwood’s request if Ironwood is required to repay such amount to the United
States government. “Tax Benefit Amount” means any additional payment to
Ironwood under either Section 4.6.2(a) or 4.6.2(b) (or portion
thereof) attributable to a Tax that reduces the U.S. federal income tax
liability of Ironwood as a result of a foreign tax credit actually claimed by
Ironwood. For purposes of the preceding sentence, to the extent any additional
payment (or portion thereof) to Ironwood under Section 4.6.2(b) (but,
for avoidance of doubt, not Section 4.6.2(a)) has not been classified as a
Tax Benefit Amount within the Applicable Period (as defined in Section 4.6.4
below), then such additional payment (or portion thereof) will be deemed to be
a Tax Benefit Amount and will be deducted from the amount of royalties owed to
Ironwood in accordance with Section 4.3.4 following the close of such
Applicable Period.

 

4.6.4.           Applicable
Period. With respect to any Tax described in Section 4.6 of this
Agreement, the “Applicable Period” will mean the period ending upon the
close of the eighth year following the year during which such Tax was paid to
the relevant authorities.

 

4.6.5.           Ironwood
Obligation to Claim Timely Foreign Tax Credits. Ironwood will file its U.S.
federal income tax returns in a timely manner, and will claim timely reductions
of its U.S. federal income tax liability for foreign tax credits attributable
to any Tax, with respect to which it has received any additional payment under
either Section 4.6.2(a) or 4.6.2(b) to the extent that the claim
of any such foreign tax credit (i) is allowed under applicable U.S. income
tax laws, and (ii) does not otherwise impose an economic detriment on
Ironwood nor on Almirall.

 

4.7.          Equity Investment.
Subject to Ironwood obtaining the necessary consents and approvals by its board
and shareholders, within 10 days of Successful U.S. Phase III, 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

28

 

Partner will purchase from Ironwood capital stock of Ironwood (the “Investment”)
for an aggregate purchase price of $15,000,000 as described in this Section. In
the event that Successful U.S. Phase III occurs prior to an initial public offering
by Ironwood, the Investment will be made pursuant to a Stock Purchase Agreement
(as defined below) pursuant to which Partner will purchase 681,819 shares of a
new series of preferred stock at a per share purchase price equal to $22.00 per
share. In such event, the terms of such purchase will be set forth in a stock
purchase agreement in form and substance (including the associated charter
amendments and exhibits, the “Stock Purchase Agreement”) as  attached hereto as Exhibit E. In the event that
Successful U.S. Phase III occurs following an initial public offering by
Ironwood, the Investment will be a purchase of 681,819 shares (as appropriately
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like occurring after the Effective Date) of Series B Common Stock (as
such term is defined in the Tenth Amended and Restated Certificate of
Incorporation of Ironwood Pharmaceuticals, Inc. attached as an exhibit to
the Stock Purchase Agreement), or any security into which all shares of Series B
Common Stock have converted or been exchanged prior to such sale, at a per
share purchase price equal to $22.00 per share. In such event, the terms of
such purchase will be on customary terms for a private investment in a
publicly-traded company.

 

4.8.          Currency.
With the exception of the royalty rate determination in Section 4.3.2, all amounts payable and
calculations hereunder will be in United States dollars. Net Sales will be
translated into United States dollars, based on the average closing conversion rate as reported in
the Wall Street Journal, for the applicable Calendar Quarter to which such Net Sales. If, due to
restrictions or prohibitions imposed by national or international authority,
payments cannot be made as provided in this Section 4, the Parties will
consult with a view to finding a prompt and acceptable solution, and the paying
Party will deal with such monies as the other Party may lawfully direct at no
additional out-of-pocket expense to the paying Party.

 

4.9.          Confidentiality.
All financial information of a Party which is subject to review under this Section 4
will be deemed to be Confidential Information subject to the provisions of Section 5.1,
and such Confidential Information will not be disclosed to any Third Party or
used for any purpose other than verifying payments to be made by one Party to
the other hereunder; provided, however, that such Confidential Information may
be disclosed to Third Parties only to the extent necessary to enforce a Party’s
rights under this Agreement.

 

4.10.        Interest. Any
payment under this Section 4 that is more than [**] past due
will be subject to interest at an annual percentage rate of [**]
(as published in the “Money Rates” table of the Eastern Edition of The Wall
Street Journal during the period such amount is overdue) [**] if a Party
does not make payment within 30 days of its receipt of notice that such amount
is past due. Likewise, any overpayment that is not refunded within [**]
after the date such overpayment was made will thereafter be subject to interest
at an annual percentage rate of [**] (as published in the “Money
Rates” table of the Eastern Edition of The Wall Street Journal during period
such amount is overdue) [**]; provided, 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

29

 

however, that if the overpayment is due to errors in reports provided by
the overpaid Party, such interest will accrue from the date the overpayment was
made. Notwithstanding the preceding, if a Party contests any amounts due
hereunder in good faith and promptly notifies the other Party of such dispute,
interest will not accrue as to amounts being so contested until [**]
following the presentation of such notice to the other Party.

 

5.                                      MUTUAL
COVENANTS

 

5.1.          Confidentiality.

 

5.1.1.           Confidential
Information. Except to the extent expressly permitted by this Agreement and
subject to the provisions of Sections 5.1.2 and 5.1.3, at all times during
the Term and for [**]
years following the expiration or termination of this Agreement, each Party (a
“Receiving Party”) (a) will keep completely confidential and will
not publish or otherwise disclose any Confidential Information furnished to it
by the other Party (a “Disclosing Party”), except to those of the
Receiving Party’s employees, Affiliates, consultants or representatives who
have a need to know such information (collectively, “Authorized Recipients”)
to perform such Party’s obligations hereunder and/or to potential Sublicensees
under an obligation of confidentiality no less protective than the terms
hereof, and (b) will not use Confidential Information of the Disclosing
Party directly or indirectly for any purpose other than performing its
obligations hereunder. The Receiving Party will be liable for any breach by any
of its Authorized Recipients of the restrictions set forth in this Agreement. Notwithstanding the foregoing, Ironwood
may disclose Confidential Information of Partner to Forest to the extent
necessary to comply with or conduct activities under the Forest Agreement.

 

5.1.2.           Exceptions to
Confidentiality. The Receiving Party’s obligations set forth in this
Agreement will not extend to any Confidential Information of the Disclosing
Party:

 

(a)           that is or hereafter
becomes part of the public domain through no wrongful act, fault or negligence
on the part of a Receiving Party or its Authorized Recipients;

 

(b)           that is received
from a Third Party without restriction and without breach of any agreement or
fiduciary duty between such Third Party and the Disclosing Party;

 

(c)           that the Receiving
Party can demonstrate by competent evidence was already in its possession
without any limitation or restriction on use or disclosure prior to its receipt
from the Disclosing Party;

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

30

 

(d)           that is generally
made available to Third Parties by the Disclosing Party without any restriction
imposed by the Disclosing Party on disclosure, whether such restriction is by
contract, fiduciary duty or by operation of law; or

 

(e)           that the Receiving
Party can demonstrate by competent evidence was independently developed by the
Receiving Party without any reference to Confidential Information.

 

5.1.3.           Authorized
Disclosure. Each Party and its Authorized Recipients may disclose
Confidential Information to the extent that such disclosure is made in response
to a valid order, governmental inquiry, or request (each an “Order”) of
a court of competent jurisdiction or other agency, as applicable; provided,
however, that the Receiving Party must first have given notice to the
Disclosing Party and given the Disclosing Party a reasonable opportunity to
quash such Order or to obtain a protective order requiring that the
Confidential Information and/or documents that are the subject of such Order be
held in confidence by such court or Agency or, if disclosed, be used only for
the purposes for which the Order was issued; and provided further that if an
Order is not quashed or a protective order is not obtained, the Confidential
Information disclosed in response to such Order will be limited to that
information that is legally required to be disclosed in such response to such
Order.

 

5.1.4.           Notification.
The Receiving Party will notify the Disclosing Party immediately, and cooperate
with the Disclosing Party as the Disclosing Party may reasonably request, upon
the Receiving Party’s discovery of any loss or compromise of the Disclosing
Party’s Confidential Information.

 

5.1.5.           Destruction of
Confidential Information. Upon the expiration or earlier termination of
this Agreement, the Receiving Party will (a) destroy all tangible
embodiments of Confidential Information of the Disclosing Party, including any
and all copies thereof, and those portions of any documents, memoranda, notes,
studies, and analyses prepared by the Receiving Party or its Authorized
Recipients that contain, incorporate, or are derived from such Confidential
Information and provide written certification of such destruction to the
Disclosing Party in a form reasonably acceptable to the Disclosing Party, provided
that the legal department of the Receiving Party will have the right to retain
one copy of any such tangible embodiments for archival purposes, provided such
copy will continue to be maintained on a confidential basis subject to the
terms of this Agreement, and (b) immediately cease, and will cause its
Authorized Recipients to cease, use of such Confidential Information as well as
any information or materials that contain, incorporate, or are derived from
such Confidential Information.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

31

 

5.1.6.           Use of Name
and Disclosure of Terms. Each Party will keep the existence of, the terms
of, and the transactions covered by this Agreement confidential and will not
disclose such information to any other Person through a press release or
otherwise, or mention or otherwise use the name, insignia, symbol, trademark,
trade name, or logotype of the other Party or its Affiliates in any manner
without the prior written consent of the other Party in each instance (which
will not be unreasonably withheld). The restrictions imposed by this Section 5.1.6
will not prohibit either Party from making any disclosure that is required by
Applicable Law, rule, or regulation or the requirements of a national
securities exchange or another similar regulatory body including disclosing
such information in any clinical trial database maintained by or on behalf of a
Party. Further, the restrictions imposed on each Party under this Section 5.1.6
are not intended, and will not be construed, to prohibit a Party from
identifying the other Party in its internal business communications, provided
that any Confidential Information in such communications remains subject to
this Section 5.1.6.

 

5.1.7.           Remedies.
The Parties acknowledge and agree that the restrictions set forth in this Section 5.1
are reasonable and necessary to protect the legitimate interests of the Parties
and that neither Party would have entered into this Agreement in the absence of
such restrictions, and that any breach or threatened breach of any provision of
this Section 5.1 will result in irreparable injury to the other Party for
which there will be no adequate remedy at law. In the event of a breach or
threatened breach of any provision of Section 5.1 by a Party, the other
Party will be authorized and entitled to obtain from any court of competent
jurisdiction injunctive relief, whether preliminary or permanent, specific
performance and an equitable accounting of all earnings, profits and other
benefits arising from such breach, which rights will be cumulative and in
addition to any other rights or remedies to which such Party may be entitled in
law or equity. The breaching Party agrees to waive any requirement that the
non-breaching Party (i) post a bond or other security as a condition for
obtaining any such relief and (ii) show irreparable harm, balancing of
harms, consideration of the public interest or inadequacy of monetary damages
as a remedy. Nothing in this Section 5.1.7 is intended, or will be
construed, to limit the Parties’ rights to equitable relief or any other remedy
for a breach of any provision of this Agreement.

 

5.2.          Restrictions.
During [**],
without the prior written consent of the other Party, neither Party nor such
Party’s Affiliates will directly or indirectly [**].

 

5.3.          Compliance with
Law. Each Party hereby covenants and agrees to comply with all Applicable
Law applicable to its activities connected with the Development, Manufacture,
and Commercialization (as applicable) of Products. Without limiting the
generality of the foregoing:

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

32

 

5.3.1.           Patient
Information. Each Party agrees to abide by all laws, rules, regulations,
and orders of all applicable supranational, national, federal, state,
provincial, and local governmental entities concerning the confidentiality or
protection of patient identifiable information and/or patients’ protected health
information, as defined by any other applicable legislation in the course of
their performance under this Agreement.

 

5.3.2.           Debarment.
Each Party agrees that it will not use, in any capacity, in connection with any
of its obligations to be performed under this Agreement any individual who has
been debarred under the FD&C Act or the Generic Drug Enforcement Act or
analogous law.

 

5.4.          Nonsolicitation
of Employees. During the Term of this Agreement and for a period of [**]
thereafter, each Party agrees that neither it nor any of its Affiliates will
recruit, solicit or induce any employee of the other Party that is involved in
the activities conducted pursuant to this Agreement to terminate his or her
employment with such other Party and become employed by or consult for such
other Party, whether or not such employee is a full-time employee of such other
Party, and whether or not such employment is pursuant to a written agreement or
is at-will. For purposes of the foregoing, “recruit”, “solicit” or “induce”
does not include (a) circumstances where an employee of one Party
initiates contact with the other Party or any of is Affiliates with regard to
possible employment, or (b) general solicitations of employment not
specifically targeted at employees of a Party or any of its Affiliates,
including responses to general advertisements. In addition, during the Term of
this Agreement and for a period of [**] thereafter, neither Party
may hire or employ any such employee of the other Party (including personnel
who were employees of such other Party within a period of [**] or less
from the date of the proposed hiring or employment) without the prior written
consent of such other Party, unless such other Party had previously terminated
the employment of such former employee.

 

5.5.          Standstill
Agreement. During [**] (the “Standstill Period”),
neither Partner nor any of its Representatives (as defined below) (collectively
the “Partner Related Parties”) will, in any manner, directly or
indirectly:

 

5.5.1.           make, effect,
initiate, directly participate in or cause

 

(a)           any acquisition of
beneficial ownership of any securities of Ironwood or any securities of any
Affiliate of Ironwood, if, after such acquisition, the Partner Related Parties
would beneficially own more than ten percent of the outstanding common stock of
Ironwood; or

 

(b)           any acquisition of
all or substantially all of the assets of Ironwood or of any Affiliate of
Ironwood; provided this subsection (b) will not apply to the acquisition
by the Partner Related Parties of a license or other rights to Ironwood assets
or technology under terms negotiated by the Parties; or

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

33

 

(c)           any tender offer,
exchange offer, merger, business combination, recapitalization, restructuring,
liquidation, dissolution or extraordinary transaction involving Ironwood or any
Affiliate of Ironwood, or involving any securities or assets of Ironwood or any
securities or assets of any Affiliate of Ironwood; or

 

(d)           any “solicitation”
of “proxies” (as those terms are used in the proxy rules of the Securities
and Exchange Commission) or consents with respect to any securities of
Ironwood; or

 

5.5.2.           form, join or
participate in a Group with respect to the beneficial ownership of any
securities of Ironwood; or

 

5.5.3.           act, alone or in
concert with others, to seek to control the management, board of directors or
policies of Ironwood; or

 

5.5.4.           take any action
that might require Ironwood to make a public announcement regarding any of the
types of matters set forth in Section 5.5.1(a); or

 

5.5.5.           agree or offer to
take, or encourage or propose (publicly or otherwise) the taking of, any action
referred to in Sections 5.5.1(a), 5.5.1(b), 5.5.1(c), or 5.5.1(d); or

 

5.5.6.           assist, induce or
encourage any other person to take any action of the type referred to in
Sections 5.5.1(a), 5.5.1(b), 5.5.1(c), or 5.5.1(d); or

 

5.5.7.           enter into any
discussions, negotiations, arrangement or agreement with any other person
relating to any of the foregoing; or

 

5.5.8.           request or
propose, publicly or to shareholders of Ironwood or its Affiliates, that
Ironwood or any of Ironwood’s Representatives (as defined below) amend, waive
or consider the amendment or waiver of any provision set forth in this Section 5.5.

 

Notwithstanding
the foregoing, the provisions of this Section 5.5 will not apply to (i) the
exercise by any of the Partner Related Parties of any rights available to
shareholders generally pursuant to any transaction described in Section 5.5.1(a) above,
provided that such Partner Related Party has not then either directly or as a
member of a Group made, effected, initiated or caused such transaction to
occur, or (ii) any activity by any of the Partner Related Parties after
Ironwood or any other Third Party unrelated to any of the Partner Related
Parties has made any public announcement of its intent to solicit or engage in
any transaction of the type referred to in this Section 5.5.1(a) above;
provided however, with respect to subpart (ii), if any of the Partner Related
Parties or such Third Party terminates or announces its intent to terminate
such transaction and such Partner Related Party 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

34

 

(A) has
not previously made any public announcement of its intent to solicit or engage
in any transaction of the type referred to in this Section 5.5.1(a) above,
or (B) in the event that such public announcement has been made by any of
the Partner Related Parties, such Partner Related Party has terminated or
announced its intent to terminate such transaction, then the provisions of this
Section 5.5 will again be applicable.

 

For
purposes of this Section, “Representatives” of a Party will be deemed to
include each person or entity that is or becomes (i) an Affiliate of such
Party, or (ii) an officer, director, employee, partner, attorney, advisor,
accountant, agent or representative of such Party or of any of such Party’s
Affiliates, provided such person is acting on behalf of such Party or such
Party’s Affiliate. “Group” means two or more persons acting as a
partnership, limited partnership, syndicate or other group for the purpose of
acquiring, holding or disposing of securities of Ironwood.

 

5.6.          Export
Restrictions. Partner will not sell, export, or distribute, directly or
indirectly, any Product to any location outside of the Territory or take any
action that Partner reasonably believes will result in such export.

 

5.7.          Communications
with other Linaclotide Partners. Except and to the extent required by this
Agreement or otherwise with the prior consent of Ironwood, Partner will not
communicate with any other Third Parties that have licensed Ironwood’s rights
to the Licensed Compound about the subject matter of this Agreement or any
activities under this Agreement or the license agreement between Ironwood and
such Third Parties.

 

6.                                      REPRESENTATIONS
AND WARRANTIES

 

6.1.          Representations
and Warranties of Each Party. As of the Effective Date, each of Partner and
Ironwood hereby represents and warrants to the other Party hereto as follows:

 

(a)           it is a corporation
or entity duly organized and validly existing under the laws of the state or
other jurisdiction of its incorporation or formation;

 

(b)           the execution,
delivery and performance of this Agreement by such Party has been duly
authorized by all requisite corporate action and does not require any
shareholder action or approval;

 

(c)           it has the power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder;

 

(d)           the execution,
delivery and performance by such Party of this Agreement and its compliance
with the terms and provisions does not and may not conflict with or result in a
breach of any of the terms and provisions of or constitute a default under (i) a
loan agreement, guaranty, 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

35

 

financing agreement, agreement affecting a product or other agreement
or instrument binding or affecting it or its property; (ii) the provisions
of its charter or operative documents or bylaws; or (iii) any order, writ,
injunction or decree of any court or governmental authority entered against it
or by which any of its property is bound; and

 

(e)           it has the full
right, power and authority to grant all of the right, title and interest in the
licenses granted to the other Party under this Agreement.

 

6.2.          Additional
Representations and Warranties of Ironwood. Ironwood hereby represents and
warrants to Partner that as of the Effective Date:

 

(a)           Ironwood has the
sole right, title and interest in and to the Ironwood Patent Rights listed in Schedule
6.2(a) to this Agreement other than the Forest Patent Rights;

 

(b)           Ironwood is not
subject to any agreement with a Third Party that includes a royalty or similar
payment obligation to, or other restriction or limitation in favor of, such
Third Party (including, for this purpose, to current or former officers,
directors, employees, consultants or personnel of Ironwood or any predecessor)
with respect to its rights to practice the Ironwood Technology;

 

(c)           No Ironwood Patent
Rights are subject to, or were developed pursuant to any funding agreement with
any government or government agency;

 

(d)           Ironwood is not in
breach of any material provisions of any agreements with Third Parties relating
to the Ironwood Patent Rights;

 

(e)           Ironwood has not
received any written or oral claim of ownership, inventorship or patent
infringement from any Third Party (including without limitation, by current or
former officers, directors, employees, consultants, or personnel of Ironwood or
any predecessor) with respect to the Ironwood Technology, and Ironwood is not
aware of any reasonable basis for any such claim.

 

6.3.          Additional
Representations and Warranties of Partner. Partner hereby represents and
warrants to Ironwood that as of the Effective Date:

 

(a)           Partner is not
subject to any agreement with a Third Party that includes a royalty or similar
payment obligation to, or other restriction or limitation in favor of, such
Third Party (including, for this purpose, to current or former officers,
directors, employees, consultants or personnel 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

36

 

of Partner or any predecessor) with respect to its rights to practice
the Partner Technology;

 

(b)           Partner has no
products currently under Development or Commercialization for diagnostic,
prophylactic or therapeutic uses in IBS-C, CC or OIC indications, except as
provided in Schedule 6.3(b); and

 

(c)           Partner has not
received any written or oral claim of ownership, inventorship or patent
infringement from any Third Party (including without limitation, by current or
former officers, directors, employees, consultants, or personnel of Partner or
any predecessor) with respect to the Partner Technology, and Partner is not
aware of any reasonable basis for any such claim.

 

6.4.          Representation by
Legal Counsel. Each Party hereto represents that it has been represented by
legal counsel in connection with this Agreement and acknowledges that it has
participated in the drafting. In interpreting and applying the terms and
provisions of this Agreement, the Parties agree that no presumption will exist
or be implied against the Party which drafted such terms and provisions.

 

6.5.          No Inconsistent
Agreements. Neither Party has in effect and after the Effective Date
neither Party may enter into any oral or written agreement or arrangement that
would be inconsistent with its obligations under this Agreement or limit the
ability of either Party to grant the licenses set forth in Section 2 of
this Agreement.

 

6.6.          Disclaimer.
THE FOREGOING WARRANTIES OF EACH PARTY ARE IN LIEU OF ANY OTHER WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
NONINFRINGEMENT, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR ANY IMPLIED
WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE ALL OF WHICH ARE HEREBY SPECIFICALLY
EXCLUDED AND DISCLAIMED. EACH PARTY HEREBY DISCLAIMS ANY REPRESENTATION OR
WARRANTY THAT THE DEVELOPMENT, MANUFACTURE OR COMMERCIALIZATION OF ANY PRODUCT
UNDER THIS AGREEMENT WILL BE SUCCESSFUL.

 

7.                                      INTELLECTUAL
PROPERTY

 

7.1.          Disclosure.  During the Term, the Parties will promptly disclose to one
another all Collaboration Know-How (whether patentable or not).

 

7.2.          Ownership.

 

7.2.1.           Ownership of
Technology. Determinations as to which Party has invented any Patent Right
or Know-How will be made in accordance with the standards of inventorship under
U.S. patent law. Subject to the license grants under Section 2 of this  Agreement, as between the Parties, Ironwood will own 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

37

 

all Ironwood Technology and Partner will own all Partner Technology.  Each Party will own an undivided one-half interest in and
to the Joint Technology. In the event inventorship and ownership of any
Collaboration Technology cannot be resolved by the Parties with advice of their
respective intellectual property counsel, such dispute will be resolved through
arbitration pursuant to Section 10.1.3, provided such arbitration panel
will include at least a single arbitrator who is a specialist in U.S. chemical
and pharmaceutical patent law and in chemical and pharmaceutical patents.

 

7.2.2.           Employee
Assignment. To the extent permissible under Applicable Law, each Party will
cause each employee and contractor conducting work on such Party’s behalf under
this Agreement to sign a contract that (i) compels prompt disclosure to
the Party of all Ironwood Technology, Partner Technology, Joint Technology, as
applicable, conceived or reduced to practice by such employee or contractor
during any performance under this Agreement, (ii) automatically assigns to
the Party all right, title and interest in and to all such Technology and all
Patent Rights disclosing or claiming such Technology, and (iii) obligates
such persons to similar obligations of confidentiality as set forth in this
Agreement. Each Party will require each employee and contractor conducting work
on such Party’s behalf under this Agreement to maintain records in sufficient
detail and in a good scientific manner appropriate for patent purposes to
properly reflect all work done.

 

7.3.          Intellectual
Property Working Group.  The Parties
will promptly establish an intellectual property working group comprised of at
least one senior patent attorney from each Party, together with research and
development personnel and such other representatives of the Parties as the
Parties may determine to be appropriate from time to time, to manage and review
the patent strategy for inventions made in the course of the Development and to
determine patent strategy relating to the Collaboration Patent Rights, to the
extent such Collaboration Patent rights are necessary or useful in the Territory
to Manufacture, Develop or Commercialize the Licensed Compound or Product.

 

7.4.          Prosecution and
Maintenance of Patent Rights.

 

7.4.1.           Patent
Prosecution and Maintenance. Each of Ironwood and Partner will be primarily
responsible for the preparation, filing, prosecution and maintenance of the
Ironwood Patent Rights and the Partner Patent Rights, respectively; provided
that: (i) each Party will provide the other with advance copies of, and a
reasonable opportunity to comment upon, proposed patent filings in the
Territory and prosecution strategies and proposed correspondence with patent
offices in the
Territory undertaken pursuant to any such filings, and will consider comments
received in good faith and will not unreasonably reject such comments, except
that Ironwood will not be obligate to provide Partner with advance copies of
proposed patent filings, related prosecution strategies or proposed
correspondence for Forest Patent Rights; (ii) Ironwood will be 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

38

 

primarily responsible for the preparation, filing, prosecution and
maintenance of the Partner Patent Rights outside the Territory, but Ironwood
will provide Partner with advance copies of, and a reasonable opportunity to
comment upon, proposed patent filings, related prosecution strategies and
proposed correspondence with patent officials outside the Territory relating to any such
patents and will consider comments received in good faith and will not
unreasonably reject such comments; and (iii) correspondence or other
communications or actions which relate to the validity of Collaboration Patent
Rights, to the extent such Collaboration Patent Rights are necessary or useful
in the Territory to Manufacture, Develop or Commercialize a Collaboration
Compound or Product in the Territory, that are made during the course of an action
before a national or regional patent office in the Territory or national court
in the Territory will require the mutual approval of both Parties. A Party
providing comments in accordance with this Section will provide such
comments expeditiously and in any event in reasonably sufficient time to meet
any filing deadline communicated to it by the other Party. The Party receiving
any such patent application and correspondence will maintain such information
in confidence, except for patent applications that have been published and
official correspondence that is publicly available.

 

7.4.2.           Joint Patent
Rights. The intellectual property working group established under Section 7.3
will designate which Party will be responsible for preparing, filing, prosecuting
and maintaining Joint Patent Rights. Irrespective of which Party is responsible
for filing, prosecuting and maintaining Joint Patent Rights, Partner and
Ironwood will equally share the costs for filing, prosecuting and maintaining
Joint Patent Rights in the Territory.

 

7.4.3.           Reversion
Rights. If a Party decides not to file, prosecute or maintain a Patent
Right covering, as applicable, Ironwood Technology, Partner Technology or Joint
Partner Technology, to the extent such Technology is necessary or useful to
Manufacture, Develop or Commercialize the Licensed Compound or Product, with
respect to Ironwood Technology within the Territory and with respect to Partner
Technology whether within or outside of the Territory, it will give the other
Party reasonable notice to that effect sufficiently in advance of any deadline
for any filing with respect to such Patent Right to permit the other Party to
carry out such activity. After such notice, the other Party may file, prosecute
and maintain the Patent Right, and perform such acts as may be reasonably
necessary for the other Party to file, prosecute or maintain such Patent Right,
at its sole cost and expense. If such other Party does so elect, then the Party
which has elected not to pursue such filing, prosecution or maintenance will
provide such cooperation to the other Party, including the execution and filing
of appropriate instruments, as may reasonably be requested to facilitate the
transition of such patent activities, and will assign all of its right, title and
interest to such patent, other than its rights 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

39

 

thereto provided by this Agreement, to the Party electing to pursue
such patent activities.

 

7.4.4.           Patent Term
Extensions. The Parties agree to cooperate in the selection of the
appropriate Ironwood Patent Rights, Partner Patent Rights or Joint Patent
Rights as listed in the patent information section of the Product NDA for
filing to obtain a patent term extension pursuant to all applicable laws and
regulations (“Patent Term Extension”), including without limitation
supplementary protection certificates and any other extensions that are now or
become available in the future wherever applicable to Patent Rights that are
applicable to the Product.

 

7.5.          Trademarks.

 

7.5.1.           Product
Trademark. Until such time as the Parties determine that the launch by a
Third Party of a generic equivalent of the Product is imminent in the Territory
(on a country-by-country basis, and based upon objective evidence shared and
discussed by both Parties), all Products will be sold in the Territory under
the Trademarks selected by the JCC with advice from the Parties’ intellectual
property counsel. No such Trademark will be used outside of the country as to
which it has been approved for use by the JCC or outside the Territory, unless
otherwise agreed by the Parties in writing. The Parties acknowledge and agree
that trademarks developed or used in connection with the Forest Agreement may
not be used by the Parties in the Territory unless agreed to by Ironwood and
Forest in writing. Ironwood owns such Trademarks subject to the license granted
to Partner herein, and is responsible for the filing, prosecution and
maintenance of such Trademarks in the applicable country or countries within
the Territory. If Ironwood decides not to file, prosecute or maintain a
Trademark in a country of the Territory, it will give Partner reasonable notice
to that effect sufficiently in advance of any deadline for any filing with
respect to such Trademark in such country to permit Partner to carry out such
activity. After such notice, Partner may file, prosecute and maintain such
Trademark in such country.

 

7.5.2.           Trademark Use.
The manner of use of the Trademarks will be subject to periodic review by the JCC. Neither Party will use the
Trademarks in a way that is inconsistent with the usage instructions approved
by the JCC, and neither
Party will use a trademark confusingly similar to one of the Trademarks with
any of its other products or, except as otherwise provided herein, use the
Trademarks in combination with its other trademarks in a manner which would
create combination marks. The Parties will utilize the Trademarks within the
Territory only in accordance with this Agreement.

 

7.5.3.           Party Name on
Product Promotional Material. Subject to Applicable Law, all Product promotional
material in the Territory will include 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

40

 

Ironwood’s trade name,
trademark, and other logos requested by Ironwood (the “Ironwood House Marks”)
in a manner that has equal prominence with Partner’s marks. To effectuate the
purposes of this Agreement, Ironwood hereby grants to Partner a royalty free
license, to use and display the Trademarks, and the Ironwood House Marks in
connection with the Commercialization of a Product in the Field, with respect
to the Trademarks in the Territory, and with respect to the Ironwood House
Marks in the U.S., and all in accordance with this Agreement. All goodwill
arising from the use of such Trademarks and Ironwood House Marks will inure to
the benefit of Ironwood.

 

7.6.                              Enforcement of Technology
Rights.

 

7.6.1.                                                     Notice. If Ironwood
or Partner becomes aware that any Ironwood Technology, Partner Technology, in
each such case, which Technology is necessary or useful in the Territory to
Manufacture, Develop or Commercialize the Licensed Compound or Product, or
Joint Technology is infringed or misappropriated by a Third Party in the
Territory in the Field or is subject to a declaratory judgment action arising
from such infringement (collectively, an “Infringement”), Ironwood or
Partner, as the case may be, will promptly notify the other Party.

 

7.6.2.                                                     Enforcement. The Party
that owns the Technology which is the subject of the Infringement will have the
first right (but not the obligation), to enforce such Technology against such
Infringement, provided that in the event Technology owned by both Parties is
the subject of the Infringement, the Parties will cooperate and act in concert
to enforce their Technology against such Infringement; provided, further, that (i) the
other Party will have the right to join such proceeding at any time at its own
expense (subject to the provisions of Section 7.6.3) and will do so at any
time if it is deemed to be a necessary Party by the tribunal in which the
Infringement is being prosecuted, and (ii) neither Party will admit the
invalidity or unenforceability of any Collaboration Technology which
Collaboration Technology is necessary or useful in the Territory to
Manufacture, Develop or Commercialize the Licensed Compound or Product or other
Technology owned solely by or jointly with the other Party without the other
Party’s prior written consent. In the event the Party with the first right to
control an action or proceeding pursuant to this Section declines to
prosecute the infringing technology or to defend such claim within 90 days (or
such shorter period as may be required to comply with legal or regulatory
deadlines which relate to such infringement) of becoming aware thereof, the
other Party will have the right to so enforce or defend. Irrespective of which
Party controls an action pursuant to this Section, the Parties will collaborate
in the choice of counsel with respect to such action and the comments of the
other Party will not be unreasonably rejected with respect to strategic
decisions and their implementation with respect to such action. In

 

[**] = Portions of this
exhibit have been omitted pursuant to a confidential treatment request. An
unredacted version of this exhibit has been filed separately with the
Commission.

 

41

 

furtherance of the
foregoing, the Party responsible for any such action will keep the other Party
reasonably informed, in person or by telephone, regarding the status and costs
of such action or proceeding prior to and during any such enforcement. Neither
Party will settle any such action without the written consent of the other
Party, such consent not to be unreasonably withheld. Neither Party will incur
any liability to the other as a consequence of such litigation or any
unfavorable decision resulting therefrom, including any decision holding any of
the Ironwood Technology, Partner Technology, or Joint Technology invalid, not
infringed, not misappropriated or unenforceable.

 

7.6.3.                                                     Costs and
Recoveries.

 

(a)                                  If the Party who did not
initiate the action against an Infringement under Section 7.6.2 (the “Non-Initiating
Party”) joins the other Party (the “Initiating Party”) in action
against an Infringement, then the costs of such prosecution or defense of
validity, and the proceeds of any awards, judgments or settlements obtained in
connection with an Infringement in the Territory will be [**].

 

(b)                                 If the Non-Initiating Party
does not join the Initiating Party in an action against an Infringement, then
the Initiating Party will control the Infringement and the proceeds of any
awards, judgments, or settlements obtained in connection with the Infringement
in the Territory will [**].

 

7.7.                              Third Party Claims.

 

7.7.1.                                                     Third Party
Claims - Course of Action. If the Development, Commercialization or
Manufacture of a Product under this Agreement is alleged by a Third Party to infringe
a Third Party’s patent right(s) or misappropriate a Third Party’s trade
secret, the Party becoming aware of such allegation will promptly notify the
other Party thereof, in writing, reasonably detailing the claim.

 

7.7.2.                                                     Third Party
Suit. If a Third Party sues a Party (the “Sued Party”) alleging that
the Sued Party’s or the Sued Party’s Sublicensees’, Development, Manufacture or
Commercialization of the Licensed Compound or the Product infringes or will
infringe said Third Party’s patent right(s) or misappropriates said Third
Party’s trade secret, then upon the Sued Party’s request and in connection with
the Sued Party’s defense of any such Third Party suit, the other Party will
provide reasonable assistance to the Sued Party for such defense and will join
such suit if deemed a necessary party. The Sued Party will keep the other
Party, if such other Party has not joined in such suit, reasonably informed on
a quarterly basis, in person or by telephone, prior to and during the pendency
of any such suit. The Sued Party will not admit the invalidity of any patent
within the Ironwood Patent Rights, the Partner Patent Rights or the Joint

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

42

 

Patent Rights, nor settle
any such suit, without written consent of the other Party, such consent not to
be unreasonably withheld. Subject to the Parties’ respective indemnity
obligations pursuant to Section 9.1 and 9.2, all litigation expenses,
including settlement costs, royalties paid in settlement of any such suit, and
the payment of any damages to the Third Party, will be paid by [**].

 

7.8.                              Patent Marking. Each Party
agrees to mark and have its Affiliates and all Sublicensees mark all Products
(or their containers or labels) sold pursuant to this Agreement in accordance
with the applicable statutes or regulations in the country or countries of
manufacture and sale thereof.

 

7.9.                              Patent Certifications. Each Party
will immediately give written notice to the other of any certification of which
it becomes aware has been filed pursuant to any foreign equivalent to 21 U.S.C.
§ 355(b)(2)(A) or § 355(j)(2)(A)(vii) (or any amendment or
successor statute thereto) claiming that the Ironwood Patent Rights, Partner
Patent Rights, or Collaboration Patent Rights covering the Product are invalid
or that infringement will not arise from the manufacture, use or sale in the
Territory of such Third Party product by a Third Party. If Partner decides not to bring infringement proceedings against
the Third Party making such a certification with respect to any Product,
Partner will give notice to Ironwood of its decision not to bring suit within
ten business days after receipt of notice of such certification (or, if the
time period permitted by law is less than 20 business days, within half of the
time period permitted by law for Partner to commence such action) and Ironwood
may then, but will not be obligated to, bring suit against the Third Party that
filed the certification. Any suit by either Party may be in the name of either
or both Parties, as may be required by law. For this purpose, the Party not
bringing suit will execute such legal papers necessary for the prosecution of
such suit as may be reasonably requested by the Party bringing suit.

 

7.10.                        No Implied Licenses.  Except as expressly set forth in this Agreement, no right
or license under any Ironwood Technology or Partner Technology is granted or
will be granted by implication as a result of the respective rights of the
Parties under this Agreement. All such rights or licenses are or will be
granted only as expressly provided in this Agreement.

 

7.11.                        [**]. In furtherance of this Agreement, it is
expected that Partner and Ironwood will, from time to time, [**].
Such disclosures are made with the understanding that they will [**].

 

8.                                      TERM AND TERMINATION

 

8.1.                              Term. The term of
this Agreement will commence on the Effective Date and, unless earlier
terminated as provided in this Section 8, will continue in full force and
effect on a Product-by-Product and country-by-country basis
until Partner is no longer Developing or Commercializing such Product in such country.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

43

 

8.2.                              Termination for Cause.

 

8.2.1.                                                     Termination for
Material Breach. This Agreement may be terminated effective
immediately to the extent set forth in the last sentence of this Section by
written notice by either Party at any time during the Term if the other Party materially
breaches this Agreement, which breach remains uncured for [**] measured
from the date written notice of such breach is given to the breaching Party,
which notice will specify the nature of the breach and demand its cure;
provided, however, that if such breach is not capable of being cured within the
stated period and the breaching Party uses Commercially Reasonable Efforts to
cure such breach during such period and presents a mutually agreeable
remediation plan for such breach, this Agreement will not terminate and the
cure period will be extended for such period provided in the remediation plan
as long as the breaching party continues to use Commercially Reasonable Efforts
to pursue the cure as provided in such remediation plan. Notwithstanding anything
to the contrary set forth in this Agreement but subject to the limitations set
forth in Section 9.5, termination will not be deemed to relieve a
defaulting party from any liability arising from such default. The
non-breaching Party may terminate this Agreement pursuant to this Section 8.2.1
(i) in the event of a material breach that is specifically related to a
country in the Territory and such country is not a Major Country, only with
respect to such country, (ii) in the event of a material breach that is
specifically related to a Major Country, with respect to such country or as to
this Agreement in its entirety, at the election of the non-breaching Party and (iii) in
the event of a material breach that does not relate specifically to a
particular country in the Territory, as to this Agreement in its entirety.

 

8.2.2.                                                     Violation of
Law. This Agreement may be terminated by either Party on giving [**]
written notice to the other, which will be effective on the expiration date of
such [**]
period in the event that the other Party (the “Violating Party”) is
convicted of a felony for violating, or a final, non-appealable order is issued
by a court of competent jurisdiction finding that the Violating Party violated,
any Applicable Law, the Federal Foreign Corrupt Practices Act (or analogous
law) or any securities laws or regulations (collectively, the “Relevant Laws”),
which are of such a nature that the Violating Party’s violation of such
Relevant Laws would prevent or substantially diminish a Party from performing
or having the ability to perform its obligation pursuant to this Agreement,
except, however, this clause will have no application in the case of civil or
criminal proceedings that either Party has disclosed to the other Party in
writing prior to the Effective Date or that are otherwise disclosed in either
Party’s reports or statements filed pursuant to the Securities Exchange Act of
1934 prior to the Effective Date. Such notice of termination must be given
within [**]
of the terminating Party becoming aware of the circumstances described in this Section 8.2.2.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

44

 

8.2.3.                                                     Effects of
Termination by Ironwood or by Partner for Convenience. If this
Agreement is terminated by Ironwood under Section 8.2.1, 8.2.2, 8.2.5, or
8.4.2, or by Partner under Section 8.3, then the following provisions will
be effective, for the corresponding country, or the entire Territory, as
applicable, upon such termination:

 

(a)                                  All licenses granted by
Ironwood to Partner hereunder will automatically terminate;

 

(b)                                 All licenses granted by Partner to Ironwood will
become fully paid up, irrevocable, perpetual, royalty-free licenses;

 

(c)                                  Partner will assign to
Ironwood all right, title, and interest in and to: (i) all Regulatory
Submissions and Regulatory Approvals pertaining to the Licensed Compound or Product
Controlled by Partner, (ii) all of Partner’s interest in any Trademark
(including, without limitation, the goodwill symbolized by such Trademark) used
to brand the Product, and (iii) all of Partner’s interest in any
copyrights to the extent necessary or useful for Commercializing the Product;

 

(d)                                 Partner will grant, and
hereby grants, to Ironwood a worldwide, exclusive (even as to Partner),
royalty-free and fully sublicensable license to practice any invention claimed
in the Partner Patent Rights or Joint Patent Rights, and to practice the
Partner Know-How and Joint Know-How for purposes of Development and
Commercialization of the Licensed Compound or the Product in the Field;

 

(e)                                  Partner will furnish
Ironwood with reasonable cooperation to assure a smooth transition of any
clinical or other studies in progress related to the Licensed Compound or
Product which Ironwood determines to continue in compliance with Applicable Law
and ethical guidelines applicable to the transfer or termination of any such
studies. In addition, Partner will return all Ironwood Confidential Information
to Ironwood; and

 

(f)                                    Until termination is
effective, Partner will continue to perform its obligations under the
Development Plan and the Commercialization Plan then in effect, except with
respect to activities that Ironwood elects to discontinue.

 

Sections 8.2.3(a) will be effective upon any such termination, and
Sections 8.2.3(b), 8.2.3(c), 8.2.3(d), 8.2.3(e) and 8.2.3(f) will be
effective upon such termination or Ironwood’s earlier election following a
notice of termination.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

45

 

8.2.4.                                                     Effects of
Termination by Partner. If Partner is entitled to terminate this
Agreement pursuant to Section 8.2.1 or 8.2.2, Partner may terminate this
Agreement, in which case all licenses granted by Ironwood to Partner will
terminate and neither Party will have any further contractual obligations to
the other except to the extent of provisions which survive the termination of
this Agreement by their respective terms and obligations accrued but remaining
outstanding as of the effectiveness of termination.

 

8.2.5.                                                     Bankruptcy. This
Agreement may be terminated by written notice by either Party at any time
during the Term of this Agreement if the other Party will file in any court or
agency, pursuant to any statute or regulation of any state or country, a
petition in bankruptcy or insolvency or for reorganization or for an
arrangement or for the appointment of a receiver or trustee of that Party or of
its assets, or if the other Party proposes a written agreement of composition
or extension of its debts, or if the other Party will be served with an
involuntary petition against it, filed in any insolvency proceeding, and such
petition is not dismissed within 60 days after the filing thereof, or if the
other Party proposes or is a Party to any dissolution or liquidation, or if the
other Party makes an assignment for the benefit of its creditors.

 

8.3.                              Termination for Convenience. Prior to its
expiration, this Agreement may be terminated in its entirety at any time by
Partner effective upon at least [**] prior written notice to
Ironwood for any reason. If Partner terminates for a material safety issue,
Partner will provide all assistance reasonably requested by Ironwood for at
least [**]
after the effective date of such termination to identify, further characterize,
and fully document such safety issue, and will provide such other assistance as
may be reasonably useful or necessary for Ironwood to continue with the
development or commercialization of the Licensed Compound. Notwithstanding the
foregoing sentence, Partner will not be required to undertake any Development,
Manufacturing, or Commercialization activities after providing notice of
termination for a material safety issue under this Section 8.3.

 

8.4.                              Change of Control.

 

8.4.1.                                                     Change of
Control Notice. Partner will notify Ironwood in writing,
referencing this Section 8.4.1 of this Agreement, immediately upon any
Change of Control, and will provide such notice where possible at least 60 days
prior to the Change of Control.

 

8.4.2.                                                     Consequences of
a Change of Control.

 

(a)           In
the event that Partner is subject to a Change of Control which could reasonably
be expected to lead to an Impairment (as defined below), Partner will notify
Ironwood at least [**] prior to the closing of such transaction,
and Ironwood may elect, in its sole discretion, to (i) continue this
Agreement in accordance with its terms, (ii) terminate this Agreement

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

46

 

on [**] notice, during which period
this Agreement would continue in effect in accordance with its terms, or (iii) terminate
this Agreement effective upon [**] written notice of
termination, in each of cases (ii) and (iii) such notice to be
delivered within [**]
after the Fair Market Value is determined pursuant to this Section 8.4.2(a).
Within [**]
following Ironwood’s receipt of notice from Partner of a Change of Control,
Ironwood will provide notice to Partner requesting a determination of the Fair
Market Value of the Product rights subject to acquisition by Ironwood upon a
termination pursuant to this Section 8.4.2(a), and the failure to so
request [**]
will be deemed the election to continue this Agreement in accordance with its
terms. Such determination must be made by the Parties in good faith, and if
such determination is not made within [**] of the request, then as
determined by a [**].
In connection with such termination, [**] of the effective date of the
termination.

 

(b)           In the event
that Partner is subject to a Change of Control and the other party to the
Change of Control is [**].

 

(c)           For purposes of
this Section 8.4.2, an “Impairment” will only be deemed to occur if
(a) it is reasonably anticipated that the entity resulting from such
Change of Control will be unable to perform its obligations in accordance with
the terms of this Agreement, [**], (b) the product line
of the entity which results from the Change of Control includes [**].

 

8.5.                              Survival of Certain
Obligations. Expiration or termination of this Agreement will
not relieve the Parties of any obligation accruing before such expiration or
termination. The provisions of this Agreement that must, by their nature,
survive expiration or termination of this Agreement to give effect to their
intent, will so survive, including without limitation Sections 5, 8, and 9. Any
expiration or early termination of this Agreement will be without prejudice to
the rights of either Party against the other accrued or accruing under this
Agreement before termination.

 

9.                                      PRODUCT LIABILITY, INDEMNIFICATION, AND INSURANCE

 

9.1.                              Indemnification by Ironwood. Ironwood will
indemnify, defend and hold harmless Partner, its Affiliates, and each of its
and their respective employees, officers, directors agents and permitted
Sublicensees (each, a “Partner Indemnified Party”) from and against any
and all losses, damages, liabilities, settlements, penalties, fines, and
expenses (including, without limitation, reasonable attorneys’ fees and
expenses) (collectively, “Liability”) that the Partner Indemnified Party
may be required to pay to one or more Third Parties to the extent resulting
from or arising out of (i) any Ironwood representation or warranty set
forth in this Agreement being untrue in any material respect or (ii) any
material breach by Ironwood of any of its covenants or obligations hereunder,
except to the extent caused by the gross negligence or willful misconduct of
Partner or any Partner Indemnified Party, or by breach of this Agreement by
Partner.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

47

 

9.2.                              Indemnification by Partner. Partner will
indemnify, defend and hold harmless Ironwood, its Affiliates, Sublicensees,
distributors and each of its and their respective employees, officers,
directors and agents (each, an “Ironwood Indemnified Party”) from and
against any and all Liabilities that the Ironwood Indemnified Party may be
required to pay to one or more Third Parties to the extent resulting from or
arising out of:

 

(a)                                  any Partner representation
or warranty set forth in this Agreement being untrue in any material respect or
a material breach by Partner of any of its covenants or obligations hereunder;

 

(b)                                 the Development of the
Product by Partner hereunder;

 

(c)                                  the Commercialization of the
Product by Partner in the Field in the Territory hereunder; or

 

(d)                                 any recall or withdrawal of
the Product in the Field in the Territory, to the extent attributable to acts
of Partner,

 

except in each case, to the extent caused by the
gross negligence or willful misconduct of Ironwood or any Ironwood Indemnified
Party, or by breach of this Agreement by Ironwood.

 

9.3.                              Procedure. Each Party
will notify the other in the event it becomes aware of a claim for which
indemnification may be sought hereunder or for which Liability is shared
pursuant to this Section 9. In case any proceeding (including any
governmental investigation) is instituted involving any Party in respect of
which indemnity may be sought pursuant to this Section 9, such Party (the “Indemnified
Party”) will promptly notify the other Party (the “Indemnifying Party”)
in writing and the Indemnifying Party and Indemnified Party will meet to
discuss how to respond to any claims that are the subject matter of such
proceeding. The Indemnifying Party, upon request of the Indemnified Party, will
retain counsel reasonably satisfactory to the Indemnified Party to represent
the Indemnified Party and will pay the fees and expenses of such counsel
related to such proceeding. In any such proceeding, the Indemnified Party will
have the right to retain its own counsel, but the fees and expenses of such
counsel will be at the expense of the Indemnified Party unless (i) the
Indemnifying Party and the Indemnified Party will have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the Indemnifying Party and the
Indemnified Party and representation of both Parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
All such fees and expenses incurred pursuant to Section 9.1 or 9.2 will be
reimbursed as they are incurred. The Indemnifying Party will not be liable for
any settlement of any proceeding unless effected with its written consent. The
Indemnifying Party will not, without the written consent of the Indemnified
Party, effect any settlement of any pending or threatened proceeding in respect
of which the Indemnified Party is, or arising out of the same set of facts
could have been, a party and indemnity could have been sought hereunder by the
Indemnified Party, unless such settlement includes an

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

48

 

unconditional release of the Indemnified
Party from all liability on claims to which the indemnity relates that are the
subject matter of such proceeding.

 

9.4.                              Insurance. Each Party
further agrees to use Commercially Reasonable Efforts to obtain and maintain,
during the Term of this Agreement, commercial general liability insurance,
including products liability insurance, with reputable and financially secure
insurance carriers to cover its indemnification obligations under
Sections 9.1 or 9.1, as applicable, or self-insurance, with limits of not
less than [**]
million dollars per occurrence and [**] million dollars in the
aggregate ($[**]
in the aggregate from and after Commercial Launch).

 

9.5.                              Liability Limitations.
NOTWITHSTANDING THE FOREGOING, IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE
OTHER FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE, OR
EXEMPLARY DAMAGES UNDER THIS AGREEMENT, EXCEPT TO THE EXTENT THE DAMAGES RESULT
FROM A PARTY’S WILLFUL MISCONDUCT OR ARISE FROM A PARTY’S INDEMNIFICATION
OBLIGATIONS UNDER THIS SECTION 9.

 

10.                               MISCELLANEOUS.

 

10.1.                        Governing Law; Jurisdiction;
Dispute Resolution.

 

10.1.1.                                               Governing Law. The
interpretation and construction of this Agreement will be governed by the laws
of the State of New York, excluding any conflicts or choice of law rule or
principle that might otherwise refer construction or interpretation of this
Agreement to the substantive law of another jurisdiction.

 

10.1.2.                                               Dispute
Resolution. In the event of a dispute arising out of or relating to this Agreement, either
Party will provide written notice of the dispute to the other, in which event
the dispute will be referred to the executive officers designated below or
their successors, for attempted resolution by good faith negotiations within 30
days after such notice is received. The designated officers are initially as
follows:

 

For Ironwood:  Its Chief Executive Officer
or his designate

For Partner:  Its Chief Executive Officer
or his designate

 

In the event the designated executive officers do
not resolve such dispute within the allotted 30 days, either Party may, after
the expiration of the 30 day period, seek to resolve the dispute through
arbitration in accordance with Section 10.1.3. Notwithstanding the
preceding, the Parties acknowledge that the failure of the JDC to reach
consensus as to any matter, which failure does

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

49

 

not involve a breach by a Party of its obligations
hereunder, will not be deemed a dispute which may be referred for resolution by
arbitration hereunder.

 

10.1.3.                                               Arbitration.

 

(a)           Claims. Any claim,
dispute, or controversy of whatever nature arising between the Parties out of
or relating to this Agreement that is not resolved under Section 10.1.2
within the required 30 day time period, including without limitation, any
action or claim based on tort, contract, or statute (including any claims of
breach or violation of statutory or common law protections from discrimination,
harassment and hostile working environment), or concerning the interpretation,
effect, termination, validity, performance and/or breach of this Agreement (“Claim”),
will be resolved by final and binding arbitration before a panel of three
experts with relevant industry experience (the “Arbitrators”). One
Arbitrator will be chosen by Ironwood and one Arbitrator will be chosen by
Partner within 15 days from the notice of initiation of arbitration. The third
Arbitrator will be chosen by mutual agreement of the Arbitrator chosen by
Ironwood and the Arbitrator chosen by Partner within 15 days of the date that
the last of such Arbitrators were appointed. The Arbitrators will be
administered by the International Chamber of Commerce (the “Administrator”)
in accordance with its then existing arbitration rules or procedures
regarding commercial or business disputes. The arbitration will be held in New
York, New York. The Arbitrators will be instructed by the Parties to complete
the arbitration within 90 days after selection of the final Arbitrator.

 

(b)           Arbitrators’
Award. The Arbitrators will, within 15 calendar days after the conclusion of
the arbitration hearing, issue a written award and statement of decision
describing the essential findings and conclusions on which the award is based,
including the calculation of any damages awarded. The decision or award
rendered by the Arbitrators will be final and non-appealable, and judgment may
be entered upon it in accordance with applicable law in the State of New York
or any other court of competent jurisdiction. The Arbitrators will be
authorized to award compensatory damages, but will NOT be authorized (i) to
award non-economic damages, such as for emotional distress, pain and suffering
or loss of consortium, (ii) to award punitive damages, or (iii) to
reform, modify or materially change this Agreement or any other agreements
contemplated hereunder; provided, however, that the damage limitations
described in parts (i) and (ii) of this sentence will not apply if
such damages are statutorily imposed.

 

(c)           Costs.
Each Party will bear its own attorney’s fees, costs, and disbursements arising
out of the arbitration and the costs of the arbitrator

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

50

 

selected by it, and will pay an equal share
of the fees and costs of the third arbitrator; provided, however, the
Arbitrators will be authorized to determine whether a party is the prevailing
party, and if so, to award to that prevailing party reimbursement for its
reasonable attorneys’ fees, costs and disbursements (including, for example,
expert witness fees and expenses, photocopy charges, travel expenses, etc.),
and/or the fees and costs of the Administrator and the Arbitrators.

 

(d)           Compliance
with this Agreement. Unless the Parties otherwise agree in writing, during
the period of time that any arbitration proceeding is pending under this
Agreement, the Parties will continue to comply with all those terms and
provisions of this Agreement that are not the subject of the pending
arbitration proceeding.

 

(e)           Injunctive
or Other Equity Relief. Nothing contained in this Agreement will deny any
Party the right to seek injunctive or other equitable relief from a court of
competent jurisdiction in the context of a bona fide emergency or prospective
irreparable harm, and such an action may be filed and maintained
notwithstanding any ongoing arbitration proceeding.

 

10.2.        Force
Majeure. No liability will result from, and no right to terminate will
arise, in whole or in part, based upon any delay in performance or
non-performance, in whole or in part, by either of the Parties to this
Agreement to the extent that such delay or non-performance is caused by an
event of Force Majeure. “Force Majeure” means an event that is beyond a
non-performing Party’s reasonable control, including an act of God, act of the
other Party, war, riot, civil commotion, terrorist act, malicious damage,
epidemic, quarantine, fire, flood, storm, natural disaster or compliance with
any law or governmental order, rule, regulation or direction, whether or not it
is later held to be invalid or inapplicable. The Force Majeure Party will
within ten days of the occurrence of the Force Majeure event, give written
notice to the other Party stating the nature of the Force Majeure event, its
anticipated duration and any action being taken to avoid or minimize its
effect. Any suspension of performance will be of no greater scope and of no
longer duration than is reasonably required and the Force Majeure Party will
use reasonable effort to remedy its inability to perform; provided, however, if
the suspension of performance continues or is anticipated to continue for 30
days after the date of the occurrence, the unaffected Party will have the right
but not the obligation to perform on behalf of the Force Majeure Party for a
period of such Force Majeure and such additional period as may be reasonably
required to assure a smooth and uninterrupted transition of such activities. If
such failure to perform would constitute a material breach of this Agreement in
the absence of such event of Force Majeure, and continues for one year from the
date of the occurrence and the Parties are not able to agree on appropriate
amendments within such period, such other Party will have the right,
notwithstanding the first sentence of this Section 10.2, to terminate this
Agreement immediately by written notice to the Force Majeure Party, in which
case neither Party will have any liability to

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

51

 

the other except for those rights and
liabilities that accrued prior to the date of termination and the consequences
of termination pursuant to Sections 8.2.3 or 8.2.4, as applicable, as if such
termination was a termination as to which such consequences applied.

 

10.3.        Additional
Approvals. Partner and Ironwood will cooperate and use respectively all
reasonable efforts to make all other registrations, filings and applications,
to give all notices and to obtain as soon as practicable all governmental or
other consents, transfers, approvals, orders, qualifications authorizations,
permits and waivers, if any, and to do all other things necessary or desirable
for the consummation of the transactions as contemplated hereby. Neither Party
will be required, however, to divest or out-license products or assets or materially
change its business if doing so is a condition of obtaining any governmental
approvals of the transactions contemplated by this Agreement.

 

10.4.        Waiver
and Non-Exclusion of Remedies. A Party’s failure to enforce, at any time or
for any period of time, any provision of this Agreement, or to exercise any
right or remedy will not constitute a waiver of that provision, right or remedy
or prevent such Party from enforcing any or all provisions of this Agreement
and exercising any rights or remedies. To be effective any waiver must be in
writing. The rights and remedies provided in this Agreement are cumulative and
do not exclude any other right or remedy provided by law or otherwise available
except as expressly set forth in this Agreement.

 

10.5.        Notices.

 

10.5.1.                Notice Requirements. Any
notice, request, demand, waiver, consent, approval or other communication
permitted or required under this Agreement must be in writing, must refer
specifically to this Agreement and will be deemed given only if delivered by
hand or sent by facsimile transmission (with transmission confirmed) or by
internationally recognized overnight delivery service that maintains records of
delivery, addressed to the Parties at their respective addresses specified in Section 10.5.2
or to such other address as the Party to whom notice is to be given may have
provided to the other Party in accordance with this Section 10.5.1. Such
Notice will be deemed to have been given as of the date delivered by hand or
transmitted by facsimile (with transmission confirmed) or on the second
business day (at the place of delivery) after deposit with an internationally
recognized overnight delivery service. This Section 10.5.1 is not intended
to govern the day-to-day business communications necessary between the Parties
in performing their obligations under the terms of this Agreement.

 

10.5.2.                                               Address for
Notice.

 

For Ironwood:

 

Ironwood Pharmaceuticals, Inc.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

52

 

320 Bent Street

Cambridge, MA 02141

Fax:                           617-494-0908

Attn:       Vice
President, Business Development

 

With a copy to:

 

Ropes & Gray LLP

One International Place

Boston, MA 02110

Fax:                           617-951-7050

Attn:       Marc
Rubenstein

 

For Partner:

 

Laboratorios Almirall, S.A.

General Mitre, 151

08022 Barcelona (Spain)

Fax: (+34) 93 291 3569

Attn: Chief Executive for Corporate Development and
Finance

 

With a copy to:

 

Laboratorios Almirall, S.A.

General Mitre, 151

08022 Barcelona (Spain)

Fax: (+34) 93 291 3561

Attn: Legal Director

 

10.6.        Entire
Agreement. This Agreement, constitutes the entire agreement between the
Parties with respect to the subject matter of this Agreement. This Agreement
supersedes all prior agreements, whether written or oral, with respect to the
subject matter of this Agreement. Each Party confirms that it is not relying on
any representations, warranties or covenants of the other Party except as
specifically set out in this Agreement. Nothing in this Agreement is intended
to limit or exclude any liability for fraud. All Exhibits or Schedules referred
to in this Agreement are intended to be and are hereby specifically incorporated
into and made a part of this Agreement. In the event of any inconsistency
between any such Exhibits or Schedules and this Agreement, the terms of this
Agreement will govern.

 

10.7.        Amendment.
Any amendment or modification of this Agreement must be in writing and signed
by authorized representatives of both Parties.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

53

 

10.8.        Assignment.
Neither Party may assign its rights or delegate its obligations under this
Agreement, in whole or in part without the prior written consent of the other
Party, except that each Party will always have the right, without such consent,
(a) to perform any or all of its obligations and exercise any or all of
its rights under this Agreement through any of its Affiliates, (b) on
written notice to the other Party, assign any or all of its rights and delegate
or subcontract any or all of its obligations hereunder to any of its
Affiliates, and (c) to assign this Agreement in its entirety in connection
with a Change of Control of such Party. Notwithstanding the foregoing, each
Party will remain responsible for any failure to perform on the part of any
such Affiliates. Any attempted assignment or delegation in violation of this Section 10.8
will be void.

 

10.9.        No
Benefit to Others. The provisions of this Agreement are for the sole
benefit of the Parties and their successors and permitted assigns, and they
will not be construed as conferring any rights in any other persons except as
otherwise expressly provided in this Agreement.

 

10.10.      Counterparts.
This Agreement may be executed in any number of counterparts, each of which
will be deemed an original and all of which taken together will be deemed to
constitute one and the same instrument. An executed signature page of this
Agreement delivered by facsimile transmission will be as effective as an
original executed signature page.

 

10.11.      Severability.
To the fullest extent permitted by applicable law, the Parties waive any
provision of law that would render any provision in this Agreement invalid,
illegal or unenforceable in any respect. If any provision of this Agreement is
held to be invalid, illegal or unenforceable, in any respect, then such
provision will be given no effect by the Parties and will not form part of this
Agreement. To the fullest extent permitted by applicable law and if the rights
or obligations of any Party will not be materially and adversely affected, all
other provisions of this Agreement will remain in full force and effect and the
Parties will use their best efforts to negotiate a provision in replacement of
the provision held invalid, illegal or unenforceable that is consistent with
applicable law and achieves, as nearly as possible, the original intention of
the Parties.

 

10.12.      Further
Assurance. Each Party will perform all further acts and things and execute
and deliver such further documents as may be necessary or as the other Party
may reasonably require to implement or give effect to this Agreement.

 

10.13.      Publicity. Notwithstanding Section 5.1.6, it is understood that the Parties
will issue a press release announcing the execution of this Agreement in such
form as the Parties mutually agree. The Parties will consult with each other
reasonably and in good faith with respect to the text and timing of any
subsequent press releases relating to this Agreement or the activity hereunder
prior to the issuance thereof, provided that a Party may not unreasonably
withhold consent to such releases, and that either Party may issue such press
releases as it determines, based on advice of counsel, are reasonably necessary

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

54

 

to comply with laws or
regulations or for appropriate market disclosure or which are consistent with
information disclosed in prior releases properly made hereunder.

 

10.14.      Relationship
of the Parties. The status of a Party under this Agreement will be that of
an independent contractor. Nothing contained in this Agreement will be
construed as creating a partnership, joint venture, or agency relationship
between the Parties or, except as otherwise expressly provided in this
Agreement, as granting either Party the authority to bind or contract any obligation
in the name of or on the account of the other Party or to make any statements,
representations, warranties, or commitments on behalf of the other Party. All
Persons employed by a Party or any of its Affiliates are employees of such
Party or its Affiliates and not of the other Party or such other Party’s
Affiliates and all costs and obligations incurred by reason of any such
employment will be for the account and expense of such Party or its Affiliates,
as applicable.

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

55

 

IN WITNESS WHEREOF, duty
authorized representatives of the Parties have duly executed this Agreement to
be effective as of the Effective Date.

 

 

	
  IRONWOOD PHARMACEUTICALS, INC.

  	
   

  	
  LABORATORIOS ALMIRALL, S.A.

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Halley E. Gilbert

  	
   

  	
  By:

  	
  /s/ P. Veronneau

  
	
   

  	
   

  	
   

  	
   

  	
  /s/ J. Figueras

  
	
  Name:

  	
  Halley E. Gilbert, Esq.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  P. Veronneau

  
	
  Title:

  	
  Vice President & General Counsel

  	
   

  	
   

  	
  J. Figueras

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Proxies

  

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

 

EXHIBIT A

 

LAUNCH PLAN

 

[**]

 

 

EXHIBIT B

 

PRODUCT SPECIFICATION

 

[**]

 

 

EXHIBIT C

 

INITIAL DEVELOPMENT PLAN

 

[**]

 

 

EXHIBIT D

 

PHARMACOVIGILANCE AGREEMENT

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

 

EXHIBIT E

 

STOCK PURCHASE AGREEMENT

 

[**] = Portions of this exhibit have been
omitted pursuant to a confidential treatment request. An unredacted version of
this exhibit has been filed separately with the Commission.

 

 

FORM OF SERIES I CONVERTIBLE PREFERRED STOCK

PURCHASE AGREEMENT

 

BY AND BETWEEN

 

IRONWOOD PHARMACEUTICALS, INC.

 

AND

 

LABORATORIOS ALMIRALL, S.A.

 

 

[DATE]

 

 

[**]
= Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

 

 

SERIES I CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT

 

This
SERIES I CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT (this “Agreement”) is made and entered into as of [Date], by
and between IRONWOOD PHARMACEUTICALS, INC.,
a Delaware corporation (the “Company”), and LABORATORIOS ALMIRALL,
S.A., a corporation organized under the laws of Spain (“Purchaser”).

 

RECITALS

 

WHEREAS, the Company has authorized
the sale and issuance of an aggregate of 681,819 shares of its Series I
Convertible Preferred Stock, par value $0.001 per share (the “Series I Stock”);

WHEREAS, Purchaser desires to
purchase the Shares (as defined in Section 1.1) on the terms and
conditions set forth herein; and

WHEREAS, the Company desires to
issue and sell the Shares to Purchaser on the terms and conditions set forth
herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the
foregoing recitals and the mutual promises hereinafter set forth, the parties
hereto agree as follows:

 

1.             AGREEMENT
TO SELL AND PURCHASE.

 

1.1          Authorization of Shares.  On or prior to
the Closing (as defined in Section 2.1), the Company shall have duly
authorized (a) the sale and issuance to Purchaser of 681,819 shares of its
Series I Stock (the “Shares”)
and (b) the issuance of such shares of Series B Common Stock, par
value $0.001 per share (the “Series B Common Stock”)
to be issued upon conversion of the Shares (the “Conversion Shares”).  The Shares and the Conversion Shares shall
have the rights, preferences, privileges and restrictions set forth in the
Tenth Amended and Restated Certificate of Incorporation of the Company, in the
form attached hereto as Exhibit A
(the “Restated
Certificate of Incorporation”). 
The Company has, or prior to the Closing will have, adopted and filed
the Restated Certificate of Incorporation with the Secretary of State of the
State of Delaware.

 

1.2          Sale and
Purchase.  Subject to the
terms and conditions hereof, at the Closing, the Company hereby agrees to issue
and sell to Purchaser and Purchaser agrees to purchase from the Company the
Shares at a purchase price of twenty-two U.S. dollars ($22.00) per share.

 

2.             CLOSING, DELIVERY AND PAYMENT.

 

2.1          Closing.  The closing of
the sale and purchase of the Shares under this Agreement (the “Closing”) shall take
place at 10:00 a.m. on the date hereof, upon the satisfaction 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

of
the closing conditions set forth in Section 5 below, at the offices of
Ropes & Gray LLP, One International Place, Boston, Massachusetts
02110, or at such other time or place as the Company and Purchaser may mutually
agree (such date is hereinafter referred to as the “Closing Date”).  If at the Closing any of the conditions
specified in Section 5.1 shall not have been fulfilled, Purchaser shall,
at its election, be relieved of all of its obligations under this Agreement
without thereby waiving any other rights Purchaser may have by reason of such
failure or such non-fulfillment.

 

2.2          Delivery.  At the
Closing, subject to the terms and conditions hereof, the Company will deliver
to Purchaser a certificate representing the Shares against payment of the
purchase price therefor by check, wire transfer made payable to the order of
the Company, or any combination of the foregoing.

 

2.3          Use of Proceeds.  The Company
shall use the proceeds from the sale of the Shares for product development and
for general working capital purposes.

 

3.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

Except
as set forth in the Schedule of Exceptions attached hereto as Exhibit C delivered by the Company to
Purchaser at the Closing, the Company hereby represents and warrants to
Purchaser as of the date of this Agreement as follows:

 

3.1          Organization, Good Standing and Qualification.  The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.  The Company has all
requisite corporate power and authority to own and operate its properties and
assets, to carry on its business as presently conducted and as presently
proposed to be conducted, to execute and deliver this Agreement and the Eighth
Amended and Restated Investors’ Rights Agreement in the form attached hereto as
Exhibit B (the “Investors’ Rights Agreement”),
to issue and sell the Shares and the Conversion Shares, and to carry out the
provisions of this Agreement, the Investors’ Rights Agreement and the Restated
Certificate of Incorporation.  The
Company is duly qualified and is authorized to do business as a foreign
corporation and is in good standing in all jurisdictions listed in the Schedule
of Exceptions in which the nature of its activities and of its properties (both
owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to so qualify would not have a material adverse
effect on the business, assets, properties, operations, prospects or financial
condition of the Company (a “Material Adverse Effect”).  The Company has furnished to Purchaser true
and complete copies of its Ninth Amended and Restated Certificate of
Incorporation (the “Certificate
of Incorporation”) and By-laws as presently in effect.

 

3.2          Subsidiaries.  Except as set
forth in the Schedule of Exceptions, the Company has no subsidiaries and does
not own or control, directly or indirectly, any equity security of any
corporation or any other interest in any other corporation, general or limited
partnership, joint venture association, business trust or other business
entity.  The Company is not a participant
in any joint venture, partnership or similar arrangement.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

3.3          Capitalization; Voting Rights.(1)

 

The
authorized capital stock of the Company, immediately prior to the Closing after
giving effect to the Restated Certificate of Incorporation, will consist of
[98,530,700] shares of Series A Common Stock, par value $0.001 per share
(the “Series A Common Stock,”
and together with the Series B Common Stock, the “Common
Stock”), none of which are issued and outstanding, and
[98,530,700] shares of which are reserved for future issuance upon conversion
of shares of Series B Common Stock, [98,530,700] shares of Series B
Common Stock, [7,095,178] shares of which are issued and outstanding and
[16,006,519] shares of which are reserved for future issuance to employees
pursuant to the Company’s 1998 Stock Option Plan, 2002 Stock Incentive Plan,
2002 California Stock Incentive Plan and 2005 Stock Incentive Plan
(collectively, the “Stock
Incentive Plans”) and [74,942,226] shares of Preferred Stock,
par value $0.001 per share, 8,904,567 of which are designated Series A
Preferred Stock, all of which are issued and outstanding, 7,419,355 of which
are designated Series B Preferred Stock, all of which are issued and
outstanding, 6,401,523 of which are designated Series C Preferred Stock,
all of which are issued and outstanding, 12,618,296 of which are designated as Series D
Preferred Stock, all of which are issued and outstanding, 20,500,000 of which are
designated as Series E Preferred Stock, 19,633,531 of which are issued and
outstanding, 8,000,000 of which are designated as Series F Preferred
Stock, all of which are issued and outstanding, 2,083,333 of which are
designated as Series G Preferred Stock, none of which are issued and
outstanding, 8,333,333 of which are designated as Series H Preferred
Stock, 4,141,586 of which are issued and outstanding, and 681,819 of which are
designated as Series I Preferred Stock, none of which are issued and
outstanding (collectively, the “Preferred Stock”). 
All issued and outstanding shares of the Company’s capital stock  (a) have been duly authorized and
validly issued, (b) are fully paid and non-assessable, and (c) were
offered, issued, sold and delivered in compliance with all applicable federal
and state securities laws.  The rights,
preferences, privileges and restrictions of the Shares are as stated in the
Restated Certificate of Incorporation. 
Each series of Preferred Stock is convertible into Series B Common Stock
on a one-for-one basis.  Each share of Series B
Common Stock is convertible into a share of Series A Common Stock on a
one-for-one basis.  The Conversion Shares
have been duly and validly reserved for issuance.

(a)           Other than the
[16,006,519] shares of Series B Common Stock reserved for issuance under
the Company’s Stock Incentive Plans, the [98,530,700] shares of Series A
Common Stock reserved for issuance upon conversion of shares of Series B
Common Stock, and except as provided in the Restated Certificate of
Incorporation and the Investors’ Rights Agreement or as set forth in the
Schedule of Exceptions, (i) no subscriptions, warrants, options,
convertible securities or other rights (contingent or otherwise) to purchase or
acquire (including conversion or preemptive rights and rights of first refusal)
any shares of capital stock of the Company are authorized or outstanding, (ii) the
Company has no obligation (contingent or otherwise) to issue any subscription,
warrant, option, convertible security or other such right (including conversion
or preemptive rights and rights of first refusal) or to issue or distribute to
holders of any shares of its capital stock any evidences of indebtedness or
assets of the Company, and (iii) the Company has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend 

 

(1) Capitalization
figures are current as of the date of the License Agreement between the Company
and Purchaser.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

or make any other distribution in respect thereof, and (iv) no
stock appreciation, phantom stock or similar rights with respect to the Company
are authorized or outstanding.  Except as
contemplated by this Agreement, the Investors’ Rights Agreement, the Fourth
Amended and Restated Voting Agreement, dated as of September 12, 2008, by
and among the Company, Fidelity Biosciences Limited Partnership and certain
stockholders of the Company (the “Voting Agreement”)
or in the Schedule of Exceptions, there are no agreements or proxies, written
or oral, between the Company and any holder of its capital stock, or, to the
best knowledge of the Company, among any holders of its capital stock, relating
to the acquisition, disposition or voting of the capital stock of the Company.

 

(b)           When issued in
compliance with the provisions of this Agreement and the Restated Certificate
of Incorporation, the Shares and the Conversion Shares will be validly issued,
fully paid and nonassessable, and will be free of any liens or encumbrances
(other than liens and encumbrances created by Purchaser); provided, however, that the Shares and the
Conversion Shares may be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein or as otherwise required by such
laws at the time a transfer is proposed. 
The sale of the Shares and the subsequent conversion of the Shares into
Conversion Shares are not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with on
or prior to the Closing.

 

3.4          Authorization; Binding Obligations. 
All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization of this Agreement
and the Investors’ Rights Agreement, the performance of all obligations of the
Company hereunder and thereunder at the Closing and the authorization, sale,
issuance and delivery of the Shares pursuant hereto and the Conversion Shares
pursuant to the Restated Certificate of Incorporation has been taken or will be
taken prior to the Closing.  This
Agreement and the Investors’ Rights Agreement have been duly executed and
delivered by the Company and constitute the valid and binding obligations of
the Company enforceable in accordance with their respective terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors’ rights, (b) general
principles of equity that restrict the availability of equitable remedies, and (c) to
the extent that the enforceability of the indemnification provisions in Section 2.9
of the Investors’ Rights Agreement may be limited by applicable laws.

 

3.5          Financial Statements.  The Company has
made available to Purchaser a complete and correct copy of (i) the audited
balance sheet of the Company as of December 31,
20    , and the related, audited statements of income,
changes in stockholders’ equity and cash flows for the fiscal year then ended,
and (ii) the unaudited balance sheet of the Company as of [Date] (the “Statement Date”), and the related,
unaudited statements of income and cash flows for the fiscal year then ended
(collectively, the “Financial Statements”). The
Financial Statements, together with the notes thereto, were prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with prior periods, are complete and correct in all material
respects and present fairly the financial condition and position of the Company
as of their respective dates; provided, however, that the unaudited Financial Statements are subject

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

to
normal recurring year-end audit adjustments (which will not be material), and
do not contain all footnotes required under generally accepted accounting
principles.

 

3.6          Liabilities.  Except as set
forth in the Schedule of Exceptions, the Company has no material liabilities
and, to the best of its knowledge, knows of no material contingent liabilities
not disclosed in the Financial Statements, except current liabilities incurred
in the ordinary course of business which are not, either individually or in the
aggregate, material to the business, assets, properties, operations, prospects
or financial condition of the Company.

 

3.7          Absence of Changes. 
Except as set forth in the Schedule of Exceptions, since the Statement
Date, there has not been:

 

(a)           any change in
the business, assets, properties, operations, prospects or financial condition
of the Company, except changes in ordinary course of business that have not
been, either individually or in the aggregate, materially adverse;

 

(b)           any change
(individually or in the aggregate) in the contingent obligations of the Company
by way of guaranty, endorsement (other than endorsement of drafts in the
ordinary course of business for the purpose of collection), indemnity, warranty
(other than in the ordinary course of business), or otherwise;

 

(c)           any material
loss, destruction or damage to any property of the Company, whether or not
insured;

 

(d)           any waiver by
the Company of any valuable right or of any material debt or claim owed to it;

 

(e)           any
satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company, except in the ordinary course of business or that is
not material to the business, assets, properties, operations, prospects or
financial condition of the Company;

 

(f)            any material
change or amendment to a material contract or arrangement by which the Company
or any of its assets or properties is bound;

 

(g)           any change in
the compensation paid or payable to any officer, director, employee,
consultant, agent or stockholder of the Company (other than compensation
increases in the ordinary course of business consistent with past practice,
which, individually and in the aggregate, are not material);

 

(h)           any resignation
or termination of any executive officer or other key employee of the Company or
material change in the terms and conditions of their employment;

 

(i)            any loans or
advances made to any person, other than ordinary advances for travel expenses;

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

(j)            any direct or
indirect redemption or acquisition of, any capital stock in the Company;

 

(k)           declared or
paid any dividends, or authorized or made any distribution in cash or in kind
upon or with respect to any class or series of its capital stock;

 

(l)            to the
Company’s knowledge, any other event or condition of any character that has
affected, or may affect, materially and adversely, the Company’s business or
prospects; or

 

(m)          any agreement
or understanding, whether in writing or otherwise, for the Company to take or
become subject to any of the actions specified in paragraphs (a) through
(l).

 

3.8          Agreements;
Action.

 

(a)           Except for
agreements explicitly contemplated hereby, agreements between the Company and
its employees with respect to the sale of the Company’s Common Stock under the
Stock Incentive Plans, and except as set forth in the Schedule of Exceptions,
there are no agreements, understandings or proposed transactions between the
Company and any of its officers, directors, affiliates or any affiliate
thereof.

 

(b)           The Schedule of
Exceptions sets forth a list of all material agreements, or commitments of any
nature (whether written or oral) to which the Company is a party by which it is
bound, including without limitation (i) any agreement which requires
future expenditures by the Company in excess of $100,000, (ii) the
transfer or license of any patent, trademark, copyright, trade secret or other
proprietary right to or from the Company (other than licenses arising from the
purchase of “off the
shelf” or other standard products), (iii) any employment or
consulting agreement in excess of $100,000, employee benefit, bonus, pension,
profit-sharing, stock option, stock purchase or similar plan or arrangement, (iv) any
distributor, sales representative or similar agreement, (v) any agreement
with any current or former stockholder, officer or director of the Company, or
any “affiliate” or “associate” of such persons (as such terms are defined in
the rules and regulations promulgated under the Securities Act of 1933, as
amended (the “Securities Act”)),
including without limitation any agreement or other arrangement providing for
the furnishing of services by, rental of real or personal property from, or
otherwise requiring payments to, any such person or entity, (vi) provisions
restricting the development, manufacture or distribution of the Company’s
products or services, or (vii) indemnification by the Company with respect
to infringements of proprietary rights (other than indemnification obligations
arising from purchase or sale or license agreements entered into in the
ordinary course of business), (viii) provisions restricting the
development, manufacture or distribution of the Company’s products or services,
(ix) any agreement relating to indebtedness for borrowed money, (x) any
agreement for the disposition of a material portion of the Company’s assets
(other than in the ordinary course of business) and (xi) any agreement for the
acquisition of the business or shares of another party.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

(c)           Except as set
forth in the Schedule of Exceptions, the Company has not (i) declared or
paid any dividends, or authorized or made any distribution upon or with respect
to any class or series of its capital stock or (ii) made any loans or
advances to any person, other than ordinary advances for travel expenses.

 

(d)           For the
purposes of subsection (b) above, all indebtedness, liabilities,
agreements, understandings, instruments, contracts and proposed transactions
involving the same person or entity (including persons or entities the Company
has reason to believe are affiliated therewith) shall be aggregated for the
purpose of meeting the individual minimum dollar amounts of such subsection.

 

(e)           All of the
contracts, agreements and instruments to which the Company is a party are
valid, binding and enforceable in accordance with their respective terms,
except for those contracts, agreements and instruments the lack of validity,
binding effect or enforceability of which would not have a Material Adverse
Effect. The Company has performed all obligations required to be performed by
it and is not in default under, or in breach of, nor in receipt of any claim of
default or breach under any contract, agreement or instrument, except for such
breaches or defaults, which either individually or in the aggregate, would not
have a Material Adverse Effect, and the Company does not have any present
expectation or intention of not fully performing all such obligations.  To the Company’s knowledge, no event has
occurred which with the passage of time or the giving of notice or both would
reasonably be expected to result in a default, breach or event of noncompliance
by the Company under any contract, agreement or instrument.  The Company has no knowledge of any breach or
anticipated breach by the other parties to any contract, agreement or
instrument.

 

(f)            To the extent
Purchaser has so requested in writing, it has been supplied with a true and
correct copy of each of the written instruments, plans, contracts and agreements
and an accurate description of each of the oral arrangements, contracts and
agreements that are referred to on the Schedule of Exceptions pursuant to this Section 3.8,
together with all amendments, waivers or other changes thereto.

 

(g)           The Company is
not a party to and is not bound by any contract, agreement or instrument, or
subject to any restriction under its Certificate of Incorporation or By-laws
that, to its knowledge, adversely affects in any material respect, its business
as currently conducted or as proposed to be conducted, or its properties or its
financial condition.

 

(h)           The Company has
not engaged in the past three months in any discussion (i) with any
representative of any corporation or entity regarding the consolidation or
merger of the Company with or into any such corporation or entity or the sale,
conveyance or disposition of all or substantially all of the assets of the
Company or a transaction or series of related transactions in which more than
fifty percent of the voting power of the Company would be disposed of, or (ii) regarding
any other form of acquisition, liquidation, dissolution or winding up to the
Company.

 

3.9          Obligations to Related Parties.  There are no
obligations of the Company to officers, directors, stockholders, or employees
of the Company other than (a) for payment of 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

salary
for services rendered, (b) reimbursement for reasonable expenses incurred
on behalf of the Company, and (c) for other standard employee benefits
made generally available to all employees (including stock option agreements
outstanding under any Stock Incentive Plans). 
The Company is not a guarantor or indemnitor of any indebtedness of any
other person, firm or corporation.

 

3.10        Title to Properties and Assets; Liens, etc.  Except as set forth in the
Schedule of Exceptions, the Company has good and marketable title to its
properties and assets and good title to its leasehold estates, in each case
subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those
resulting from taxes which have not yet become delinquent, (b) minor liens
and encumbrances which do not materially detract from the value of the property
subject thereto or materially impair the operations of the Company, and (c) those
that have otherwise arisen in the ordinary course of business.  The Company is in compliance with all
material terms of each lease to which it is a party or is otherwise bound.

 

3.11        Patents and Trademarks.

 

(a)           As used in this Agreement, the term “Intellectual Property Rights” with respect to
a party means all: (i) patents, patent applications, inventions and
designs, and any registration thereof with any agency or authority; (ii) trademarks,
service marks, trade names, franchises and copyrights and all registrations and
applications to register any of the foregoing with any agency or authority; (iii) trade
secrets including all formulae, processes, know-how, technical data, shop
rights, and any media or other tangible embodiment thereof and all descriptions
thereof; (iv) all other technology and intangible property, including
without limitation computer programs in object code or source code form,
databases, and documentation and flow charts; and (v) with respect to the
Company, any licenses and other rights granted to or by the Company with
respect to any of the foregoing, excluding
licenses or agreements arising from the purchase of “off the shelf” or
standard products.

 

(b)           The Schedule of
Exceptions contains a complete and accurate list of all (i) patents,
patent applications, trademarks, copyrights and service marks owned by the
Company, identifying the title, filing dates, issue dates, docket or serial
numbers, status and countries of issuance, and (ii) material licenses
granted to or by the Company with respect to
any of the Intellectual Property Rights owned or used by the
Company.  The  Company owns or possesses sufficient legal rights to all
Intellectual Property Rights necessary for its business as now conducted and as
presently proposed to be conducted.  To
the Company’s knowledge, none of the activities conducted by the Company or
proposed to be conducted by the Company infringes, violates or constitutes a
misappropriation of the Intellectual Property Rights of any other person or
entity.  In addition, to the Company’s
knowledge, no other person or entity is infringing, violating or misappropriating
any of the Intellectual Property Rights that the Company owns or has
licensed.  The Company has not received
any communications alleging that the Company has violated or, by conducting its
business as presently conducted and as proposed to be conducted, would violate
any of the Intellectual Property Rights of any other person or entity.  To the Company’s knowledge, no directors,
officers or employees are obligated under any contract (including licenses,
covenants or commitments of any nature) or other 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with their duties to the Company or
that would conflict with the Company’s business as presently conducted and as
proposed to be conducted.  Neither the
execution nor delivery of this Agreement or the Investors’ Rights Agreement,
nor the carrying on of the Company’s business by the employees of the Company,
nor the conduct of the Company’s business as presently conducted and as
proposed to be conducted, will, to the Company’s knowledge, conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any director,
officer or employee, is now obligated. 
The Company does not believe it is or will be necessary to utilize any
inventions, trade secrets or proprietary information of any of its employees
made prior to their employment by the Company, except for inventions, trade
secrets or proprietary information that have been assigned to the Company and
which are disclosed in the Schedule of Exceptions hereto.

 

(c)           The Company has
taken commercially reasonable precautions (i) to protect its rights in its
Intellectual Property Rights, and (ii) to maintain the confidentiality of
its trade secrets, know-how and other confidential Intellectual Property
Rights, and to the Company’s knowledge, there have been no acts or omissions by
the officers, directors, stockholders, employees, consultants and advisors of
the Company the result of which would be to materially compromise the rights of
the Company to apply for, enforce and otherwise ensure the Company’s legal and
equitable rights to all its Intellectual Property Rights.  Each employee and officer of the Company has
executed the Proprietary Information and Inventions Agreement, substantially in
the form attached hereto as Exhibit F
(the “Proprietary Information and Inventions
Agreement”).  Each of the
Company’s consultants has executed a consulting agreement containing provisions
relating to proprietary information and inventions substantially similar to
those contained in the Proprietary Information and Inventions Agreement.

 

3.12        Compliance with Other Instruments. 
The Company is not in violation or default of any term of its
Certificate of Incorporation  or By-laws, or
of any provision of any mortgage, indenture, agreement, instrument or contract
to which it is party or by which it is bound or of any judgment, decree, order,
writ.  The execution of and performance
of the transactions contemplated by this Agreement and the Investors’ Rights
Agreement, and compliance with their respective provisions by the Company, will
not (a) conflict with or violate any provision of the Certificate of
Incorporation or By-laws of the Company; (b) require on the part of the
Company any filing with, or any permit, authorization, consent or approval of,
any court, arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency (each of the foregoing is
hereafter referred to as a “Governmental  Entity”); (c) conflict with, result in a
breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, or other arrangement to which the Company is a party or by which
the Company is bound or to which its assets are subject; (d) result in the
imposition of any mortgage, pledge, security interest, encumbrance, charge, or
other lien (whether arising by contract or by operation of law) upon any assets
of the Company; or 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

(e) violate
any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its properties or assets.

 

3.13        Litigation.  There is no
action, suit, proceeding or investigation pending or, to the Company’s
knowledge, currently threatened against the Company that questions the validity
of this Agreement, the Investors’ Rights Agreement or the right of the Company
to enter into any of such agreements, or to consummate the transactions
contemplated hereby or thereby, or which might result, either individually or
in the aggregate, in any material adverse change in the business, assets,
properties, operations, prospects or financial condition of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for any of the
foregoing.  The foregoing includes,
without limitation, actions pending or threatened (or any basis therefor known
to the Company) involving the prior employment of any of the Company’s
employees, their use in connection with the Company’s business of any information
or techniques allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers.  The Company is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. 
There is no action, suit, proceeding or investigation by the Company
currently pending or which the Company intends to initiate.

 

3.14        Tax Returns and Payments.  The Company has timely filed all foreign,
federal, state, county and local income, excise or franchise tax returns, real
estate and personal property tax returns, sales and use tax returns and other
tax returns and reports required to be filed by it and such returns and reports
are true and correct in all material respects. 
All taxes shown to be due and payable on such returns, any assessments
imposed, and to the Company’s knowledge all other taxes due and payable by the
Company on or before the Closing, have been paid or will be paid prior to the
time they become delinquent.  The Company
has no knowledge of any liability of any tax to be imposed upon its properties
or assets as of the date of this Agreement that is not adequately provided for
in the Financial Statements.  With regard
to the income tax returns of the Company, the Company has not received notice
of any audit or of any proposed deficiencies from any taxing authority, and no
controversy with respect to taxes of any type is pending or, to the knowledge
of the Company, threatened.  There are in
effect no waivers of applicable statutes of limitations with respect to any
taxes owed by the Company for any year. 
There is no tax lien (other than for current taxes not yet due and
payable), whether imposed by any federal, state or other taxing authority,
outstanding against the assets, properties or business of the Company.  The Company has not elected pursuant to the
Internal Revenue Code of 1986, as amended (the “Code”) to be treated as an “S corporation” pursuant to Section 1362(a) of the
Code or a “collapsible corporation” pursuant to Section 341(f) of
the Code, nor has it made any other elections pursuant to the Code (other than
elections that relate solely to methods of accounting, depreciation, or
amortization) that would have a Material Adverse Effect.

 

3.15        Employees.  The Company
has no collective bargaining agreements with any of its employees.  There is no labor union organizing activity
pending or, to the Company’s knowledge, threatened with respect to the
Company.  To the Company’s knowledge, no
employee of the Company, nor any consultant with whom the Company has
contracted, is in 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

violation
of any term of any employment contract, proprietary information agreement or
any other agreement relating to the right of any such individual to be employed
by, or to contract with, the Company because of the nature of the business to
be conducted by the Company; and to the Company’s knowledge the continued
employment by the Company of its present employees, and the performance of the
Company’s contracts with its independent contractors, will not result in any
such violation.  The Company has not
received any notice alleging that any such violation has occurred.  No employee of the Company has been granted
the right to continued employment by the Company or to any severance or other
material compensation following termination of employment with the
Company.  The Company is not aware that
any officer or key employee, or that any group of key employees, intends to
terminate his, her or their employment with the Company, nor does the Company
have a present intention to terminate the employment of any officer, key
employee or group of key employees.  The
Company has complied in all material respects with all applicable laws relating
to the employment of its personnel, including provisions relating to hours
worked, wages, equal opportunity, collective bargaining and the payment of
social security and other taxes.

 

3.16        Scientific Advisory Board.  Each member of the Company’s Scientific
Advisory Board has executed a Consulting Agreement, substantially in the form
attached hereto as Exhibit G.

 

3.17        Registration Rights.  Except as required pursuant to the Investors’
Rights Agreement, the Company is presently not under any obligation, and has
not granted or agreed to grant any rights, to register (as defined in Section 1.1
of the Investors’ Rights Agreement) any of the Company’s presently outstanding
securities or any of its securities that may hereafter be issued.

 

3.18        Compliance with Laws; Permits.  The Company is not in violation of any
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof (including, without
limitation, laws relating to the environment, ERISA (as defined in Section 3.24)
and occupational health and safety) in respect of the conduct of its business
or the ownership of its properties which violation would have a Material
Adverse Effect.  No governmental orders,
permissions, consents, approvals or authorizations are required to be obtained
and no registrations or declarations are required to be filed in connection
with the execution and delivery of this Agreement and the issuance of the
Shares or the Conversion Shares, except such as have been duly and validly
obtained or filed, or with respect to any filings that must be made after the Closing,
as will be filed in a timely manner.  The
Company has all franchises, permits, licenses and any similar authorizations
necessary for the conduct of its business as now being conducted by it, except
for those franchises, permits, licenses or authorizations the lack of which
could not have a Material Adverse Effect and which the Company believes it can
obtain, without undue burden or expense.

 

3.19        Environment and Safety Laws.  To its
knowledge, the Company is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety, and
no material expenditures are required in order to comply with any such existing
statute, law or regulation with respect to the operations of the Company as
presently 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

conducted.  To the Company’s knowledge, no Hazardous
Materials (as defined below) are used or have been used, stored, or disposed of
by the Company in violation of applicable law. 
For purposes of the preceding sentence, “Hazardous
Materials” shall mean (a) materials which are listed or
otherwise defined as “hazardous” or “toxic” under any applicable local, state,
federal and/or foreign laws and regulations that govern the existence and/or
remedy of contamination on property, the protection of the environment from
contamination, the control of hazardous wastes, or other activities involving
hazardous substances, including building materials, or (b) any petroleum
products or nuclear materials.

 

3.20        Offering Valid.  Assuming the accuracy of the representations
and warranties of Purchaser contained in Section 4.2 hereof, the offer,
sale and issuance of the Shares and the Conversion Shares will be exempt from
the registration requirements of the Securities Act, and will have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.  Neither the
Company nor any agent on its behalf has solicited or will solicit any offers to
sell or has offered to sell or will offer to sell all or any part of the Shares
to any person or persons so as to bring the sale of such Shares by the Company
within the registration provisions of the Securities Act.

 

3.21        Insurance.  The Company
maintains valid policies of workers’ compensation insurance and of insurance
with respect to its properties and business of the kinds and in the amounts
customarily maintained by companies engaged in the same or similar business and
similarly situated, including, without limitation, insurance against loss,
damage, fire, casualty, theft, general public liability and other risks.

 

3.22        Brokerage.  There are
no claims for brokerage commissions, finders fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of the Company.

 

3.23        Disclosure.  Neither this Agreement nor any exhibits
hereto, nor any report, certificate, or instrument furnished to Purchaser or
its counsel in connection with the transactions contemplated by this Agreement,
when read together, contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statement contained
herein or therein, in light of the circumstances under which they were made,
not misleading.  Each projection and
budget furnished to Purchaser or its counsel by the Company was prepared in
good faith based on assumptions believed by the Company to be reasonable and
represents the Company’s good faith estimate of future results based on
information available as of the respective dates of the presentations and the
budget; provided that no representation is made
as to whether the financial results reflected in such projections or
budget will in fact be achieved.

 

3.24        ERISA.  Except as
set forth on the Schedule of Exceptions, the Company does not maintain any
employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”)).  To the extent that the Company does maintain
any such employee benefit plans, each plan complies in all material 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

respects
with (i) all applicable requirements of ERISA, and (ii) all
applicable requirements of the Code.

 

3.25        Books and Records.  The minute
books of the Company contain complete and accurate records of all meetings and
other corporate actions of its stockholders and its Board of Directors and
committees thereof.  The stock ledger of
the Company is complete and reflects all issuances, transfers, repurchases and
cancellations of shares of capital stock of the Company.

 

3.26        Qualified Small Business.  To the best of its knowledge, the Company is
a “qualified small  business” within the meaning of Section 1202(d) of
the Code, as of the date hereof and the Shares should qualify as “qualified  small
business stock” as defined in Section 1202(c) of the Code
as of the date hereof.  As of the date
hereof, the Company meets the “active
business requirement” of Section 1202(e) of
the Code, and it has made no “significant
redemptions” within the meaning
of Section 1202(c)(3)(B) of the Code.

 

3.27        Real Property Holding Company.  The Company is
not a real property holding company within the meaning of Section 897 of
the Code.

 

3.28        Investment Company.  The
Company is not an “investment company” within the meaning of the Investment
Company Act of 1940, as amended, and will not, as a result of the transactions
contemplated hereby, become an “investment company”.

 

4.             REPRESENTATIONS AND WARRANTIES OF PURCHASER.

 

Purchaser
hereby represents and warrants to the Company as follows (such representations
and warranties do not lessen or obviate the representations and warranties of
the Company set forth in this Agreement):

 

4.1          Requisite Power and Authority.  Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement, the Investors’ Rights Agreement and the Instrument of Accession to
the Voting Agreement in the form attached hereto as Exhibit D (the “Instrument of Accession”), and to carry out
their respective provisions.  All action
on Purchaser’s part required for the lawful execution and delivery of this
Agreement, the Investors’ Rights Agreement and the Instrument of Accession has
been or will be effectively taken prior to the Closing.  Upon their execution and delivery, this
Agreement, the Investors’ Rights Agreement and the Instrument of Accession will
be valid and binding obligations of Purchaser, enforceable in accordance with
their respective terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors’ rights, (b) general principles of
equity that restrict the availability of equitable remedies, and (c) to
the extent that the enforceability of the indemnification provisions of Section 2.9
of the Investors’ Rights Agreement may be limited by applicable laws.

 

4.2          Investment Representations.  Purchaser understands that neither the Shares
nor the Conversion Shares have been registered under the Securities Act.  Purchaser also understands that the Shares
are being offered and sold pursuant to an exemption from registration 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

contained
in the Securities Act based in part upon Purchaser’s representations contained
in this Agreement.  Purchaser hereby
represents and warrants as follows:

 

(a)           Purchaser Bears Economic Risk.  Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of the investment in the Company and
has the capacity to protect its own interests. 
Purchaser must bear the economic risk of this investment indefinitely
unless the Shares (or the Conversion Shares) are registered pursuant to the
Securities Act, or an exemption from registration is available.  Purchaser understands that the Company has no
present intention of registering the Shares, the Conversion Shares or any
shares of its Common Stock.  Purchaser
also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any
portion of the Shares or the Conversion Shares under the circumstances, in the
amounts or at the times Purchaser might propose.

 

(b)           Acquisition for Own Account.  Purchaser is
acquiring the Shares and the Conversion Shares for Purchaser’s own account for
investment only, and not with a view towards their distribution.

 

(c)           Purchaser Can Protect Its Interest. 
Purchaser has, by reason of its, or of its management’s, business or
financial experience, the capacity to protect its own interests in connection
with the transactions contemplated in this Agreement, the Investors’ Rights
Agreement and the Instrument of Accession. 
Further, Purchaser is aware of no publication of any advertisement in
connection with the transactions contemplated in this Agreement.

 

(d)           Accredited Investor.  Purchaser is an
accredited investor within the meaning of Regulation D under the Securities
Act.

 

(e)           Company Information.  Purchaser has
had an opportunity to discuss the Company’s business, management and financial
affairs with directors, officers and management of the Company and has had the
opportunity to review the Company’s operations and facilities.  Purchaser has also had the opportunity to ask
questions of and receive answers from, the Company and its management regarding
the terms and conditions of this investment.

 

(f)            Rule 144.  Purchaser
acknowledges and agrees that the Shares, and, if issued, the Conversion Shares,
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available.

 

(g)           Investment Decision Location.  The office of
Purchaser in which its investment decision was made is located at the address
of Purchaser as set forth in Section 7.8 hereof.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

4.3          Transfer Restrictions.  Purchaser acknowledges and agrees that the
Shares and, if issued, the Conversion Shares are subject to restrictions on
transfer as set forth in the Investors’ Rights Agreement.

 

4.4          Brokerage.  There are no claims for brokerage
commissions, finders fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Purchaser.

 

4.5          HSR.      Purchaser acknowledges and
agrees that (a) its purchase of the Shares is made solely for purposes of
investment, and (b) after the Closing, Purchaser will hold ten percent or
less of the Company’s outstanding voting securities, and therefore its purchase
of the Shares is exempt from notification obligations under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, pursuant to (i) 15
U.S.C. 18a(c)(9) or (ii) 16 C.F.R. Section 802.9.

 

5.             CONDITIONS TO CLOSING.

 

5.1          Conditions to Obligations of Purchaser.  Purchaser’s obligations to purchase the Shares
at the Closing are subject to the satisfaction or waiver, at or prior to the
Closing, of the following conditions:

 

(a)           Representations and Warranties True. 
The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all material respects (except for those
representations and warranties that are qualified as to materiality,  Material Adverse Effect or any similar
materiality qualifier which shall be true and correct in all respects) on and
as of the Closing Date, with the same force and effect as if they had been made
on and as of the Closing Date, except for the representations and warranties
that are made as of a certain date which shall be true and correct as of that
certain date.

 

(b)           Performance of Obligations.  The Company
shall have performed and complied with all agreements, obligations and
conditions contained herein required to be performed or complied with by it on
or prior to the Closing.

 

(c)           Consents, Permits, and Waivers.  The Company
shall have obtained any and all consents, permits and waivers necessary or
appropriate for consummation of the transactions contemplated by this Agreement
and the Investors’ Rights Agreement (except for such as may be properly
obtained subsequent to the Closing).

 

(d)           Filing of Restated Certificate of Incorporation.  The Restated Certificate of
Incorporation shall have been filed with the Secretary of State of the State of
Delaware and shall continue to be in full force and effect as of the Closing
Date.

 

(e)           Corporate Documents.  The Company
shall have delivered to Purchaser or its counsel, copies of all corporate
documents of the Company as Purchaser shall reasonably request.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

(f)            Reservation of Conversion Shares.  The Conversion
Shares issuable upon conversion of the Shares shall have been duly authorized
and reserved for issuance upon such conversion.

 

(g)           Certificates and Documents.  Prior to the Closing, the Company shall have
delivered to Purchaser:

 

(i)            Certificates,
dated no more than five days prior to the Closing Date, as to the corporate
good standing of the Company issued by the Secretary of State of Delaware and
the Secretary of the Commonwealth of Massachusetts;

 

(ii)           Compliance
Certificate executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, certifying as to the fulfillment of the conditions specified
in Sections 5.1(a) through 5.1(f) of this Agreement.

 

(iii)         Certificate of
the Secretary of the Company, dated as of the Closing Date, certifying as to (A) the
incumbency of the Company’s principal officers, (B) a copy of the
Certificate of Incorporation, certified by the Secretary of State of the State
of Delaware, as in effect immediately prior to the Closing Date, (C) a
copy of the By-laws of the Company, as in effect on and as of the Closing Date,
and (D) a copy of the resolutions of the Board of Directors and the
stockholders of the Company, authorizing and approving all matters in
connection with this Agreement, the Investors’ Rights Agreement and the
transactions contemplated hereby and thereby.

 

(h)           Investors’ Rights Agreement.  An Eighth
Amended and Restated Investors’ Rights Agreement substantially in the form
attached hereto as Exhibit B
shall have been executed and delivered by the Company and the parties thereto.

 

(i)            Proceedings and Documents.  All corporate
and other proceedings in connection with the transactions contemplated hereby
at the Closing and all documents and instruments incident to such transactions
shall be reasonably satisfactory in substance and form to Purchaser and its
counsel, and Purchaser and its counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably
request.

 

(j)            Legal Opinion.  Purchaser shall
have received from Company counsel an opinion addressed to Purchaser, dated as
of the Closing Date, in substantially the form attached hereto as Exhibit E.

 

5.2          Conditions to Obligations of the Company.  The Company’s obligation to issue and sell
the Shares at the Closing is subject to the satisfaction or waiver, at or prior
to the Closing, of the following conditions:

 

(a)           Representations and Warranties True. 
The representations and warranties made by Purchaser in Section 4
hereof shall be true and correct on and as of the 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

Closing Date, with the same force and effect as if they had been made
on and as of the Closing Date.

 

(b)           Performance of Obligations. Purchaser shall have
performed and complied with all agreements, obligations and conditions
contained herein required to be performed or complied with by Purchaser on or
prior to the Closing.

 

(c)           Investors’ Rights Agreement.  An Eighth
Amended and Restated Investors’ Rights Agreement substantially in the form attached
hereto as Exhibit B shall
have been executed and delivered by the Investors named therein.

 

(d)           Instrument of Accession.  An Instrument
of Accession in the form attached hereto as Exhibit D
shall have been executed and delivered by Purchaser.

 

(e)           Consents, Permits, and Waivers.  The Company
shall have obtained any and all consents, permits and waivers necessary or
appropriate for consummation of the transactions contemplated by this Agreement
and the Investors’ Rights Agreement (except for such as may be properly
obtained subsequent to the Closing).

 

6.             MISCELLANEOUS.

 

6.1          Governing Law.  Except to
the extent that any provision of this Agreement is contrary to any mandatory
provision of the Delaware General Corporation Law (in which case such mandatory
statutory provision shall apply), this Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts and
the laws of the United States applicable therein (without giving effect to any
choice or conflict of laws provision or rule that would cause the
application of the laws of any other jurisdiction) and shall be treated in all
respects as a Massachusetts contract. 
Any action, suit or proceeding arising out of or relating to this
Agreement shall be brought in the courts of the Commonwealth of Massachusetts
and each of the parties hereto hereby irrevocably submits (i) in the case
of a suit or proceeding to which the Company is a party, to the exclusive
jurisdiction of such courts and (ii) in the case of a suit or proceeding
to which the Company is not a party, to the non-exclusive jurisdiction of such
courts.

 

6.2          Survival.  The
representations, warranties, covenants and agreements made herein shall survive
any investigation made by Purchaser and the execution and delivery of this
Agreement and the closing of the transactions contemplated hereby for a period
of three (3) years following the Closing Date.  All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.

 

6.3          Successors and Assigns.  Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.  Nothing in 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement, except
as expressly provided in this Agreement.

 

6.4          Entire Agreement.  This
Agreement, the Exhibits and Schedules hereto, the Investors’ Rights Agreement,
the Instrument of Accession and the other documents delivered pursuant hereto
or thereto constitute the full and entire understanding and agreement between
the parties with regard to the subjects hereof and supersede all prior
agreements and understandings among the parties, written or oral, with respect
thereto.  No party shall be liable or
bound to any other in any manner by any representations, warranties, covenants
and agreements except as specifically set forth herein and therein.

 

6.5          Severability.  In case any
provision of this Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

 

6.6          Amendment and Waiver.

 

(a)           This Agreement
may be amended or modified only upon the written consent of the Company and
holders of at least a majority of the then outstanding Shares (treated as if
converted and including any Conversion Shares into which the Shares have been
converted that have not been sold to the public).

 

(b)           The obligations
of the Company and the rights of the holders of the Shares and the Conversion
Shares under this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the holders of at least a majority of the then outstanding Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).  No waivers of or exceptions to any term,
condition or provision of this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any such term,
condition or provision.

 

6.7          Delays or Omissions.  It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Investors’
Rights Agreement, the Voting Agreement or the Restated Certificate of
Incorporation, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring.  It is further
agreed that any waiver, permit, consent or approval of any kind or character on
Purchaser’s part of any breach, default or noncompliance under this Agreement,
the Investors’ Rights Agreement, the Voting Agreement or under the Restated
Certificate of Incorporation or any waiver on such party’s part of any
provisions or conditions of this Agreement, the Investors’ Rights Agreement,
the Voting Agreement or the Restated Certificate of Incorporation must be in
writing and shall be effective only to the extent specifically set forth in
such writing.  All remedies, either under
this Agreement, the Investors’ Rights Agreement, the Voting Agreement 

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

and
the Restated Certificate of Incorporation, by law, or otherwise afforded to any
party, shall be cumulative and not alternative.

 

6.8          Notices.  All notices
required or permitted hereunder shall be in writing and shall be deemed
effectively given:  (a) upon
personal delivery to the party to be notified, (b) when sent by facsimile
transmission (with receipt confirmed by telephone or by automatic transmission
report) or by electronic mail, if sent during normal business hours of the
recipient, if not, then on the next business day, (c) five (5) days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt.  All
communications shall be sent to the party at such party’s address as set forth
below or as subsequently modified by ten (10) days advance written notice
to the other parties hereto, as follows:

 

(a)           if to the Company,
to:

 

Ironwood Pharmaceuticals, Inc.

320 Bent Street

Cambridge, MA 02141

	
  Telephone:

  	
   

  	
  (617)
  621-7722

  
	
  Facsimile:

  	
   

  	
  (617)
  494-0908

  
	
  Email:

  	
   

  	
  hgilbert@ironwoodpharma.com

  

 

or
at such other address or addresses as may have been furnished in writing by the
Company to Purchaser,

 

(b)           if to
Purchaser, to:

 

Laboratorios Almirall, S.A. 

General Mitre, 151 

08022 Barcelona (Spain) 

Fax: (+34) 93 291 3569 

Attn: Chief Executive for Corporate Development and Finance 

With a copy to: 

Laboratorios Almirall, S.A. 

General Mitre, 151 

08022 Barcelona (Spain) 

Fax: (+34) 93 291 3561 

Attn: Legal Director

 

6.9          Expenses.   Each party shall pay all costs and
expenses that it incurs with respect to the negotiation, execution, delivery
and performance of this Agreement.

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

6.10        Attorneys’ Fees.  In the
event that any suit or action is instituted to enforce any provision in this
Agreement, the prevailing party in such dispute shall be entitled to recover
from the losing party all fees, costs and expenses of enforcing any right of
such prevailing party under or with respect to this Agreement, including
without limitation, such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.

 

6.11        Titles and Subtitles.  The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

 

6.12        Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one instrument.  This Agreement may be executed by facsimile
signatures.

 

6.13        Confidentiality.  Each
party hereto agrees that, except with the prior written consent of the other
party, it shall at all times keep confidential and not divulge, furnish or make
accessible to anyone any confidential information, knowledge or data concerning
or relating to the business or financial affairs of the other parties to which
such party has been or shall become privy by reason of this Agreement, the
Investors’ Rights Agreement or the Voting Agreement, discussions or
negotiations relating to this Agreement, the Investors’ Rights Agreement or the
Voting Agreement, the performance of its obligations hereunder or the ownership
of the Shares purchased hereunder; provided,
however, that Purchaser may
disclose confidential information, knowledge or data concerning or relating to
the business or financial affairs of the Company (i) to its attorneys,
accountants and consultants, to the extent necessary to obtain their services
in connection with monitoring its investment in the Company, provided that such
attorney, accountant or consultant is legally obligated not to use or disclose
any such information, knowledge or data or (ii) as may otherwise be
required by law, provided that Purchaser takes reasonable steps to minimize the
extent of any such required disclosure. 
The provisions of this Section 7.14 shall be in addition to, and
not in substitution for, the provisions of any separate nondisclosure agreement
executed by the parties hereto.

 

6.14        Pronouns.  All pronouns
contained herein, and any variations thereof, shall be deemed to refer to the
masculine, feminine or neutral, singular or plural, as the identity of the
parties hereto may require.

 

[Remainder of this page is intentionally blank.]

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

IN WITNESS WHEREOF, the parties hereto have
executed the SERIES I CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.

 

	
   

  	
  Company:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  IRONWOOD PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Peter
  M. Hecht

  
	
   

  	
   

  	
  Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Purchaser:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LABORATORIOS ALMIRALL, S.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

 

 

SCHEDULE
1.66

 

LICENSED
COMPOUND

 

[**]

 

 

SCHEDULE
6.2(a)

 

IRONWOOD
PATENT RIGHTS

 

[**]

 

 

SCHEDULE
6.3(b)

 

PRODUCTS

 

[**]

 

[**] = Portions of this exhibit have been omitted pursuant to a
confidential treatment request. An unredacted version of this exhibit has been
filed separately with the Commission.

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