Document:

Exhibit 10.2

 

TRANSITION SERVICES AGREEMENT

 

by and between

 

CYCLERION THERAPEUTICS, INC.

 

and

 

IRONWOOD PHARMACEUTICALS, INC.

 

Dated as of        , 2019

 

 

TRANSITION SERVICES AGREEMENT

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    
	
Article I DEFINITIONS and INTERPRETATION
    	
1
    
	
 
    	
 
    	
 
    
	
Section 1.1.
    	
General
    	
1
    
	
 
    	
 
    	
 
    
	
Section 1.2.
    	
Interpretation
    	
2
    
	
 
    	
 
    	
 
    
	
Article II   SERVICES
    	
3
    
	
 
    	
 
    	
 
    
	
Section 2.1.
    	
General
    	
3
    
	
 
    	
 
    	
 
    
	
Section 2.2.
    	
Standard for Services
    	
3
    
	
 
    	
 
    	
 
    
	
Section 2.3.
    	
Protection of Cyclerion   Information Systems
    	
4
    
	
 
    	
 
    	
 
    
	
Section 2.4.
    	
Transitional Nature of   the Services; Changes
    	
4
    
	
 
    	
 
    	
 
    
	
Section 2.5.
    	
Omitted Services
    	
4
    
	
 
    	
 
    	
 
    
	
Section 2.6.
    	
Additional Services
    	
5
    
	
 
    	
 
    	
 
    
	
Section 2.7.
    	
Use of Third Parties
    	
6
    
	
 
    	
 
    	
 
    
	
Section 2.8.
    	
Cooperation
    	
6
    
	
 
    	
 
    	
 
    
	
Section 2.9.
    	
Location of Services   Provided; Access
    	
6
    
	
 
    	
 
    	
 
    
	
Section 2.10.
    	
Performance
    	
6
    
	
 
    	
 
    	
 
    
	
Section 2.11.
    	
Intellectual Property
    	
6
    
	
 
    	
 
    	
 
    
	
Article III   FEES AND PAYMENT
    	
7
    
	
 
    	
 
    	
 
    
	
Section 3.1.
    	
Fees
    	
7
    
	
 
    	
 
    	
 
    
	
Section 3.2.
    	
Expense
    	
8
    
	
 
    	
 
    	
 
    
	
Section 3.3.
    	
Quarterly Statements
    	
8
    
	
 
    	
 
    	
 
    
	
Section 3.4.
    	
Invoice
    	
8
    
	
 
    	
 
    	
 
    
	
Section 3.5.
    	
Late Payments
    	
8
    
	
 
    	
 
    	
 
    
	
Section 3.6.
    	
Taxes
    	
9
    
	
 
    	
 
    	
 
    
	
Section 3.7.
    	
No Right to Set-Off
    	
9
    
	
 
    	
 
    	
 
    
	
Article IV   SERVICE MANAGEMENT
    	
9
    
	
 
    	
 
    	
 
    
	
Section 4.1.
    	
Service Managers
    	
9
    
	
 
    	
 
    	
 
    
	
Section 4.2.
    	
Service Coordinators
    	
9
    
	
 
    	
 
    	
 
    
	
Article V   SUB-CONTRACTING; THIRD PARTY AGREEMENTS
    	
9
    
	
 
    	
 
    	
 
    
	
Section 5.1.
    	
Sub-Contractors
    	
9
    

 

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Section 5.2.
    	
Third Party Agreements
    	
10
    
	
 
    	
 
    	
 
    
	
Section 5.3.
    	
Consents
    	
10
    
	
 
    	
 
    	
 
    
	
Article VI   TERM AND TERMINATION AND EFFECTS OF TERMINATION
    	
10
    
	
 
    	
 
    	
 
    
	
Section 6.1.
    	
Termination
    	
10
    
	
 
    	
 
    	
 
    
	
Section 6.2.
    	
Termination for Breach
    	
11
    
	
 
    	
 
    	
 
    
	
Section 6.3.
    	
Early Termination of a   Service
    	
11
    
	
 
    	
 
    	
 
    
	
Section 6.4.
    	
Termination Upon   Insolvency
    	
11
    
	
 
    	
 
    	
 
    
	
Section 6.5.
    	
Accrued Rights
    	
11
    
	
 
    	
 
    	
 
    
	
Section 6.6.
    	
Effect of Termination
    	
12
    
	
 
    	
 
    	
 
    
	
Article VII   DISPUTE RESOLUTION
    	
12
    
	
 
    	
 
    	
 
    
	
Section 7.1.
    	
Negotiation
    	
12
    
	
 
    	
 
    	
 
    
	
Section 7.2.
    	
Arbitration
    	
12
    
	
 
    	
 
    	
 
    
	
Section 7.3.
    	
Continuity
    	
12
    
	
 
    	
 
    	
 
    
	
Article VIII   LIMITATION OF LIABILITY; INDEMNIFICATION
    	
13
    
	
 
    	
 
    	
 
    
	
Section 8.1.
    	
Limited Liability
    	
13
    
	
 
    	
 
    	
 
    
	
Section 8.2.
    	
Services Provided   “As-Is”
    	
13
    
	
 
    	
 
    	
 
    
	
Section 8.3.
    	
Indemnification
    	
14
    
	
 
    	
 
    	
 
    
	
Article IX   INSURANCE MATTERS
    	
14
    
	
 
    	
 
    	
 
    
	
Section 9.1.
    	
Insurance
    	
14
    
	
 
    	
 
    	
 
    
	
Article X   CONFIDENTIALITY
    	
15
    
	
 
    	
 
    	
 
    
	
Section 10.1.
    	
Confidentiality
    	
15
    
	
 
    	
 
    	
 
    
	
Article XI   MISCELLANEOUS
    	
15
    
	
 
    	
 
    	
 
    
	
Section 11.1.
    	
Complete Agreement;   Construction
    	
15
    
	
 
    	
 
    	
 
    
	
Section 11.2.
    	
Transaction Agreements
    	
15
    
	
 
    	
 
    	
 
    
	
Section 11.3.
    	
Counterparts
    	
15
    
	
 
    	
 
    	
 
    
	
Section 11.4.
    	
Notices
    	
15
    
	
 
    	
 
    	
 
    
	
Section 11.5.
    	
Waivers
    	
16
    
	
 
    	
 
    	
 
    
	
Section 11.6.
    	
Force Majeure
    	
16
    
	
 
    	
 
    	
 
    
	
Section 11.7.
    	
Assignment
    	
17
    
	
 
    	
 
    	
 
    
	
Section 11.8.
    	
Successors and Assigns
    	
17
    
	
 
    	
 
    	
 
    
	
Section 11.9.
    	
Third Party   Beneficiaries
    	
17
    
	
 
    	
 
    	
 
    
	
Section 11.10.
    	
Titles and Headings
    	
17
    

 

ii

 

	
Section 11.11.
    	
Exhibits and Schedules
    	
17
    
	
 
    	
 
    	
 
    
	
Section 11.12.
    	
Governing Law
    	
17
    
	
 
    	
 
    	
 
    
	
Section 11.13.
    	
Severability
    	
17
    
	
 
    	
 
    	
 
    
	
Section 11.14.
    	
Interpretation
    	
18
    
	
 
    	
 
    	
 
    
	
Section 11.15.
    	
No Duplication
    	
18
    
	
 
    	
 
    	
 
    
	
Section 11.16.
    	
No Waiver
    	
18
    
	
 
    	
 
    	
 
    
	
Section 11.17.
    	
Independent Contractor   Status
    	
18
    

 

List of Exhibits and Schedules

 

	
Schedule I
    	
 
    	
Cyclerion Services and Fees
    
	
Exhibit A
    	
 
    	
Initial Service Managers
    
	
Exhibit B
    	
 
    	
Migration Plan
    
	
Exhibit C
    	
 
    	
IT Acceptable Use Policy
    
	
Exhibit D
    	
 
    	
Quarterly Statement
    

 

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TRANSITION SERVICES AGREEMENT

 

This TRANSITION SERVICES AGREEMENT (this “Agreement”), dated as of        , 2019 (the “Effective Date”), is entered into by and between Cyclerion Therapeutics, Inc. (“Cyclerion”), a Massachusetts corporation and Ironwood Pharmaceuticals, Inc. (“Ironwood”) a Delaware corporation.  “Party” or “Parties” means Cyclerion or Ironwood, individually or collectively, as the case may be.

 

W I T N E S S E T H:

 

WHEREAS, in conjunction with a Separation Agreement between Ironwood and Cyclerion of even date hereof (the “Separation Agreement”), Ironwood desires to obtain certain transition services from Cyclerion, and Cyclerion is willing to provide such services to Ironwood on the terms and conditions set forth in this Agreement; and

 

WHEREAS, the Parties acknowledge that the efficient and effective transition of Services (as defined below) under this Agreement in a manner that permits the successful operations of each Party following the Effective Date is a priority to the shareholders of each Party.

 

NOW, THEREFORE, in consideration of the foregoing and the respective warranties, covenants and agreements hereinafter set forth, and intending to be legally bound hereby, the Parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS AND INTERPRETATION

 

Section 1.1.                                 General.  Capitalized terms not defined in this Agreement have the meanings assigned to them in the Separation Agreement.  As used herein, the following terms have the following meanings:

 

(1)                                 “Additional Service” shall have the meaning set forth in Section 2.6.

 

(2)                                 “Force Majeure” shall have the meaning set forth in Section 11.6.

 

(3)                                 “FTE Rate” means the amount to be paid per full-time equivalent of Service Provider under this Agreement on an annual basis. The FTE Rate as of the Effective Date will be three hundred and fifteen thousand dollars ($315,000), as such rate may be amended from time to time by the mutual written consent of the Parties.  The FTE Rate for a full-time equivalent for a calendar month shall equal one-twelfth (1/12th) of the foregoing annual rate and the FTE Rate for a full-time equivalent for a calendar quarter shall equal one-fourth (1/4th) of the foregoing annual rate.  For clarity, the FTE Rate shall not include any Expenses.

 

(4)                                 “Internal Costs” shall mean, for any Services conducted during a given period of time during the Term, (a) the FTE Rate plus eight percent (8%) of such FTE Rate multiplied by the number of full-time equivalents of Service Provider performing such Services in accordance with this Agreement during such period of time plus (b) any other costs directly related to the provision of such Services during such period of time under this Agreement, as agreed upon

 

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between the Parties in writing.  For the avoidance of doubt, Internal Costs do not include Third Party Costs or Expenses.

 

(5)                                 “Migration Plan” shall have the meaning set forth in Section 2.12.

 

(6)                                 “Omitted Service” shall have the meaning set forth in Section 2.5.

 

(7)                                 “One-Time Costs” shall have the meaning set forth in Section 3.1.

 

(8)                                 “Service Provider” means, as the context may require, Cyclerion or, if not Cyclerion, the Person providing the Services on behalf of Cyclerion, including any of its Affiliates (it being agreed and understood that, for purposes of this Agreement, Cyclerion shall cause each such Person to comply with the provisions of this Agreement applicable to such Person in such Person’s capacity as a “Service Provider”).

 

(9)                                 “Services” means (a) all of the services to be provided by or on behalf of a Service Provider under this Agreement described on Schedule I hereto, as such Schedule may be updated and supplemented from time to time in accordance with the provisions of this Agreement, (b) any Omitted Services and (c) any Additional Services.  “Service” means each such service.

 

(10)                          “Term” means the period commencing on the date hereof and ending, subject to Section 6.1, upon the expiration of all Services set forth in Schedule I.

 

(11)                          “Third Party” means any person or entity other than Cyclerion, Ironwood or their Affiliates.

 

(12)                          “Third Party Costs” means the price paid by Cyclerion or its Affiliates to a Third Party (not in its capacity as a Service Provider) for all applicable Services provided by such Third Party to Cyclerion or its Affiliates that are directly allocable to the provision of Services hereunder.  For clarity, there shall be no mark-up added to Third Party Costs under this Agreement, unless such mark-up was actually paid by Cyclerion or its Affiliates to a Third Party.

 

Section 1.2.                                 Interpretation.  Except where the context otherwise requires, the singular will include the plural, the plural will include the singular, the use of any gender will be applicable to all genders, and the word “or” means “and/or.” References to a number of days, unless otherwise specified, means calendar days.  The captions of this Agreement are for convenience of reference only and do not define, describe, extend or limit the scope or intent of any provision contained in this Agreement.  The terms “including,” “include,” or “includes” are not intended to limit generality of any description preceding such term.  The language of this Agreement will be deemed to be the language mutually chosen by the Parties, and no rule of strict construction will be applied against either Party.  Unless otherwise expressly specified, references to Cyclerion include Cyclerion’s Affiliates, and references to Ironwood include Ironwood’s Affiliates.

 

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ARTICLE II

 

SERVICES

 

Section 2.1.                                 General.  During the Term, subject to Section 2.2, Cyclerion shall (and shall cause each Service Provider providing Services to) provide to Ironwood and, to the extent directed by Ironwood, its Affiliates, the Services, in each case subject to the terms and conditions set forth herein.  Notwithstanding anything to the contrary herein, a Service Provider shall not be required to perform or cause to be performed any of the Services for the benefit of any Person other than Ironwood and its Affiliates.  The Parties agree to negotiate in good faith any proposed changes to the Services, including pricing related thereto, during the Term.  Such proposed changes will become effective only upon mutual agreement of the Parties as reflected in an addendum to Schedule I.  If there is any inconsistency between the terms of Schedule I and the terms of this Agreement, the terms of this Agreement will govern.  The Parties acknowledge and agree that the Services are generally intended to facilitate the transactions contemplated by the Separation Agreement, and, to the extent Services described in Schedule I are general in nature, are solely intended to support the continued operation of the New Ironwood Pharmaceutical Business.

 

Section 2.2.                                 Standard for Services.  Cyclerion shall use commercially reasonable efforts to provide, or cause to be provided, to Ironwood the Services in accordance with the terms and conditions of this Agreement.  Cyclerion shall provide, or cause to be provided, the Services in a manner (i) in compliance in all material respects with all applicable Laws and (ii) generally consistent with the provision of the Services during the twelve (12) months immediately prior to the date hereof (the “Prior Period”); provided that if a Service Provider has not previously provided a Service to another Person, the Service Provider shall provide such Service in a manner generally consistent with the provision of similar services provided to its Affiliates or businesses.  To the extent a more specific standard of care is specified in Schedule I with respect to any Service, a Service Provider shall use its commercially reasonable efforts to comply with such more specific standard.  It is the Parties’ shared objective to transition responsibility for the performance of all Services from Service Provider to Ironwood and its Affiliates in a manner that minimizes, to the extent reasonably possible, disruption to the business operations of Service Providers and their Affiliates and the business operations of Ironwood and its Affiliates.  Notwithstanding any provision of this Agreement or the Separation Agreement to the contrary, no Service Provider shall be required to (a) perform any Service in any manner that violates or contravenes any restrictions imposed on the Service Provider by applicable Law, (b) perform any Service in any manner that breaches or contravenes any contractual obligations owed by the Service Provider to any Third Party(ies) or (c) perform any Service to the extent that the conduct of such would, in the good faith belief of Service Provider, infringe, violate or misappropriate intellectual property rights of any Third Party.  Notwithstanding any provision of this Agreement to the contrary, but without limiting a Service Provider’s obligations under Section 2.1 or Section 2.2, in no event shall Cyclerion or any of its Affiliates be (i) obligated to make any specific employment decisions in terms of hiring and terminating employees; (ii) obligated to enter into retention agreements with employees or otherwise provide any incentive beyond payment of regular salary and benefits; (iii) prevented from determining, in its sole discretion, the individual employees or contractors who provide Services; (iv) obligated to purchase, lease or license any additional equipment or software, except as specifically provided for in Schedule I; or (v) obligated to create or supply any documentation

 

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or information not currently existing or reasonably available, except as specifically provided for in Schedule I.

 

Section 2.3.                                 Protection of Cyclerion Information Systems

 

(a)                                 In providing information technology Services to Ironwood, Cyclerion shall have the right to implement reasonable processes from time to time under which there will be no greater threat to Cyclerion’s information technology operating environment than would exist in the absence of the provision of such Services.  Without limiting the foregoing, Ironwood shall, and shall cause each of its employees with access to Cyclerion’s information technology operating environment to, comply with the terms and conditions of Cyclerion’s IT Acceptable Use Policy set forth in Exhibit C hereunder as may be amended from time to time upon written notice by Cyclerion to Ironwood (such policy, the “IT Acceptable Use Policy”).

 

(b)                                 If, in connection with the provision of any Services under this Agreement, it is reasonably necessary for Cyclerion to implement any information technology connections, firewalls or the like (“Information System Additions”) specifically in connection with the provision of such Services and that would not have otherwise been implemented in the absence of the provision of the Services, the costs of implementing such Information System Additions shall be borne by Ironwood, unless specifically provided otherwise in Schedule I hereto or otherwise agreed to in writing by Cyclerion.

 

Section 2.4.                                 Transitional Nature of the Services; Changes.

 

(a)                                 Ironwood understands that the Services provided hereunder are transitional in nature and are furnished by the Service Providers as an accommodation and for the purpose of facilitating the transactions contemplated by the Separation Agreement.  Each of the Parties agrees to cooperate in good faith and use, and shall cause its Affiliates to use, commercially reasonable efforts to effect a smooth transition from the Services as provided by the Service Provider to services performed by Ironwood or furnished by another party as soon as practically possible, but in no case later than the expiration of the Term.  Ironwood further understands that the Service Providers are not in the business of providing Services to Third Parties and shall not provide Services beyond the Term.

 

(b)                                 Ironwood acknowledges and agrees that Cyclerion or its Affiliates may make changes from time to time in the manner of performing the Services if Cyclerion or its Affiliates (i) are making similar changes in the performance of similar services for itself or their own Affiliates or would have made in performing similar services for their own Affiliates; and (ii) furnish to Ironwood notice with respect to such changes, and if applicable, substantially the same notice (in content and timing) as Cyclerion or its Affiliates shall furnish to their own Affiliates with respect to such changes; and (iii) reasonably considers reasonable concerns of Ironwood in implementing any such changes.

 

Section 2.5.                                 Omitted Services.  If, during the sixty (60) day period immediately following the date of this Agreement, either Party identifies a service that was provided in connection with the New Ironwood Pharmaceutical Business (other than those services expressly excluded hereunder) during the Prior Period, or which are reasonably anticipated as of the date

 

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hereof to be necessary to continue to support the New Ironwood Pharmaceutical Business during the Term, but such services were inadvertently omitted from the list of Services in Schedule I hereto (each, to the extent included in the Services pursuant to this Section, an “Omitted Service”) and notifies the other Party thereof, then the Parties shall enter into good faith discussions as to whether such Omitted Service should be added as a Service hereunder, taking into account considerations such as whether the provision of such Service would be commercially reasonable from Service Provider’s perspective and whether the Omitted Service can be obtained from a provider other than the Service Provider at comparable or lower expense.  If the Parties determine that an Omitted Service will be provided under this Agreement, then the Parties shall cooperate to amend Schedule I to add such Omitted Service as a Service, provided that, notwithstanding anything to the contrary in this Agreement, Service Provider shall not be obligated to provide any Omitted Service if it does not, in its reasonable judgment, have adequate resources to provide such Omitted Service or if the provision of such Omitted Service would significantly disrupt the operation of its business.  In the event that the Parties agree that a Service Provider should provide any such Omitted Service, the Parties shall execute amendments to Schedule I for such Omitted Service that will set forth, among other things, (a) the time period during which such Omitted Service will be provided, (b) a description of such Omitted Service in reasonable detail, (c) primary points of contact for each of the Parties with respect to the Service, (d) any Internal Costs or One-Time Costs related to such Omitted Service and agreed upon by the Parties and (e) any additional terms and conditions specific to such Omitted Service.  A Service Provider’s obligations with respect to providing any such Omitted Service shall become effective only upon mutual agreement of the Parties as reflected in an amendment to Schedule I being duly executed and delivered by each Party.  Notwithstanding the foregoing, the time period for any such Omitted Service will expire not later than the expiration of the Term as calculated prior to the addition of such Omitted Service unless the Parties mutually agree otherwise.

 

Section 2.6.                                 Additional Services.  The Parties hereto acknowledge that Schedule I might not identify all of the Services that, although not provided in connection with the New Ironwood Pharmaceutical Business during the Prior Period, may be necessary or appropriate to effect the understanding set forth in this Agreement.  Ironwood may request such additional Services from a Service Provider (each, to the extent included in the Services pursuant to this Section, an “Additional Service”) in writing during the Term.  A Service Provider shall consider any such request for Additional Services promptly and in good faith, except to the extent such request is for Omitted Services (in which case Section 2.5 shall govern) or for services intentionally not included by mutual agreement of the Parties as part of the Services as of the Effective Date.  In the event that the Parties agree that a Service Provider should provide any such Additional Service, the Parties shall execute amendments for such Additional Service to Schedule I that will set forth, among other things, (a) the time period during which such Additional Service will be provided, (b) a description of such Additional Service in reasonable detail, (c) primary points of contact for each of the Parties with respect to the Service, (d) any Internal Costs or One-Time Costs related to such Additional Service and agreed upon by the Parties and (e) any additional terms and conditions specific to such Additional Service.  A Service Provider’s obligations with respect to providing any such Additional Service will become effective only upon mutual agreement of the Parties as reflected in an amendment to Schedule I being duly executed and delivered by each Party.  Notwithstanding the foregoing, the time period for any such Additional Service will expire not later than the expiration of the Term as calculated prior to addition of such Additional Service unless the Parties agree otherwise.

 

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Section 2.7.                                 Use of Third Parties.  Ironwood understands that certain Services may be provided to it by a Service Provider pursuant to agreements between the Service Provider and various Third Parties.  To the extent not prohibited by a Third Party and with Ironwood’s consent (not to be unreasonably withheld, conditioned or delayed), the Service Provider shall coordinate the provision of Services by the Third Party to Ironwood, and Ironwood shall reasonably cooperate with any Third Party providing Services on behalf of the Service Provider in order to facilitate the provision and receipt of such Services.

 

Section 2.8.                                 Cooperation.  Ironwood and its Affiliates who are recipients of the Services shall reasonably cooperate with each Service Provider in order to facilitate the provision and receipt of the Services.  Ironwood acknowledges that such Services are dependent on such reasonable cooperation, and that its or its Affiliates’ failure to so cooperate, if not reasonable, will relieve the Service Provider of its obligation to provide the related Services to the extent such failure renders such provision impractical or impossible.  Ironwood and its Affiliates who are recipients of the Services shall comply in all material respects with all applicable policies and procedures of the Service Provider.

 

Section 2.9.                                 Location of Services Provided; Access.  Each Service Provider shall provide the Services to Ironwood from locations of the Service Provider’s choice in its sole discretion unless Services are required to be performed at a specific location identified in Schedule I.  Certain key personnel of the Service Providers who are expected to be utilized to perform Services may be required to travel to the offices of Ironwood or between Service Provider locations.  Each Party shall allow the other Party and its Affiliates and Representatives reasonable access to the facilities of such Party and its Affiliates that is necessary for each Service Provider to provide Services or for Ironwood and its Affiliates to receive the Services in accordance with this Agreement, subject to applicable confidentiality and non-use restrictions consistent with those set forth in this Agreement.  Each Party agrees that all of its and its Affiliates’ employees shall, and that it shall use commercially reasonable efforts to cause its Representatives’ employees to, when on the property of the other Party or any of its Affiliates, or when given access to any facilities, information, systems, infrastructure or personnel of the other Party or any of its Affiliates, conform to the policies and procedures of such other Party and any of its Affiliates, as applicable, concerning health, safety, conduct and security which are made known to the Party receiving such access from time to time.

 

Section 2.10.                          Performance.  Any Party may cause any of its Subsidiaries to perform any or all of its obligations hereunder, and may designate any of its Subsidiaries to receive any of its entitlements hereunder.  Each of the Parties shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set herein to be performed by any Subsidiary of such Party or by any entity that becomes a Subsidiary of such Party at or after the Distribution Effective Time, in each case to the extent such Subsidiary remains a Subsidiary of the applicable Party.

 

Section 2.11.                          Intellectual Property.

 

(a)                                 Neither Party will gain, by virtue of this Agreement, any rights of ownership or use of copyrights, patents, trade secrets, trademarks, know-how or any other intellectual property rights (“Intellectual Property Rights”) owned by the other Party or its Affiliates.  To the

 

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extent any Intellectual Property Rights are developed by Cyclerion or its Affiliates in the course of the performance of the Services that relate exclusively to the New Ironwood Pharmaceutical Business as such exists as of the Effective Date (the “Ironwood Intellectual Property Rights”), all right, title and interest in and to any such Intellectual Property Rights will be the sole and exclusive property of Ironwood, and Cyclerion shall (and shall cause its Affiliates to) assign, and does hereby assign, to Ironwood all right, title and interest in and to any such Ironwood Intellectual Property Rights.  Except as expressly specified in the foregoing, as between the Parties, all right, title and interest in any Intellectual Property Rights developed by or on behalf of Cyclerion in the course of providing the Services will be owned by Cyclerion.  To the extent that Cyclerion performs any Services through any Affiliate or subcontractor, Cyclerion shall obligate such Affiliate or such subcontractor to assign to Ironwood all Ironwood Intellectual Property Rights, and Cyclerion shall not utilize any such Affiliate or subcontractor in the performance of such Services unless such Affiliate or subcontractor is so obligated.

 

(b)                                 Solely for and with respect to the performance of Services and other activities under this Agreement during the Term, Ironwood (on behalf of itself and its Affiliates) hereby grants to each Service Provider a non-exclusive, royalty-free, non-transferable license and right of reference, with the right to grant further licenses and rights of reference, to all intellectual property, Regulatory Approvals, Regulatory Submissions and records included within the New Ironwood Pharmaceutical Business that are necessary to perform the Services solely to perform the Services and other obligations of Cyclerion or a Service Provider under this Agreement.

 

Section 2.12.                          Migration Plan. The plan for the migration of Services from Cyclerion to Ironwood is set forth in Exhibit B hereunder (the “Migration Plan”).  During the Term, the Parties (i) shall use commercially reasonable efforts to perform their respective obligations under the Migration Plan and (ii) may mutually amend or supplement the Migration Plan.

 

ARTICLE III

 

FEES AND PAYMENT

 

Section 3.1.                                 Fees.  The fees payable hereunder for Services (the “Fees”) will be equal to (i) the Service Provider’s Internal Costs for such Services plus (ii) the Service Provider’s Third Party Costs for such Services.  Ironwood shall also pay the Service Provider for all of the reasonable, documented one-time costs and expenses, if any, incurred by the Service Provider in order to enable the Service Provider to provide and to terminate Services as contemplated hereby, including costs for adapting the Service Provider’s systems to be able to interface with Ironwood’s systems for provision of the Services, if reasonably required (the “One-Time Costs”); provided, however that Cyclerion shall not incur any One-Time Cost (on an event-by-event basis) over five thousand dollars ($5,000)  that is not specifically identified in Schedule I without Ironwood’s prior written consent, not to be unreasonably withheld, conditioned or delayed.  The Parties agree that they have used reasonable good faith efforts to identify One-Time Costs in excess of five thousand dollars ($5,000) on Schedule I as of the Effective Date and, in the event that Cyclerion declines to consent to any One-Time Cost for a Service pursuant to this Section 3.1, Service Provider shall not be required under this Agreement to perform such Service to the extent such Service cannot be performed without payment of such One-Time Cost.

 

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Section 3.2.                                 Expense.  The Fees are exclusive of expenses related to travel (including long-distance and local transportation, accommodation and meal expenses and other incidental expenses) by the Service Provider’s personnel or any subcontractor in connection with performing the Services.  All of the costs and expenses described in this Section 3.2 (“Expenses”) will be charged by the Service Provider to the recipient of such Service on a pass-through basis.  For the avoidance of doubt, the Expenses described in this Section 3.2 will be consistent with the Service Provider’s general approach with respect to such types of costs and expenses; provided that with respect to any Service, the recipient of such Service’s prior written approval will be required to the extent that Expenses exceed fifteen percent (15%) of the Fees paid and payable to the Service Provider for such Service in any calendar quarter.  For clarity, there shall be no mark-up added to Expenses under this Agreement, unless such mark-up was actually paid by the Service Provider’s personnel or subcontractor.

 

Section 3.3.                                 Quarterly Statements.  Cyclerion will furnish Ironwood with a preliminary statement six (6) Business Days after the close of each calendar quarter and a final statement ten (10) Business Days after the close of each calendar quarter, each such statement to be in the form attached as Exhibit D (each, a “Quarterly Statement”), which Quarterly Statement shall reflect Cyclerion’s good faith estimate of, on a Service-by-Service basis: (a) the Fees payable for the Services provided by the Service Provider to Ironwood for the preceding calendar quarter (itemized to reflect Internal Costs and Third Party Costs), (b) any Expenses payable for the preceding calendar quarter and (c) any One-Time Costs payable for the preceding calendar quarter, in each case as incurred in accordance with this Agreement.

 

Section 3.4.                                 Invoice.  Not later than twenty-five (25) days after the last day of each calendar quarter (or, if the Term ends during a calendar quarter, the last day of the Term), Cyclerion shall provide to Ironwood an invoice for the preceding calendar quarter, which will list (a) the Services provided by the Service Provider to Ironwood for the preceding calendar quarter, (b) the Fees payable for such Services (and reasonable documentation supporting such Fees, to the extent requested by Ironwood) for the preceding calendar quarter (itemized to reflect Internal Costs and Third Party Costs) (c) any Expenses (and reasonable documentation supporting such Expenses, to the extent requested by Ironwood) for the preceding calendar quarter and (d) any One-Time Costs (and reasonable documentation supporting such costs and expenses, to the extent requested by Ironwood) for the preceding calendar quarter, in each case as incurred in accordance with this Agreement.  Ironwood shall pay the amount stated in such invoices in full within thirty (30) days of the issuance of the invoices (or, if such date is not a Business Day, then on the immediately succeeding Business Day) to an account designated by Cyclerion, except to the extent such amount is the subject of a good faith dispute by Ironwood as notified in writing to Cyclerion.

 

Section 3.5.                                 Late Payments.  Without prejudice to the Service Provider’s other rights and remedies, where any sum remains unpaid after the applicable due date, it will carry interest, which will accrue daily, from the due date until the date of actual payment, at a rate based on the prime rate listed in the Wall Street Journal (Bond Yields and Rates) on the date such sum is due and payable plus two percent (2%).  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 and unless the dispute is resolved in the payee Party’s favor.

 

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Section 3.6.           Taxes.  Ironwood shall make all payments to a Service Provider for any Service without deduction or withholding for taxes including income tax withholding, Value Added Tax (“VAT”), duties, sales tax or a similar tax except to the extent any such deduction or withholding is required by the tax laws of any federal, state, provincial or foreign government.  In the event a deduction or withholding for taxes is applicable, Ironwood shall submit such deduction or withholding for taxes to the appropriate governmental authority and shall provide a tax certificate to Service Provider.  In the event VAT or sales tax applies to the services provided, a Service Provider shall invoice such tax to Ironwood, as a reimbursable expense, and a Service Provider shall remit such tax to the relevant government authority.  Service Provider and Ironwood shall mutually cooperate to minimize any amount of tax assessed in respect of the performance of Services hereunder or as a deduction or withholding of taxes, including through the prompt completion and filing of any relevant tax forms with the relevant tax authorities.

 

Section 3.7.           No Right to Set-Off.  Each Party hereto acknowledges and agrees that it shall not be permitted to set-off any amount owed by such Party pursuant to this Agreement against any amount or obligation owed to such Party or an Affiliate hereunder or pursuant to the Separation Agreement or any other Ancillary Agreement.

 

ARTICLE IV

 

SERVICE MANAGEMENT

 

Section 4.1.           Service Managers.  Cyclerion and Ironwood shall each appoint an employee to have overall responsibility for managing and coordinating the delivery of Services in accordance with this Agreement (such employee, a “Service Manager”).  The initial Service Managers will be identified on Exhibit A hereto or otherwise designated by each of the Parties prior to the Distribution Effective Time, and may thereafter be replaced from time to time upon written notice to the other Party.  Service Managers shall consult and coordinate with one another regarding the provision of Services hereunder.

 

Section 4.2.           Service Coordinators.  Each Party has designated an employee or title as the principal point of contact for the day-to-day implementation or monitoring of each Service as specified in Schedule I (each, a “Service Coordinator”).  The Parties shall direct communications relating to specific Services to the applicable Service Coordinators.  The Service Coordinators shall report to the applicable Service Manager from time to time, as directed by the Service Manager.

 

ARTICLE V

 

SUB-CONTRACTING; THIRD PARTY AGREEMENTS

 

Section 5.1.           Sub-Contractors.  Upon Ironwood’s consent, not to be unreasonably withheld, conditioned or delayed, a Service Provider may delegate or sub-contract its duties under this Agreement to a qualified Third Party, provided that, notwithstanding such delegation or sub-contracting, the Service Provider will remain liable for the performance of its duties hereunder and shall ensure and guaranty that any Services provided by a subcontractor shall meet Service Provider’s obligations set forth in Section 2.2(i) and (ii).  In the event any such consent is not

 

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granted, Service Provider shall not have any liability resulting from any delay in providing any such Service.  For the avoidance of doubt, Service Provider will not be liable with respect to any agreement entered into directly by Ironwood (or its Affiliates) and a subcontractor, other than as mutually agreed in writing by the Parties hereto.

 

Section 5.2.           Third Party Agreements.  Ironwood acknowledges that the Services that were provided through Third Parties prior to the date hereof are subject to the terms and conditions of any applicable agreements between the Service Provider and such Third Parties, and Ironwood agrees to comply with such terms and conditions to the extent applicable to Ironwood and necessary for purposes of receiving such Services by Ironwood.  For any Service to be delegated to a Third Party after the date hereof, and so long as any such Service is provided solely to Ironwood and not to a Service Provider or any Affiliates of Service Provider, the Service Provider shall provide Ironwood with a copy of any agreement contemplated to be entered into with such Third Party in relation to such Service and, as set forth in Section 5.1, seek Ironwood’s consent to such delegation, which consent may not be unreasonably withheld, delayed or conditioned.

 

Section 5.3.           Consents.  Notwithstanding anything to the contrary contained herein, each Service Provider shall use commercially reasonable efforts to obtain all consents from vendors that are necessary in order to provide any of the Services to Ironwood under this Agreement; provided, however, that a Service Provider will not be required to pay any out-of-pocket fees to any vendor in order to obtain such consent, but will, instead, request that Ironwood pay such out-of-pocket fees.  In the event that a Service Provider is unable to obtain any such consent, Cyclerion’s sole liability and obligation and Ironwood’s sole remedy will be to require the Parties hereto to work together to agree upon a commercially reasonable alternative arrangement, which may include identification of alternate resources and equivalent services from such alternative resources on commercially reasonable terms.  Any costs specified in the second sentence of Section 3.1 and any actual out-of-pocket fees levied on a Service Provider (a) in connection with its efforts to obtain and implement such consents and (b) in connection with the implementation of any such commercially reasonable alternative arrangement, will be borne by Ironwood.  For the avoidance of doubt, any costs incurred by a Service Provider in connection with obtaining consents prior to the Distribution Effective Time will be borne by Cyclerion.

 

ARTICLE VI

 

TERM AND TERMINATION AND EFFECTS OF TERMINATION

 

Section 6.1.           Termination.  Except as otherwise provided herein or unless otherwise agreed in writing by the Parties hereto, a Service Provider’s obligation to provide or procure, and Ironwood’s obligation to purchase, each Service shall cease as of the end of the term specified for such Service in Schedule I hereto, and the Agreement will terminate in its entirety at the end of the Term; provided that (a) this Agreement may be extended, with respect to one or more Services, by mutual written agreement of the Parties, consent to which extension shall be in each Party’s absolute discretion, provided that such extension shall be limited to one period of up to six (6)  months following the initial Term of the Service and (b) in the event that a Service shall not have been transitioned to Ironwood solely as a result of a material breach by Cyclerion of its obligations under the Migration Plan, the term for such Service will be extended solely for such period as shall be necessary for Cyclerion to cure such material breach; provided that the breach is curable with

 

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the use of commercially reasonable efforts and is not related to a Service that could reasonably be obtained or performed by Ironwood itself.

 

Section 6.2.           Termination for Breach.  In the event that a Party hereto commits a material breach with respect to any of the Services, the other Party may terminate this Agreement with respect to such Service only, unless such breach is cured not later than thirty (30) days after receipt by the breaching Party of written notice of such breach.

 

Section 6.3.           Early Termination of a Service.  Subject to the restrictions set forth herein, if Ironwood should wish to terminate a Service (in whole, but not in part), Ironwood shall provide written notice to the Service Provider not later than forty-five (45) days prior to the requested termination date for such Service; provided, however, that no such notice of termination may be delivered to the Service Provider during the forty-five (45) day period immediately following the date hereof.  Notwithstanding the foregoing provisions, the Parties hereto acknowledge and agree that, in certain instances, terminating certain Services may require time periods longer than the forty-five (45) day period specified in this Section 6.3.  In any such event, the Parties agree to negotiate in good faith a longer period of time for any and all such transfers following the termination notice.  Ironwood will remain liable for any Fees or other amounts payable hereunder in connection with the terminated Service(s) incurred prior to the effective date of termination of such Service(s), including in the event that such terminated Services contemplated a deliverable that was not provided due to such early termination.  Ironwood acknowledges and agrees that (a) Services provided by Third Parties may be subject to term-limited licenses and contracts between a Service Provider and applicable Third Parties (collectively, “Provider Third Party Contracts”), (b) the renewal periods under the Provider Third Party Contracts may be for fixed periods and (c) a Service Provider may not have the right to renew certain Provider Third Party Contracts.  As a result, Ironwood agrees that (i) if Service Provider is required to extend any Provider Third Party Contract in order to continue to provide any Service during the Term, then Service Provider shall notify Ironwood and, if Ironwood informs Service Provider within twenty (20) days of such notice that it wishes to continue to receive such Service, then Ironwood shall be required to pay Service Provider the amount of any renewal fees or purchase commitments applicable to the relevant Service for the full renewal period specified in the applicable Provider Third Party Contract, regardless of whether the Term or Service Provider’s provision of the relevant Service ends prior to the end of the relevant renewal period and (ii) a Service Provider shall not be required to provide any Service to the extent it is unable to renew any applicable Provider Third Party Contract or Ironwood either informs Service Provider that it does not wish to continue to receive such Service under this Section 6.3 or does not respond to Service Provider’s notice in the applicable 20-day period.

 

Section 6.4.           Termination Upon Insolvency.  Either Party may terminate this Agreement immediately in the event the other Party (a) becomes insolvent, (b) is generally unable to pay, or fails to pay, its debts as they become due, (c) files, or has filed against it, a petition for voluntary or involuntary bankruptcy or pursuant to any other insolvency Law, (d) makes or seeks to make a general assignment for the benefit of its creditors, or (e) applies for, or consents to, the appointment of a trustee, receiver or custodian for a substantial part of its property or business.

 

Section 6.5.           Accrued Rights.  Termination or expiration of this Agreement for any reason will be without prejudice to any rights that have accrued to the benefit of a Party prior to

 

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such termination or expiration.  Such termination or expiration will not relieve a Party from obligations that are expressly indicated to survive the termination or expiration of this Agreement.

 

Section 6.6.           Effect of Termination.  Not later than thirty (30) days following the date it receives a final invoice from a Service Provider following termination or expiration of any Services or this Agreement, Ironwood shall pay to the Service Provider all remaining monies due to the Service Provider hereunder in respect of Services provided prior to such termination or expiration except for any amounts then the subject of a good faith dispute.  In addition, at the end of the Term, each Party hereto shall, at the disclosing Party’s option, return or destroy the Confidential Information of the disclosing Party.  In the event that the disclosing Party elects destruction, the other Party shall furnish to the disclosing Party a written certificate of destruction signed by an officer of the certifying Party.  Any provision which by its nature should survive, including the provisions of this Section 6.6 (Effect of Termination), Section 2.11 (Intellectual Property), Article III (Fees and Payment), Article VIII (Limitation of Liability; Indemnification), Article X (Preservation of Records; Access to Information; Confidentiality; Privilege) and Article XI (Miscellaneous), shall survive the termination of this Agreement.

 

ARTICLE VII

 

DISPUTE RESOLUTION

 

Section 7.1.           Negotiation.  A Party seeking resolution of a controversy, dispute or action arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or otherwise arising out of, or in any way related to, this Agreement or the transactions contemplated hereby or thereby, including any action based on contract, tort, statute or constitution (collectively, “Disputes”) shall provide written notice of such Dispute to the other Party, specifying the terms of such Dispute in reasonable detail (“Dispute Notice”).  The appropriate executives of the Parties who have authority to settle the Dispute (or such other individuals designated by the respective executives) shall attempt to resolve the Dispute through good faith negotiation for a reasonable period of time; provided that such reasonable period shall not, unless otherwise agreed by the Parties in writing, exceed fifteen (15) days from the time of receipt by a Party of the Dispute Notice.  If the Dispute has not been resolved within fifteen (15) days after receipt of the Dispute Notice, the respective Chief Executive Officers or their respective designees (with full settlement authority) of Ironwood and Cyclerion shall meet in person (or where necessary, by phone) at a mutually acceptable time and, if applicable, place, and thereafter as often as they reasonably deem necessary, to attempt in good faith to resolve the Dispute.  Any contractual time period or deadline under this Agreement to which such Dispute relates occurring after the Dispute Notice is received shall not be deemed to have passed until such Dispute has been resolved pursuant to this Article VII.

 

Section 7.2.           Arbitration.  Any Dispute that is not resolved pursuant to Section 7.1 within thirty (30) days after receipt of a Dispute Notice shall be resolved by final and binding arbitration pursuant to the procedures set forth in Section 8.2 of the Separation Agreement.

 

Section 7.3.           Continuity of Service and Performance.  Unless otherwise agreed in writing, the Parties shall continue to provide service and honor all other commitments under this Agreement during the course of a Dispute with respect to all matters not subject to such Dispute.

 

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ARTICLE VIII

 

LIMITATION OF LIABILITY; INDEMNIFICATION

 

Section 8.1.           Limited Liability.

 

(a)           The aggregate Liabilities of Cyclerion and its Affiliates and Representatives, collectively, under this Agreement for any act or failure to act in connection herewith (including the performance or breach of this Agreement), or from the sale, delivery, provision or use of any Services provided under or contemplated by this Agreement, whether in contract, tort (including negligence and strict liability) or otherwise, at law or equity, will not exceed the aggregate amount of the Internal Costs, Expenses and One-Time Costs paid (and not previously paid back as a Liability hereunder) to Cyclerion (or its Affiliates) under this Agreement prior to the date on which Service Provider’s action or inaction giving rise to the Liability arises or occurs; provided that if such action or inaction occurs during the first year of this Agreement, the aggregate Liabilities of Cyclerion and its Affiliates and Representatives related to such action or inaction will not exceed the aggregate amount of the Internal Costs, Expenses and One-Time Costs actually paid and payable (and not previously paid back as a Liability hereunder) in the first twelve (12) months of this Agreement.

 

(b)           Notwithstanding anything to the contrary contained in the Separation Agreement or this Agreement, a Service Provider will not be liable to Ironwood or any of its Affiliates or Representatives, whether in contract, tort (including negligence and strict liability) or otherwise, at law or equity, for any special, indirect, incidental, punitive or consequential damages whatsoever (including lost profits or damages calculated on multiples of earnings approaches), which in any way arise out of, relate to or are a consequence of, the performance or nonperformance by the Service Provider (including any Affiliates and Representatives of the Service Provider and any unaffiliated third party providers, in each case, providing the applicable Services) under this Agreement or the provision of, or failure to provide, any Services under this Agreement, including with respect to loss of profits, business interruptions or claims of customers.

 

(c)           The limitations in this Section 8.1 will not apply with respect to any Liability arising out of, relating to or in connection with (i) any Third Party claim to the extent a Party has an indemnification obligation to the other Party for such Liability under Section 8.3(a) or Section 8.3(b), (ii) any breach of Article X or (iii) the gross negligence, willful misconduct or fraud of or by the Party to be charged.

 

Section 8.2.           Services Provided “As-Is”.  EACH SERVICE PROVIDER PROVIDES ANY AND ALL SERVICES ON AN “AS-IS” BASIS AND, EXCEPT AS SET FORTH IN Section 2.2, MAKES NO REPRESENTATIONS OR WARRANTIES AS TO THE SERVICES PROVIDED.  EACH SERVICE PROVIDER DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, IN CONNECTION WITH THIS AGREEMENT.

 

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Section 8.3.           Indemnification.

 

(a)           Subject to Section 8.1, Ironwood hereby agrees to indemnify, defend and hold harmless each Service Provider and its Affiliates and Representatives from and against any and all Liabilities arising from, relating to or in connection with (i) the use of any Services by such Ironwood or any of its Affiliates, Representatives or other Persons using such Services or (ii) a material breach by Ironwood or any of its Affiliates of any covenant or agreement contained in this Agreement, except in each case to the extent that such Liabilities arise out of, relate to or are a consequence of the Service Provider’s or its Affiliates’ or Representatives’ gross negligence, willful misconduct or fraud.

 

(b)           Subject to Section 8.1, Cyclerion hereby agrees to indemnify, defend and hold harmless Ironwood and its Affiliates and Representatives from and against any and all Liabilities arising from, relating to or in connection with the (i) the gross negligence or willful misconduct of Service Provider in connection with the provision of the Services or (ii) a material breach by Service Provider of any covenant or agreement contained in this Agreement, except in each case to the extent that such Liabilities arise out of, relate to or are a consequence of Ironwood’s gross negligence, willful misconduct or fraud.

 

(c)           The Party seeking to be indemnified (the “Indemnified Party”) shall provide prompt written notice of a Liability or events likely to give rise to a Liability to the Party with the obligation to indemnify (the “Indemnifying Party”) (in any event within sufficient time so as not to prejudice the defense of such Claim).  The Indemnifying Party shall be given the opportunity at all times to control the defense of the Claim, with the cooperation and assistance of the Indemnified Party; provided, however, that the Indemnifying Party shall not settle any claim for which it has an indemnification obligation under this Section 8.3 with an admission of liability or wrongdoing by the Indemnified Party without such Party’s prior written consent.

 

(d)           Indemnification pursuant to this Section 8.3 represents the Parties’ sole and exclusive remedy under this Agreement, provided that, if a Service Provider commits an error with respect to, incorrectly performs or fails to perform any Service, at Ironwood’s request, without prejudice to any other rights or remedies Ironwood may have, the Service Provider shall use commercially reasonable efforts to correct such error, re-perform such Service or perform such Service, as applicable, at no additional cost to Ironwood.  To the extent a Service Provider is unable to provide in its entirety a Service because of a partial delay which excuses performance pursuant to Section 11.6, the Service Provider shall allocate such resources and/or products as are then currently available to it and necessary for the performance of such Service ratably between the Service Provider for its own account and Ironwood for the performance of such Services hereunder.

 

ARTICLE IX

 

INSURANCE MATTERS

 

Section 9.1.           Insurance.  Each Party hereto shall, throughout the term of this Agreement, carry appropriate insurance with a reputable insurance company covering property damage, business interruptions, automobile and general liability insurance (including contractual liability) to protect its own business and property interests; provided that each Party shall be permitted to reasonably self-insure against the liabilities specified in Article VIII.

 

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ARTICLE X

 

CONFIDENTIALITY

 

Section 10.1.         Confidentiality.  The provisions of Article VII of the Separation Agreement will apply to disclosures of information made pursuant to this Agreement mutatis mutandis.

 

ARTICLE XI

 

MISCELLANEOUS

 

Section 11.1.         Complete Agreement; Construction.  This Agreement, including the Exhibits and Schedules, together with the Separation Agreement and the other Ancillary Agreements, shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments, course of dealings and writings with respect to such subject matter.  In the event of any inconsistency between this Agreement and any Schedule hereto, the Schedule shall prevail.  In the event and to the extent that there shall be a conflict between the provisions of the Separation Agreement and the provisions of this Agreement, the Separation Agreement shall control.

 

Section 11.2.         Transaction Agreements.  Except as expressly set forth herein, this Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the other Transaction Agreements.

 

Section 11.3.         Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to each of the Parties.

 

Section 11.4.         Notices.  All notices, requests, claims, demands and other communications under this Agreement shall be in English, shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile with receipt confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as will be specified in a notice given in accordance with this Section 11.4):

 

To Cyclerion:

 

Cyclerion Therapeutics, Inc.
 301 Binney Street

Cambridge, MA 02142

United States
 Attn: Chief Financial Officer

Phone: 
 Fax:

 

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To Ironwood:

 

Ironwood Pharmaceuticals, Inc.
 301 Binney Street
 Cambridge, MA 02142
 United States
 Attn:  General Counsel
 Phone:  617-621-7722
 Fax:  617-588-0623

 

Section 11.5.         Waivers.  The delay or failure of either Party to exercise or enforce any of its rights under this Agreement will not constitute, or be deemed to be, a waiver of those rights, nor will any single or partial exercise of any such rights preclude any other or further exercise thereof or the exercise of any other right.  No waiver of any provision of this Agreement will be effective unless it is in writing and signed by the Party against which it is being enforced.

 

Section 11.6.         Force Majeure.

 

(a)           Neither Party hereto will be liable for delay in performance (other than the payment of money) of its obligations to the extent caused by events which could not have been foreseen and are beyond the reasonable control of the Party affected (an event of “Force Majeure”), including (i) acts of God, the elements, epidemics, explosions, accidents, landslides, lightning, earthquakes, fires, storms (including tornadoes and hurricanes or tornado and hurricane warnings), sinkholes, floods or washouts; (ii) labor shortage or trouble including strikes or injunctions (whether or not within the reasonable control of such Party and provided that the settlement of strikes and other labor disputes shall be entirely within the discretion of the Party experiencing the difficulty); (iii) inability to obtain material, equipment or transportation; (iv) national defense requirements, war, blockades, insurrections, sabotage, terrorism, riots, arrests and restraints of the government, either federal or state, civil or military (including any governmental taking by eminent domain or otherwise); or (v) any changes in applicable Law, regulation or rule or the enforcement thereof by any governmental or regulatory agency having jurisdiction, that limits or prevents a Party from performing its obligations hereunder or any notice from any such agency of its intention to fine or penalize such Party or otherwise impede or limit such Party’s ability to perform its obligations hereunder.

 

(b)           Each Service Provider shall endeavor to provide to Ironwood uninterrupted Services through the Term.  In the event, however, that (i) the Service Provider is wholly or partially prevented from providing a Service or Services either temporarily or permanently by reason of any Force Majeure event, or (ii) the Service Provider, in the exercise of its reasonable good faith judgment, deems it necessary to suspend delivery of a Service hereunder for purposes of inspection, maintenance, repair, replacement of equipment parts or structures, or similar activities consistent with past practices, the Service Provider shall not be obligated to deliver the affected part of such Service during such periods, and, in the case of the immediately preceding clause (ii), the Service Provider shall cooperate with Ironwood with respect to the timing of such interruption.  Notices provided under this Section 11.6 shall be provided to Ironwood’s Service Manager (or other executive designated in writing by Ironwood in accordance with Article VII) and may be provided in accordance with Article IV.

 

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Section 11.7.         Assignment.  Except as provided herein, neither Party may assign any rights or delegate any obligations arising under this Agreement, in whole or in part, directly or indirectly, without the prior written consent of the other Party (such consent not to be unreasonably withheld, conditioned or delayed), and any attempt to so assign any rights or delegate any obligations arising under this Agreement without such consent will be void.  Notwithstanding the foregoing, no such consent shall be required for any such assignment or delegation (i) with respect to Cyclerion, to a Subsidiary of Cyclerion (so long as such Subsidiary remains a Subsidiary of Cyclerion), (ii) with respect to Ironwood, to a Subsidiary of Ironwood (so long as such Subsidiary remains a Subsidiary of Ironwood) or (iii) to a bona fide Third Party in connection with a merger, reorganization, consolidation or the sale of all or substantially all the assets of a Party so long as the resulting, surviving or transferee entity assumes all the obligations of the assigning Party by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the non-assigning Party; provided, however, that in the case of each of the preceding clauses (i) and (ii), no assignment permitted by this Section 11.7 shall release the assigning Party from liability for the full performance of its obligations under this Agreement.

 

Section 11.8.         Successors and Assigns.  The provisions of this Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and against) the Parties and their respective successors (whether by merger, acquisition of assets or otherwise) and permitted assigns.

 

Section 11.9.         Third Party Beneficiaries.  Except as provided in Section 8.3 with respect to Persons entitled to claim indemnification hereunder, this Agreement is solely for the benefit of the Parties and will not be deemed to confer upon Person other than the Parties any remedy, claim, liability, reimbursement, cause of Action or other right beyond any that exist without reference to this Agreement.

 

Section 11.10.      Titles and Headings.  Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

 

Section 11.11.      Exhibits and Schedules.  The Exhibits and Schedules will be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein.

 

Section 11.12.      Governing Law.  This Agreement will be governed by, construed and interpreted in accordance with the laws of the Commonwealth of Massachusetts, U.S.A., without reference to principles of conflicts of laws.

 

Section 11.13.      Severability.  In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby.  The Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

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Section 11.14.      Interpretation.  Interpretation of this Agreement shall be governed by the following rules of construction: (a) words in the singular shall be held to include the plural and vice versa, and words of one gender shall be held to include the other gender as the context requires; (b) references to the terms “Section,” “paragraph,” “clause,” “Exhibit” and “Schedule” are references to the Sections, paragraphs, clauses, Exhibits and Schedules of this Agreement unless otherwise specified; (c) the terms “hereof,” “herein,” “hereby,” “hereto,” and derivative or similar words refer to this entire Agreement, including the Schedules and Exhibits hereto; (d) references to “$” shall mean U.S. dollars; (e) the word “including” and words of similar import when used in this Agreement shall mean “including without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) references to “written” or “in writing” include in electronic form; (h) unless the context requires otherwise, references to “party” shall mean Ironwood or Cyclerion, as appropriate, and references to “parties” shall mean Ironwood and Cyclerion; (i) provisions shall apply, when appropriate, to successive events and transactions; (j) the table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; (k) Ironwood and Cyclerion have each participated in the negotiation and drafting of this Agreement and if an ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or burdening either party by virtue of the authorship of any of the provisions in this Agreement or any interim drafts of this Agreement; and (l) a reference to any Person includes such Person’s successors and permitted assigns.

 

Section 11.15.      No Duplication; No Double Recovery.  Nothing in this Agreement, the Separation Agreement or any other Ancillary Agreement is intended to confer to or impose upon any Party a duplicative right, entitlement, obligation or recovery with respect to any matter arising out of the same facts and circumstances.

 

Section 11.16.      No Waiver.  No failure to exercise and no delay in exercising, on the part of any Party, any right, remedy, power or privilege hereunder shall operate as a waiver hereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

Section 11.17.      Independent Contractor Status.  Each Service Provider will be deemed to be an independent contractor to Ironwood.  Nothing contained in this Agreement will create or be deemed to create the relationship of employer and employee between the Service Provider and Ironwood.  The relationship created between the Service Provider and Ironwood pursuant to or by this Agreement is not and will not be one of partnership or joint venture.  No Party to this Agreement will, by reason hereof, be deemed to be a partner or a joint venture of the other Party hereto in the conduct of their respective businesses and/or the conduct of the activities contemplated by this Agreement.  Except as specifically and explicitly provided in this Agreement, and subject to and in accordance with the provisions hereof, no Party to this Agreement is now, will become, or will be deemed to be an agent or representative of the other Party.  Except as herein explicitly and specifically provided, neither Party shall have any authority or authorization, of any nature whatsoever, to speak for or bind the other Party to this Agreement.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written.

 

	
 
    	
IRONWOOD   PHARMACEUTICALS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CYCLERION   THERAPEUTICS, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signature Page to Transition Services Agreement]Exhibit 10.3

 

TAX MATTERS AGREEMENT

 

by and between

 

IRONWOOD PHARMACEUTICALS, INC.

 

and

 

CYCLERION THERAPEUTICS, INC.

 

Dated as of        , 2019

 

 

TAX MATTERS AGREEMENT

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE I   DEFINITIONS
    	
2
    
	
 
    	
 
    
	
Section 1.1.
    	
General
    	
2
    
	
 
    	
 
    	
 
    
	
ARTICLE II   LIABILITY FOR TAXES AND DISTRIBUTION LOSSES
    	
11
    
	
 
    	
 
    
	
Section 2.1.
    	
General   Rule
    	
11
    
	
 
    	
 
    	
 
    
	
Section 2.2.
    	
Allocation   Of Taxes For Pre-Distribution Periods
    	
11
    
	
 
    	
 
    	
 
    
	
ARTICLE III   PREPARATION AND FILING OF TAX RETURNS
    	
12
    
	
 
    	
 
    
	
Section 3.1.
    	
Ironwood’s   Responsibility
    	
12
    
	
 
    	
 
    	
 
    
	
Section 3.2.
    	
Cyclerion’s   Responsibility
    	
12
    
	
 
    	
 
    	
 
    
	
Section 3.3.
    	
Cooperation
    	
12
    
	
 
    	
 
    	
 
    
	
Section 3.4.
    	
Tax   Reporting Practices
    	
12
    
	
 
    	
 
    	
 
    
	
Section 3.5.
    	
Certain   Elections
    	
13
    
	
 
    	
 
    	
 
    
	
Section 3.6.
    	
Right to   Review Tax Returns
    	
14
    
	
 
    	
 
    	
 
    
	
Section 3.7.
    	
Adjustment   Requests and Cyclerion Carrybacks
    	
14
    
	
 
    	
 
    	
 
    
	
Section 3.8.
    	
Apportionment   Of Tax Attributes
    	
15
    
	
 
    	
 
    	
 
    
	
Section 3.9.
    	
Ironwood   and Cyclerion Income Tax Deductions in Respect of Certain Equity Awards and   Compensation
    	
15
    
	
 
    	
 
    	
 
    
	
Section 3.10.
    	
Withholding   and Reporting
    	
16
    
	
 
    	
 
    	
 
    
	
ARTICLE IV   TAX PAYMENTS
    	
16
    
	
 
    	
 
    
	
Section 4.1.
    	
Payment   of Joint Return and Separate Return Taxes
    	
16
    
	
 
    	
 
    	
 
    
	
Section 4.2.
    	
Indemnification   Payments
    	
16
    
	
 
    	
 
    	
 
    
	
ARTICLE V   TAX BENEFITS
    	
17
    
	
 
    	
 
    
	
Section 5.1.
    	
Tax   Benefits
    	
17
    
	
 
    	
 
    	
 
    
	
ARTICLE VI   TAX-FREE STATUS
    	
18
    
	
 
    	
 
    
	
Section 6.1.
    	
Restrictions   on Cyclerion
    	
18
    
	
 
    	
 
    	
 
    
	
Section 6.2.
    	
Restrictions   on Ironwood
    	
20
    

 

i

 

	
Section 6.3.
    	
Rulings
    	
20
    
	
 
    	
 
    	
 
    
	
Section 6.4.
    	
Liability   For Distribution Losses
    	
20
    
	
 
    	
 
    	
 
    
	
ARTICLE VII   ASSISTANCE AND COOPERATION
    	
21
    
	
 
    	
 
    
	
Section 7.1.
    	
Assistance   and Cooperation
    	
21
    
	
 
    	
 
    	
 
    
	
Section 7.2.
    	
Income   Tax Return Information
    	
22
    
	
 
    	
 
    	
 
    
	
Section 7.3.
    	
Reliance   by Ironwood
    	
22
    
	
 
    	
 
    	
 
    
	
Section 7.4.
    	
Reliance   by Cyclerion
    	
23
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII   TAX RECORDS
    	
23
    
	
 
    	
 
    
	
Section 8.1.
    	
Retention   of Tax Records
    	
23
    
	
 
    	
 
    	
 
    
	
Section 8.2.
    	
Access to   Tax Records
    	
23
    
	
 
    	
 
    	
 
    
	
Section 8.3.
    	
Preservation   of Privilege
    	
24
    
	
 
    	
 
    	
 
    
	
ARTICLE IX   TAX CONTESTS
    	
24
    
	
 
    	
 
    
	
Section 9.1.
    	
Notice
    	
24
    
	
 
    	
 
    	
 
    
	
Section 9.2.
    	
Control   of Tax Contests
    	
24
    
	
 
    	
 
    	
 
    
	
ARTICLE X   EFFECTIVE DATE
    	
26
    
	
 
    	
 
    
	
ARTICLE XI   SURVIVAL OF OBLIGATIONS
    	
26
    
	
 
    	
 
    
	
ARTICLE XII   TAX TREATMENT OF PAYMENTS
    	
26
    
	
 
    	
 
    
	
Section 12.1.
    	
General   Rule
    	
26
    
	
 
    	
 
    	
 
    
	
Section 12.2.
    	
Gross-Up   of Indemnification Payments Made Pursuant to this Agreement
    	
26
    
	
 
    	
 
    	
 
    
	
Section 12.3.
    	
Interest
    	
27
    
	
 
    	
 
    	
 
    
	
ARTICLE XIII   DISPUTE RESOLUTION
    	
27
    
	
 
    	
 
    
	
Section 13.1.
    	
Negotiation
    	
27
    
	
 
    	
 
    	
 
    
	
Section 13.2.
    	
Arbitration
    	
27
    
	
 
    	
 
    	
 
    
	
Section 13.3.
    	
Referral   To Tax Advisor For Computational Or Tax Law Disputes
    	
27
    
	
 
    	
 
    	
 
    
	
Section 13.4.
    	
Continuity   of Service and Performance
    	
28
    
	
 
    	
 
    	
 
    
	
Section 13.5.
    	
Injunctive   or Other Equity Relief
    	
28
    
	
 
    	
 
    	
 
    
	
ARTICLE XIV   GENERAL PROVISIONS
    	
28
    
	
 
    	
 
    
	
Section 14.1.
    	
Complete   Agreement; Construction
    	
28
    
	
 
    	
 
    	
 
    
	
Section 14.2.
    	
Transaction   Agreements
    	
29
    
	
 
    	
 
    	
 
    
	
Section 14.3.
    	
Counterparts
    	
29
    

 

ii

 

	
Section 14.4.
    	
Survival   Of Agreement
    	
29
    
	
 
    	
 
    	
 
    
	
Section 14.5.
    	
Expenses
    	
29
    
	
 
    	
 
    	
 
    
	
Section 14.6.
    	
Notices
    	
29
    
	
 
    	
 
    	
 
    
	
Section 14.7.
    	
Waivers
    	
30
    
	
 
    	
 
    	
 
    
	
Section 14.8.
    	
Assignment
    	
30
    
	
 
    	
 
    	
 
    
	
Section 14.9.
    	
Successors   and Assigns
    	
30
    
	
 
    	
 
    	
 
    
	
Section 14.10.
    	
Termination   and Amendment
    	
30
    
	
 
    	
 
    	
 
    
	
Section 14.11.
    	
Payment   Terms
    	
31
    
	
 
    	
 
    	
 
    
	
Section 14.12.
    	
Subsidiaries
    	
31
    
	
 
    	
 
    	
 
    
	
Section 14.13.
    	
Third   Party Beneficiaries
    	
31
    
	
 
    	
 
    	
 
    
	
Section 14.14.
    	
Titles   And Headings
    	
32
    
	
 
    	
 
    	
 
    
	
Section 14.15.
    	
Governing   Law
    	
32
    
	
 
    	
 
    	
 
    
	
Section 14.16.
    	
Severability
    	
32
    
	
 
    	
 
    	
 
    
	
Section 14.17.
    	
Interpretation
    	
32
    
	
 
    	
 
    	
 
    
	
Section 14.18.
    	
No   Duplication; No Double Recovery
    	
32
    
	
 
    	
 
    	
 
    
	
Section 14.19.
    	
No Waiver
    	
32
    
	
 
    	
 
    	
 
    
	
Section 14.20.
    	
Further   Action
    	
33
    

 

iii

 

TAX MATTERS AGREEMENT

 

This TAX MATTERS AGREEMENT (this “Agreement”) is entered into as of        , 2019, by and between Ironwood Pharmaceuticals, Inc. (“Ironwood”), a Delaware corporation, and Cyclerion Therapeutics, Inc. (“Cyclerion”), a Massachusetts corporation and wholly owned Subsidiary of Ironwood.  (Ironwood and Cyclerion are sometimes collectively referred to herein as the “Parties” and, as the context requires, individually referred to herein as a “Party”).

 

W I T N E S S E T H:

 

WHEREAS, Ironwood is a commercial biotechnology company engaged in the discovery, development, and commercialization of pharmaceutical drugs to treat diseases in areas of large unmet need (the “Pharmaceutical Business”).

 

WHEREAS, the Board of Directors of Ironwood (the “Board”) has determined that it is appropriate, desirable and in the best interests of Ironwood and its stockholders to separate the Pharmaceutical Business into (a) a business related to Ironwood’s soluble guanylate cyclase (“sGC”) stimulators (the “Cyclerion Pharmaceutical Business” as such term is defined in the Separation Agreement) and (b) a business related to Ironwood’s remaining drug products and programs (the “New Ironwood Pharmaceutical Business” as such term is defined in the Separation Agreement).

 

WHEREAS, the Board has determined that it is appropriate, desirable and in the best interests of Ironwood and its stockholders, to cause all of the issued and outstanding shares of Cyclerion Common Stock held by Ironwood following the Separation to be issued pro rata to the holders of Ironwood Common Stock on the terms and conditions set forth in the Separation Agreement (such issuance, the “Distribution”) and for each of Ironwood and Cyclerion to be two separate publicly traded companies;

 

WHEREAS, for U.S. federal Income Tax purposes, it is the intention of the Parties that the Separation and the Distribution, taken together, will qualify as a reorganization within the meaning of Section 368(a)(1)(D) of the Code and, except for cash received in lieu of any fractional shares, the Distribution will qualify as tax-free under Section 355(a) of the Code to the stockholders of Ironwood and as tax-free to Ironwood under Section 361(c) of the Code;

 

WHEREAS, as of the date hereof, Ironwood is the common parent of an Affiliated Group, including Cyclerion, which has elected to file consolidated U.S. federal Income Tax Returns; and

 

WHEREAS, the Parties desire to provide for and agree upon the allocation between the Parties of liabilities, and entitlements to refunds thereof, for certain Taxes arising prior to, at the time of, and subsequent to the Distribution, and to provide for and agree upon other matters relating to Taxes and to set forth certain covenants and indemnities relating to the Tax-Free Status of the Separation and the Distribution;

 

WHEREAS, pursuant to that certain Common Stock Purchase Agreement, dated as of January 7, 2019 by and between Cyclerion and the investors named therein (the “Common Stock

 

1

 

Purchase Agreement”), shares of Cyclerion Common Stock will be purchased by investors immediately following the consummation of the Distribution (such purchase, the “Offering”).

 

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements, provisions and covenants contained in this Agreement, the Parties hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1.                                 General.  For purposes of this Agreement (including the recitals hereof), the following terms have the following meanings, and capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Separation Agreement:

 

(1)                                 “Action” has the meaning set forth in the Separation Agreement.

 

(2)                                 “Active Conduct” means “active conduct” as defined in Section 355(b)(2) of the Code and the Treasury Regulations thereunder.

 

(3)                                 “Active Trade or Business” has the meaning set forth on Exhibit A.

 

(4)                                 “Adjustment Request” means any formal or informal claim or request filed with any Tax Authority, or with any administrative agency or court, for the adjustment, refund, or credit of Taxes, including (a) any amended Tax Return claiming adjustment to the Taxes as reported on the Tax Return or, if applicable, as previously adjusted, (b) any claim for equitable recoupment or other offset, and (c) any claim for refund or credit of Taxes previously paid.

 

(5)                                 “Affiliate” means any entity that is directly or indirectly “controlled” by either the person in question or an Affiliate of such person.  “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, by contract or otherwise.  The term Affiliate shall refer to Affiliates of a person as determined immediately after the Distribution.

 

(6)                                 “Affiliated Group” means, with respect to a Party, the affiliated group (as that term is defined in Section 1504(a) of the Code and the Treasury Regulations thereunder) of which the Party is the common parent.

 

(7)                                 “Ancillary Agreement” has the meaning set forth in the Separation Agreement; provided, however, that for purposes of this Agreement, this Agreement shall not constitute an Ancillary Agreement.

 

(8)                                 “Business Day” has the meaning set forth in the Separation Agreement.

 

(9)                                 “Code” means the U.S. Internal Revenue Code of 1986, as amended.

 

(10)                          “Complete Pre-Distribution Period” means any Tax Period ending on or before the Distribution Date.

 

2

 

(11)                          “Common Stock Purchase Agreement” has the meaning set forth in the Recitals to this Agreement.

 

(12)                          “Contribution” means the contribution by Ironwood of the assets constituting the Cyclerion Pharmaceutical Business to Cyclerion solely in exchange for stock of Cyclerion and the assumption by Cyclerion of any liabilities related to the Cyclerion Pharmaceutical Business.

 

(13)                          “Controlling Party” has the meaning set forth in Section 9.2(b) of this Agreement.

 

(14)                          “Cyclerion” has the meaning provided in the first sentence of this Agreement.

 

(15)                          “Cyclerion Capital Stock” means all classes or series of capital stock of Cyclerion, including (a) the Cyclerion Common Stock, (b) all options, warrants and other rights to acquire such capital stock and (c) all instruments properly treated as stock in Cyclerion for U.S. federal Income Tax purposes.

 

(16)                          “Cyclerion Carryback” means any net operating loss, net capital loss, excess tax credit, or other similar Tax item of any member of the Cyclerion Group which may or must be carried from one Tax Period to another prior Tax Period under the Code or other applicable Law.

 

(17)                          “Cyclerion Common Stock” has the meaning set forth in the Separation Agreement.

 

(18)                          “Cyclerion Disqualifying Act” means, following the Distribution, (a) any act, or failure or omission to act, by any member of the Cyclerion Group that results in any Party (or any of its Affiliates) being responsible for Distribution Taxes pursuant to a Final Determination, regardless of whether such act or failure to act (i) is covered by a Post-Distribution Ruling or Unqualified Tax Opinion (or is subject to Section 6.1(d)-(e)), or (ii) occurs during or after the Restricted Period; (b) the direct or indirect acquisition of all or a portion of the stock of Cyclerion (or any transaction or series of related transactions that is deemed to be such an acquisition for purposes of the Code and the Treasury Regulations promulgated thereunder) by any means whatsoever by any Person, including, for the avoidance of doubt, pursuant to the Offering or any other issuance of stock by Cyclerion; or (c) any event (or series of events) involving Cyclerion Capital Stock or any assets of any member of the Cyclerion Group.

 

(19)                          “Cyclerion Entity” means an entity which is a member of the Cyclerion Group.

 

(20)                          “Cyclerion Group” means Cyclerion and its Affiliates, as determined after the Distribution.

 

(21)                          “Cyclerion Pharmaceutical Business” has the meaning set forth in the recitals to this Agreement.

 

(22)                          “Cyclerion Separate Return” means (a) any Tax Return of or including any member of the Cyclerion Group (including any consolidated, combined or unitary return) that does not include any member of the Ironwood Group and (b) any Tax Return relating to Transfer Taxes that Cyclerion is obligated to file under applicable Law.

 

3

 

(23)                          “DGCL” means the Delaware General Corporation Law.

 

(24)                          “Dispute Notice” has the meaning set forth in Section 13.1.

 

(25)                          “Disputed Tax Matter” has the meaning set forth in Section 13.3.

 

(26)                          “Disputes” has the meaning set forth in Section 13.1.

 

(27)                          “Distribution” has the meaning set forth in the recitals to this Agreement.

 

(28)                          “Distribution Date” has the meaning set forth in the Separation Agreement.

 

(29)                          “Distribution Effective Time” has the meaning set forth in the Separation Agreement.

 

(30)                          “Distribution Losses” shall mean (a) all Distribution Taxes (including interest and penalties thereon) imposed (or, in the case of Ironwood Attribute Losses, that would have been imposed if Ironwood were a Full Taxpayer) pursuant to any settlement, Final Determination, judgment or otherwise; (b) all accounting, legal and other professional fees and court costs incurred in connection with such Distribution Taxes, as well as any other out-of-pocket costs incurred in connection with such Taxes; and (c) all reasonable costs and expenses and all damages associated with shareholder litigation or controversies and any amount paid by any member of the Ironwood Group or member of the Cyclerion Group in respect of the liability of shareholders, whether paid to any shareholder or to the IRS or any other Tax Authority, in each case, resulting from the failure of any Separation Transaction to have Tax-Free Status.

 

(31)                          “Distribution Taxes” means (i) any and all Taxes required to be paid by or imposed on a Party or any of its Affiliates, plus (ii) without duplication, the hypothetical Taxes that would have been described in clause (i) if Ironwood were a Full Taxpayer (“Ironwood Attribute Losses”), in each case, resulting from, attributable to, or arising in connection with the failure of (a) the Contribution and Distribution, taken together, to qualify as a reorganization described in Sections 355(a) and 368(a)(1)(D) of the Code or (b) the stock distributed in the Distribution to constitute “qualified property” for purposes of Sections 355(d), 355(e) and Section 361(c) of the Code (or any corresponding provision of the Laws of other jurisdictions).

 

(32)                          “Employee Matters Agreement” means the Employee Matters Agreement, as amended from time to time, by and between Ironwood and Cyclerion.

 

(33)                          “Fifty-Percent or Greater Interest” has the meaning ascribed to such term for purposes of Section 355(e) of the Code.

 

(34)                          “Final Determination” means the final resolution of liability for any Tax, which resolution may be for a specific issue or adjustment or for a taxable period, (a) by IRS Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the taxpayer, or by a comparable form under the Laws of a state, local, or foreign taxing jurisdiction, except that a Form 870 or 870-AD or comparable form shall not constitute a Final Determination to the extent that it reserves (whether by its terms or by operation of Law) the right of the taxpayer to file a claim for refund or the right of the Tax Authority to assert a further deficiency

 

4

 

in respect of such issue or adjustment or for such taxable period (as the case may be); (b) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (c) by a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the Laws of a state, local, or foreign taxing jurisdiction; (d) by any allowance of a refund or credit in respect of an overpayment of a Tax, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) by the jurisdiction imposing such Tax; (e) by a final settlement resulting from a treaty-based competent authority determination; or (f) by any other final disposition, including by reason of the expiration of the applicable statute of limitations, the execution of a pre-filing agreement with the IRS or other Tax Authority, or by mutual agreement of the Parties.

 

(35)                          “Full Taxpayer” means the assumption that each relevant member of the Ironwood Group (a) is subject to the highest marginal regular statutory income Tax rate, and (b) will not utilize any Tax Attribute other than a Tax Attribute arising from the adjustment at issue.

 

(36)                          “Governmental Entity” has the meaning set forth in the Separation Agreement.

 

(37)                          “Group” means the Ironwood Group or the Cyclerion Group, or both, as the context requires.

 

(38)                          “Income Tax” means all U.S. federal, state, and local and foreign income, franchise or similar Taxes imposed on (or measured by) net income or net profits, and any interest, penalties, additions to tax or additional amounts in respect of the foregoing.

 

(39)                          “Internal Restructuring” has the meaning set forth in Section 6.1(e) of this Agreement.

 

(40)                          “Ironwood Attribute Losses” has the meaning set forth in the definition of Distribution Taxes.

 

(41)                          “Ironwood Capital Stock” means all classes or series of capital stock of Ironwood, including (a) the Ironwood Common Stock, (b) all options, warrants and other rights to acquire such capital stock and (c) all instruments properly treated as stock of Ironwood for U.S. federal Income Tax purposes.

 

(42)                          “Ironwood Common Stock” has the meaning set forth in the Separation Agreement.

 

(43)                          “Ironwood Disqualifying Act” means (a) any act, or failure or omission to act, by any member of the Ironwood Group following the Distribution that results in any Party (or any of its Affiliates) being responsible for such Distribution Taxes pursuant to a Final Determination; (b) the direct or indirect acquisition of all or a portion of the stock of Ironwood (or any transaction or series of related transactions that is deemed to be such an acquisition for purposes of the Code and the Treasury Regulations promulgated thereunder) by any means whatsoever by any Person, including pursuant to an issuance of stock by Ironwood; (c) any event (or series of events) involving Ironwood Capital Stock or any assets of any member of the Ironwood Group; or (d) any failure to be true, inaccuracy in, or breach of any of Ironwood’s representations or

 

5

 

statements contained in the Representation Letters to the extent relating to acts, omissions, events, conditions, facts or circumstances existing on or before the Distribution Effective Time.

 

(44)                          “Ironwood Equity Awards” means options, stock appreciation rights, restricted stock, stock units or other compensatory rights with respect to Ironwood Common Stock that are granted by Ironwood on or before the Distribution Date in connection with employee, independent contractor or director compensation or other employee benefits; provided, however, that options, stock appreciation rights, restricted stock, stock units or other rights with respect to Cyclerion Common Stock issued in respect of any of the foregoing by reason of the Distribution or any subsequent transaction shall not be treated as Ironwood Equity Awards.

 

(45)                          “Ironwood Group” means Ironwood and its Affiliates, excluding any entity that is a member of the Cyclerion Group.

 

(46)                          “Ironwood Separate Return” means (a) any Tax Return of or including any member of the Ironwood Group (including any consolidated, combined or unitary return) that does not include any member of the Cyclerion Group and (b) any Tax Return relating to Transfer Taxes that Ironwood is obligated to file under applicable Law.

 

(47)                          “IRS” means the U.S. Internal Revenue Service.

 

(48)                          “Joint Return” means any Tax Return (including any consolidated, combined or unitary Tax Return) that relates to at least one asset or activity that is part of the New Ironwood Pharmaceutical Business, on the one hand, and at least one asset or activity that is part of the Cyclerion Pharmaceutical Business, on the other hand.

 

(49)                          “Law” means the law of any Governmental Entity or political subdivision thereof, including statutes, regulations promulgated thereunder, and administrative and judicial interpretations thereof.

 

(50)                          “New Ironwood Pharmaceutical Business” has the meaning set forth in the recitals to this Agreement.

 

(51)                          “Non-Controlling Party” has the meaning set forth in Section 9.2(b) of this Agreement.

 

(52)                          “Non-Responsible Party” means the Party that is not the Responsible Party.

 

(53)                          “Offering” has the meaning set forth in the Recitals to this Agreement.

 

(54)                          “Parties” and “Party” have the meaning set forth in the first sentence of this Agreement.

 

(55)                          “Past Practices” has the meaning set forth in Section 3.4(a) of this Agreement.

 

(56)                          “Payment Date” means (a) with respect to any consolidated U.S. federal Income Tax Return for the Affiliated Group of which Ironwood is the common parent, (i) the due date for any required installment of estimated taxes determined under Section 6655 of the Code, (ii)

 

6

 

the due date (determined without regard to extensions) for filing the return determined under Section 6072 of the Code, or (iii) the date the return is filed, as the case may be, and (b) with respect to any other Tax Return, the corresponding dates determined under the applicable Law.

 

(57)                          “Payor” has the meaning set forth in Section 4.2(a) of this Agreement.

 

(58)                          “Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a Governmental Entity or any department, agency or political subdivision thereof, without regard to whether any entity is treated as disregarded for U.S. federal Income Tax purposes.

 

(59)                          “Post-Distribution Period” means any Tax Period beginning after the Distribution Date and, in the case of any Straddle Period, the portion of such Tax Period beginning on the day after the Distribution Date.

 

(60)                          “Pre-Distribution Period” means any Tax Period ending on or before the Distribution Date and, in the case of any Straddle Period, the portion of such Straddle Period ending on the Distribution Date.

 

(61)                          “Post-Distribution Ruling” has the meaning set forth in Section 6.1 of this Agreement.

 

(62)                          “Preliminary Tax Advisor” has the meaning set forth in Section 13.3 of this Agreement.

 

(63)                          “Prime Rate” has the meaning set forth in the Separation Agreement.

 

(64)                          “Privilege” means any privilege that may be asserted under applicable Law, including, any privilege arising under or relating to the attorney-client relationship (including the attorney-client and work product privileges), the accountant-client privilege and any privilege relating to internal evaluation processes.

 

(65)                          “Proposed Acquisition Transaction” means a transaction or series of transactions (or any agreement, understanding or arrangement, within the meaning of Section 355(e) of the Code and Treasury Regulation Section 1.355-7, or any other regulations promulgated thereunder, to enter into a transaction or series of transactions), whether such transaction is supported by Cyclerion management or shareholders, is a hostile acquisition, merger, consolidation or otherwise, as a result of which any Person or any group of related Persons would (directly or indirectly) acquire, or have the right to acquire, from Cyclerion and/or one or more direct or indirect holders of outstanding shares of Cyclerion Capital Stock, a number of shares of Cyclerion Capital Stock that would, when combined with any other changes in ownership of Cyclerion Capital Stock pertinent for purposes of Section 355(e) of the Code (other than the Offering), comprise three percent (3%), or more of (a) the value of all outstanding shares of stock of Cyclerion as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series, or (b) the total combined voting power of all outstanding shares of voting stock of Cyclerion as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series.  Notwithstanding the

 

7

 

foregoing, a Proposed Acquisition Transaction shall not include (i) the adoption by Cyclerion of a shareholder rights plan and (ii) issuances by Cyclerion that satisfy Safe Harbor VIII (relating to acquisitions in connection with a Person’s performance of services).  For purposes of determining whether a transaction constitutes an indirect acquisition, any recapitalization resulting in a shift of voting power or any redemption of shares of stock shall be treated as an indirect acquisition of shares of stock by the non- exchanging shareholders.  This definition and the application thereof is intended to monitor compliance with Section 355(e) of the Code and shall be interpreted accordingly.  Any clarification of, or change in, the statute or regulations promulgated under Section 355(e) of the Code shall be incorporated in this definition and its interpretation. For the avoidance of doubt, the Offering shall not constitute a Proposed Acquisition Transaction.

 

(66)                          “Representation Letters” means the statements of facts and representations, officer’s certificates, representation letters and any other materials delivered or deliverable by Ironwood, its Affiliates (including Cyclerion) or representatives thereof in connection with any Ruling Request or the rendering by Tax Advisor of the Tax Opinion.

 

(67)                          “Required Party” has the meaning set forth in Section 4.2 of this Agreement.

 

(68)                          “Responsible Party” means, with respect to any Tax Return, the Party having responsibility for preparing and filing such Tax Return under this Agreement.

 

(69)                          “Restricted Period” means the period beginning at the Distribution Effective Time and ending on the two-year anniversary of the day after the Distribution Date.

 

(70)                          “Retention Date” has the meaning set forth in Section 8.1 of this Agreement.

 

(71)                          “Ruling” means a private letter ruling issued by the IRS to Ironwood in connection with the Separation Transactions.

 

(72)                          “Ruling Request” means any letter or memorandum filed by Ironwood with the IRS requesting a ruling regarding certain Tax consequences of the Separation Transactions (including all attachments, exhibits, and other materials submitted with such ruling request letter) and any amendment or supplement to such ruling request letter.

 

(73)                          “Section 336(e) Allocation Statement” has the meaning set forth in Section 3.5(b)(ii) of this Agreement.

 

(74)                          “Section 336(e) Election” has the meaning set forth in Section 3.5(b).

 

(75)                          “Separate Return” means an Ironwood Separate Return or a Cyclerion Separate Return, as the case may be.

 

(76)                          “Separation” has the meaning set forth in the Separation Agreement.

 

(77)                          “Separation Agreement” means the Separation Agreement, as amended from time to time, by and between Ironwood and Cyclerion.

 

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(78)                          “Separation Taxes” means any and all Taxes (other than Distribution Taxes) required to be paid by or imposed on a Party or any of its Affiliates resulting from, attributable to, or arising in connection with the Distribution or any other Separation Transaction including Transfer Taxes.

 

(79)                          “Separation Transactions” means the contribution to, and distribution of, Cyclerion pursuant to the Separation, as described in Exhibit A.

 

(80)                          “Straddle Period” means any Tax Period that begins on or before and ends after the Distribution Date.

 

(81)                          “Subsidiary” has the meaning set forth in the Separation Agreement.

 

(82)                          “Substantial Authority” has the meaning set forth in Section 3.4(c) of this Agreement.

 

(83)                          “Tax” or “Taxes” means any income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers compensation, unemployment, disability, property, ad valorem, value added, stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, escheat, alternative minimum, estimated or other tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax), imposed by any Governmental Entity or political subdivision thereof, and any interest, penalty, additions to tax or additional amounts in respect of the foregoing.

 

(84)                          “Tax Advisor” means a tax counsel or tax accountant of recognized national standing.

 

(85)                          “Tax Attribute” means a net operating loss, carryforward under Section 163(j) of the Code, net capital loss, unused investment credit, unused foreign Tax credit, excess charitable contribution, general business credit, research and development credit, orphan drug credit, earnings and profits, basis, or any other Tax Item that could reduce a Tax or create a Tax Benefit.

 

(86)                          “Tax Benefit” means any Tax Refund, credit or other reduction in Tax payments (determined on a “with and without” basis).

 

(87)                          “Tax Contest” means an audit, review, examination, or any other administrative or judicial proceeding with the purpose or effect of redetermining Taxes (including any administrative or judicial review of any claim for refund).

 

(88)                          “Tax-Free Status” means the qualification of the Contribution and the Distribution, taken together, (a) as a reorganization described in Sections 355(a) and 368(a)(1)(D) of the Code; (b) as a transaction in which the stock distributed thereby is “qualified property” for purposes of Sections 355(d), 355(e) and 361(c) of the Code; and (c) as a transaction in which Ironwood, Cyclerion and the shareholders of Ironwood recognize no income or gain for U.S. federal Income Tax purposes pursuant to Sections 355, 361 and 1032 of the Code, other than, in the case of Ironwood and Cyclerion, intercompany items or excess loss accounts taken into account pursuant to the Treasury Regulations promulgated pursuant to Section 1502 of the Code.

 

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(89)                          “Tax Authority” means, with respect to any Tax, the Governmental Entity or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the assessment, administration, collection, enforcement, determination or imposition of such Tax for such entity or subdivision.

 

(90)                          “Tax Item” means, with respect to any Income Tax, any item of income, gain, loss, deduction, or credit.

 

(91)                          “Tax Period” means, with respect to any Tax, the period for which the Tax is reported as provided under the Code or other applicable Law.

 

(92)                          “Tax Records” means any (a) Tax Returns, (b) Tax Return work papers, (c) documentation relating to any Tax Contests, and (d) any other books of account or records (whether or not in written, electronic or other tangible or intangible forms and whether or not stored on electronic or any other medium) required to be maintained under the Code or other applicable Laws or under any record retention agreement with any Tax Authority, in each case filed with respect to or otherwise relating to Taxes.

 

(93)                          “Tax Refund” means any refund of Taxes (including any overpayment of Taxes that can be refunded or, alternatively, credited or applied to future Taxes payable), including any interest paid on or with respect to such refund of Taxes.

 

(94)                          “Tax Return” or “Return” means any report of Taxes due, any claim for refund of Taxes paid, any information return with respect to Taxes, or any other similar report, statement, declaration, or document required to be filed under the Code or other Law with respect to Taxes, including any attachments, exhibits, or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing.

 

(95)                          “Third Party” means any Person other than the Parties or any of their respective Subsidiaries.

 

(96)                          “Transaction Agreement” has the meaning set forth in the Separation Agreement.

 

(97)                          “Transfer Taxes” means all sales, use, transfer, real property transfer, intangible, recordation, registration, documentary, stamp or similar Taxes imposed on the Distribution or any of the other Separation Transactions (excluding, for the avoidance of doubt, any Income Taxes).

 

(98)                          “Treasury Regulations” means the regulations promulgated from time to time under the Code as in effect for the relevant Tax Period.

 

(99)                          “Unqualified Tax Opinion” means an unqualified “will” opinion of a Tax Advisor, which Tax Advisor is reasonably acceptable to Ironwood, on which Ironwood may rely to the effect that a transaction will not affect the Tax-Free Status.  Any such opinion must assume that the Contribution and the Distribution would have qualified for Tax-Free Status if the transaction in question did not occur.

 

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ARTICLE II

 

LIABILITY FOR TAXES AND DISTRIBUTION LOSSES

 

Section 2.1.                                 General Rule.

 

(a)                                 Ironwood Liability.  Ironwood shall be liable for, and shall indemnify and hold harmless the Cyclerion Group from and against any liability for:

 

(i)                                     Taxes that are allocated to Ironwood under this Article II;

 

(ii)                                  Separation Taxes;

 

(iii)                               any Taxes resulting from a breach of any of Ironwood’s covenants in this Agreement, the Separation Agreement or any Ancillary Agreement; and

 

(iv)                              any Distribution Losses that are the responsibility of Ironwood under Section 6.4.

 

(b)                                 Cyclerion Liability.  Cyclerion shall be liable for, and shall indemnify and hold harmless the Ironwood Group, in each case assuming the relevant member of the Ironwood Group is a Full Taxpayer, from and against any liability for:

 

(i)                                     Taxes that are allocated to Cyclerion under this Article II;

 

(ii)                                  any Taxes resulting from a breach of any of Cyclerion’s covenants in this Agreement, the Separation Agreement or any Ancillary Agreement; and

 

(iii)                               any Distribution Losses that are the responsibility of Cyclerion under Section 6.4.

 

Section 2.2.                                 Allocation Of Taxes For Pre-Distribution Periods.  Except with respect to Taxes described in Section 2.1(a)(ii), Section 2.1(a)(iii), Section 2.1(a)(iv), Section 2.1(b)(ii) and Section 2.1(b)(iii), Taxes shall be allocated as follows:

 

(a)                                 Allocation of Taxes Relating to Joint Returns.  With respect to any Joint Return, Ironwood shall be responsible for any and all Taxes for Pre-Distribution Periods due with respect to or required to be reported on any such Tax Return (including any increase in such Tax as a result of a Final Determination) which Taxes are attributable to the New Ironwood Pharmaceutical Business or the Cyclerion Pharmaceutical Business.

 

(b)                                 Allocation of Tax Relating to Separate Returns.

 

(i)                                     Ironwood shall be responsible for any and all Taxes for (A) Complete Pre-Distribution Periods due with respect to or required to be reported on any Cyclerion Separate Return and (B) all Tax Periods due with respect to or required to be reported on any Ironwood Separate Return (including, in each case, any increase in such Tax as a result of a Final Determination).

 

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(ii)                                  Cyclerion shall be responsible for any and all Taxes due with respect to or required to be reported on any Cyclerion Separate Return for (A) Pre-Distribution Periods (other than Complete Pre-Distribution Periods) and (B) Post-Distribution Periods (including, in each case, any increase in such Tax as a result of a Final Determination).

 

ARTICLE III

 

PREPARATION AND FILING OF TAX RETURNS

 

Section 3.1.                                 Ironwood’s Responsibility.  Ironwood shall prepare and file, or cause to be prepared and filed:

 

(a)                                 All Joint Returns that Ironwood or any of its Affiliates is legally responsible for preparing or filing under applicable Law; and

 

(b)                                 Ironwood Separate Returns.

 

Section 3.2.                                 Cyclerion’s Responsibility.  Cyclerion shall prepare and file, or cause to be prepared and filed, all Tax Returns required to be filed by or with respect to members of the Cyclerion Group other than those Tax Returns which Ironwood is required to prepare and file under Section 3.1.  The Tax Returns required to be prepared and filed by Cyclerion under this Section 3.2 shall include any Cyclerion Separate Returns.

 

Section 3.3.                                 Cooperation.  The Parties shall provide, and shall cause their Affiliates to provide, assistance and cooperation to one another in accordance with Article VII with respect to the preparation and filing of Tax Returns, including providing information required to be provided in Article VII.

 

Section 3.4.                                 Tax Reporting Practices.

 

(a)                                 Ironwood General Rule.  Except as provided in Section 3.4(c), Ironwood shall prepare any Tax Return which it has the obligation and right to prepare and file, or cause to be prepared and filed, under Section 3.1, in accordance with the past practices, accounting methods, elections or conventions of Ironwood (“Past Practices”) used with respect to the items reflected on such Tax Return (unless there is no reasonable basis for the use of such Past Practices), and to the extent any items are not covered by Past Practices (or in the event that there is no reasonable basis for the use of such Past Practices), in accordance with reasonable Tax accounting practices selected by Ironwood.

 

(b)                                 Cyclerion General Rule.  Except as provided in Section 3.4(c), with respect to any Tax Return that Cyclerion has the obligation and right to prepare and file, or cause to be prepared and filed, under Section 3.2, such Tax Return shall be prepared in accordance with Past Practices used with respect to the items reflected on such Tax Returns (unless there is no reasonable basis for the use of such Past Practices), and to the extent any items are not covered by Past Practices (or in the event that there is no reasonable basis for the use of such Past Practices), in accordance with reasonable Tax accounting practices selected by Cyclerion.

 

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(c)                                  Reporting of Separation Transactions and Other Transactions.  The Tax treatment of the Separation Transactions reported on any Tax Return shall be consistent with the treatment thereof in the Ruling Request, Rulings, Representation Letters and Unqualified Tax Opinion, and the Tax treatment of the transactions contemplated by the Transition Services Agreement reported on any Tax Return shall be consistent with the treatment determined by Ironwood in its sole discretion, in each case taking into account the jurisdiction in which such Tax Returns are filed, unless the Parties jointly determine that there is not at least “substantial authority,” within the meaning of Section 6662(d)(2)(B)(i) of the Code (or any corresponding or similar provision of state, local or foreign Law) (“Substantial Authority”) for such Tax treatment.  Such treatment reported on any Tax Return for which Cyclerion is the Responsible Party shall be consistent with that on any Tax Return filed or to be filed by Ironwood or any member of the Ironwood Group or caused or to be caused to be filed by Ironwood, unless the Parties jointly determine that there is not Substantial Authority for such Tax treatment.  Notwithstanding the foregoing, Ironwood shall have the right to make a “protective” Section 336(e) Election in accordance with Section 3.5(b).

 

Section 3.5.                                 Certain Elections.

 

(a)                                 Consolidated or Combined Tax Returns.  Cyclerion will elect and join, and will cause its respective Affiliates to elect and join, in filing any Joint Returns that Ironwood determines are required to be filed or that Ironwood elects to file pursuant to Section 3.1(a).

 

(b)                                 Protective Section 336(e) Election.

 

(i)                                     The Parties agree that Ironwood in its sole discretion may make, and Cyclerion will join in filing, timely protective elections under Section 336(e) of the Code and the Treasury Regulations issued thereunder, including under Treasury Regulation Sections 1.336-2(h)(1)(i) and 1.336-2(j), for each member of the Cyclerion Group that is a domestic corporation for U.S. federal Tax purposes with respect to the Distribution (a “Section 336(e) Election”).  It is intended that a Section 336(e) Election will have no effect unless the Distribution is a “qualified stock disposition,” as defined in Treasury Regulation Section 1.336-1(b)(6), by reason of the application of Treasury Regulation Section 1.336-1(b)(5)(i)(B) or Treasury Regulation Section 1.336-1(b)(5)(ii).

 

(ii)                                  If Ironwood determines to make a Section 336(e) Election pursuant to Section 3.5(b)(i), Ironwood and Cyclerion shall cooperate in the preparation, completion and filing of the Section 336(e) Election, including filing any statements, amending any Tax Returns or undertaking such other actions reasonably necessary to carry out the Section 336(e) Election.  Ironwood shall reasonably determine the “Aggregate Deemed Asset Disposition Price” and the “Adjusted Grossed-Up Basis” (each as defined under applicable Treasury Regulations) and the allocation of such Aggregate Deemed Asset Disposition Price and Adjusted Grossed-Up Basis among the disposition date assets of Cyclerion and its Subsidiaries, each in accordance with Section 336(e) of the Code and the applicable Treasury Regulations (the “Section 336(e) Allocation Statement”), and shall provide Cyclerion (A) a draft of such statement for its review and comment fifteen (15) Business Days prior to the due date for filing such statement and (B) a copy of such statement as filed.  To the extent the Section 336(e)

 

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Election becomes effective, each Party agrees not to take any position (and to cause each of its Affiliates not to take any position) that is inconsistent with the Section 336(e) Election, including the Section 336(e) Allocation Statement, on any Tax Return, in connection with any Tax Contest or for any other Tax purposes (in each case, excluding any position taken for financial accounting purposes), except as may be required by a Final Determination.

 

Section 3.6.                                 Right to Review Tax Returns.  The Responsible Party with respect to any Tax Return shall make the portion of a draft of such Tax Return which is relevant to the determination of the other Party’s rights or obligations under this Agreement available for review by the other Party, if requested, to the extent (a) such Tax Return relates to Taxes that could reasonably be expected to be equal to or in excess of $100,000 and that are the subject of a Tax Contest and for which the requesting Party would reasonably be expected to be liable, (b) such Tax Return relates to a Tax Benefit that could reasonably be expected to be equal to or in excess of $100,000 and for which the requesting Party would reasonably be expected to have a claim under this Agreement, or (c) the requesting Party reasonably determines that it must inspect such Tax Return to confirm compliance with the terms of this Agreement.  The Responsible Party shall (x) use its reasonable best efforts to make such portion of such Tax Return available for review as required under this paragraph sufficiently in advance of the due date for filing of such Tax Return to provide the requesting Party with a meaningful opportunity to analyze and comment on such Tax Return and (y) use reasonable efforts to have such Tax Return modified before filing in accordance with any reasonable comments of the requesting Party.  The Parties shall attempt in good faith to resolve any issues arising out of the review of such Tax Return.

 

Section 3.7.                                 Adjustment Requests and Cyclerion Carrybacks.

 

(a)                                 Cyclerion hereby agrees that, unless Ironwood consents in writing (which consent may not be unreasonably withheld, conditioned or delayed) or as required by Law, (i) no Cyclerion Entity shall file an Adjustment Request with respect to any Tax Return for a Pre-Distribution Period or Straddle Period, and (ii) any available elections to waive the right to claim in any Pre-Distribution Period with respect to any Tax Return any Cyclerion Carryback arising in a Post-Distribution Period shall be made, and no affirmative election shall be made to claim any such Cyclerion Carryback.  In the event that Cyclerion (or the appropriate member of the Cyclerion Group) is prohibited by applicable Law from waiving or otherwise forgoing a Cyclerion Carryback or Ironwood consents to a Cyclerion Carryback, Ironwood shall cooperate with Cyclerion, at Cyclerion’s expense, in seeking from the appropriate Tax Authority such Tax Benefit as reasonably would result from such Cyclerion Carryback, to the extent that such Tax Benefit is directly attributable to such Cyclerion Carryback, and shall pay over to Cyclerion the amount of such Tax Benefit within thirty (30) days after such Tax Benefit is realized (as determined on a “with and without” basis); provided, however, that Cyclerion shall indemnify and hold the members of the Ironwood Group harmless from and against any and all collateral Tax consequences resulting from or caused by any such Cyclerion Carryback, including, without limitation, the loss or postponement of any benefit from the use of Tax Attributes generated by a member of the Ironwood Group if (i) such Tax Attributes expire unused, but would have been utilized but for such Cyclerion Carryback, or (ii) the use of such Tax Attributes is postponed to a later Tax Period than the Tax Period in which such Tax Attributes would have been used but for such Cyclerion Carryback.

 

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(b)                                 Ironwood hereby agrees that, unless Cyclerion consents in writing (which consent may not be unreasonably withheld, conditioned, or delayed) or as required by Law, no member of the Ironwood Group shall file any Adjustment Request with respect to any Tax Return if the result could reasonably be expected to change the Tax liability for which any member of the Cyclerion Group is liable under Section 2.1(b) for any Tax Period in an amount equal to or in excess of $25,000.

 

Section 3.8.                                 Apportionment Of Tax Attributes.  Ironwood shall advise Cyclerion in writing of a reasonable allocation of any Tax Attributes, which Ironwood shall determine in accordance with a reasonable interpretation of the Code, Treasury Regulations, and any other applicable Law, and Ironwood shall consider in good faith any reasonable comments provided by Cyclerion regarding such allocation.  The Parties and all members of their respective Groups shall prepare all Tax Returns in accordance with such allocation.  Notwithstanding anything to the contrary contained herein, for the avoidance of doubt, the Parties agree that Ironwood is not warranting or guaranteeing the amount of any such Tax Attributes.

 

Section 3.9.                                 Ironwood and Cyclerion Income Tax Deductions in Respect of Certain Equity Awards and Compensation.  Unless otherwise required by a change in applicable Law following the date of this Agreement or by a Final Determination, (a) Ironwood shall be the sole person entitled to claim any Income Tax deduction in respect of any (i) compensatory options on Ironwood stock that are vested as of the Distribution Date, (ii) compensatory options on Ironwood stock or on Cyclerion stock issued in respect of options described in clause (a)(i) in connection with the Distribution, (iii) compensatory options on Ironwood stock that are unvested as of the Distribution Date, (iv) any compensatory options on Ironwood stock issued in respect of compensatory options described in clause (a)(iii) in connection with the Distribution,  (v) restricted stock units of Ironwood that are unvested as of the Distribution Date, and (vi) any restricted stock units of Ironwood issued in respect of restricted stock units described in clause (a)(v) in connection with the Distribution, (b) Cyclerion shall be the sole person entitled to claim any Income Tax deduction in respect of any (i) compensatory options on Cyclerion stock issued in respect of compensatory options described in clause (a)(iii) in connection with the Distribution, and (ii) restricted stock units of Cyclerion issued in respect of restricted stock units described in clause (a)(v) in connection with the Distribution, and (c) in the case of any equity awards or other compensation not governed by subsection (a) or subsection (b) above, the member of the Group (or the person acting as the agent for such member under Treasury Regulation Section 1.1502-76 or any similar provision under U.S. state or local or foreign Law) for which the relevant individual is currently employed or, if such individual is not currently employed by a member of the Group, was most recently employed at the time of the vesting, exercise, disqualifying disposition, payment or other relevant taxable event, as appropriate, in respect of equity awards and other compensation, shall be the sole person entitled to claim any Income Tax deduction in respect of such equity awards and other compensation on its respective Tax Return associated with such event; provided, however, that Ironwood may, in its sole and absolute discretion, claim a prorated Income Tax deduction (determined by multiplying the amount of any Income Tax deduction by a fraction, the numerator of which is the number of days in the service period while employed by Ironwood and the denominator of which is the applicable vesting period for the compensatory options or restricted stock units) in the case of any compensatory options on Cyclerion Stock or restricted stock units of Cyclerion that would otherwise be described in clause (b), to the extent such compensatory options or restricted stock

 

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units partially vested as of the Distribution Date, in which case each of Ironwood and Cyclerion shall be the sole person entitled to claim any Income Tax deduction in respect of its respective prorated share thereof.

 

Section 3.10.                          Withholding and Reporting. The person or persons that claim a deduction in accordance with Section 3.9 shall be responsible for all applicable Taxes (including payroll, employment and excise taxes, but excluding withholding taxes which shall be governed by Section 5.2(d) of the Employee Matters Agreement) in respect of the compensation that gives rise to such deduction, in the same proportions as such persons share such deduction under Section 3.9.  Except as expressly set forth in the Employee Matters Agreement or any Ancillary Agreement, all matters relating to the employer tax withholding and reporting obligations of the Parties and their respective Subsidiaries shall be governed exclusively by Section 5.2(d) of the Employee Matters Agreement.

 

ARTICLE IV

 

TAX PAYMENTS

 

Section 4.1.                                 Payment of Joint Return and Separate Return Taxes.  Each Party shall pay, or shall cause to be paid, to the applicable Tax Authority when due all Taxes owed by such Party or a member of such Party’s Group with respect to a Joint Return or Separate Return.

 

Section 4.2.                                 Indemnification Payments.

 

(a)                                 If any Party (the “Payor”) is required under applicable Law to pay to a Tax Authority a Tax that another Party (the “Required Party”) is liable for under this Agreement, the Payor shall provide notice to the Required Party for the amount due, accompanied by evidence of payment and a statement detailing the Taxes paid and describing in reasonable detail the particulars relating thereto.  Such Required Party shall have a period of thirty (30) days after the receipt of notice to respond thereto.  Unless the Required Party disputes the amount it is liable for under this Agreement, the Required Party shall reimburse the Payor within forty-five (45) Business Days of delivery by the Payor of the notice described above.  To the extent the Required Party does not agree with the amount the Payor claims the Required Party is liable for under this Agreement, the dispute shall be resolved in accordance with Article XIII.  Any reimbursement shall include interest on the Tax payment computed at the Prime Rate based on the number of days from the date of the payment to the Tax Authority to the date of reimbursement under this Section 4.2.

 

(b)                                 Any Tax indemnity payment required to be made by the Required Party pursuant to this Section 4.2 shall be reduced by any corresponding Tax Benefit payment required to be made to the Required Party by the other Party pursuant to Article V. For the avoidance of doubt, a Tax Benefit payment is treated as corresponding to a Tax indemnity payment to the extent the Tax Benefit realized is directly attributable to the same Tax Item (or adjustment of such Tax Item pursuant to a Final Determination) that gave rise to the Tax indemnity payment.

 

(c)                                  All indemnification payments under this Agreement shall be made by Ironwood directly to Cyclerion and by Cyclerion directly to Ironwood; provided, however, that if

 

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the Parties mutually agree with respect to any such indemnification payment, any member of the Ironwood Group, on the one hand, may make such indemnification payment to any member of the Cyclerion Group, on the other hand, and vice versa. All indemnification payments shall be treated in the manner described in Article XII.

 

ARTICLE V

 

TAX BENEFITS

 

Section 5.1.                                 Tax Benefits.

 

(a)                                 If a member of the Cyclerion Group realizes any Tax Benefit resulting from, attributable to or arising in connection with a Section 336(e) Election, and such Tax Benefit would not have arisen but for such election (determined on a “with and without” basis), Cyclerion shall make a payment to Ironwood within thirty (30) Business Days following each such realization of a Tax Benefit, in an amount equal to (A) the product of (x) such Tax Benefit, times (y) the percentage of the total related Distribution Losses represented by the portion of such total Distribution Losses for which the Ironwood Group is responsible pursuant to Section 6.4, plus (B) interest on such amount computed at the Prime Rate based on the number of days from the date of such actual realization of the Tax Benefit to the date of payment of such amount under this Section 5.1; provided, however, that (i) such payments shall be reduced by all reasonable costs incurred by the Cyclerion Group to amend any Tax Returns or other governmental filings, and (ii) if a Tax Benefit is realized (determined on a “with and without” basis) as a result of an audit adjustment by a tax authority for a tax period that has already been completed as of the time of such adjustment, then, solely for purposes of determining (x) the date on which Cyclerion must make a payment to Ironwood in respect of such Tax Benefit, (y) the date on which Cyclerion must provide the notice described in Section 5.1(b) , and (z) the date from which interest computed at the Prime Rate accrues on such amount, such Tax Benefit shall be treated as having been realized as of the date on which the applicable tax authority issued such adjustment.

 

(b)                                 No later than thirty (30) Business Days after a Tax Benefit described in Section 5.1 is realized by a member of the Cyclerion Group, Cyclerion shall provide Ironwood with notice of the amount payable to Ironwood by Cyclerion pursuant to this Article V.  In the event that Ironwood disagrees with any such calculation described in this Section 5.1(b), Ironwood shall so notify Cyclerion in writing within thirty (30) Business Days of receiving the written calculation set forth above in this Section 5.1(b).  Ironwood and Cyclerion shall endeavor in good faith to resolve such disagreement, and, failing that, the amount payable under this Article V shall be determined in accordance with the disagreement resolution provisions of Article XIII as promptly as practicable.

 

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ARTICLE VI

 

TAX-FREE STATUS

 

Section 6.1.                                 Restrictions on Cyclerion.

 

(a)                                 Cyclerion will not take or fail to take, or permit any Cyclerion Affiliate, as the case may be, to take or fail to take, any action (i) where such action or failure to act would be inconsistent with or cause to be untrue any statement, information, covenant or representation from Cyclerion in any Representation Letters, Unqualified Tax Opinion, Ruling Request or Ruling, or (ii) which adversely affects or could reasonably be expected to adversely affect the Tax-Free Status of the Separation, the Distribution, or any other Separation Transaction.

 

(b)                                 During the Restricted Period, Cyclerion shall continue and cause to be continued the Active Conduct of the Cyclerion Pharmaceutical Business.

 

(c)                                  During the Restricted Period, Cyclerion shall not:

 

(i)                                     enter into any Proposed Acquisition Transaction, approve any Proposed Acquisition Transaction for any purpose, or to the extent Cyclerion or any other member of the Cyclerion Group has the right to prohibit any Proposed Acquisition Transaction, allow any Proposed Acquisition Transaction to occur (including, but not limited to, by (A) redeeming rights under a shareholder rights plan, (B) finding a tender offer to be a “permitted offer” under any such plan or otherwise causing any such plan to be inapplicable or neutralized with respect to any Proposed Acquisition Transaction, (C) approving any Proposed Acquisition Transaction, whether for purposes of Section 203 of the DGCL or any similar corporate statute, any “fair price” or other provision of Cyclerion’s charter or bylaws, (D) amending its certificate of incorporation to declassify its Board of Directors or approving any such amendment, or otherwise) with respect to Cyclerion;

 

(ii)                                  merge or consolidate with any other Person, unless Cyclerion is the survivor of such merger or consolidation, liquidate or partially liquidate;

 

(iii)                               engage (or permit a Cyclerion Affiliate to engage) in any transaction that would result in Cyclerion ceasing to be a company engaged in the Active Conduct of any Active Trade or Business;

 

(iv)                              make or revoke any election under Treasury Regulation Section 301.7701-3;

 

(v)                                 in one or more transactions, sell, transfer or dispose of, or enter into any other transaction(s) treated for U.S. federal Income Tax purposes as a sale or exchange of (or approve or allow the sale, transfer or other disposition of, or other transaction(s) treated for U.S. federal Income Tax purposes as a sale or exchange of) 25% or more of the net or gross assets of any Active Trade or Business (such percentage to be measured based on fair market value as of the Distribution Date), in each case other than (A) sales or transfers of assets in the ordinary course of business, (B) any cash paid to acquire assets from an unrelated Person in an arm’s-length transaction, (C) any assets transferred to a Person that is disregarded as an entity separate from the transferor for U.S. federal Income Tax purposes or (D) any mandatory or optional repayment (or pre-payment) of any indebtedness of Cyclerion or any member of the Cyclerion Group;

 

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(vi)                              amend its certificate of incorporation (or other organizational documents), or take any other action, whether through a stockholder vote or otherwise, affecting the voting rights of Cyclerion Capital Stock (including, without limitation, through the conversion of one class of Cyclerion Capital Stock into another class of Cyclerion Capital Stock); or

 

(vii)                           redeem or otherwise repurchase, directly or through any Affiliate, any of its outstanding stock, or rights to acquire stock, after the Distribution, other than through purchases meeting the requirements of Section 4.05(1)(b) of Revenue Procedure 96-30 (without regard to the effect of Revenue Procedure 2003-48 on Revenue Procedure 96-30);

 

provided, however, that Cyclerion shall be permitted to take such action or one or more actions set forth in the foregoing clauses (i) through (vii) if, prior to taking any such actions, (1) Cyclerion shall have received a favorable private letter ruling from the IRS, that confirms that such action or actions will not result in Distribution Taxes, taking into account such actions and any other relevant transactions in the aggregate (a “Post-Distribution Ruling”), in form and substance satisfactory to Ironwood, acting reasonably and in good faith solely to prevent the imposition on Ironwood, or responsibility for payment by Ironwood, of Distribution Taxes (and/or to avoid or delay Ironwood Attribute Losses) (including consideration of the reasonableness of any representations made in connection with such Post-Distribution Ruling); (2) Cyclerion shall have received an Unqualified Tax Opinion that confirms that such action or actions will not result in Distribution Taxes, taking into account such actions and any other relevant transactions in the aggregate, in form and substance satisfactory to Ironwood (including any representations or assumptions that may be included in such Unqualified Tax Opinion), acting reasonably and in good faith solely to prevent the imposition on Ironwood, or responsibility for payment by Ironwood, of Distribution Taxes (and/or to avoid or delay Ironwood Attribute Losses); or (3) Ironwood shall have waived the requirement to obtain such Post-Distribution Ruling or Unqualified Tax Opinion.  Unless Ironwood shall have waived the requirement to obtain the Post-Distribution Ruling or Unqualified Tax Opinion described in this paragraph, Cyclerion shall provide a copy of the Post-Distribution Ruling or the Unqualified Tax Opinion described in this paragraph to Ironwood as soon as practicable prior to taking or failing to take any action set forth in the foregoing clause (i) through (vii).  Ironwood’s evaluation of a Post-Distribution Ruling or Unqualified Tax Opinion may consider, among other factors, the appropriateness of any underlying assumptions, representations, and covenants made in connection with such Post-Distribution Ruling or Unqualified Tax Opinion.  Cyclerion shall bear all costs and expenses of securing any such Post- Distribution Ruling or Unqualified Tax Opinion and shall reimburse Ironwood for all reasonable out-of-pocket costs and expenses that Ironwood may incur in good faith in seeking to obtain or evaluate any such Post-Distribution Ruling or Unqualified Tax Opinion.

 

(d)                                 Cyclerion shall not take or fail to take any action (including any Internal Restructuring described in Section 6.1(e)), in the Restricted Period, that would reasonably be expected to increase the Tax liability of the Ironwood Group in connection with the Separation Transactions.

 

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(e)                                  Cyclerion shall not engage in, cause or permit any contribution, sale, exchange, disposition or other transfer of any of the material assets directly or indirectly contributed to Cyclerion or any of its Affiliates as described in the Separation Agreement, to Cyclerion or any of its Affiliates, apart from sales in the ordinary course of business (any such action, an “Internal Restructuring”) during or with respect to any Tax Period (or portion thereof) ending on or prior to the end of the Restricted Period if Cyclerion, after consultation with a Tax Advisor, believes there is a substantial possibility that the Internal Restructuring could adversely affect the Tax-Free Status, unless Cyclerion shall first consult with Ironwood regarding any such proposed actions reasonably in advance of taking any such proposed actions and consider in good faith any comments from Ironwood relating thereto.

 

Section 6.2.                                 Restrictions on Ironwood.  Ironwood agrees that it will not take or fail to take, or permit any Ironwood Affiliate, as the case may be, to take or fail to take, any action where such action or failure to act would be inconsistent with or cause to be untrue any statement, information, covenant or representation in any Ruling Request, Representation Letter or Unqualified Tax Opinion.  Ironwood agrees that it will not take or fail to take, or permit any Ironwood Affiliate, as the case may be, to take or fail to take, any action which adversely affects or could reasonably be expected to adversely affect the Tax-Free Status of the Separation, the Distribution, or any other Separation Transaction; provided, however, that this Section 6.2 shall not be construed as obligating Ironwood to consummate the Separation or the Distribution, nor shall it be construed as preventing Ironwood from terminating the Separation Agreement pursuant to Section 10.10 thereof.  For the avoidance of doubt, Cyclerion’s sole recourse for violations of this Section 6.2 shall be as set forth in Section 6.4.

 

Section 6.3.                                 Rulings.  Cyclerion hereby agrees that Ironwood shall have sole and exclusive control over the process of obtaining any Ruling, and that only Ironwood shall apply for a Ruling.  Neither Cyclerion nor any Cyclerion Affiliate directly or indirectly controlled by Cyclerion shall seek any guidance from the IRS or any other Tax Authority (whether written, verbal or otherwise) at any time concerning the Separation or the Distribution (including the impact of any transaction on the Tax-Free Status of the Separation or the Distribution or the intended Tax treatment of any other Separation Transaction) without the prior written consent of Ironwood, such consent not to be unreasonably withheld.

 

Section 6.4.                                 Liability For Distribution Losses.  In the event that, pursuant to a Final Determination, Distribution Taxes become due and payable to a Tax Authority or an Ironwood Attribute Loss occurs, then, notwithstanding anything to the contrary in this Agreement:

 

(a)                                 if and to the extent such Distribution Taxes and/or Ironwood Attribute Losses result from Section 355(e) of the Code:

 

(i)                                     as a result of an acquisition of a Fifty-Percent or Greater Interest in Ironwood, then Ironwood shall be responsible for any Distribution Losses.

 

(ii)                                  as a result of an acquisition of a Fifty-Percent or Greater Interest in Cyclerion, then Cyclerion shall be responsible for any Distribution Losses.

 

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(b)                                 if and to the extent such Distribution Taxes and/or Ironwood Attribute Losses do not result from Section 355(e) of the Code:

 

(i)                                     if such Distribution Taxes and/or Ironwood Attribute Losses are attributable to a Cyclerion Disqualifying Act and are not also attributable to an Ironwood Disqualifying Act, then Cyclerion shall be responsible for any Distribution Losses;

 

(ii)                                  if such Distribution Taxes and/or Ironwood Attribute Losses are attributable to an Ironwood Disqualifying Act and are not also attributable to a Cyclerion Disqualifying Act, then Ironwood shall be responsible for any Distribution Losses;

 

(iii)                               if such Distribution Taxes and/or Ironwood Attribute Losses are attributable to both a Cyclerion Disqualifying Act and an Ironwood Disqualifying Act, then responsibility for any Distribution Losses shall be shared by Ironwood and Cyclerion according to relative fault; and

 

(iv)                              if such Distribution Taxes and/or Ironwood Attribute Losses are not attributable to an Ironwood Disqualifying Act or a Cyclerion Disqualifying Act, then Ironwood shall be responsible for any Distribution Losses.

 

For the avoidance of doubt, and notwithstanding anything to the contrary in this Agreement, under no circumstances shall Ironwood be liable to Cyclerion in respect of any Ironwood Attribute Losses.

 

ARTICLE VII

 

ASSISTANCE AND COOPERATION

 

Section 7.1.                                 Assistance and Cooperation.

 

(a)                                 The Parties shall cooperate (and cause their respective Affiliates to cooperate) with each other and with each other’s agents, including accounting firms and legal counsel, in connection with Tax matters relating to the Parties and their Affiliates including (i) preparation and filing of Tax Returns, (ii) determining the liability for and amount of any Taxes due (including estimated Taxes) or the right to and amount of any refund of Taxes, (iii) examinations of Tax Returns, and (iv) any administrative or judicial proceeding in respect of Taxes assessed or proposed to be assessed.  Such cooperation shall include making all information and documents in their possession relating to the other Party and its Affiliates reasonably available to such other Party as provided in Article VIII of this Agreement.  Each of the Parties shall also make available to the other, as reasonably requested and available, personnel (including officers, directors, employees and agents of the Parties or their respective Affiliates) responsible for preparing, maintaining, and interpreting information and documents relevant to Taxes, and personnel reasonably required as witnesses or for purposes of providing information or documents in connection with any administrative or judicial proceedings relating to Taxes.  The Cyclerion Group shall cooperate with Ironwood and take any and all actions reasonably requested by Ironwood in connection with obtaining the Unqualified Tax Opinion or Post-Distribution Ruling (including, without limitation, by making any new representation or covenant, confirming any previously made representation or covenant or providing any materials

 

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or information requested by any Tax Advisor; provided that Cyclerion shall not be required to make or confirm any representation or covenant that is inconsistent with historical facts or as to future matters or events over which it has no control).

 

(b)                                 Any information or documents provided under this Article VII shall be kept confidential by the Party receiving the information or documents, except as may otherwise be necessary in connection with the filing of Tax Returns or in connection with any administrative or judicial proceedings relating to Taxes.  Notwithstanding any other provision of this Agreement, the Separation Agreement or any Ancillary Agreement, (i) neither Ironwood nor any Ironwood Affiliate shall be required to provide Cyclerion or any Cyclerion Affiliate or any other Person access to or copies of any information, documents or procedures (including the proceedings of any Tax Contest) other than information, documents or procedures that relate solely to Cyclerion, the business or assets of Cyclerion or any Cyclerion Affiliate, (ii) in no event shall Ironwood or any Ironwood Affiliate be required to provide Cyclerion, any Cyclerion Affiliate or any other Person access to or copies of any information or documents if such action could reasonably be expected to result in the waiver of any Privilege, and (iii) in no event shall Cyclerion or any Cyclerion Affiliate be required to provide Ironwood, any Ironwood Affiliate or any other Person access to or copies of any information or documents if such action could reasonably be expected to result in the waiver of any Privilege.  In addition, in the event that Ironwood determines that the provision of any information or documents to Cyclerion or any Cyclerion Affiliate, or Cyclerion determines that the provision of any information or documents to Ironwood or any Ironwood Affiliate, could be commercially detrimental, violate any Law or agreement or waive any Privilege, the Parties shall use reasonable best efforts to permit compliance with its obligations under this Article VII in a manner that avoids any such harm or consequence.

 

Section 7.2.                                 Income Tax Return Information.  Each Party shall provide to the other Party information and documents relating to its Group reasonably required by the other Party to prepare Tax Returns, including any pro forma returns required by the Responsible Party for purposes of preparing such Tax Returns.  Any information or documents the Responsible Party requires to prepare such Tax Returns shall be provided in such form as the Responsible Party reasonably requests and at or prior to the time reasonably specified by the Responsible Party so as to enable the Responsible Party to file such Tax Returns on a timely basis.  Cyclerion and Ironwood acknowledge that time is of the essence in relation to any request for information, assistance or cooperation made by Ironwood or Cyclerion pursuant to Section 7.1 or this Section 7.2.  Cyclerion and Ironwood acknowledge that failure to conform to the reasonable deadlines set by Ironwood or Cyclerion could cause irreparable harm.

 

Section 7.3.                                 Reliance by Ironwood.  If any member of the Cyclerion Group supplies information to a member of the Ironwood Group in connection with any Tax position and an officer of a member of the Ironwood Group signs a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then upon the written request of such member of the Ironwood Group identifying the information being so relied upon, the chief financial officer of Cyclerion (or any officer of Cyclerion as designated by the chief financial officer of Cyclerion) shall certify in writing that to his or her knowledge (based upon consultation with appropriate employees) the information so supplied is accurate and complete.

 

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Section 7.4.                                 Reliance by Cyclerion.  If any member of the Ironwood Group supplies information to a member of the Cyclerion Group in connection with any Tax position and an officer of a member of the Cyclerion Group signs a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then upon the written request of such member of the Cyclerion Group identifying the information being so relied upon, the chief financial officer of Ironwood (or any officer of Ironwood as designated by the chief financial officer of Ironwood) shall certify in writing that to his or her knowledge (based upon consultation with appropriate employees) the information so supplied is accurate and complete.

 

ARTICLE VIII

 

TAX RECORDS

 

Section 8.1.                                 Retention of Tax Records.  Each Party shall preserve and keep all Tax Records exclusively relating to the assets and activities of its Group for Pre-Distribution Periods, and Ironwood shall preserve and keep all other Tax Records relating to Taxes of the Groups for Pre-Distribution Periods, for so long as the contents thereof may be material in the administration of any matter under the Code or other applicable Law, but in any event until the later of (i) the expiration of any applicable statutes of limitations, or (ii) seven (7) years after the Distribution Date (such later date, the “Retention Date”).  After the Retention Date, each Party may dispose of such Tax Records upon sixty (60) Business Days’ prior written notice to the other Party.  If, prior to the Retention Date, a Party reasonably determines that any Tax Records which it would otherwise be required to preserve and keep under this Article VIII are no longer material in the administration of any matter under the Code or other applicable Law and the other Party agrees, then such first Party may dispose of such Tax Records upon sixty (60) Business Days’ prior notice to the other Party.  Any notice of an intent to dispose given pursuant to this Section 8.1 shall include a list of the Tax Records to be disposed of describing in reasonable detail each file, book, or other record accumulation being disposed.  The notified Party shall have the opportunity, at its cost and expense, to copy or remove, within such sixty (60) Business Day period, all or any part of such Tax Records.  If, at any time prior to the Retention Date, a Party determines to decommission or otherwise discontinue any computer program or information technology system used to access or store any Tax Records, then such Party may decommission or discontinue such program or system upon ninety (90) Business Days’ prior notice to the other Party and the other Party shall have the opportunity, at its cost and expense, to copy, within such ninety (90) Business Day period, all or any part of the underlying data relating to the Tax Records accessed by or stored on such program or system.

 

Section 8.2.                                 Access to Tax Records.  The Parties and their respective Affiliates shall make available to each other for inspection and copying during normal business hours upon reasonable notice all Tax Records (and, for the avoidance of doubt, any pertinent underlying data accessed or stored on any computer program or information technology system) in their possession and shall permit the other Party and its Affiliates, authorized agents and representatives and any representative of a Tax Authority or other Tax auditor direct access, at the cost and expense of such other Party, during normal business hours upon reasonable notice to any computer program or information technology system used to access or store any Tax Records, in each case to the extent reasonably required by the other Party in connection with the

 

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preparation of Tax Returns or financial accounting statements, audits, litigation, or the resolution of items under this Agreement.

 

Section 8.3.                                 Preservation of Privilege.  No Party or any of its Affiliates shall provide access to, copies of, or otherwise disclose to any Person any documentation relating to Taxes existing prior to the Distribution Date to which Privilege may reasonably be asserted without the prior written consent of the other Party, such consent not to be unreasonably withheld.

 

ARTICLE IX

 

TAX CONTESTS

 

Section 9.1.                                 Notice.  Each of the Parties shall provide prompt notice to the other Party of any written communication from a Tax Authority regarding any pending Tax audit, assessment or proceeding or other Tax Contest of which it becomes aware related to Taxes for Tax Periods (i) for which it may be indemnified by the other Party hereunder or (ii) for which it may be required to indemnify the other Party hereunder (excluding, in the case of clause (ii), any Taxes attributable to any Post-Distribution Period), or otherwise relating to the Tax-Free Status or the Separation Transactions (including the resolution of any Tax Contest relating thereto).  Such notice shall attach copies of the pertinent portion of any written communication from a Tax Authority and contain factual information (to the extent known) describing any asserted Tax liability in reasonable detail and shall be accompanied by copies of any notice and other documents received from any Tax Authority in respect of any such matters.  If an indemnified Party has knowledge of an asserted Tax liability with respect to a matter for which it is to be indemnified hereunder and such Party fails to give the indemnifying Party prompt notice of such asserted Tax liability and the indemnifying Party is entitled under this Agreement to contest the asserted Tax liability, then (a) if the indemnifying Party is precluded from contesting the asserted Tax liability in any forum as a result of the failure to give prompt notice, the indemnifying Party shall have no obligation to indemnify the indemnified Party for any Taxes arising out of such asserted Tax liability, and (b) if the indemnifying Party is not precluded from contesting the asserted Tax liability in any forum, but such failure to give prompt notice results in a material monetary detriment to the indemnifying Party, then any amount which the indemnifying Party is otherwise required to pay the indemnified Party pursuant to this Agreement shall be reduced by the amount of such detriment.

 

Section 9.2.                                 Control of Tax Contests.

 

(a)                                 Joint Return.  In the case of any Tax Contest with respect to any Joint Return, Ironwood shall have exclusive control over the Tax Contest, including exclusive authority with respect to any settlement of such Tax liability; provided, however, that in the case of any Tax Contest with respect to any Joint Return regarding Distribution Taxes for which Cyclerion may reasonably be expected to become liable to make any indemnification payment to Ironwood under this Agreement, Cyclerion shall have the right to participate in such Tax Contest, and Ironwood shall not settle such Tax Contest without the consent of Cyclerion, which consent Cyclerion shall not unreasonably withhold, condition or delay, taking into account the likelihood of success of such Tax Contest on its merits.

 

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(b)                                 Separate Returns.  In the case of any Tax Contest with respect to any Separate Return, the Party having liability for the Tax pursuant to Article II hereof shall have exclusive control over the Tax Contest, including exclusive authority with respect to any settlement of such Tax liability, subject to Section 9.2(b)(i) and ((ii)) below.

 

(i)                                     Settlement Rights.  The Controlling Party shall have the sole right to contest, litigate, compromise and settle any Tax Contest without obtaining the prior consent of the Non-Controlling Party, provided, however, that the Controlling Party shall not settle any Tax Contest with respect to which the Non-Controlling Party may reasonably be expected to become liable to make any indemnification payment to the Controlling Party under this Agreement without the Non-Controlling Party’s prior written consent (which consent may not be unreasonably withheld, conditioned, or delayed).  Unless waived by the Parties in writing, in connection with any potential adjustment in a Tax Contest as a result of which adjustment the Non-Controlling Party may reasonably be expected to become liable to make any indemnification payment to the Controlling Party under this Agreement: (A) the Controlling Party shall keep the Non-Controlling Party informed in a timely manner of all actions taken or proposed to be taken by the Controlling Party with respect to such potential adjustment in such Tax Contest; (B) the Controlling Party shall timely provide the Non-Controlling Party copies of any written materials relating to such potential adjustment in such Tax Contest received from any Tax Authority; (C) the Controlling Party shall timely provide the Non-Controlling Party with copies of any correspondence or filings submitted to any Tax Authority or judicial authority in connection with such potential adjustment in such Tax Contest; (D) the Controlling Party shall consult with the Non-Controlling Party and offer the Non-Controlling Party a reasonable opportunity to comment before submitting any written materials prepared or furnished in connection with such potential adjustment in such Tax Contest; and (E) the Controlling Party shall defend such Tax Contest diligently and in good faith.  The failure of the Controlling Party to take any action specified in the preceding sentence with respect to the Non-Controlling Party shall not relieve the Non-Controlling Party of any liability and/or obligation which it may have to the Controlling Party under this Agreement except to the extent that the Non-Controlling Party was actually harmed by such failure, and in no event shall such failure relieve the Non-Controlling Party from any other liability or obligation which it may have to the Controlling Party.  In the case of any Tax Contest described in this Section 9.2(b), “Controlling Party” means the Party entitled to control the Tax Contest under such section and “Non-Controlling Party” means the other Party.

 

(ii)                                  Tax Contest Participation.  Unless waived by the Parties in writing, the Controlling Party shall provide the Non-Controlling Party with written notice reasonably in advance of, and the Non-Controlling Party shall have the right to attend, any formally scheduled meetings with Tax Authorities or hearings or proceedings before any judicial authorities in connection with any potential adjustment in a Tax Contest pursuant to which the Non-Controlling Party may reasonably be expected to become liable to make any indemnification payment to the Controlling Party under this Agreement.  The failure of the Controlling Party to provide any notice specified in this Section 9.2(b)(ii) to the Non-Controlling Party shall not relieve the Non-Controlling Party of any liability or obligation which it may have to the Controlling Party under this

 

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Agreement except to the extent that the Non- Controlling Party was actually harmed by such failure, and in no event shall such failure relieve the Non-Controlling Party from any other liability or obligation which it may have to the Controlling Party.

 

ARTICLE X

 

EFFECTIVE DATE

 

This Agreement shall be effective as of the date hereof.

 

ARTICLE XI

 

SURVIVAL OF OBLIGATIONS

 

The representations, warranties, covenants and agreements set forth in this Agreement shall be unconditional and absolute and shall remain in effect without limitation as to time.

 

ARTICLE XII

 

TAX TREATMENT OF PAYMENTS

 

Section 12.1.                          General Rule.  Except as otherwise required by a change in applicable Law or as otherwise agreed to among the Parties, any payment made pursuant to this Agreement, the Separation Agreement or any Ancillary Agreement by: (a) Cyclerion to Ironwood shall be treated for all Tax purposes as (i) an adjustment to any cash contributed by Ironwood to Cyclerion in the Contribution, to the extent of such cash contribution, and thereafter (ii) a distribution by Cyclerion to Ironwood with respect to stock of Cyclerion held by Ironwood occurring immediately before the Distribution; or (b) Ironwood to Cyclerion shall be treated for all Tax purposes as a tax-free contribution by Ironwood to Cyclerion with respect to stock of Cyclerion held by Ironwood occurring immediately before the Distribution; provided, however, that the foregoing treatment shall apply in each case only to the extent the payment does not relate to a Tax allocated to the payor in accordance with Section 1552 of the Code or the Treasury Regulations thereunder or Treasury Regulation Section 1.1502-33(d) (or under corresponding principles of other applicable Laws); provided, further, that any payments made by Cyclerion to Ironwood pursuant to Section 5.1 shall be treated as an adjustment to the amount deemed contributed to Cyclerion by Ironwood in respect of the corresponding indemnity payment pursuant to Section 4.2.  Neither Party shall take any position inconsistent with the treatment described in the preceding sentence, and in the event that a Tax Authority asserts that a Party’s treatment of a payment pursuant to this Agreement should be other than as set forth in the preceding sentence, such Party shall use its commercially reasonable efforts to contest such challenge.

 

Section 12.2.                          Gross-Up of Indemnification Payments Made Pursuant to this Agreement.  Except to the extent provided in Section 12.3, any Tax indemnity payment made by a Party under this Agreement shall be increased as necessary so that after making all payments in respect to Taxes imposed on or attributable to such indemnity payment, the recipient Party receives an amount equal to the sum it would have received had no such Taxes been imposed. For the

 

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avoidance of doubt, all payments required to be made by Cyclerion to Ironwood pursuant to this Section 12.2 shall be calculated assuming all members of the Ironwood Group are Full Taxpayers.

 

Section 12.3.                          Interest.  Anything herein to the contrary notwithstanding, to the extent one Party makes a payment of interest to another Party under this Agreement with respect to the period from the date that the Party receiving the interest payment made a payment of Tax to a Tax Authority to the date that the Party making the interest payment reimbursed the Party receiving the interest payment for such Tax payment, the interest payment shall be treated as interest expense to the Party making such payment (deductible to the extent provided by Law) and as interest income by the Party receiving such payment (includible in income to the extent provided by Law).  The amount of the payment shall not be adjusted to take into account any reduction in Tax to the Party making such payment or increase in Tax to the Party receiving such payment.

 

ARTICLE XIII

 

DISPUTE RESOLUTION

 

Section 13.1.                          Negotiation.  A Party seeking resolution of (i) a controversy, dispute or Action arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or otherwise arising out of, or in any way related to, this Agreement or the transactions contemplated hereby, including any Action based on contract, tort, statute or constitution, (collectively, “Disputes”) shall provide written notice of such Dispute to the other Party, specifying the terms of such Dispute in reasonable detail (“Dispute Notice”).  The appropriate executives of the Parties who have authority to settle the Dispute (or such other individuals designated by the respective executives) shall attempt to resolve the Dispute through good faith negotiation for a reasonable period of time; provided, that such reasonable period shall not, unless otherwise agreed by the Parties in writing, exceed fifteen (15) days from the time of receipt by a Party of the Dispute Notice.  If the Dispute has not been resolved within fifteen (15) days after receipt of the Dispute Notice, the respective Chief Executive Officers or their respective designees (with full settlement authority) of Ironwood and Cyclerion shall meet in person (or where necessary, by phone) at a mutually acceptable time and, if applicable, place, and thereafter as often as they reasonably deem necessary, to attempt in good faith to resolve the Dispute.  Any contractual time period or deadline under this Agreement to which such Dispute relates occurring after the Dispute Notice is received shall not be deemed to have passed until such Dispute has been resolved pursuant to this Article XIII.

 

Section 13.2.                          Arbitration.  Any Dispute that is not resolved pursuant to Section 14.1 within thirty (30) days after receipt of a Dispute Notice shall be resolved by final and binding arbitration pursuant to the procedures set forth in Section 8.2 of the Separation Agreement.

 

Section 13.3.                          Referral To Tax Advisor For Computational Or Tax Law Disputes.  Notwithstanding anything to the contrary in Article XIII, with respect to any Dispute involving one or more computational matters or pure questions of Tax Law, if the Parties are not able to resolve the Dispute through the negotiation process set forth in Section 13.1, then such computational matters or pure questions of Tax Law (each, a “Disputed Tax Matter”) will be

 

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referred to a Tax Advisor acceptable to each of the Parties to act as an arbitrator solely in order to resolve the Disputed Tax Matters.  In the event that the Parties are unable to agree upon a Tax Advisor within forty-five (45) days of receipt of a Dispute Notice, the Parties shall each separately retain an independent, nationally recognized Law or accounting firm (each, a “Preliminary Tax Advisor”), which Preliminary Tax Advisors shall jointly select a Tax Advisor on behalf of the Parties to act as an arbitrator in order to resolve the Disputed Tax Matters.  The Tax Advisor may, in its discretion, obtain the services of any third-party appraiser, accounting firm or consultant that the Tax Advisor deems necessary to assist it in resolving such disagreement.  The Tax Advisor shall furnish written notice to the Parties of its resolution of any such Dispute Tax Matters as soon as practical, but in any event no later than thirty (30) Business Days after its acceptance of the matter for resolution.  Any such resolution by the Tax Advisor will be conclusive and binding on the Parties, and shall not be reviewable by the arbitrator of the underlying Dispute under Section 13.2.  Following receipt of the Tax Advisor’s written notice to the Parties of its resolution of the Dispute Tax Matters, the Parties shall each take or cause to be taken any action necessary to implement such resolution of the Tax Advisor.  Each Party shall pay its own fees and expenses (including the fees and expenses of its representatives) incurred in connection with the referral of the Disputed Tax Matters to the Tax Advisor (and the Preliminary Tax Advisors, if any).  All fees and expenses of the Tax Advisor (and the Preliminary Tax Advisors, if any) in connection with such referral shall be shared equally by the Parties.  For the avoidance of doubt, the arbitrator of the underlying Dispute under Section 13.2 shall resolve all portions of any Dispute that are not Disputed Tax Matters, and shall resolve any question as to whether any portion of a Dispute is a Disputed Tax Matter.

 

Section 13.4.                          Continuity of Service and Performance.  Unless otherwise agreed in writing, the Parties shall continue to provide service and honor all other commitments under this Agreement during the course of a Dispute with respect to all matters not subject to such Dispute.

 

Section 13.5.                          Injunctive or Other Equity Relief.  Nothing contained in this Agreement shall deny any Party the right to seek injunctive or other equitable relief 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; provided, however, that any other relief not expressly permitted under this Section 13.5 must be pursued in accordance with Section 13.2, with all remedies being cumulative to the extent allowed by applicable Law.  The Parties further agree that irreparable harm would occur, and thus need not be established, in an action to enforce the covenants set forth in Section 6.1, and that such action may be brought pursuant to this Section 13.5.  The Parties further agree that any action brought under this Section 13.5 shall be brought exclusively in the state or federal courts within the Commonwealth of Massachusetts and that such courts shall have personal jurisdiction over the Parties in such action.

 

ARTICLE XIV

 

GENERAL PROVISIONS

 

Section 14.1.                          Complete Agreement; Construction.  This Agreement, together with the Separation Agreement and the Ancillary Agreements, shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments, course of dealings and writings with respect to such subject matter;

 

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for the avoidance of doubt, the preceding clause shall apply to all other agreements, whether or not written, in respect of any Tax between or among any member or members of the Ironwood Group, on the one hand, and any member or members of the Cyclerion Group, on the other hand, which agreements shall be of no further effect between the Parties and any rights or obligations existing thereunder shall be fully and finally settled, calculated as of the date hereof.  In the event and to the extent that there shall be a conflict between the provisions of the Separation Agreement and the provisions of this Agreement, this Agreement shall control.  Except as expressly set forth in the Separation Agreement or any Ancillary Agreement: (a) all matters to the extent relating to Taxes and Tax Returns of the Parties and their respective Subsidiaries shall be governed exclusively by this Agreement; and (b) for the avoidance of doubt, in the event of any conflict between the Separation Agreement or any Ancillary Agreement, on the one hand, and this Agreement, on the other hand, with respect to such matters, the terms and conditions of this Agreement shall govern.

 

Section 14.2.                          Transaction Agreements.  Except as expressly set forth herein, this Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the other Transaction Agreements.

 

Section 14.3.                          Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to each of the Parties.

 

Section 14.4.                          Survival Of Agreement.  Except as otherwise contemplated by this Agreement, all covenants and agreements of the Parties contained in this Agreement shall survive the Distribution Effective Time and remain in full force and effect in accordance with their applicable terms.

 

Section 14.5.                          Expenses.  Except as otherwise provided in this Agreement, each party and its Affiliates shall bear their own expenses incurred in connection with preparation of Tax Returns, Tax Contests, and other matters related to Taxes under the provisions of this Agreement.

 

Section 14.6.                          Notices.  All notices, requests, claims, demands and other communications under this Agreement shall be in English, shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile with receipt confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 14.6):

 

To Ironwood:

 

Ironwood Pharmaceuticals, Inc.
 301 Binney Street
 Cambridge, MA 02142

 

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United States
 Attn: General Counsel

Phone: 617-621-7722

Fax:  617-588-0623

 

To Cyclerion:

 

Cyclerion Therapeutics, Inc.
  301 Binney Street

Cambridge, MA 02142

United States

Attn:  Chief Financial Officer

Phone:

Fax:

 

Section 14.7.                          Waivers.  The delay or failure of either Party to exercise or enforce any of its rights under this Agreement will not constitute, or be deemed to be, a waiver of those rights, nor will any single or partial exercise of any such rights preclude any other or further exercise thereof or the exercise of any other right.  No waiver of any provision of this Agreement will be effective unless it is in writing and signed by the Party against which it is being enforced.

 

Section 14.8.                          Assignment.  No Party may assign any rights or delegate any obligations arising under this Agreement, in whole or in part, directly or indirectly, without the prior written consent of the other Party (such consent not to be unreasonably withheld, conditioned or delayed), and any attempt to so assign any rights or delegate any obligations arising under this Agreement without such consent shall be void.  Notwithstanding the foregoing, no such consent shall be required for any such assignment or delegation (a) with respect to Ironwood, to a Subsidiary of Ironwood (so long as such Subsidiary remains a Subsidiary of Ironwood), (b) with respect to Cyclerion, to a Subsidiary of Cyclerion (so long as such Subsidiary remains a Subsidiary of Cyclerion) or (c) to a bona fide Third Party in connection with a merger, reorganization, consolidation or the sale of all or substantially all the assets of a Party so long as the resulting, surviving or transferee entity assumes all the obligations of the assigning Party by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the non-assigning Party; provided, however, that in the case of each of the preceding clauses (a) and (b), no assignment permitted by this Section 14.8 shall release the assigning Party from liability for the full performance of its obligations under this Agreement.

 

Section 14.9.                          Successors and Assigns.  The provisions of this Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and against) the Parties and their respective successors (whether by merger, acquisition of assets, or otherwise, and including any successor of Ironwood or Cyclerion succeeding to the Tax attributes of either under Section 381 of the Code) and permitted assigns.

 

Section 14.10.                   Termination and Amendment.  This Agreement may be terminated, modified or amended at any time prior to the Distribution Effective Time by and in the sole and absolute discretion of Ironwood without the approval of Cyclerion or the stockholders of Ironwood.  In the event of such termination, no Party shall have any liability of any kind to the

 

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other Party or any other Person by reason of such termination.  After the Distribution Effective Time, this Agreement may not be terminated, modified or amended except by an agreement in writing signed by Ironwood and Cyclerion.

 

Section 14.11.                   Payment Terms.

 

(a)                                 Except as expressly provided to the contrary in this Agreement, any amount to be paid or reimbursed by a Party (and/or a member of such Party’s Group) to the other Party (and/or a member of such other Party’s Group) under this Agreement shall be paid or reimbursed hereunder within sixty (60) days after presentation of an invoice or a written demand therefor, in either case setting forth, or accompanied by, reasonable documentation or other reasonable explanation supporting such amount.

 

(b)                                 Except as expressly provided to the contrary in this Agreement, any amount not paid when due pursuant to this Agreement (and any amount billed or otherwise invoiced or demanded and properly payable that is not paid within sixty (60) days of such bill, invoice or other demand) shall bear interest at a rate per annum equal to the Prime Rate, from time to time in effect, plus two percent (2%), calculated for the actual number of days elapsed, accrued from the date on which such payment was due up to the date of the actual receipt of payment.

 

(c)                                  Without the consent of the party receiving any payment under this Agreement specifying otherwise, all payments to be made by either Ironwood or Cyclerion under this Agreement shall be made in U.S. dollars.  Except as expressly provided herein, any amount which is not expressed in U.S. dollars shall be converted into U.S. dollars by using the exchange rate published on Bloomberg at 5:00 p.m., Eastern time, on the day before the relevant date, or in The Wall Street Journal, Eastern Edition, on such date if not so published on Bloomberg.  Except as expressly provided herein, in the event that any indemnification payment required to be made hereunder may be denominated in a currency other than U.S. dollars, the amount of such payment shall be converted into U.S. dollars on the date notice of the claim is given to the indemnifying Party.

 

Section 14.12.                   Subsidiaries.  Each of the Parties shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such Party or by any entity that becomes a Subsidiary of such Party at or after the Distribution Effective Time, in each case to the extent such Subsidiary remains a Subsidiary of the applicable Party. If, at any time, Cyclerion acquires or creates one or more Subsidiaries that are includable in the Cyclerion Group, all references to the Cyclerion Group herein shall thereafter include a reference to such Subsidiaries.

 

Section 14.13.                   Third Party Beneficiaries.  Except as specifically provided herein, this Agreement is solely for the benefit of the Parties and shall not be deemed to confer upon any Person other than the Parties any remedy, claim, liability, reimbursement, cause of action or other right beyond any that exist without reference to this Agreement.

 

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Section 14.14.                   Titles And Headings.  Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

 

Section 14.15.                   Governing Law.  This Agreement will be governed by, construed and interpreted in accordance with the Laws of the State of Delaware, without giving effect to the conflicts of Laws principles thereof that might lead to the application of Laws other than the Laws of the State of Delaware.

 

Section 14.16.                   Severability.  In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby.  The Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

Section 14.17.                   Interpretation.  Interpretation of this Agreement shall be governed by the following rules of construction: (a) words in the singular shall be held to include the plural and vice versa, and words of one gender shall be held to include the other gender as the context requires; (b) references to the terms “Section,” “paragraph,” “clause,” “Exhibit” and “Schedule” are references to the Sections, paragraphs, clauses, Exhibits and Schedules of this Agreement unless otherwise specified; (c) the terms “hereof,” “herein,” “hereby,” “hereto,” and derivative or similar words refer to this entire Agreement, including the Schedules and Exhibits hereto; (d) references to “$” shall mean U.S. dollars; (e) the word “including” and words of similar import when used in this Agreement shall mean “including without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) references to “written” or “in writing” include in electronic form; (h) unless the context requires otherwise, references to “party” shall mean Ironwood or Cyclerion, as appropriate, and references to “parties” shall mean Ironwood and Cyclerion; (i) provisions shall apply, when appropriate, to successive events and transactions; (j) the table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; (k) Ironwood and Cyclerion have each participated in the negotiation and drafting of this Agreement and if an ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or burdening either party by virtue of the authorship of any of the provisions in this Agreement or any interim drafts of this Agreement; and (l) a reference to any Person includes such Person’s successors and permitted assigns.

 

Section 14.18.                   No Duplication; No Double Recovery.  Nothing in this Agreement, the Separation Agreement or any Ancillary Agreement is intended to confer to or impose upon any Party a duplicative right, entitlement, obligation or recovery with respect to any matter arising out of the same facts and circumstances.

 

Section 14.19.                   No Waiver.  No failure to exercise and no delay in exercising, on the part of any Party, any right, remedy, power or privilege hereunder shall operate as a waiver hereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder

 

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preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

Section 14.20.                   Further Action.  The Parties shall execute and deliver all documents, provide all information, and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement, including the execution and delivery to the other parties and their Affiliates and representatives of such powers of attorney or other authorizing documentation as is reasonably necessary or appropriate in connection with Tax Contests (or portions thereof) under the control of such other parties in accordance with Article IX.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, each Party has caused this Agreement to be executed on its behalf by a duly authorized officer on the date first set forth above.

 

	
 
    	
IRONWOOD   PHARMACEUTICALS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CYCLERION   THERAPEUTICS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
 
    
	
 
    	
 
    	
Name:   
    
	
 
    	
 
    	
Title:
    
				

 

[Signature Page to Tax Matters Agreement]

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