Document:

FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

Exhibit 10.3

 

TAX MATTERS AGREEMENT

 

by and between

 

IRONWOOD PHARMACEUTICALS, INC.

 

and

 

CYCLERION THERAPEUTICS, INC.

 

Dated as of        , 2019

 

 

FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

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
    
	
 
    	
 
    	
 
    
	
Section 3.11.
    	
Tax Payments
    	
16
    
	
 
    	
 
    	
 
    
	
Section 3.12.
    	
Payment of Joint Return and   Separate Return Taxes
    	
16
    
	
 
    	
 
    	
 
    
	
Section 3.13.
    	
Indemnification Payments
    	
16
    
	
 
    	
 
    	
 
    
	
ARTICLE IV   TAX BENEFITS
    	
17
    
	
 
    	
 
    	
 
    
	
Section 4.1.
    	
Tax Benefits
    	
17
    
	
 
    	
 
    	
 
    
	
ARTICLE V   TAX-FREE STATUS
    	
17
    
	
 
    	
 
    	
 
    
	
Section 5.1.
    	
Restrictions on Cyclerion
    	
17
    
	
 
    	
 
    	
 
    
	
Section 5.2.
    	
Restrictions on Ironwood
    	
20
    
	
 
    	
 
    	
 
    
	
Section 5.3.
    	
Rulings
    	
20
    
	
 
    	
 
    	
 
    
	
Section 5.4.
    	
Liability for Distribution Losses
    	
20
    
	
 
    	
 
    	
 
    
	
ARTICLE VI   ASSISTANCE AND COOPERATION
    	
21
    

 

i

 

FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

	
Section 6.1.
    	
Assistance and Cooperation
    	
21
    
	
 
    	
 
    	
 
    
	
Section 6.2.
    	
Income Tax Return Information
    	
22
    
	
 
    	
 
    	
 
    
	
Section 6.3.
    	
Reliance by Ironwood
    	
22
    
	
 
    	
 
    	
 
    
	
Section 6.4.
    	
Reliance by Cyclerion
    	
23
    
	
 
    	
 
    	
 
    
	
ARTICLE VII   TAX RECORDS
    	
23
    
	
 
    	
 
    	
 
    
	
Section 7.1.
    	
Retention of Tax Records
    	
23
    
	
 
    	
 
    	
 
    
	
Section 7.2.
    	
Access to Tax Records
    	
23
    
	
 
    	
 
    	
 
    
	
Section 7.3.
    	
Preservation of Privilege
    	
24
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII   TAX CONTESTS
    	
24
    
	
 
    	
 
    	
 
    
	
Section 8.1.
    	
Notice
    	
24
    
	
 
    	
 
    	
 
    
	
Section 8.2.
    	
Control of Tax Contests
    	
24
    
	
 
    	
 
    	
 
    
	
ARTICLE IX   EFFECTIVE DATE
    	
26
    
	
 
    	
 
    	
 
    
	
ARTICLE X   SURVIVAL OF OBLIGATIONS
    	
26
    
	
 
    	
 
    	
 
    
	
ARTICLE XI   TAX TREATMENT OF PAYMENTS
    	
26
    
	
 
    	
 
    	
 
    
	
Section 11.1.
    	
General Rule
    	
26
    
	
 
    	
 
    	
 
    
	
Section 11.2.
    	
Gross-Up of Indemnification   Payments Made Pursuant to this Agreement
    	
26
    
	
 
    	
 
    	
 
    
	
Section 11.3.
    	
Interest
    	
27
    
	
 
    	
 
    	
 
    
	
ARTICLE XII   DISPUTE RESOLUTION
    	
27
    
	
 
    	
 
    	
 
    
	
Section 12.1.
    	
Negotiation
    	
27
    
	
 
    	
 
    	
 
    
	
Section 12.2.
    	
Arbitration
    	
27
    
	
 
    	
 
    	
 
    
	
Section 12.3.
    	
Referral to Tax Advisor for   Computational or Tax Law Disputes
    	
27
    
	
 
    	
 
    	
 
    
	
Section 12.4.
    	
Continuity of Service and   Performance
    	
28
    
	
 
    	
 
    	
 
    
	
Section 12.5.
    	
Injunctive or Other Equity Relief
    	
28
    
	
 
    	
 
    	
 
    
	
ARTICLE XIII   GENERAL PROVISIONS
    	
28
    
	
 
    	
 
    	
 
    
	
Section 13.1.
    	
Complete Agreement; Construction
    	
28
    
	
 
    	
 
    	
 
    
	
Section 13.2.
    	
Transaction Agreements
    	
29
    
	
 
    	
 
    	
 
    
	
Section 13.3.
    	
Counterparts
    	
29
    
	
 
    	
 
    	
 
    
	
Section 13.4.
    	
Survival of Agreement
    	
29
    
	
 
    	
 
    	
 
    
	
Section 13.5.
    	
Expenses
    	
29
    
	
 
    	
 
    	
 
    
	
Section 13.6.
    	
Notices
    	
29
    
	
 
    	
 
    	
 
    
	
Section 13.7.
    	
Waivers
    	
30
    

 

ii

 

FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

	
Section 13.8.
    	
Assignment
    	
30
    
	
 
    	
 
    	
 
    
	
Section 13.9.
    	
Successors and Assigns
    	
30
    
	
 
    	
 
    	
 
    
	
Section 13.10.
    	
Termination and Amendment
    	
30
    
	
 
    	
 
    	
 
    
	
Section 13.11.
    	
Payment Terms
    	
31
    
	
 
    	
 
    	
 
    
	
Section 13.12.
    	
Subsidiaries
    	
31
    
	
 
    	
 
    	
 
    
	
Section 13.13.
    	
Third Party Beneficiaries
    	
31
    
	
 
    	
 
    	
 
    
	
Section 13.14.
    	
Titles and Headings
    	
32
    
	
 
    	
 
    	
 
    
	
Section 13.15.
    	
Governing Law
    	
32
    
	
 
    	
 
    	
 
    
	
Section 13.16.
    	
Severability
    	
32
    
	
 
    	
 
    	
 
    
	
Section 13.17.
    	
Interpretation
    	
32
    
	
 
    	
 
    	
 
    
	
Section 13.18.
    	
No Duplication; No Double   Recovery
    	
32
    
	
 
    	
 
    	
 
    
	
Section 13.19.
    	
No Waiver
    	
32
    
	
 
    	
 
    	
 
    
	
Section 13.20.
    	
Further Action
    	
33
    

 

iii

 

FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

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

 

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FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

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.

 

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FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

(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(c) 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.

 

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FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

(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

 

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FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

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

 

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FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

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(c) 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)

 

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FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

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

 

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FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

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.

 

8

 

FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

(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.

 

9

 

FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

(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.

 

10

 

FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

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).

 

11

 

FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

(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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FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

(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 3.6(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)

 

13

 

FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

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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FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

(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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FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

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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FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

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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FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

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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Pursuant to 17 CFR 200.83

 

(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]FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

Exhibit 10.4

 

EMPLOYEE MATTERS AGREEMENT

 

by and between

 

IRONWOOD PHARMACEUTICALS, INC.

 

and

 

CYCLERION THERAPEUTICS, INC.

 

Dated as of         , 2019

 

 

FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

EMPLOYEE MATTERS AGREEMENT

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I   DEFINITIONS
    	
 
    	
1
    
	
 
    	
 
    	
 
    
	
Section 1.1.
    	
General
    	
 
    	
1
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE II   TRANSFER OF CYCLERION EMPLOYEES; GENERAL PRINCIPLES
    	
 
    	
6
    
	
 
    	
 
    	
 
    
	
Section 2.1.
    	
Transfer of Employment   to Cyclerion of Additional Employees; Post-Effective Time Transfers; Independent   Contractors
    	
 
    	
6
    
	
Section 2.2.
    	
Assumption and   Retention of Liabilities
    	
 
    	
6
    
	
Section 2.3.
    	
Cyclerion Participation   in the Ironwood Plans
    	
 
    	
7
    
	
Section 2.4.
    	
Sponsorship of the   Cyclerion Plans
    	
 
    	
7
    
	
Section 2.5.
    	
No Duplication of   Benefits; Service and Other Credit
    	
 
    	
7
    
	
Section 2.6.
    	
Reimbursements
    	
 
    	
8
    
	
Section 2.7.
    	
Approval of Plans
    	
 
    	
8
    
	
Section 2.8.
    	
Delivery of Shares;   Registration Statement
    	
 
    	
8
    
	
Section 2.9.
    	
Labor Relations
    	
 
    	
8
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE III   DEFINED CONTRIBUTION AND NON-QUALIFIED DEFERRED COMPENSATION PLANS
    	
 
    	
9
    
	
 
    	
 
    	
 
    
	
Section 3.1.
    	
401(k) Plan
    	
 
    	
9
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IV   HEALTH AND WELFARE PLANS; PAYROLL; COBRA AND VACATION
    	
 
    	
10
    
	
 
    	
 
    	
 
    
	
Section 4.1.
    	
Cessation of   Participation in Ironwood Health and Welfare Plans
    	
 
    	
10
    
	
Section 4.2.
    	
Allocation of Health   and Welfare Plan Liabilities
    	
 
    	
10
    
	
Section 4.3.
    	
Flexible Spending Plan   Treatment
    	
 
    	
11
    
	
Section 4.4.
    	
Workers’ Compensation   Liabilities
    	
 
    	
11
    
	
Section 4.5.
    	
Payroll Taxes and   Reporting
    	
 
    	
12
    
	
Section 4.6.
    	
COBRA and HIPAA   Compliance
    	
 
    	
12
    
	
Section 4.7.
    	
Vacation and Paid Time   Off
    	
 
    	
13
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE V   INCENTIVE COMPENSATION, EQUITY COMPENSATION AND OTHER BENEFITS
    	
 
    	
13
    
	
 
    	
 
    	
 
    
	
Section 5.1.
    	
Annual Cash-Based   Incentive Plans
    	
 
    	
13
    
	
Section 5.2.
    	
Awards under the   Ironwood Equity-Based Plans
    	
 
    	
13
    

 

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Section 5.3.
    	
Ironwood ESPP
    	
 
    	
19
    
	
Section 5.4.
    	
Blackout Period
    	
 
    	
19
    
	
Section 5.5.
    	
Section 409A
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VI   GENERAL AND ADMINISTRATIVE
    	
 
    	
20
    
	
 
    	
 
    	
 
    
	
Section 6.1.
    	
Sharing of Participant   Information
    	
 
    	
20
    
	
Section 6.2.
    	
No Third Party   Beneficiaries
    	
 
    	
20
    
	
Section 6.3.
    	
Audit Rights with   Respect to Information Provided
    	
 
    	
20
    
	
Section 6.4.
    	
Fiduciary Matters
    	
 
    	
20
    
	
Section 6.5.
    	
Consent of Third   Parties
    	
 
    	
21
    
	
Section 6.6.
    	
Assignment of   “Claw-Back” or Recoupment Rights
    	
 
    	
21
    
	
Section 6.7.
    	
Proprietary Information   and Inventions Agreements
    	
 
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VII   DISPUTE RESOLUTION
    	
 
    	
21
    
	
 
    	
 
    	
 
    
	
Section 7.1.
    	
Negotiation
    	
 
    	
21
    
	
Section 7.2.
    	
Arbitration
    	
 
    	
22
    
	
Section 7.3.
    	
Continuity of Service   and Performance
    	
 
    	
22
    
	
Section 7.4.
    	
Injunctive or Other   Equity Relief
    	
 
    	
22
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VIII   MISCELLANEOUS
    	
 
    	
22
    
	
 
    	
 
    	
 
    
	
Section 8.1.
    	
Complete Agreement;   Construction
    	
 
    	
22
    
	
Section 8.2.
    	
Transaction Agreements
    	
 
    	
22
    
	
Section 8.3.
    	
Counterparts
    	
 
    	
22
    
	
Section 8.4.
    	
Survival of Agreements
    	
 
    	
23
    
	
Section 8.5.
    	
Expenses
    	
 
    	
23
    
	
Section 8.6.
    	
Notices
    	
 
    	
23
    
	
Section 8.7.
    	
Waivers
    	
 
    	
24
    
	
Section 8.8.
    	
Assignment
    	
 
    	
24
    
	
Section 8.9.
    	
Successors and Assigns
    	
 
    	
24
    
	
Section 8.10.
    	
Termination and   Amendment
    	
 
    	
24
    
	
Section 8.11.
    	
Payment Terms
    	
 
    	
24
    
	
Section 8.12.
    	
Subsidiaries
    	
 
    	
25
    
	
Section 8.13.
    	
Third Party   Beneficiaries
    	
 
    	
25
    
	
Section 8.14.
    	
Titles and Headings
    	
 
    	
25
    
	
Section 8.15.
    	
Governing Law
    	
 
    	
25
    
	
Section 8.16.
    	
Severability
    	
 
    	
25
    

 

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Section 8.17.
    	
Interpretation
    	
 
    	
26
    
	
Section 8.18.
    	
No Duplication; No   Double Recovery
    	
 
    	
26
    
	
Section 8.19.
    	
No Waiver
    	
 
    	
26
    
	
Section 8.20.
    	
Transfer of Records and   Information
    	
 
    	
26
    
	
Section 8.21.
    	
Cooperation
    	
 
    	
26
    

 

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EMPLOYEE MATTERS AGREEMENT

 

This EMPLOYEE MATTERS AGREEMENT (this “Agreement”), dated as of      , 2019, is entered into by and between Ironwood Pharmaceuticals, Inc. (“Ironwood”), a Delaware corporation, and Cyclerion Therapeutics, Inc. (“Cyclerion”), a Massachusetts corporation and a wholly owned subsidiary of Ironwood.  Capitalized terms used and not defined herein shall have the meaning set forth in the Separation Agreement between the Parties, dated as of        ,       (the “Separation Agreement”).

 

W I T N E S S E T H:

 

WHEREAS, as contemplated by the Separation Agreement, Ironwood and Cyclerion desire to enter into this Agreement to provide for the allocation of Assets, Liabilities, and responsibilities with respect to certain matters relating to employees and other individual service providers (including employee compensation and benefit plans and programs) between them.

 

NOW, THEREFORE, the Parties, intending to be legally bound, agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1.                                 General.  For purposes of this Agreement the following terms shall have the meaning ascribed to them in this Article I.

 

(1)                                 “2005 Plan” means the Ironwood Pharmaceuticals, Inc. Amended and Restated 2005 Stock Incentive Plan.

 

(2)                                 “2010 Plan” means the Ironwood Pharmaceuticals, Inc. Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan.

 

(3)                                 “Action” means any demand, action, claim, suit, countersuit, arbitration, inquiry, subpoena, case, litigation, proceeding or investigation (whether civil, criminal, administrative or investigative) by or before any court or grand jury, any Governmental Entity or any arbitration or mediation tribunal.

 

(4)                                 “Adjustment Fraction” means a fraction, the numerator of which is the volume-weighted average trading price of Ironwood Common Stock (trading “regular way”) on the ten (10) trading days immediately prior to the date upon which the Distribution Effective Time occurs, as reported on Bloomberg, and the denominator of which is the Ironwood Post-Distribution Stock Price.

 

(5)                                 “Assets” means all rights, title and ownership interests in and to all rights, properties, claims, Contracts, businesses, or assets (including goodwill), wherever located (including in the possession of vendors or other third parties or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible or intangible, whether accrued, contingent or otherwise, in each case, whether or not recorded or reflected on the books

 

 

FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

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and records or financial statements of any Person.  Except as otherwise specifically set forth herein, in the Separation Agreement or in the Tax Matters Agreement, the rights and obligations of the Parties with respect to Taxes shall be governed by the Tax Matters Agreement and, therefore, Taxes (including any Tax items, attributes or rights to receive any Tax Refunds (as defined in the Tax Matters Agreement)) shall not be treated as Assets governed by this Agreement.

 

(6)                                 “COBRA” means the continuation coverage requirements for “group health plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as codified in Code Section 4980B and ERISA Sections 601 through 608.

 

(7)                                 “Code” means the Internal Revenue Code of 1986, as amended, or any successor federal income tax law.  Reference to a specific Code provision also includes any proposed, temporary, or final regulation in force under that provision.

 

(8)                                 “Consents” means any consents, waivers, notices, reports or other filings to be obtained from or made, including with respect to any Contract, or any registrations, licenses, permits, authorizations to be obtained from, or approvals from, or notification requirements to, any Third Parties, including any Governmental Entity.

 

(9)                                 “Conversion Fraction” means a fraction, the numerator of which is the volume-weighted average trading price of Ironwood Common Stock (trading “regular way”) on the ten (10) trading days immediately prior to the date upon which the Distribution Effective Time occurs and the denominator of which is the Purchase Price (as such term is used in the Stock Purchase Agreement).

 

(10)                          “Cyclerion 401(k) Plan” means the tax-qualified defined contribution savings plan with a cash or deferred arrangement under Section 401(k) of the Code adopted by Cyclerion or a Cyclerion Group member prior to the Distribution Effective Time.

 

(11)                          “Cyclerion Common Stock” means the common stock of Cyclerion, no par value.

 

(12)                          “Cyclerion Employee” means any individual who, as of the Distribution Effective Time, is either actively employed by or then on a leave of absence from Cyclerion or a Cyclerion Group member (including maternity, paternity, family, sick, disability leave, qualified military service under the Uniformed Services Employment and Reemployment Rights Act of 1994, and leave under the Family Medical Leave Act and other approved leaves) or who is employed by Ironwood or an Ironwood Group member and who becomes a Cyclerion Employee pursuant to the operation of this Agreement.

 

(13)                          “Cyclerion ESPP” has the meaning set forth in Section 2.7.

 

(14)                          “Cyclerion FSAs” has the meaning set forth in Section 4.3.

 

(15)                          “Cyclerion Group” means (a) Cyclerion and each entity that is a Subsidiary of Cyclerion or will be a Subsidiary of Cyclerion immediately following the Distribution Effective Time and (b) on and after the Distribution Effective Time, Cyclerion and any entity that is a Subsidiary of Cyclerion.

 

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(16)                          “Cyclerion Health and Welfare Plans” has the meaning set forth in Section 4.1.

 

(17)                          “Cyclerion Omnibus Equity Plan” means the Cyclerion Omnibus Equity Plan adopted by Cyclerion prior to the Distribution Effective Time.

 

(18)                          “Cyclerion Participant” means any individual who is a Cyclerion Employee or a Former Cyclerion Employee, and any beneficiary, dependent, or alternate payee of such individual, as the context requires.

 

(19)                          “Cyclerion Pharmaceutical Business” means: (i) the business, operations and activities conducted at any time prior to the Distribution Effective Time by either Party or any of its Subsidiaries to the extent relating to, arising out of or resulting from the Cyclerion Product Candidates (including the discovery, research and development of such Cyclerion Product Candidates worldwide) or similar to the services to be provided under the Development Agreement; and (ii) the Cyclerion Discovery Programs.

 

(20)                          “Cyclerion RSU” means a restricted stock unit that represents a general unsecured promise by Cyclerion to deliver a share of Cyclerion Common Stock (or an amount in cash determined by reference to the value of a share of Cyclerion Common Stock), which restricted stock unit is granted as part of the adjustment to Ironwood RSUs as set forth in Section 5.2(c).

 

(21)                          “Dispute Notice” has the meaning set forth in Section 7.1.

 

(22)                          “Disputes” has the meaning set forth in Section 7.1.

 

(23)                          “Distribution Date” means the date, as shall be determined by the Board of Directors of Ironwood, on which the Distribution occurs.

 

(24)                          “Distribution Effective Time” means 12:01 a.m. on            , 2019, Eastern time, on the Distribution Date.

 

(25)                          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.  Reference to a specific provision of ERISA also includes any proposed, temporary, or final regulation in force under that provision.

 

(26)                          “Former Cyclerion Employee” means any individual whose employment with either Party or any of its respective Subsidiaries and Affiliates terminated for any reason before the Distribution Effective Time, and who was primarily engaged in providing services to the Cyclerion Pharmaceutical Business as of the date of his or her termination of employment.

 

(27)                          “Former Ironwood Employee” means any individual whose employment with an Ironwood Group member terminated for any reason before the Distribution Effective Time, other than a Former Cyclerion Employee.

 

(28)                          “Governmental Entity” means any nation or government, any state, municipality or other political subdivision thereof and any entity, body, agency, commission, department, board, bureau or court, whether domestic, foreign, multinational, or supranational exercising

 

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executive, legislative, judicial, regulatory, self-regulatory or administrative functions of or pertaining to government and any executive official thereof.

 

(29)                          “Group” means (a) with respect to Ironwood, the Ironwood Group and (b) with respect to Cyclerion, the Cyclerion Group, as the context requires.

 

(30)                          “HIPAA” means the health insurance portability and accountability requirements for “group health plans” under the Health Insurance Portability and Accountability Act of 1996, as amended.

 

(31)                          “Incentive Stock Option” means an option which qualifies as an incentive stock option under the provisions of Section 422 of the Code.

 

(32)                          “Indemnifiable Loss” means any and all Liabilities, including damages, losses, deficiencies, obligations, penalties, judgments, settlements, claims, payments, fines and other costs and expenses of any and all Actions and demands, assessments, judgments, settlements and compromises relating thereto and the reasonable fees and expenses of attorneys’, accountants’, consultants’ and other professionals’ incurred in the investigation or defense thereof or the enforcement of rights hereunder.

 

(33)                          “Indemnifying Party” means, with respect to any Direct Claim or Third Party Claim, the Party which is or may be required pursuant to Article VI of the Separation Agreement to provide indemnification pursuant to such claim.

 

(34)                          “Ironwood 401(k) Plan” means the Ironwood Pharmaceuticals, Inc. 401(k) Savings Plan.

 

(35)                          “Ironwood Common Stock” means the Class A common stock, par value $0.001 per share, of Ironwood.

 

(36)                          “Ironwood Employee” means any individual who, as of the Distribution Effective Time, is either receiving compensation from a member of the Ironwood Group which is to be reported on IRS Form W-2 (in the case of individuals employed in the United States) or who is on the payroll of an Ironwood Group member (in the case of individuals outside the United States), but does not include any Cyclerion Employee.

 

(37)                          “Ironwood Equity-Based Plans” means the 2005 Plan and the 2010 Plan.

 

(38)                          “Ironwood ESPP” means the Amended and Restated Ironwood 2010 Employee Stock Purchase Plan.

 

(39)                          “Ironwood FSAs” has the meaning set forth in Section 4.3.

 

(40)                          “Ironwood Group” means (a) prior to the Distribution Effective Time, Ironwood and each entity that will be a Subsidiary of Ironwood immediately following the Distribution Effective Time and (b) from and after the Distribution Effective Time, Ironwood and each entity that is a Subsidiary of Ironwood.

 

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(41)                          “Ironwood Health and Welfare Plans” means the health and welfare plans sponsored and maintained by Ironwood or any Ironwood Group member immediately prior to the Distribution Effective Time which provide group health, life, dental, accidental death and dismemberment, health care reimbursements, dependent care assistance and disability benefits.

 

(42)                          “Ironwood Participant” means any individual who is an Ironwood Employee or a Former Ironwood Employee, and any beneficiary, dependent, or alternate payee of such individual, as the context requires.

 

(43)                          “Ironwood Post-Distribution Stock Price” means a number equal to (a) the aggregate value of all shares of Ironwood Common Stock outstanding immediately following the Distribution Effective Time minus the aggregate value of all shares of Cyclerion Common Stock outstanding immediately following the Distribution Effective Time, each as determined on a fully-diluted basis pursuant to the treasury stock method, divided by (b) the number of shares of Ironwood Common Stock outstanding immediately following the Distribution Effective Time, as determined on a fully-diluted treasury stock method basis.

 

(44)                          “Ironwood Restricted Stock” means Ironwood Common Stock subject to restrictions requiring that it be delivered or offered for sale to Ironwood if specified service or performance-based conditions are not satisfied granted by Ironwood prior to the Distribution Date pursuant to the Ironwood Equity-Based Plans.

 

(45)                          “Ironwood RSU” means a restricted stock unit that represents a general unsecured promise by Ironwood to deliver a share of Ironwood Common Stock (or an amount in cash determined by reference to the value of a share of Ironwood Common Stock).

 

(46)                          “Liabilities” means any and all indebtedness, liabilities, costs, expenses, interest and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, known or unknown, reserved or unreserved, or determined or determinable, including those arising under any Law, Action, or in connection with any dispute, whether asserted or unasserted, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Entity and those arising under any Contract or any fines, damages or equitable relief which may be imposed and including all costs and expenses related thereto.  Except as otherwise specifically set forth herein, in the Separation Agreement or in the Tax Matters Agreement, the rights and obligations of the Parties with respect to Taxes shall be governed by the Tax Matters Agreement and, therefore, Taxes shall not be treated as Liabilities governed by this Agreement.

 

(47)                          “Option” when immediately preceded by “Ironwood” means an option (either nonqualified or an Incentive Stock Option) to purchase Ironwood Common Stock granted by Ironwood prior to the Distribution Date pursuant to the Ironwood Equity-Based Plans and when immediately preceded by “Cyclerion” means an option (either nonqualified or an Incentive Stock Option) to purchase Cyclerion Common Stock, which option is granted pursuant to the Cyclerion Omnibus Equity Plan as part of the adjustment to Ironwood Options as set forth in Section 5.2(a).

 

(48)                          “Plan” when immediately preceded by “Ironwood” means any plan, policy, program, payroll practice, on-going arrangement, contract, trust, insurance policy or other

 

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agreement or funding vehicle (including an Ironwood Health and Welfare Plan) for which the eligible classes of participants include employees or former employees of Ironwood or an Ironwood Group member (which may include employees of Cyclerion Group members prior to the Distribution Effective Time), and when immediately preceded by “Cyclerion,” means any plan, policy, program, payroll practice, on-going arrangement, contract, trust, insurance policy or other agreement or funding vehicle (including a Cyclerion Health and Welfare Plan) for which the eligible classes of participants are limited to employees or former employees (and their eligible dependents) of Cyclerion or a Cyclerion Group member, but no other Ironwood Group member.

 

(49)                          “Stock Purchase Agreement” means the Common Stock Purchase Agreement by and between Cyclerion Therapeutics, Inc. and the Investors named therein, dated as of       , 2019.

 

ARTICLE II

 

TRANSFER OF CYCLERION EMPLOYEES; GENERAL PRINCIPLES

 

Section 2.1.                                 Transfer of Employment to Cyclerion of Additional Employees; Post-Effective Time Transfers; Independent Contractors.

 

(a)                                 Following the date hereof and prior to the Distribution Effective Time, Ironwood and Cyclerion may cause the employment of individuals designated by Ironwood who are not employed by a Cyclerion Group member as of the date hereof to be transferred to a Cyclerion Group member.

 

(b)                                 In the event that Ironwood determines following the Distribution Effective Time that any individual employed outside the United States (other than an individual who the Parties intend to be a Cyclerion Employee) has inadvertently become employed by a member of the Cyclerion Group (due to the operation of transfer of undertakings or similar law or regulation), the Parties shall cooperate and take such actions as may be reasonably necessary in order to cause the employment of such individuals to be promptly transferred to a member of the Ironwood Group.

 

(c)                                  The Parties shall cooperate and take such actions as may be reasonably necessary in order to minimize potential statutory, contractual, plan-based or other severance or similar obligations to the Parties or their Affiliates in connection with any transfers of employment described in this Section 2.1.

 

(d)                                 Cyclerion will determine which, if any, temporary workers, individual consultants or independent contractors who are performing service primarily related to the Cyclerion Pharmaceutical Business, it wishes to transfer to Cyclerion and, the Parties shall use reasonable efforts to transfer the individual or to assign the applicable Contract to a member of the Cyclerion Group and Cyclerion shall, or shall cause a member of the Cyclerion Group to, assume and perform such Contract.

 

Section 2.2.                                 Assumption and Retention of Liabilities.  Ironwood and Cyclerion intend that employment-related Liabilities associated with Ironwood Participants are to be retained or assumed by Ironwood or an Ironwood Group member (other than, for the avoidance of doubt, a

 

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Cyclerion Group member), and employment-related Liabilities associated with Cyclerion Participants are to be assumed by Cyclerion or a Cyclerion Group member, in each case, except as specifically set forth herein.  Accordingly, as of the Distribution Effective Time:

 

(a)                                 Ironwood or the applicable member of the Ironwood Group hereby retains or assumes and agrees to pay, perform, fulfill, and discharge, except as expressly provided in this Agreement, (i) all Liabilities arising under or related to Ironwood Plans, (ii) all employment or service-related Liabilities with respect to (A) all Ironwood Participants and (B) any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker or in any other employment or similar relationship primarily connected to Ironwood or an Ironwood Group member and (iii) any Liabilities expressly transferred or allocated to Ironwood or an Ironwood Group member under this Agreement (it being understood and agreed that the provisions of this Agreement do not create or constitute a source of any such Liability); and

 

(b)                                 Cyclerion hereby retains or assumes and agrees to pay, perform, fulfill, and discharge, except as expressly provided in this Agreement, (i) all Liabilities arising under or related to Cyclerion Plans, (ii) all employment or service-related Liabilities with respect to (A) all Cyclerion Participants and (B) any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker or in any other employment or similar relationship primarily connected to Cyclerion or a Cyclerion Group member, including, without limitation, for both (A) and (B) hereof, any such Liabilities that may have arisen or that may be based upon events that occurred while such Cyclerion Participant or other individual was employed by or otherwise provided services to Ironwood or an Ironwood Group member, and (iii) any Liabilities expressly transferred or allocated to Cyclerion or a Cyclerion Group member under this Agreement.

 

Section 2.3.                                 Cyclerion Participation in the Ironwood Plans.  Except as expressly provided in Article V of this Agreement, effective not later than the Distribution Effective Time, Cyclerion and each Cyclerion Group member shall cease to be a participating company in each Ironwood Plan, and Ironwood and Cyclerion shall take all necessary action before the Distribution Effective Time to effectuate such cessation as a participating company.

 

Section 2.4.                                 Sponsorship of the Cyclerion Plans.  Effective no later than immediately prior to the Distribution Effective Time, Ironwood and Cyclerion shall take such actions (if any) as are required to cause Cyclerion or a Cyclerion Group member to assume, sole sponsorship of, and all Liabilities with respect to, each Cyclerion Plan.

 

Section 2.5.                                 No Duplication of Benefits; Service and Other Credit.  Ironwood and Cyclerion shall adopt, or cause to be adopted, all reasonable and necessary amendments and procedures to prevent Cyclerion Participants from receiving duplicative benefits from the Ironwood Plans and the Cyclerion Plans. With respect to Cyclerion Employees, each Cyclerion Plan shall provide that for purposes of determining eligibility to participate, vesting, and entitlement to benefits, service prior to the Distribution Effective Time with Ironwood or an Ironwood Group member shall be treated as service with Cyclerion or the applicable Cyclerion

 

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Group member.  Such service also shall apply for purposes of satisfying any waiting periods, evidence of insurability requirements, or the application of any preexisting condition limitations under any Cyclerion Plan.  Each Cyclerion Plan shall, to the extent practicable, waive pre-existing condition limitations with respect to Cyclerion Employees.  Cyclerion shall honor any deductibles incurred by Cyclerion Employees and their eligible dependents under any Ironwood medical plan (but not, for the avoidance of doubt, under any Ironwood dental plan) in which they participated immediately prior to the Distribution Effective Time during the then-elapsed portion of the calendar year prior to the Distribution Effective Time for purposes of satisfying any deductibles or out-of-pocket maximums under the Cyclerion Plans in which they are eligible to participate after the Distribution Effective Time in the same plan year in which such deductibles were incurred.  For the avoidance of doubt, Cyclerion shall not be required to honor any co-payments incurred by Cyclerion Employees or their eligible dependents under any Ironwood Health and Welfare Plan for purposes of satisfying any out-of-pocket maximums under the Cyclerion Plans in which they are eligible to participate after the Distribution Effective Time.

 

Section 2.6.                                 Reimbursements.  From time to time after the Distribution Effective Time, the Parties shall reimburse one another, within sixty (60) days following reasonable request of the Party requesting reimbursement and the presentation by such Party of such substantiating documentation as the other Party shall reasonably request, for the cost of any Liabilities satisfied or assumed by the Party requesting reimbursement or its Affiliates that are made, pursuant to this Agreement, the responsibility of the other Party or any of its Affiliates.

 

Section 2.7.                                 Approval of Plans.  Prior to the Distribution Effective Time, Ironwood shall have caused Cyclerion to adopt the Cyclerion Omnibus Equity Plan and an employee stock purchase plan intended to meet the requirements of Section 423 of the Code and the regulations promulgated thereunder (the “Cyclerion ESPP”) and have taken all actions as may be necessary to approve the Cyclerion Omnibus Equity Plan and the Cyclerion ESPP in order to satisfy the applicable requirements of the Code and the applicable rules and regulations of the NASDAQ.

 

Section 2.8.                                 Delivery of Shares; Registration Statement.  From and after the Distribution Effective Time, Ironwood shall have sole responsibility for delivery of shares of Ironwood Common Stock pursuant to awards issued under an Ironwood Plan in satisfaction of any obligations to deliver such shares under such Ironwood Plan (including delivery to Cyclerion Employees and Former Cyclerion Employees) and shall do so without compensation from any Cyclerion Group member.  From and after the Distribution Effective Time, Cyclerion shall have sole responsibility for delivery of shares of Cyclerion Common Stock pursuant to awards issued under a Cyclerion Plan in satisfaction of any obligations to deliver such shares under the Cyclerion Plans (including delivery to Ironwood Employees and Former Ironwood Employees) and shall do so without compensation from any Ironwood Group member.  Cyclerion shall cause a registration statement on Form S-8 (or other appropriate form) to be filed with respect to such issued or issuable shares prior to the Distribution Effective Time and shall cause such registration to remain in effect for so long as there may be an obligation to deliver Cyclerion shares under such Cyclerion and/or Ironwood Plans.  Ironwood shall use commercially reasonable efforts to assist Cyclerion in completing such registration.

 

Section 2.9.                                 Labor Relations.  To the extent required by applicable Law or any agreement with a labor union, works council or similar employee organization, the Parties shall

 

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cooperate to provide notice, engage in consultation and take any similar action which may be required on its part in connection with the Separation.

 

ARTICLE III

 

DEFINED CONTRIBUTION AND NON-QUALIFIED DEFERRED COMPENSATION PLANS

 

Section 3.1.                                 401(k) Plan.

 

(a)                                 Establishment of Plan and Trust.  Prior to the Distribution Effective Time, Ironwood shall cause Cyclerion or a Cyclerion Group member to adopt the Cyclerion 401(k) Plan, which shall be substantially similar in all material respects to the Ironwood 401(k) Plan, and any trust agreements, other plan documents, summary plan descriptions, notices and enrollment materials reasonably necessary to implement the Cyclerion 401(k) Plan, and shall cause trustees to be appointed for such plan.  Each Cyclerion Employee who was eligible to participate in the Ironwood 401(k) Plan immediately prior to the effective date of the Cyclerion 401(k) Plan (or prior to the Distribution Effective Time, if later) shall be eligible to participate in the Cyclerion 401(k) Plan as of its effective date, and the participation of each Cyclerion Employee in the Ironwood 401(k) Plan shall cease as of such date.  All other Cyclerion Employees shall become eligible to participate in the Cyclerion 401(k) Plan as provided under the terms of such plan.

 

(b)                                 Assumption of Liabilities and Transfer of Assets.  In accordance with applicable Law, Ironwood and Cyclerion shall cause, in the manner described herein, the accounts under the Ironwood 401(k) Plan of each Cyclerion Employee to be transferred to the Cyclerion 401(k) Plan on, or as soon as practicable after, the effective date of the Cyclerion 401(k) Plan and prior to the Distribution Date.  On, or as soon as practicable after, the effective date of the Cyclerion 401(k) Plan, and prior to the Distribution Date: (i) Ironwood shall cause the accounts (including any outstanding loan balances) of each Cyclerion Employee in the Ironwood 401(k) Plan to be transferred from the trust established under the Ironwood 401(k) Plan to the trust established under the Cyclerion 401(k) Plan ; (ii) the Cyclerion 401(k) Plan shall assume and be solely responsible for all Liabilities under the Cyclerion 401(k) Plan relating to the accounts that are so transferred as of the time of such transfer; and (iii) Cyclerion shall cause such transferred accounts to be accepted by the Cyclerion 401(k) Plan and its related trust and shall cause the Cyclerion 401(k) Plan to satisfy all protected benefit requirements under Section 411(d)(6) of Code and applicable Law with respect to the transferred accounts.

 

(c)                                  Severance from Employment.  Participants in the Ironwood 401(k) Plan will not be treated as having experienced a severance from employment, within the meaning of Section 401(k)(2)(B)(i) of the Code, for purposes of such plans as a result of the Separation or the occurrence of the Distribution Effective Time.

 

(d)                                 Post-Distribution Effective Time Contributions.  If any Cyclerion Employees are entitled to employer matching contributions under Section 1.11(a)(2) of the Ironwood 401(k) Plan (or any other employer contributions under such plan) with respect to contributions made by Cyclerion Employees into the Ironwood 401(k) Plan in the 2019 plan year

 

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prior to the Distribution Effective Time, and such employer matching contributions have not yet been deposited into the Cyclerion Employees’ accounts under the Ironwood 401(k) Plan as of the date such accounts are transferred from the trust established under the Ironwood 401(k) Plan to the trust established under the Cyclerion 401(k) Plan as set forth in Section 3.1(b), then Ironwood shall contribute the amount of such employer matching contributions (and other employer contributions, if any) into the applicable Cyclerion Employees’ accounts under the Ironwood 401(k) Plan as soon as practicable following the determination of such employer matching contribution (and other employer contribution, if any) amounts.  Ironwood shall then cause the amount of such employer matching contributions (and other employer contributions, if any) to be transferred to the Cyclerion 401(k) Plan in the manner set forth in Section 3.1(b) as soon as practicable following their deposit into the Ironwood 401(k) Plan, and Cyclerion shall cause such transferred amounts to be accepted by the Cyclerion 401(k) Plan.

 

ARTICLE IV

 

HEALTH AND WELFARE PLANS; PAYROLL; COBRA AND VACATION

 

Section 4.1.                                 Cessation of Participation in Ironwood Health and Welfare Plans.  Prior to the Distribution Effective Time, Cyclerion shall establish health and welfare plans (the “Cyclerion Health and Welfare Plans”) which generally correspond to the Ironwood Health and Welfare Plans in which Cyclerion Employees participate immediately prior to the Distribution Effective Time.  As of the Distribution Effective Time, Cyclerion Employees shall cease to participate in the Ironwood Health and Welfare Plans and shall, as applicable, commence participation in the corresponding Cyclerion Health and Welfare Plan in which they have enrolled.  Cyclerion shall cause Cyclerion Employees and their covered dependents who participate in Ironwood Health and Welfare Plans immediately before the Distribution Effective Time to be automatically enrolled as of the Distribution Effective Time in such Cyclerion Health and Welfare Plans as are made available to the Cyclerion Employee.  The transfer of employment from Ironwood or an Ironwood Group member to Cyclerion or a Cyclerion Group member prior to or as of the Distribution Effective Time shall not be treated as a “qualifying event” with respect to any Cyclerion Employee under the Ironwood Health and Welfare Plans or the Cyclerion Health and Welfare Plans.

 

Section 4.2.                                 Allocation of Health and Welfare Plan Liabilities.  All outstanding Liabilities relating to, arising out of, or resulting from health and welfare coverage or claims incurred by or on behalf of Cyclerion Employees or their covered dependents under the Ironwood Health and Welfare Plans on or before the Distribution Effective Time shall be retained by Ironwood.  Any Liabilities relating to, arising out of, or resulting from health and welfare coverage or claims incurred by or on behalf of Cyclerion Employees or their covered dependents under the Ironwood Health and Welfare Plans following the Distribution Effective Time shall be assumed by Cyclerion; provided, however, that to the extent such a Liability is covered under an insurance policy maintained with respect to an Ironwood Health and Welfare Plan regardless of when the Liability arises, and such Liability is not covered under an insurance policy maintained with respect to a Cyclerion Health and Welfare Plan, such Liability shall be retained by Ironwood to the extent of such coverage; and provided further, however, that to the extent that Ironwood receives prior to the Distribution Effective Time an invoice from a service provider billing Ironwood for a service or product relating to health or welfare coverage for

 

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Cyclerion Employees or their covered dependents following the Distribution Effective Time, Ironwood shall be responsible for paying such invoice and Cyclerion shall reimburse Ironwood for any amount paid by Ironwood.  For purposes of this Agreement, a claim shall be incurred upon the date upon which service or product giving rise to the Liability was provided. Any payments, repayments, reimbursements or credits consisting of, or representing, dividends, demutualizations, premium refunds, rebates, subrogation or similar reimbursements, overpayments, class action recoveries, or like payments under, or relating to, any Ironwood Health or Welfare Plan whenever occurring shall remain the property solely of Ironwood and neither Cyclerion, any Cyclerion Group member nor any Cyclerion Participant shall have any interest in or right to such Ironwood property.

 

Section 4.3.                                 Flexible Spending Plan Treatment.  Prior to the Distribution Effective Time, Cyclerion shall establish a dependent care spending account and a medical care spending account (the “Cyclerion FSAs”) effective as of the Distribution Effective Time, which Cyclerion FSAs shall have terms that are substantially identical to the analogous Ironwood dependent care and medical care flexible spending accounts (the “Ironwood FSAs”) as in effect immediately prior to the Distribution Effective Time.  Cyclerion and Ironwood shall take all steps necessary or appropriate so that the account balances (positive or negative) under the Ironwood FSAs of each Cyclerion Employee who has elected to participate therein in the year in which the Distribution Effective Time occurs shall be transferred on, or as soon as practicable after, the Distribution Effective Time from the Ironwood FSAs to the corresponding Cyclerion FSAs.  The Cyclerion FSAs shall assume responsibility as of the Distribution Effective Time for all outstanding dependent care and medical care claims under the Ironwood FSAs of each Cyclerion Employee for the year in which the Distribution Effective Time occurs and shall assume the rights of and agree to perform the obligations of the analogous Ironwood FSA from and after the Distribution Effective Time.  Cyclerion shall take all steps necessary or appropriate so that the contribution elections of each such Cyclerion Employee as in effect immediately before the Distribution Effective Time remain in effect under the Cyclerion FSAs following the Distribution Effective Time. As soon as practicable, after the Distribution Effective Time, Ironwood shall transfer to Cyclerion an amount equal to the total contributions made to the Ironwood FSAs by Cyclerion Employees in respect of the plan year in which the Distribution Effective Time occurs, reduced by an amount equal to the total claims already paid to Cyclerion Employees in respect of such plan year. From and after the Distribution Effective Time, Ironwood shall provide Cyclerion with such information such entity may reasonably request to enable it to verify any claims information pertaining to an Ironwood FSA.

 

Section 4.4.                                 Workers’ Compensation Liabilities.  All workers’ compensation Liabilities relating to, arising out of, or resulting from any claim by Cyclerion Employees or Former Cyclerion Employees that result from an accident or from an occupational disease which is incurred or becomes manifest, as the case may be, on or before the Distribution Effective Time and while such individual was employed by Ironwood or an Ironwood Group member shall be retained by Ironwood.  Any workers’ compensation Liabilities relating to, arising out of, or resulting from any claim by Cyclerion Employees or Former Cyclerion Employees that result from an accident or from an occupational disease which is incurred or becomes manifest, as the case may be, following the Distribution Effective Time shall be assumed by Cyclerion; provided, however, that to the extent such a Liability is covered under a workers compensation insurance policy of Ironwood or an Ironwood Group member regardless of when the Liability arises, and

 

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such Liability is not covered under a workers compensation insurance policy of Cyclerion or a Cyclerion Group member, such Liability shall be retained by Ironwood or an Ironwood Group member to the extent of such coverage; and provided further, however, that to the extent that Ironwood or an Ironwood Group member, as applicable,  receives prior to the Distribution Effective Time an invoice for a covered expense with respect to such Liability, Ironwood shall be responsible for paying such invoice and Cyclerion shall reimburse Ironwood for any amount paid by Ironwood.  Notwithstanding the foregoing, Cyclerion shall assume worker’s compensation Liabilities to the extent they are imposed on Cyclerion under applicable Law or where the injury or illness related to the Liability is aggravated or subject to further injury after the Distribution Effective Time.  A Liability which must be paid due to the existence of a deductible shall not be deemed to be covered by a workers compensation insurance policy for purposes of this Section 4.4.  Subject to the foregoing, Cyclerion and each Cyclerion Group member shall also be solely responsible for all workers’ compensation Liabilities relating to, arising out of, or resulting from any claim incurred for a compensable injury sustained by a Cyclerion Employee that results from an accident or from an occupational disease which is incurred or becomes manifest, as the case may be, after the Distribution Effective Time.  Ironwood, each Ironwood Group member, Cyclerion and each Cyclerion Group member shall cooperate with respect to processing of claims, any notification to appropriate governmental agencies of the disposition and the issuance of new, or the transfer of existing, workers’ compensation insurance policies and claims handling contracts.

 

Section 4.5.                                 Payroll Taxes and Reporting.  Ironwood and Cyclerion (i) shall, to the extent practicable, treat Cyclerion (or a Cyclerion Group member designated by Cyclerion) as a “successor employer” and Ironwood (or the appropriate Ironwood Group member) as a “predecessor,” within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the Code, with respect to Cyclerion Employees for purposes of taxes imposed under the United States Federal Unemployment Tax Act or the United States Federal Insurance Contributions Act, and (ii) hereby agree to use commercially reasonable efforts to implement the standard procedure described in Section 4 of Revenue Procedure 2004-53.  Without limiting in any manner the obligations and Liabilities of the Parties under the Tax Matters Agreement, including all withholding obligations otherwise set forth therein, Ironwood, each Ironwood Group member, Cyclerion and each Cyclerion Group member shall each bear its responsibility for payroll tax obligations and for the proper reporting to the appropriate governmental authorities of compensation earned by their respective employees after the Distribution Effective Time, including compensation related to the exercise of stock options or the vesting or exercise of other equity awards, including in instances where such equity awards are with respect to the equity of the other Party.

 

Section 4.6.                                 COBRA and HIPAA Compliance.  Ironwood or an Ironwood Group member shall retain the responsibility for administering compliance with the health care continuation requirements of COBRA for any COBRA qualified beneficiaries who incur a COBRA qualifying event or loss of coverage under the Ironwood Health and Welfare Plans at any time before the Distribution Effective Time.  Cyclerion shall be responsible for administering compliance with the health care continuation requirements of COBRA, and the corresponding provisions of the Cyclerion Health and Welfare Plans with respect to Cyclerion Participants who incur a COBRA qualifying event or loss of coverage under the Cyclerion Health and Welfare Plans at any time upon or after the Distribution Effective Time.

 

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Section 4.7.                                 Vacation and Paid Time Off.  As of the Distribution Effective Time, the applicable Cyclerion Group member shall credit each Cyclerion Employee with the vacation that such individual has accrued immediately prior to the Distribution Effective Time in accordance with the vacation and personnel policies applicable to such employee immediately prior to the Distribution Effective Time.

 

ARTICLE V

 

INCENTIVE COMPENSATION, EQUITY COMPENSATION AND OTHER BENEFITS

 

Section 5.1.                                 Annual Cash-Based Incentive Plans.  As of the Distribution Effective Time, Cyclerion shall assume the obligation, if any, to pay each Cyclerion Employee who is participating in an annual cash incentive bonus program in respect of 2019 performance (whether payable in fiscal year 2019 or fiscal year 2020) of Ironwood or an Ironwood Group member such Cyclerion Employee’s incentive bonus under such plan, based upon the amount accrued by Ironwood in respect of such obligations.  Cyclerion shall cause such payments to be made to the applicable Cyclerion Employees at the time such payments are made under the corresponding Ironwood incentive bonus program.

 

Section 5.2.                                 Awards under the Ironwood Equity-Based Plans.  Ironwood and, where applicable, Cyclerion shall take all actions necessary or appropriate so that each outstanding Ironwood Option, share of Ironwood Restricted Stock and Ironwood RSU outstanding immediately prior to the Distribution Effective Time shall be adjusted as set forth in this Section 5.2.

 

(a)                                 Options.

 

(i)                                     Vested Ironwood Options.  Subject to Section 5.2(a)(ii), upon the Distribution Effective Time, each vested Ironwood Option, whether held by an Ironwood Participant or a Cyclerion Participant, will be equitably adjusted in accordance with the Distribution, such that each Ironwood Participant or Cyclerion Participant who holds vested Ironwood Options shall, upon the Distribution Effective Time, hold vested Ironwood Options and vested Cyclerion Options.

 

(1)                                 The number of shares of Ironwood Common Stock subject to the vested adjusted Ironwood Option will be equal to the number of shares of Ironwood Common Stock subject to the option immediately prior to the Distribution Effective Time.  The per share exercise price of the vested adjusted Ironwood Option will be equal to the per share exercise price of the original Ironwood Option divided by the Adjustment Fraction, with the result being rounded up to the nearest whole cent.  Each vested adjusted Ironwood Option shall be subject to the same terms and conditions regarding type (whether an Incentive Stock Option or a nonqualified Option), term, and other provisions regarding exercise as set forth in the original Ironwood Option

 

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(including, for the avoidance of doubt, that a Cyclerion Participant will not be deemed to have experienced a termination of employment for purposes of any post-termination exercise provisions applicable to such vested adjusted Ironwood Option so long as he or she remains in continued employment with Cyclerion).

 

(2)                                 The number of shares of Cyclerion Common Stock subject to the vested Cyclerion Option will be equal to the number of shares of Ironwood Common Stock subject to the option immediately prior to the Distribution Effective Time divided by      , with the result being rounded down to the nearest whole share.  The per share exercise price of the vested Cyclerion Option will be equal to the per share exercise price of the original Ironwood Option divided by the Conversion Fraction, with the result being rounded up to the nearest whole cent.  Each vested Cyclerion Option shall be subject to the same terms and conditions regarding type (whether an Incentive Stock Option or a nonqualified Option), term, and other provisions regarding exercise as set forth in the original Ironwood Option (including, for the avoidance of doubt, that an Ironwood Participant will not be deemed to have experienced a termination of employment for purposes of any post-termination exercise provisions applicable to such vested Cyclerion Option so long as he or she remains in continued employment with Ironwood).

 

(ii)                                  Vested Ironwood Incentive Stock Options under the 2010 Plan.

 

(1)                                 Incentive Stock Options held by Ironwood Participants.  Notwithstanding anything to the contrary herein, unless an Ironwood Participant has, pursuant to Section 23 of the 2010 Plan, submitted a written request to the Administrator of the 2010 Plan to convert his or her vested Ironwood Incentive Stock Options into vested non-statutory Options to purchase Ironwood Common Stock (in which case, Section 5.2(a)(i) shall apply to such awards), upon the Distribution Effective Time, each vested Ironwood Incentive Stock Option granted pursuant to the 2010 Plan held by an Ironwood Participant will be equitably adjusted solely into a vested adjusted Ironwood Incentive Stock Option.  The number of shares of Ironwood Common Stock subject to the vested adjusted Ironwood Incentive Stock Option will be equal to the number of shares of Ironwood Common Stock subject to the option immediately prior to the Distribution Effective Time multiplied by the

 

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Adjustment Fraction, with the result being rounded down to the nearest whole share.  The per share exercise price of the adjusted Ironwood Incentive Stock Option will be equal to the per share exercise price of the original Ironwood Incentive Stock Option divided by the Adjustment Fraction, with the result being rounded up to the nearest whole cent.  Each vested adjusted Ironwood Incentive Stock Option shall be subject to the same terms and conditions regarding type (whether an Incentive Stock Option or a nonqualified Option), term, and other provisions regarding exercise as set forth in the original Ironwood Incentive Stock Option.

 

(2)                                 Incentive Stock Options held by Cyclerion Participants. Notwithstanding anything to the contrary herein, unless a Cyclerion Participant has, pursuant to Section 23 of the 2010 Plan, submitted a written request to the Administrator of the 2010 Plan to convert his or her vested Ironwood Incentive Stock Options into vested non-statutory Options to purchase Ironwood Common Stock (in which case, Section 5.2(a)(i) shall apply to such awards), upon the Distribution Effective Time, each vested Ironwood Incentive Stock Option granted under the 2010 Plan held by a Cyclerion Participant will be converted into a vested Cyclerion Incentive Stock Option.  The number of shares of Cyclerion Common Stock subject to the vested Cyclerion Incentive Stock Option will be equal to the number of shares of Ironwood Common Stock subject to the option immediately prior to the Distribution Effective Time multiplied by the Conversion Fraction, with the result being rounded down to the nearest whole share.  The per share exercise price of the Cyclerion Incentive Stock Option will be equal to the per share exercise price of the original Ironwood Incentive Stock Option divided by the Conversion Fraction, with the result being rounded up to the nearest whole cent.  Each vested Cyclerion Incentive Stock Option shall be subject to the same terms and conditions regarding type (whether an Incentive Stock Option or a nonqualified Option), term, and other provisions regarding exercise as set forth in the original Ironwood Incentive Stock Option.

 

(iii)                               Unvested Ironwood Options held by Ironwood Participants. Upon the Distribution Effective Time, each unvested Ironwood Option held by an Ironwood Participant will be equitably adjusted solely into an unvested adjusted Ironwood Option.  The number of shares of Ironwood Common Stock subject to the unvested adjusted Ironwood Option will be equal to the number of shares of Ironwood Common

 

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Stock subject to the option immediately prior to the Distribution Effective Time multiplied by the Adjustment Fraction, with the result being rounded down to the nearest whole share.  The per share exercise price of the unvested adjusted Ironwood Option will be equal to the per share exercise price of the original Ironwood Option divided by the Adjustment Fraction, with the result being rounded up to the nearest whole cent.  Each unvested adjusted Ironwood Option shall be subject to the same terms and conditions regarding type (whether an Incentive Stock Option or a nonqualified Option), term, vesting, and other provisions regarding exercise as set forth in the original Ironwood Option.

 

(iv)                              Unvested Ironwood Options held by Cyclerion Participants.  Upon the Distribution Effective Time, each unvested Ironwood Option held by a Cyclerion Participant will be converted into an unvested Cyclerion Option.  The number of shares of Cyclerion Common Stock subject to the unvested Cyclerion Option will be equal to the number of shares of Ironwood Common Stock subject to the option immediately prior to the Distribution Effective Time multiplied by the Conversion Fraction, with the result being rounded down to the nearest whole share.  The per share exercise price of the unvested Cyclerion Option will be equal to the per share exercise price of the original Ironwood Option divided by the Conversion Fraction, with the result being rounded up to the nearest whole cent.  Each unvested Cyclerion Option shall be subject to the same terms and conditions regarding type (whether an Incentive Stock Option or a nonqualified Option), term, vesting (including, for the avoidance of doubt, that each Cyclerion Participant will receive service credit for purposes of vesting for periods of employment with Ironwood prior to the Distribution Effective Time), and other provisions regarding exercise as set forth in the original Ironwood Option; provided, however, that each Cyclerion Option held by Mark Currie that vests upon the attainment of specified performance criteria shall be adjusted to provide that the relevant performance criteria applies to performance of Cyclerion following the Distribution Effective Time.

 

(v)                                 Extended Exercisability of Options.  Any extended period of exercisability applicable to stock options held by an individual listed on Schedule 5.2(a)(v) to which such individual becomes entitled pursuant to an Executive Severance Agreement entered into prior to the Distribution Effective Time between such individual and Ironwood or Cyclerion, as applicable (or if such individual has not yet entered into an Executive Severance Agreement with Ironwood or Cyclerion, as applicable, the extended period of exercisability set forth opposite such individuals name on Schedule 5.2(a)(v)) shall apply to any adjusted Ironwood Options and any Cyclerion Options issued in accordance with this Section 5.2.

 

(b)                                 Ironwood Restricted Stock.

 

(i)                                     Ironwood Restricted Stock held by Ironwood Participants.  Upon the Distribution Effective Time, each share of Ironwood Restricted Stock held by an Ironwood Participant will be equitably adjusted solely into shares of adjusted Ironwood Restricted Stock.  The number of shares of adjusted Ironwood Restricted Stock will be equal to the number of shares of Ironwood Restricted Stock immediately prior to the Distribution Effective Time multiplied by the Adjustment Fraction, with the result being

 

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rounded down to the nearest whole share.  Each adjusted Ironwood Restricted Stock award shall be subject to the same terms and conditions regarding term, vesting, and other provisions as set forth in the original Ironwood Restricted Stock award.  For the avoidance of doubt, the adjusted Ironwood Restricted Stock shall continue to vest only for so long as the applicable Ironwood Participant continues to serve on the Board of Directors of Ironwood.

 

(ii)                                  Ironwood Restricted Stock held by Cyclerion Participants.  Upon the Distribution Effective Time, each share of Ironwood Restricted Stock held by a Cyclerion Participant will be equitably adjusted solely into shares of adjusted Cyclerion Restricted Stock.  The number of shares of Cyclerion Restricted Stock will be equal to the number of shares of Ironwood Restricted Stock immediately prior to the Distribution Effective Time multiplied by the Conversion Fraction, with the result being rounded down to the nearest whole share.  Each Cyclerion Restricted Stock award shall be subject to the same terms and conditions regarding term, vesting, and other provisions as set forth in the original Ironwood Restricted Stock award.  For the avoidance of doubt, the Cyclerion Restricted Stock shall continue to vest only for so long as the applicable Cyclerion Participant continues to serve on the Board of Directors of Cyclerion.

 

(c)                                  Ironwood RSUs.

 

(i)                                     Ironwood RSUs held by Ironwood Participants.  Upon the Distribution Effective Time, each Ironwood RSU held by an Ironwood Participant will be equitably adjusted solely into an adjusted Ironwood RSU.  The number of shares of Ironwood Common Stock subject to the adjusted Ironwood RSU will be equal to the number of shares of Ironwood Common Stock subject to the Ironwood RSU immediately prior to the Distribution Effective Time multiplied by the Adjustment Fraction, with the result being rounded down to the nearest whole share.  Each adjusted Ironwood RSU shall be subject to the same terms and conditions regarding term, vesting, and other provisions as set forth in the original Ironwood RSU award.

 

(ii)                                  Ironwood RSUs held by Cyclerion Participants.  Except as otherwise provided in this Section 5.2(c)(ii), upon the Distribution Effective Time, each Ironwood RSU held by a Cyclerion Participant will be equitably adjusted solely into an Cyclerion RSU.  The number of shares of Cyclerion Common Stock subject to the Cyclerion RSU will be equal to the number of shares of Ironwood Common Stock subject to the Ironwood RSU immediately prior to the Distribution Effective Time multiplied by the Conversion Fraction, with the result being rounded down to the nearest whole share.  Each Cyclerion RSU shall be subject to the same terms and conditions regarding term, vesting (including, for the avoidance of doubt, that each Cyclerion Participant will receive service credit for purposes of vesting for periods of employment with Ironwood prior to the Distribution Effective Time), and other provisions as set forth in the original Ironwood RSU award.  Notwithstanding anything to the contrary in this Section 5.2(c)(ii), each Ironwood RSU granted on July 31, 2018 and designated as a “recognition award” will be adjusted as provided in Section 5.2(c)(i).

 

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(d)                                 Delivery; Withholding.

 

(i)                                     Delivery.  Cyclerion shall be solely responsible for the issuance of Cyclerion Common Stock in respect of the grant, exercise and/or vesting of Cyclerion Options and Cyclerion RSUs (regardless of the holder thereof).  Ironwood shall be solely responsible for the issuance of Ironwood Common Stock in respect of the grant, exercise, and/or vesting of Ironwood Options, Ironwood Restricted Stock and Ironwood RSUs (regardless of the holder thereof).

 

(ii)                                  Withholding and Reporting. Following the Distribution Effective Time, (i) Cyclerion shall be solely responsible for all income, payroll and other tax remittance and reporting related to the compensation of Cyclerion Participants in respect of Cyclerion Options and Cyclerion RSUs and Ironwood Options, Ironwood Restricted Stock and Ironwood RSUs and (ii) Ironwood shall be solely responsible for all income, payroll and other tax remittance and reporting related to the compensation of Ironwood Participants in respect of Cyclerion Options and Cyclerion RSUs and Ironwood Options, Ironwood Restricted Stock and Ironwood RSUs. The Parties will cooperate and communicate with each other and with third-party providers to effectuate the withholding and remittance of any such taxes, as well as any required tax reporting, in a timely, efficient and appropriate manner.  To the maximum extent permitted under applicable Law, Ironwood and Cyclerion shall share, and shall cause each member of its respective Group to share, with each other and their respective agents and vendors all information reasonably necessary for the efficient and accurate administration of each of the Ironwood Equity-Based Plans and the Cyclerion Omnibus Equity Plan, including but not limited to information regarding terminations of employment and the attainment of any specified performance criteria set forth in any awards of Ironwood or Cyclerion Options, Restricted Stock or RSUs.

 

(e)                                  Allocation of Tax Deduction.  The allocation of any deduction in respect of equity based awards held by Ironwood or Cyclerion Participants will be governed by Section 3.09 of the Tax Matters Agreement.

 

(f)                                   Partial Interests in Shares.  To the extent that any adjustment described in this Section 5.2 results in any fractional interest in shares, such fractional interest shall be rounded down to the nearest whole share and Ironwood or Cyclerion, as the case may be, shall pay to their respective employees as soon as practicable following the Separation Date a payment in cash equal to such fractional share interest multiplied by the volume-weighted average trading price of the Ironwood Common Stock or Cyclerion Common Stock, as the case may be, on the ten (10) trading days immediately following the date upon which the Separation Effective Time occurs.

 

(g)                                  Administration.  Each of Ironwood and Cyclerion shall establish an appropriate administration system (through E*TRADE Securities LLC and Computershare Limited) in order to handle exercises and delivery of shares in an orderly manner and provide reasonable levels of service for equity award holders.  Upon the Distribution Effective Time, Cyclerion shall succeed to all administrative and interpretive and other rights of Ironwood with respect to awards converted into awards with respect to Cyclerion Common Stock hereunder.  Each of Ironwood and Cyclerion agree that it shall engage E*TRADE Securities LLC as its stock plan administrator until the date on which all Cyclerion Options and RSUs held by Ironwood

 

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Participants and all Ironwood Options, Restricted Stock and RSUs held by Cyclerion Participants have vested (or, with respect to Options, vested and been exercised), expired, terminated or been forfeited or cancelled.  Notwithstanding the foregoing sentence, Ironwood or Cyclerion may engage a stock plan administrator other than E*TRADE Securities LLC with the written consent of the other party.

 

(h)                                 No Effect on Subsequent Awards.  The provisions of this Section 5.2 shall have no effect on the terms and conditions of equity and equity-based awards granted following the Distribution Date by Ironwood or Cyclerion.

 

(i)                                     No Termination of Employment or Service.  Holders of equity or equity-based awards described in this Section 5.2 will not be treated as having experienced a termination of employment or service for purposes of such awards as a result of the Separation or the occurrence of the Distribution Effective Time.

 

Section 5.3.                                 Ironwood ESPP.  As of the Distribution Effective Time, the participation of Cyclerion Employees in the Ironwood ESPP shall terminate and, as soon as practicable following the Distribution Date, the Cyclerion Employees shall receive a lump sum amount in respect of their payroll deductions not previously used to purchase Ironwood Common Stock in accordance with the terms of the Ironwood ESPP.

 

Section 5.4.                                 Blackout Period.

 

(a)                                 During the period beginning as of the Record Date and ending as of the date that is eight (8) weeks following the Distribution Date (the “Blackout Period”), no Ironwood Participant or Cyclerion Participant who holds vested Ironwood Options may exercise such Ironwood Options.

 

(b)                                 If the employment of an Ironwood Employee or a Cyclerion Employee is terminated during the Blackout Period, and the entity employing such individual (the “Employing Entity”), determines to extend the period of exercisability applicable to stock options held by such Ironwood Employee or Cyclerion Employee, the entity that does not employ such individual (the “Non-Employing Entity”) shall also elect to extend the period of exercisability applicable to any stock options held by such individual in the Non-Employing Entity; provided, however, that the Non-Employing Entity shall not be required to extend the period of exercisability for such stock options for any period longer than is necessary to provide such individual the opportunity to exercise his or her stock options in the Non-Employing Entity for the period of time provided in the applicable award agreement.

 

Section 5.5.                                 Section 409A. The Parties agree that their intent is that all payments and benefits under this Agreement will comply with or be exempt from Section 409A of the Code to the extent applicable.  This Agreement shall be interpreted such that all such payments and benefits either comply with or are exempt from Section 409A of the Code, and all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code.  Notwithstanding anything in this Agreement to the contrary, Ironwood and Cyclerion agree to negotiate in good faith regarding the need for any treatment of any payments or benefits hereunder different from that otherwise provided

 

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herein to ensure that the treatment of Ironwood or Cyclerion Options, RSUs, Restricted Stock or other compensation hereunder does not cause the imposition of a tax under Section 409A of the Code.

 

ARTICLE VI

 

GENERAL AND ADMINISTRATIVE

 

Section 6.1.                                 Sharing of Participant Information.  To the maximum extent permitted under applicable Law, Ironwood and Cyclerion shall share, and shall cause each member of its respective Group to share, with each other and their respective agents and vendors all participant information reasonably necessary for the efficient and accurate administration of each of the Ironwood Plans and the Cyclerion Plans. Ironwood and Cyclerion and their respective authorized agents shall, subject to applicable Laws on confidentiality, be given reasonable and timely access to, and may make copies of, all information relating to the subjects of this Agreement in the custody of the other Party, to the extent necessary for such administration.

 

Section 6.2.                                 No Third Party Beneficiaries.  No provision of this Agreement or the Separation Agreement shall be construed to create any right, or accelerate entitlement, to any compensation or benefit whatsoever on the part of any future, present, or former employee of Ironwood, an Ironwood Group member, Cyclerion, or a Cyclerion Group member under this Agreement, the Separation Agreement, any Ironwood Plan or Cyclerion Plan or otherwise.  Except as expressly provided in this Agreement, nothing in this Agreement shall preclude Cyclerion or any Cyclerion Group member, at any time after the Distribution Effective Time, from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any respect any Cyclerion Plan, any benefit under any Cyclerion Plan or any trust, insurance policy or funding vehicle related to any Cyclerion Plan; and (iii) except as expressly provided in this Agreement, nothing in this Agreement shall preclude Ironwood or any Ironwood Group member, at any time after the Distribution Effective Time, from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any respect any Ironwood Plan, any benefit under any Ironwood Plan or any trust, insurance policy or funding vehicle related to any Ironwood Plan.

 

Section 6.3.                                 Audit Rights with Respect to Information Provided.  Each of Ironwood and Cyclerion, and their duly authorized representatives, shall have the right to conduct reasonable audits with respect to all information provided to it by the other Party pursuant to this Agreement.  The Parties shall cooperate to determine the procedures and guidelines for conducting audits under this Section 6.3, which shall require reasonable advance notice by the auditing Party.  The auditing Party shall have the right to make copies of any relevant records at its expense, subject to applicable Law.  Failure of a third party service provider to provide information shall not constitute a breach of this Section 6.3; provided, that the applicable Party has timely requested the information from such service provider

 

Section 6.4.                                 Fiduciary Matters.  Ironwood and Cyclerion each acknowledge that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other applicable Law, and no Party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its

 

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good faith determination (as supported by advice from counsel experienced in such matters) that to do so would violate such a fiduciary duty or standard. Each Party shall be responsible for taking such actions as are deemed necessary and appropriate to comply with its own fiduciary responsibilities and shall fully release and indemnify the other Party for any Liabilities caused by the failure to satisfy any such responsibility.

 

Section 6.5.                                 Consent of Third Parties.  If any provision of this Agreement is dependent on the consent of any third party (such as a vendor or Governmental Entity), Ironwood and Cyclerion shall use commercially reasonable efforts to obtain such consent, and if such consent is not obtained, to implement the applicable provisions of this Agreement to the full extent practicable.  If any provision of this Agreement cannot be implemented due to the failure of such third party to consent, Ironwood and Cyclerion shall negotiate in good faith to implement the provision in a mutually satisfactory manner.  The phrase “commercially reasonable efforts” as used herein shall not be construed to require the incurrence of any non-routine or unreasonable expense or liability or the waiver of any right.

 

Section 6.6.                                 Assignment of “Claw-Back” or Recoupment Rights.  To the extent a member of the Ironwood Group holds any repayment “claw-back” or recoupment rights with respect to remuneration paid or provided to Cyclerion Employees (e.g., the right to require repayment of compensation upon a termination of employment or misconduct by the employee) in connection with any relocation benefit, sign-on bonus, tuition benefit or otherwise, such rights are hereby assigned to Cyclerion upon the Distribution Effective Time, it being agreed that the transactions contemplated by the Separation Agreement shall not, in and of themselves, trigger any such repayment or recoupment right.  The Parties shall cooperate to execute any further documentation as may be necessary to evidence such assignment.

 

Section 6.7.                                 Proprietary Information and Inventions Agreements.  Effective as of the Distribution Effective Time, Ironwood shall, or shall cause the appropriate member of the Ironwood Group to, waive such rights under any proprietary information, confidentiality, inventions, restrictive covenant or similar agreement between any Cyclerion Employee and any Ironwood Group member as Ironwood determines in its discretion to be necessary or appropriate to permit such Cyclerion Employee to perform her services to Cyclerion or a Cyclerion Group member from and after the Distribution Effective Time.

 

ARTICLE VII

 

DISPUTE RESOLUTION

 

Section 7.1.                                 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 transaction 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

 

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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 or any Ancillary 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.

 

Section 7.4.                                 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 7.4 must be pursued in accordance with Section 7.2, with all remedies being cumulative to the extent allowed by applicable Law.  The Parties further agree that any action brought under this Section 7.4 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 VIII

 

MISCELLANEOUS

 

Section 8.1.                                 Complete Agreement; Construction.  This Agreement 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 and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of the Separation Agreement, this Agreement shall prevail.

 

Section 8.2.                                 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 8.3.                                 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

 

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effective when one or more such counterparts have been signed by each of the Parties and delivered to each of the Parties.

 

Section 8.4.                                 Survival of Agreements.  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 8.5.                                 Expenses.

 

(a)                                 Except as otherwise expressly provided in this Agreement, or as otherwise agreed to in writing by the Parties, all out-of-pocket fees and expenses incurred at or prior to the Distribution Effective Time in connection with, and as required by, the preparation, execution, delivery and implementation of this Agreement shall be borne and paid by Ironwood.

 

(b)                                 Except as otherwise expressly provided in this Agreement (including this Section 8.4), or as otherwise agreed to in writing by the Parties, each Party shall bear its own costs and expenses incurred or accrued after the Distribution Effective Time; provided, however, that, except as otherwise expressly provided in this Agreement, any fees, costs and expenses incurred in obtaining any Consents or novation from a Third Party in connection with the Transfer to or Assumption by a Party or its Subsidiary of any Assets or Liabilities in connection with the Separation shall be borne by the Party or its Subsidiary to which such Assets are being Transferred or which is Assuming such Liabilities.

 

Section 8.6.                                 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 8.6):

 

To Ironwood:

Ironwood Pharmaceuticals, Inc.

301 Binney Street

Cambridge, MA 02142

United States

Attn: General Counsel

Phone: 617-621-7722

Facsimile: 617-588-0623

 

To Cyclerion:

Cyclerion Therapeutics, Inc.

301 Binney Street

Cambridge, MA 02142

United States

Attn: Chief Financial Officer

Phone:

Facsimile:

 

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Section 8.7.                                 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 8.8.                                 Assignment.  No Party may assign any rights or delegate any obligations arising under 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 (i) with respect to Ironwood, to a Subsidiary of Ironwood (so long as such Subsidiary remains a Subsidiary of Ironwood), (ii) with respect to Cyclerion, to a Subsidiary of Cyclerion (so long as such Subsidiary remains a Subsidiary of Cyclerion) 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 8.7 shall release the assigning Party from liability for the full performance of its obligations under this Agreement.  It is understood and agreed that 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.

 

Section 8.9.                                 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 permitted assigns.

 

Section 8.10.                          Termination and Amendment.  This Agreement may be terminated, modified or amended, and the Distribution may be amended, modified or abandoned, 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 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 8.11.                          Payment Terms.

 

(a)                                 Except as otherwise 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

 

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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 8.12.                          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.

 

Section 8.13.                          Third Party Beneficiaries.  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.

 

Section 8.14.                          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 8.15.                          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 8.16.                          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

 

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effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

Section 8.17.                          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 8.18.                          No Duplication; No Double Recovery.  Nothing in this 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 8.19.                          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 or thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

Section 8.20.                          Transfer of Records and Information.  Subject to applicable Law, Ironwood shall transfer to Cyclerion any and all employment records and information (including, but not limited to, any Form I-9, Form W-2 or other Internal Revenue Service forms) with respect to Cyclerion Employees and other records reasonably required by Cyclerion to enable Cyclerion properly to carry out its obligations under this Agreement. Such transfer of records and information generally shall occur as soon as administratively practicable on or after the Distribution Effective Time. Each Party will permit the other Party reasonable access to employee records and information, to the extent reasonably necessary for such accessing Party to carry out its obligations hereunder (subject to applicable Law).

 

Section 8.21.                          Cooperation.  The Parties agree to reasonably cooperate to effect the terms and conditions of this Agreement, from and after the date hereof.

 

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FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

[Signature Page Follows.]

 

27

 

FOIA Confidential Treatment Requested by Cyclerion Therapeutics, Inc.

Pursuant to 17 CFR 200.83

 

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 Employee Matters Agreement]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00291-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00291-of-00352.parquet"}]]