Exhibit 10.2

 

SECOND AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT

 

This SECOND AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (the
“Agreement”) dated May 2, 2011 by and between Synergy Pharmaceuticals,, Inc., a
company incorporated under the laws of Florida (the “Company”), and Gary S.
Jacob, Ph.D., an individual (the “Executive”) with reference to the following
facts:

 

Executive serves as the President and Chief Executive Officer of the Company;

 

Synergy is engaged in the business of developing and marketing drug products;

 

The Executive has previously entered into an employment agreement with the
Company as of March 11, 2009 , as amended by the Amended and Restated 
Employment Agreement with the Company as of February 10, 2010 (the “Employment
Agreement”); and

 

The parties wish to amend and restate the Employment Agreement between the
Executive and the Company in its entirety, on the terms and conditions contained
in this Agreement, to reflect certain changes to bonus terms which have been
approved by the Compensation Panel.

 

NOW THEREFORE, in consideration of the foregoing facts and mutual agreements set
forth below, the parties, intending to be legally bound, agree as follows:

 

1.                                       Employment.  The Company hereby agrees
to employ Executive, and Executive hereby accepts such employment and agrees to
perform Executive’s duties and responsibilities in accordance with the terms and
conditions hereinafter set forth.

 

1.1                                 Duties and Responsibilities.  Executive
shall serve as Chief Executive Officer and President. During the Employment
Term, Executive shall perform all duties and accept all responsibilities
incident to such positions and other appropriate duties as may be assigned to
Executive by the Company’s Board of Directors from time to time. Executive shall
also serve as a director of the Company if requested by the Company’s Board of
Directors, and as an officer of one or more of the Company’s subsidiaries
without any additional compensation. The Company shall retain full direction and
control of the manner, means and methods by which Executive performs the
services for which he is employed hereunder and of the place or places at which
such services shall be rendered. The Executive also agrees that in the absence
of a Chief Accounting Officer, he will sign various federal and state securities
filings as the Company’s principal accounting officer.

 

1.2                                 Employment Term.  The term of Executive’s
employment under this Agreement  commenced as of August 1, 2008 (the “Effective
Date”) and shall continue until December 31, 2014, unless earlier terminated in
accordance with Section 4 hereof. The term of Executive’s employment shall be
automatically renewed for successive one (1) year periods until the Executive or
the Company delivers to the

 

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other party a written notice of their intent not to renew the “Employment Term,”
such written notice to be delivered at least sixty (60) days prior to the
expiration of the then-effective “Employment Term” as that term is defined
below. The period commencing as of the Effective Date and ending December 31,
2014 or such later date to which the term of Executive’s employment under the
Agreement shall have been extended is referred to herein as the “Employment
Term” and the end of the Employment Term is referred to herein as the
“Expiration Date.”

 

1.3                                 Extent of Service.  Except for discharging
his duties as Chief Executive Officer of Callisto, the Company’s corporate
parent, during the Employment Term, Executive agrees to use Executive’s best
efforts to carry out the duties and responsibilities under Section 1.1 hereof
and to devote substantially all Executive’s business time, attention and energy
thereto. Executive further agrees not to work either on a part-time or
independent contracting basis for any other business or enterprise during the
Employment Term without the prior written consent of the Company’s Board of
Directors (the “Board”), which consent shall not be unreasonably withheld.

 

1.4                                 Base Salary.

 

(a)                                  The Company shall pay Executive a base
salary (the “Base Salary”) at the annual rate of $300,000 (U.S.) payable at such
times as the Company customarily pays its other senior level executives (but in
any event no less often than monthly). The Base Salary shall be subject to all
state, federal, and local payroll tax withholding and any other withholdings
required by law. The overall cap of $300,000 shall not be diminished by any
bonus or accelerated payment benefit given to Executive by Callisto.  The
Executive’s Base Salary may be increased, but not decreased by the Compensation
Panel.  Once increased, such increased amount shall constitute the Executive’s
Base Salary and shall not be decreased.

 

(b)                                 It is expressly acknowledged that
Executive’s Base Salary shall be allocated between the Company and Callisto, so
that the aggregate Base Salary payable to the Executive during the Employment
Term from the Company and Callisto will not exceed $300,000 (or such higher
amount as is determined by the committee of the Company’s and/or Callisto’s
Board of Directors empowered to fix or review compensation of the other
executive officers of the Company (the “Compensation Panel”).  The current
estimate of such allocation is that 75% of the Executive’s Base Salary shall be
payable by the Company and 25% of such Base Salary shall by payable by Callisto,
however such allocation may change, no more frequently than once each fiscal
quarter as determined in good faith by the Company’s Chief Financial Officer. 
At any time if Callisto is not obligated to or does not pay its allocated share
of Executive’s Base Salary, the Company shall pay Executive’s Base Salary in
full, irrespective of any  accounting allocation.  The overall cap of $300,000
shall not be

 

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diminished by any bonus or accelerated payment benefit given to Executive by
Callisto.

 

(c)                                  In the event Callisto is obligated to pay
any item of compensation or reimburse expenses to Executive under this
Agreement, Callisto fails to do so and the Company makes payment to the
Executive pursuant to Section 1.4(b) of this Agreement, the Company shall be
subrogated to all claims of the Executive against Callisto arising from
Callisto’s failure to make payment to the extent of such payments made to the
Executive.

 

1.5                                 Incentive Compensation.

 

(a)                                  Bonus.  Executive shall be eligible to earn
a cash bonus of up to 50% of his Base Salary per full calendar year  during the
Employment Term (and a pro rated bonus for the period from August 1, 2008 to
December 31, 2008) based on meeting performance objectives and bonus criteria to
be mutually identified by Executive and the Compensation Panel.  Bonuses, if
any, shall be subject to all applicable tax and payroll withholdings.  The bonus
shall be determined on or before March 1 of each year of the Employment Term
commencing March 1, 2009 and paid on or before April 14 of each year.

 

(b)                                 Realization Bonus.

 

(i)                                     In the event during the Term of this
Agreement the Company enters into either a out-license agreement for any of its
technology that grants exclusive marketing rights to a third party (and the
license fees the Company contracts to receive (disregarding any contingencies to
such payment) equals or exceeds $50 million) or enters into a joint venture in
which the Company contributes such rights to the joint venture, in each case
where the Enterprise Value (defined below) equals or exceeds the minimum value
of $250 million,   the Company shall accrue  a bonus  determined by multiplying
the Enterprise Value (defined below) in the case of a joint venture or the sum
of the license fees actually received in the case of an out license, as the case
may be, by 0.5% (one half percent).

 

(ii)                                  In the event during the Term of this
Agreement the Company

 

(A)      engages in (i) a merger transaction as a result of which the
stockholders of the Company existing immediately before the consummation of such
merger beneficially own less than 20% of the stock of the ultimate parent of the
surviving entity immediately after the consummation of the merger, where the
Enterprise Value equals or exceeds a minimum value of $400 million or (ii) a
sale of substantially all of the assets of the Company, where the Enterprise
Value equals or exceeds a minimum value of $400 million, the Executive shall
accrue a bonus in an amount determined by multiplying the Enterprise Value by
2.5% (a “Sale Transaction”); or

 

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(B)        engages in (i) a merger transaction, as a result of which the
stockholders of the Company existing immediately before the consummation of such
merger beneficially own 20% or more of the stock of the ultimate parent of the
surviving entity immediately after the consummation of the merger, where the
Enterprise Value of the Company (either at the effective date of the transaction
or  12 months after the effective date of the transaction) equals or exceeds a
minimum value of $250 million or (ii) a sale of substantially all of the assets
of the Company, where the Enterprise Value equals or exceeds a minimum value of
$250 million,  the Executive shall accrue a bonus in an amount determined by
multiplying the Enterprise Value by 2.5% (a “Combination Transaction”).

 

(iii)  The accrued bonuses shall be payable to Executive (a)  in the same form
of the consideration received by the Company’s stockholders in full
contemporaneously at the closing of any joint venture, Sale Transaction or
Combination Transaction; or (b) in cash 5 business days after the Company’s
receipt of license fees at the rate of 0.5% of license fees actually received. 
The expiration or termination of this Agreement shall not terminate or diminish
the Executive’s right to receive bonus payments with respect to out license fees
collected or the consummation of any joint venture, Sale Transaction or
Combination Transaction after the termination or expiration of this Agreement
provided the Company has entered into an agreement for such a transaction any
time during the Employment  Term or 90 days thereafter.

 

(iv)  The “Enterprise Value” in the case of a Change in Control in which
consideration is payable to the Company in respect of its assets or business,
shall mean the total cash and non-cash (including, without limitation, the
assumption of debt) consideration received by the Company or in the case of a
Change in Control in which consideration is payable to the Company’s
stockholders, the total cash and non-cash (including, without limitation, the
assumption of debt) consideration payable to the Company’s stockholders.
“Enterprise Value” shall also include, if applicable, any cash or non-cash
consideration payable to the Company or to the Company’s stockholders on a
contingent, earnout or deferred basis. To the extent that any consideration in a
transaction is not received in cash upon the consummation of the Change in
Control, the value of such non-cash consideration for purposes of calculating
the Enterprise Value will be determined by the independent Board of Directors of
the Company prior to the Change in Control in good faith in consultation with an
independent investment bank or financial advisor retained by Board of Directors
in connection with the Change in Control transaction. In the event that less
than 100% of the stock or assets of the Company is purchased in the Change in
Control transaction, the Enterprise Value shall be extrapolated from the
percentage of the Company’s capital stock or assets impacted in such Change in
Control transaction to determine if the applicable threshold was exceeded, but
the Transaction Fee shall be calculated based on the actual consideration
received by the Company or shareholders, as the case may be. Section 1.5(b),
however, shall not apply to any event resulting in a Change in Control in which
neither the Company nor its stockholders receives consideration either upon, or
in connection with, the occurrence or consummation of the event resulting in a
Change in Control.

 

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(v)  For purposes of Section 1.5(b)(ii)(B), Enterprise Value at any time
subsequent to the effective date of a transaction  shall be computed by
reference to the market capitalization of the combined entity (based on an
average closing price of the combined entities common stock for a period of 20
consecutive trading days) multiplied by the quotient of the number of combined
entities shares of common stock and common stock equivalents issued to the
Company’s stockholders in the transaction divided by the total number of shares
of the common stock and common stock equivalents outstanding on the effective
date of the transaction, on a fully diluted basis.

 

(c)                                 
Options.                                                  The Compensation Panel
will consider grants of options to the Executive no less frequently than
annually commencing March 1, 2010.

 

(d)                                 Executive
Benefits.                                           The Executive shall be
entitled to participate in all executive benefit or incentive compensation plans
now maintained or hereafter established by the Company for the purpose of
providing compensation and/or benefits to executives of the Company and any
supplemental retirement, salary continuation, stock option, deferred
compensation, supplemental medical or life insurance or other bonus or incentive
compensation plans. Unless otherwise provided herein, the Executive’s
participation in such plans shall be on the same basis and terms as other
similarly situated executives of the Company. No additional compensation
provided under any of such plans shall be deemed to modify or otherwise affect
the terms of this Agreement or any of the Executive’s entitlements hereunder.

 

1.6                                 Other
Benefits.                                                                During
the Employment Term, Executive shall be entitled to participate in all employee
benefit plans and programs made available to the Company’s senior level
executives as a group or to its employees generally, as such plans or programs
may be in effect from time to time (the “Benefit Coverages”), including, without
limitation, medical, dental, hospitalization, short-term and long-term
disability and life insurance plans, accidental death and dismemberment
protection and travel accident insurance. Executive shall be provided office
space and staff assistance appropriate for Executive’s position and adequate for
the performance of his duties.

 

1.7                                 Reimbursement of Expenses; Vacation; Sick
Days and Personal Days.  Executive shall be provided with reimbursement of
expenses related to Executive’s employment by the Company on a basis no less
favorable than that which may be authorized from time to time by the Board, in
its sole discretion, for senior level executives as a group. Executive shall be
entitled to vacation and holidays in accordance with the Company’s normal
personnel policies for senior level executives, but not less than three
(3) weeks of vacation per calendar year, provided Executive shall not utilize
more than ten (10) consecutive business days without the express consent of the
Board of Directors. Unused vacation time will be forfeited as of December 31 of
each calendar year of the Employment Term. Executive shall be entitled to no
more than an aggregate of ten (10) sick days and personal days per calendar
year.

 

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1.8                                 No Other Compensation.            Except as
expressly provided in Sections 1.4 through 1.7, Executive shall not be entitled
to any other compensation or benefits.

 

2.                                       Confidential Information. Executive
recognizes and acknowledges that by reason of Executive’s employment by and
service to the Company before, during and, if applicable, after the Employment
Term, Executive will have access to certain confidential and proprietary
information relating to the Company’s business, which may include, but is not
limited to, trade secrets, trade “know-how,” product development techniques and
plans, formulas, customer lists and addresses, financing services, funding
programs, cost and pricing information, marketing and sales techniques, strategy
and programs, computer programs and software and financial information
(collectively referred to as “Confidential Information”). Executive acknowledges
that such Confidential Information is a valuable and unique asset of the Company
and Executive covenants that he will not, unless expressly authorized in writing
by the Company, at any time during the course of Executive’s employment use any
Confidential Information or divulge or disclose any Confidential Information to
any person, firm or corporation except in connection with the performance of
Executive’s duties for the Company and in a manner consistent with the Company’s
policies regarding Confidential Information. Executive also covenants that at
any time after the termination of such employment, directly or indirectly, he
will not use any Confidential Information or divulge or disclose any
Confidential Information to any person, firm or corporation, unless such
information is in the public domain through no fault of Executive or except when
required to do so by a court of law, by any governmental agency having
supervisory authority over the business of the Company or by any administrative
or legislative body (including a committee thereof) with apparent jurisdiction
to order Executive to divulge, disclose or make accessible such information. All
written Confidential Information (including, without limitation, in any computer
or other electronic format) which comes into Executive’s possession during the
course of Executive’s employment shall remain the property of the Company.
Except as required in the performance of Executive’s duties for the Company, or
unless expressly authorized in writing by the Company, Executive shall not
remove any written Confidential Information from the Company’s premises, except
in connection with the performance of Executive’s duties for the Company and in
a manner consistent with the Company’s policies regarding Confidential
Information. Upon termination of Executive’s employment, the Executive agrees to
return immediately to the Company all written Confidential Information
(including, without limitation, in any computer or other electronic format) in
Executive’s possession. As a condition of Executive’s continued employment with
the Company and in order to protect the Company’s interest in such proprietary
information, the Company shall require Executive’s execution of a
Confidentiality Agreement and Inventions Agreement in the form attached hereto
as Exhibit “B”, and incorporated herein by this reference.

 

3.                                       Non-Competition; Non-Solicitation.

 

3.1                                 Non-Compete.                   The Executive
hereby covenants and agrees that during the term of this Agreement and for a
period of one year following the end of the Employment Term, the Executive will
not, without the prior written consent of the Company, directly or indirectly,
on his own behalf or in the service or on behalf of others, whether or not for
compensation, engage in any business activity, or have any interest in any
person, firm, corporation or business, through a subsidiary or parent entity or
other entity (whether as a shareholder, agent, joint

 

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venturer, security holder, trustee, partner, Executive, creditor lending credit
or money for the purpose of establishing or operating any such business, partner
or otherwise) with any Competing Business in the Covered Area. For the purpose
of this Section 3.1, (i) “Competing Business” means any biotechnology or
pharmaceutical company, any contract manufacturer, any research laboratory or
other company or entity (whether or not organized for profit) that has, or is
seeking to develop, one or more products or therapies that is related to
azaspiranes and guanylyl cyclase receptor agonists and (ii) “Covered Area” means
all geographical areas of the United States and  foreign jurisdictions where the
Company then has offices and/or sells its products directly or indirectly
through distributors and/or other sales agents. Notwithstanding the foregoing,
the Executive may own shares of companies whose securities are publicly trades,
so long as such securities do not constitute more than one percent (1%) of the
outstanding securities of any such company.

 

3.2                                 Non-Solicitation. The Executive further
agrees that as long as the Agreement remains in effect and for a period of one
(1) year from its termination, the Executive will not divert any business of the
Company and/or its affiliates or any customers or suppliers of the Company
and/or the Company’s and/or its affiliates’ business to any other person, entity
or competitor, or induce or attempt to induce, directly or indirectly, any
person to leave his or her employment with the Company.

 

3.3                                 Remedies. The Executive acknowledges and
agrees that his obligations provided herein are necessary and reasonable in
order to protect the Company and its affiliates and their respective business
and the Executive expressly agrees that monetary damages would be inadequate to
compensate the Company and/or its affiliates for any breach by the Executive of
his covenants and agreements set forth herein. Accordingly, the Executive agrees
and acknowledges that any such violation or threatened violation of this
Section 3 will cause irreparable injury to the Company and that, in addition to
any other remedies that may be available, in law, in equity or otherwise, the
Company and its affiliates shall be entitled to obtain injunctive relief against
he threatened breach of this Section 3 or the continuation of any such breach by
the Executive without the necessity of proving actual damages.

 

4.                                       Termination.

 

4.1                                 Termination Without Cause or for Good
Reason.

 

(a)                                  If this Agreement is terminated by the
Company other than for Cause (as defined in Section 4.4 hereof) or as a result
of Executive’s death or Permanent Disability (as defined in Section 0 hereof),
or if Executive terminates his employment for Good Reason (as defined in
Section 0 hereof) prior to the Expiration Date, Executive shall receive or
commence receiving as soon as practicable in accordance with the terms of this
Agreement:

 

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(i)                                     a severance payment (the “Severance
Payment”), which amount shall be paid in a cash lump sum within ten (10) days of
the date of termination, in an amount equal to the higher of the aggregate
amount of the Executive’s Base Salary for the then remaining term of this
Agreement or twelve times the average monthly Base Salary paid or accrued during
the three  full calendar months immediately preceding such termination;

 

(ii)                                  expense compensation, which shall be paid
in a lump sum payment within ten (10) days of the date of termination, in an
amount equal to twelve times the sum of average Base Salary during the three 
full months immediately preceding such termination of providing the services to
Executive set forth in Section 1.4 and Executive’s reimbursed expenses set forth
in Section 1.7;

 

(iii)                               immediate vesting of all unvested stock
options and the extension of the exercise period of such options to the later of
the longest period permitted by the Company’s stock option plans or ten years
following the Termination Date;

 

(iv)                              payment in respect of compensation earned but
not yet paid (the “Compensation Payment”) which amount shall be paid in a cash
lump sum within ten (10) days of the date of termination; and

 

(v)                                 payment of the cost of comprehensive medical
insurance for Executive for a period of  twelve months following the
termination.

 

(b)                                 For purposes of this Agreement, “Good
Reason” shall mean any of the following (without Executive’s express prior
written consent):

 

(i)                                     Any material breach by Company of any
provision of this Agreement, including any material reduction by Company of
Executive’s duties or responsibilities (except in connection with the
termination of Executive’s employment for Cause, as a result of Permanent
Disability, as a result of Executive’s death or by Executive other than for Good
Reason);

 

(ii)                                  A reduction by the Company in Executive’s
Base Salary or any  failure of the Company to reimburse Executive for material
expenses described in Section 1.7;

 

(iii)                               The failure by the Company to obtain the
specific assumption of this Agreement by any successor or assign of Company as
provided for in Section 8.6 hereof;

 

(iv)                              Moving the principal offices of Company to a
location outside of the Metropolitan New York Area; or

 

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(v)                                 Upon a Change of Control of Company (as such
term is hereinafter defined).

 

(c)                                  The following provisions shall apply in the
event compensation provided in Section 0 becomes payable to the Executive:

 

(i)                                     if the severance compensation provided
for in subsection 0  above  cannot be finally determined on or before the tenth
day following such termination, the Company shall pay to the Executive on such
day an estimate, as determined in good faith by the Company of the minimum
amount of such compensation and shall pay the remainder of such compensation
(together with interest at the Federal short-term rate provided in
Section 1274(d)(7)(C)(1) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the Date of
Termination. In the event the amount of the estimated payment exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan by
the Company to the Executive payable on the fifth day after demand by the
Company (together with interest at the Federal short-term rate provided in
Section 1274(d)(7)(C)(1) of the Code).

 

(ii)                                  If the payment of the Total Payments (as
defined below) will be subject to the tax (the “Excise Tax”) imposed by
Section 4999 of the Code, the Company shall pay the Executive on or before the
tenth day following the Date of Termination, an additional amount (the “Gross-Up
Payment”) such that the net amount retained by the Executive, after deduction of
any Excise Tax on Total Payments and any federal and state and local income tax
and Excise Tax upon the payment provided for by this paragraph, shall be equal
to the Total Payments. For purposes of determining whether any of the payments
will be subject to the Excise Tax and the amount of such Excise Tax, (A) any
payments or benefits received or to be received by the Executive in connection
with a Change in Control of the Company or the Executive’s termination of
employment, whether payable pursuant to the terms of Section 10 of this
Agreement or any other plan, arrangement or agreement with the Company, its
successors, any person whose actions result in a Change in Control of the
Company or any corporation affiliated (or which, as a result of the completion
of transaction causing such a Change in control, will become affiliated) with
the Company within the meaning of Section 1504 of Code (the “Total Payments”)
shall be treated as “parachute payments” within the meaning of
Section 28OG(b)(2) of the Code, and all “excess parachute payments” within the
meaning of Section 28OG(b)(1) shall be treated as subject to the Excise Tax,
unless, in the opinion of tax counsel selected by the Company’s independent
auditors and

 

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acceptable to the Executive, the Total Payments (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually rendered within
the meaning of Section 28OG(b)(4) of the Code either in their entirety or in
excess of the base amount within the meaning of Section 28OG(b)(3) of the Code,
or are otherwise not subject to the Excise Tax, (B) the amount of the Total
Payments that shall be treated as subject to the Excise Tax shall be equal to
the lesser of (I) the total amount of the Total Payments or (II) the amount of
excess parachute payments or benefit shall be determined by the Company’s
independent auditors in accordance with the principles of Section 28OG(d)(3) and
(4) of the Code. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive’s residence
an the Date of Termination, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes. In the
event the Excise Tax is subsequently determined to be less than the amount taken
into account hereunder at the time of termination of the Executive’s employment,
the Executive shall repay to the Company at the time the amount of such
reduction in Excise Tax is finally determined the portion of the Gross-Up
Payment that can be repaid such that the Executive remains whole on an after-tax
basis following such repayment (taking into account any reduction in income or
excise taxes to the Executive from such repayment) plus interest on the amount
of such repayment at the Federal short-term rate provided in
Section 1274(d)(1)(C)(i) of the Code. In the event the Excise Tax is determined
to exceed the amount taken into account hereunder at the time of the termination
of the Executive’s employment (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional gross-up payment in respect of such excess
(plus any interest payable with respect to such excess) at the time that the
amount of such excess is finally determined.

 

4.2                                 Permanent Disability.  If Executive becomes
totally and permanently disabled (as defined in the Company’s disability benefit
plan applicable to senior executive officers as in effect on the date thereof)
(“Permanent Disability”), Company or Executive may terminate this Agreement on
written notice thereof, and Executive shall receive or commence receiving, as
soon as practicable:

 

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(a)                                  amounts payable pursuant to the terms of
the disability insurance policy or similar arrangement which Company maintains
for the Executive, if any, during the term hereof;

 

(a)                                  the Compensation Payment which shall be
paid to Executive as a cash lump sum within 30 days of such termination; and

 

(b)                                 immediate vesting of all unvested stock
options.

 

4.3                                 Death.             In the event of
Executive’s death during the term of his employment hereunder, Executive’s
estate or designated beneficiaries shall receive or commence receiving, as soon
as practicable in accordance with the terms of this Agreement:

 

(a)                                  compensation equal to one year’s Base
Salary (calculate by multiplying the average monthly Base Salary paid or accrued
for the three full calendar months immediately such event, which shall be paid
within 30 days of such termination;

 

(b)                                 any death benefits provided under the
Executive benefit programs, plans and practices in which the Executive has an
interest, in accordance with their respective terms;

 

(c)                                  the Compensation Payment which shall be
paid to Executive’s estate as a cash lump sum within 30 days of such
termination; and

 

(c)                                  such other payments under applicable plans
or programs to which Executive’s estate or designated beneficiaries are entitled
pursuant to the terms of such plans or programs.

 

4.4                                 Voluntary Termination by Executive:
Discharge for Cause.                            The Company shall have the right
to terminate this Agreement for Cause (as hereinafter defined). In the event
that Executive’s employment is terminated by Company for Cause, as hereinafter
defined, or by Executive other than for Good Reason or other than as a result of
the Executive’s Permanent Disability or death, prior to the Termination Date,
Executive shall be entitled only to receive, as a cash lump sum within 30 days
of such termination, the Compensation Payment.  As used herein, the term “Cause”
shall be limited to (a) willful malfeasance or willful misconduct by Executive
in connection with the services to the Company in a matter of material
importance to the conduct of the Company’s affairs which has a material adverse
affect on the business of the Company, or (b) the conviction of Executive for
commission of a felony.  For purposes of this subsection, no act or failure to
act on the Executive’s part shall be considered “willful” unless done, or
omitted to be done, by the Executive not in good faith and without reasonable
belief that his action or omission was in the best interest of the Company. 
Termination of this Agreement for Cause pursuant to this Section 0 shall be made
by delivery to Executive of a copy of a resolution duly adopted by the
affirmative vote of all of the members of the Board of Directors called and held
for such purpose (after 30

 

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days prior written notice to Executive and reasonable opportunity for Executive
to be heard before the Board of Directors prior to such vote), finding that in
the good faith business judgment of such Board of Directors, Executive was
guilty of conduct set forth in any of clauses (a) through (b) above and
specifying the particulars thereof.

 

5.                                       Change In Control.

 

5.1                                
Definition.                                        For purposes of this
Agreement, a “Change in Control” shall be deemed to have occurred if (i) there
shall be consummated (A) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of the Company’s Common Stock would be converted into cash, securities or
other property, other than a merger of the Company in which the holders of the
Company’s Common Stock immediately prior to the merger have substantially the
same proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (B) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all or substantially
all the assets of the Company, or (ii) the stockholders of the Company shall
approve any plan or proposal for the liquidation or dissolution of the Company,
or (iii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934 (the “Exchange Act”)), other than the Company or
any executive benefit plan sponsored by the Company, or such person on the
Effective Date hereof is a 20% or more beneficial owner, shall become the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company representing 20% or more of the combined voting power
of the Company’s then outstanding securities ordinarily (and apart from rights
accruing in special circumstances) having the right to vote in the election of
directors, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, or (iv) at any time during a period
of two consecutive years, individuals who at the beginning of such period,
constituted the Board of Directors of the Company shall cease for any reason to
constitute at least a majority thereof, unless the election or the nomination
for election by the Company’s stockholders of each new director during such
two-year period was approved by a vote of at least two-thirds of the directors
then still in office, who were directors at the beginning of such two-year
period.

 

5.2                                 Rights and Obligations.                  If
a Change in Control of the Company shall have occurred while the Executive is
director of the Company, the Executive shall be entitled to the compensation
provided in Section 0 of this Agreement upon the subsequent termination of this
Agreement by either the Company, or the Executive within two years of the date
upon which the Change in Control shall have occurred, unless such termination is
a result of (i) the Executive’s death; (ii) the Executive’s Disability;
(iii) the Executive’s Retirement; or (iv) the Executive’s termination for Cause.

 

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6.                                       Assignment.                           
This Agreement shall be binding upon and inure to the benefit of the heirs and
representatives of Executive and the assigns and successors of Company, but
neither this Agreement nor any rights or obligations hereunder shall be
assignable or otherwise subject to hypothecation by Executive (except by will or
by operation of the laws of intestate succession or by Executive notifying the
Company that cash payment be made to an affiliated investment partnership in
which Executive is a control person) or by Company, except that Company may
assign this Agreement to any successor (whether by merger, purchase or
otherwise) to all or substantially all of the stock, assets or businesses of
Company, if such successor expressly agrees to assume the obligations of Company
hereunder.

 

7.                                       Indemnification.

 

Executive, as such and as a Director of the Company, shall be indemnified by the
Company against all liability incurred by the Executive in connection with any
proceeding, including, but not necessarily limited to, the amount of any
judgment obtained against Executive, the amount of any settlement entered into
by the Executive and any claimant with the approval of the Company, attorneys’
fees, actually and necessarily incurred by him in connection with the defense of
any action, suit, investigation or proceeding or similar legal activity,
regardless of whether criminal, civil, administrative or investigative in nature
(“Claim”), to which he is made a party or is otherwise subject to, by reason of
his being or having been a director, officer, agent or employee of the Company,
to the full extent permitted by applicable law and the Certificate of
Incorporation of the Company..  Such right of indemnification will not be deemed
exclusive of any other rights to which Executive may be entitled under Company’s
Certificate of Incorporation or By-laws, as in effect from time to time, any
agreement or otherwise.

 

8.                                       General Provisions.

 

8.1                                 Modification: No Waiver. No modification,
amendment or discharge of this Agreement shall be valid unless the same is in
writing and signed by all parties hereto. Failure of any party at any time to
enforce any provisions of this Agreement or any rights or to exercise any
elections hall in no way be considered to be a waiver of such provisions, rights
or elections and shall in no way affect the validity of this Agreement. The
exercise by any party of any of its rights or any of this elections under this
Agreement shall not preclude or prejudice such party from exercising the same or
any other right it may have under this Agreement irrespective of any previous
action taken.

 

8.2                                 Notices. All notices and other
communications required or permitted hereunder or necessary or convenient in
connection herewith shall be in writing and shall be deemed to have been given
when hand delivered or mailed by registered or certified mail as follows
(provided that notice of change of address shall be deemed given only when
received):

 

If to the Company, to:

 

Synergy Pharmaceuticals, Inc.

420 Lexington Avenue, Suite 60

 

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New York, NY 10070

 

If to Executive, to:

Gary S. Jacob, Ph.D.

171 East 84th Street, #16J

New York, NY 10028

 

Or to such other names or addresses as the Company or Executive, as the case may
be, shall designate by notice to each other person entitled to receive notices
in the manner specified in this Section.

 

8.3                                 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.

 

8.4                                 Further Assurances. Each party to this
Agreement shall execute all instruments and documents and take all actions as
may be reasonably required to effectuate this Agreement.

 

8.5                                 Severability. Should any one or more of the
provisions of this Agreement or of any agreement entered into pursuant to this
Agreement be determined to be illegal or unenforceable, then such illegal or
unenforceable provision shall be modified by the proper court or arbitrator to
the extent necessary and possible to make such provision enforceable, and such
modified provision and all other provisions of this Agreement and of each other
agreement entered into pursuant to this Agreement shall be given effect
separately from the provisions or portion thereof determined to be illegal or
unenforceable and shall not be affected thereby.

 

8.6                                 Successors and Assigns. Executive may not
assign this Agreement without the prior written consent of the Company. The
Company may assign its rights without the written consent of the executive, so
long as the Company or its assignee complies with the other material terms of
this Agreement. The rights and obligations of the Company under this Agreement
shall inure to the benefit of and be binding upon the successors and permitted
assigns of the Company, and the Executive’s rights under this Agreement shall
inure to the benefit of and be binding upon his heirs and executors. The
Company’s subsidiaries and controlled affiliates shall be express third party
beneficiaries of this Agreement.

 

8.7                                 Entire Agreement. This Agreement supersedes
all prior agreements and understandings between the parties, oral or written. No
modification, termination or attempted waiver shall be valid unless in writing,
signed by the party against whom such modification, termination or waiver is
sought to be enforced.

 

8.8                                 Counterparts; Facsimile. This Agreement may
be executed in one or more counterparts, each of which shall for all purposes be
deemed to be an original, and all of which taken together shall constitute one
and the same instrument. This Agreement may be executed by facsimile with
original signatures to follow.

 

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IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Agreement as of the date first written above.

 

EXECUTIVE:

 

SYNERGY PHARMACEUTICALS, INC.

 

 

 

 

 

 

/s/ Gary S. Jacob

 

/s/ Bernard Denoyer

 

 

Bernard Denoyer, Senior Vice President, Finance

Gary S. Jacob, Ph.D.

 

 

 

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